Leaderboard

http://benefitslink.com/pr/detail.php?id=49237#.VE6HrU10yUk Attaboy Dave! And that picture is very recent.

I have some questions/comments: 1. Has the plan actually been disqualified? When? Why? If the plan had been disqualified (for any reason) before the payment was made, the distribution would truly not have been eligible to be rolled over. Remember that merely failing to follow the rules does not automatically disqualify a plan - the IRS must impose that penalty, and they have in place a number of correction methods intended to give sponsors a way out short of outright disqualification. 2. Assuming that the distribution itself was not ineligible to be rolled over, the participant could certainly have taken action to roll over the proceeds within 60 days of payment (recognizing that this could mean that any amounts withheld for taxes would either have to be replaced from other participant funds or some of the distribution would have remained taxable). If the distribution was relatively large, the participant could well have availed him or herself of professional guidance to optimize the tax consequences of the distribution (assuming, again, that the distribution did not have to be treated as ineligible for rollover). 3. Not to deny that there are many plans whose primary reason for existence is to minimize the impact of taxes, the tax-favored treatment is being provided to encourage retirement savings and to encourage companies to provide an element of retirement security to their employees, to reduce poverty and dependence after the working years (not to minimize taxes). What incentive would the government have to provide tax-favored treatment for retirement plans if all that would be accomplished would be to reduce taxes? 4. It is by no means a certainty that future taxes on amounts rolled over to IRAs and subsequently distributed from there will be more favorable than those that would apply if the proceeds were taxed currently, even if the level of annual income at the time the IRA balances are distributed is lower. What if tax rates are raised some day to reduce government deficits? It could happen.