NEW YORK (CNNfn) - Rules regarding SEP-IRAs are confusing to many investors, especially since there are different contribution limits. When you leave your job, do you have to roll over your SEP-IRA into a traditional IRA?
In response to a reader's question, Donald H. Boegel, a certified financial planner from Plymouth, Minn., and a member of the Financial Planning Association, says you don't have to roll over your SEP-IRA if you leave a small company.
Ask the experts a question.
I worked for a small company where I had an SEP-IRA. Since then, I've left the job and I wasn't sure if I needed to transfer it to a regular IRA. Can I transfer my SEP-IRA into a regular IRA now without paying a penalty?
A Simplified Employee Pension (SEP) is a written agreement that allows an employer to make contributions toward his own retirement, if self-employed, and employees' retirement, without becoming involved in more complex retirement plans. The contributions are made to SEP-IRAs of the participants of the plan. Under a SEP, IRAs are set up for each qualified employee.
The SEP rules permit an employer to contribute each year to each participating employee's SEP-IRA up to 15 percent of the employee's compensation. These contributions are funded by the employer, and can be made up until the tax-filing deadline for the year of funding.
Since an SEP plan is a type of IRA, individuals are not required to transfer those assets to another IRA if they leave that employer. They can choose to transfer to another IRA for other reasons, such as different investments, etc., but they will not be subject to any tax penalties for simply doing nothing.
As such, you really don't have make any quick decisions regarding your existing SEP account. If this is your only IRA, and therefore your only retirement account, it may be easiest to simply leave it where it is now.
However, if you have another IRA account and you would like to consolidate everything, it may make sense to transfer your SEP. If you decide to transfer your SEP, it can be done today, one year from today, or 10 years from today ... it doesn't matter from a tax standpoint.
You may consider transferring now rather than later for broader investment options and the cost to maintain one or more IRAs. Most IRAs have a custodial fee and the smaller your account the larger impact this will have. Regarding investments, you should compare the account you have now with other options and then make a decision about whether you can make improvements. 
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