I have simplified my question greatly in the hopes of getting some opinions from someone. Here it is:

My husband and I (age 41 and 45, with four young children, not all of whom can be claimed as exemptions for 2006 for reasons not relevant) currently have no IRA accounts whatsover, but in part because of some inheritance funds that have been distributed to us in 2006 (a smaller amount) and will be distributed to us in 2007 (the larger, non-taxable amount), we would like to open Roth IRAs from 2007 forward and are considering opening traditional IRAs by April 17th for 2006 for the primary purpose of taking an $8,000 deduction on our taxable income for 2006.

Does anyone have an idea about whether it is better to ditch the idea of a traditional IRA (which I admit I am motivated to do in order to reduce 2006 taxes) and just plan on Roth IRAs from this time forward?

I get the idea that Roth IRAs are the better choice for just about everyone. I would like to cut $1,200 in my tax bill for 2006 which is what I've calculated we'll be able to do if we open a trad. IRA. I am already aware of eligibility, etc. and our income is not very high (about $48,000 most years and about $65,000 due to a taxable-as-income chunk of money we received in 2006) and I've already figured our taxes. Thanks if anyone has an opinion.

Does anyone have a current opinion on ETF's for example TD Ameritrade has a few selections within my account that I can choose from.

I have a Roth account with them in the Amerivest vehicle which is with the Russell 3000 and it has earned almost $600 since April 2006 from 2 years of Roth contributions (max.).

The asset allocation is about 80% stocks (IWV) , 16% bonds (AIGG) , and 4% cash.

It seems to be doing ok but now that the price I paid for the stocks $76.20 and bonds $98.10 per share have risen (which is good) and are now $81.30 and $101.20 and it is time to start investing again now that I can, it being 2007 I am concerned about making a choice on either investing the max. all at once or on a monthly basis.

Am I diversified enough with Russell 3000 (supposed to be a well diversified vehicle) and should I can continue investing in this alone or start investing in mutual funds ou

tside of the ETF to make my portfolio even more diversified ?

Here is some history

almost 39 years old

will be investing forever

will max out the yearly Roth contributions (with a retirement goal of 42000 per year based on withdrawls of 4 or 5 % per year after age 69)

Am investing regularly in an individual account (outside of the Roth account to create additional retirement income) of at least the same amount as the Roth

Any advice on my current situation ( I feel as if I have started later than I would have liked but better late than never I suppose)

I will try to make the background brief and leave out unimportant detail, but please feel free to ask. I just don't want to bore everyone by writing a book

I am 41, husband 45. As of now we have no retirement funds whatsoever (please don't throw tomatoes.) We have also just now gotten out of the red; our income is not especially high. We have four young children but cannot claim all of them on tax return every year. I will spare you details on that. (it has to do with the non-custodial father of three of them complying with a technicality that allows him to claim three of the children including the child tax credit - ouch!)

This year (2006) our income is uncustomarily large (for us); the unusual part comes from $22,000 this year only that we wouldn't normally receive; is taxable as income. It is the proceeds from a deceased relative's IRA that was not included in the rest of that estate. So, added to our income from work of $44,000, our income for 2006 is higher than past years and higher than future years (in the nearly foreseeable future, anyway).

To put it into perspective, in 2005, to be approximate, our income was about $33,000 and we had 6 exemptions, and you can imagine that we owed little tax for that year. By contrast:

In 2006, due to increased earnings and the 22K, our AGI is looking like $65,000 with only 3 exemptions that can be made this year. I worked it up and see that we'll owe about $6,000 in taxes. This is no surpise. We were counseled that we could have received those IRA proceeds as a rollover and pay no tax or take it as cash and owe tax; it was well worth it since we had almost that much debt to settle and it's great to be DEBT FREE. But anyway, since we had little tax withheld, we're going to have to come up with the money, and we can do it easily (due to the relative's estate settling soon) but of course like everyone else I would like to pay as little tax as possible.

