Because the funding vehicle for the simplified employee pension (SEP) is a traditional individual retirement account (IRA), the same transfer and rollover rules that apply to a traditional IRA also apply to a SEP IRA. Basically, the SEP IRA is treated as a traditional IRA, except that it is allowed to accept employer contributions.

So an employee who participates in an SEP and is no longer working for the employer that sponsors the SEP has the following options:

  • Retain the assets in the SEP IRA (assuming the company allows ex-employees to do so).
  • Transfer the SEP IRA balance to a Traditional IRA or another SEP IRA
  • Roll over the balance to a qualified plan, 403(b) or 457(b) account in which the individual participates.