If you contribute to a
SIMPLE IRA,
the contributions go into an
IRA (Individual Retirement Account)
in your name. That means all the assets in the account are immediately
vested
and are yours outright, including the
matching contributions
your employer makes. So, if you change jobs and rollover your account, you don’t have to worry about leaving any of the value of your account behind.
If you contribute to a SIMPLE 401(k), your contributions are held in a qualified trust that operates the same way that a conventional IRA does.
But SIMPLEs have stricter rules on early withdrawals and on tax-free transfers to an IRA or a new employer plan than most other salary reduction plans. Your account must be open for two years before you can move the money or take it out. Otherwise you’ll owe a 25% penalty on the amount transferred or withdrawn, rather than the usual 10%.
