How long must a SIMPLE account be held in order for funds to be rolled over into an IRA?

A SIMPLE (Savings Incentive Match Plan for Employees) IRA must be held for 2 years before funds can be rolled over into a traditional IRA or a Roth IRA without incurring penalties. This 2-year period is critical because it is designed to establish the tax-favored nature of the SIMPLE plan, during which employees must work to maintain the benefits associated with it.

The rollover restriction is primarily to discourage premature withdrawals and to promote long-term retirement savings. After the initial 2-year period, the funds can be transferred or rolled over without penalty, allowing the employee to move their savings into another tax-advantaged account if they choose to do so.

This requirement reflects the governmental goal of ensuring that SIMPLE plans encourage contributions and continued participation in retirement savings without the immediate temptation of easy access to these funds.