So my focus now is on reducing our taxes for 2006. The only thing I can see that will reduce our taxable income is to contribute 4K apiece (8K total) to a traditional IRA (we'd have to open them, and that's no problem.) I was surprised to see that we have till April 17th to do this. We will be able to do this with no problem. Here's my question:

As someone only learning fine points about having more money than debts (I know a good amount about investing but am not as sharp on taxes), I have a vague understanding that Roth IRAs are preferred by most, and that if you expect to have accumulated much wealth in the future, traditional IRAs are not the preferred thing to contribute to (I could be wrong.) I am thinking of the here and now and I calculated a savings of $1,200 on our 2006 tax bill if we can throw $8k into IRAs. Question: Does this seem like a reasonable thing to do, to save that amount of tax this year? I know it's totally up to me, but for all I know I'm making a long-term mistake for a short-term gain (that's why I'm asking people who know more about this stuff than I do). Would it possibly be better to just pay the tax and throw the same money into Roth IRAs and settle down for the long haul (we do plan to chart an intelligent course - we're smart people but have been all over the financial map for years now, for reasons I definitely won't go into, but change is on the horizon in part because an inheritance is being settled soon and we are going to work that money like a team of packmules. One of our children is disabled and we really want to work that money, and yes, we know that soon we'll need more comprehensive advice and guidance.) Thanks in advance for anyone's advice on whether I'll regret opening a traditional IRA just to save that amount of money this year in taxes. (and in future years, too - we could contribute 8K each year, as I understand it, more after turning 50). I don't see a lot good being said about traditional IRAs; I get the feeling people are converting them to Roths in droves. But for my situation, are they a good idea? THANK YOU for reading.

I'm reading through the final 4k regs and am hoping you all can confirm my understanding of gap period income. Here is what I have concluded:

The final regs clarified that gap period income needs to be included only to the extent the employee is or would be credited with allocable gain or loss on those excess contributions for that period, if the total account were distributed. For daily valued plans and plans with deferrals going into self directed IDAs I would have to include the gap period income in the total refund amount. If I have a monthly, quarterly, etc. balance forward plan, then I would only have to include gap period income IF I've pass a mid-year valuation date. In addition the "End Date" of the gap period can be up to 7 days (I'm assuming business days?) prior to the actual distribution date.

My source for this is Internal Revenue Bulletin 2005-5.

In addition, from what I have read about PPA 2006, the bill would eliminate the requirement to distribute gap period earnings, but this would not be effective until plan years that begin in 2008 so with the exception of 2006 and 2007, I can go back to ignoring gap period income.

I'd appreciate any feedback if I am misunderstanding the regs.

Thanks!

The PPA plan amendment deadline is the last day of the plan year beginning on or after 1/1/09. What about for discretionary PPA plan amendments? Must they be made in accordance with the general remedial amendment period schedule?

OK - I never have good luck searching for old threads!!!

Client was using safe harbor match for part of '06. Stopped mid way throught the year with 30 days notice to employees.

End of the year arrives and ADP/ACP testing is required. Do we test the whole year? That would make sense because if we only tested from the termination of the safe harbor, there would be no ACP testing because there was no match from that point forward.

Sorry for what may be an easy/obvious question, but my mind's been frazzled of late.....

Thanks in advance.

I'm working on the premium filing for a brand new cash balance plan adopted 12/28/2006 and effective retroactivly to 1/1/2006. My premium snapshot date will be 12/28/2006. The plan includes the following provisions:

Years of service prior to effective date are included for vesting purposes.

1,000 hours during the plan year gives you the right to receive a contribution credit.

Contribution credits are credited on the last day of the plan year (12/31/2006 in this case).

Is there an accrued benefit on the pemium snapshot date? The participants have the right to receive the benefit, but as of 12/28/2006, no contribution credits have been credited. I've got an e-mail into the PBGC, but who knows when I'll get that back. I was hoping I could get some insight from all you bright folks out there in pension land.

Thanks!

Can anyone tell me if a participant that wanted to take a distribution under KETRA, if they had until December 31, 2006?

C. Definition of Katrina distribution.

Section 101(d)(1) of KETRA defines a Katrina distribution as any

distribution from an eligible retirement plan made on or after August 25, 2005,

and before January 1, 2007, to a qualified individual. Section 101(b) of KETRA

limits the amount of distributions that can be treated as Katrina distributions to no

more than $100,000.

Any thoughts?

Thank you!

nm

I would expect it to be very soon since the Form 5500 and instructions for 2006 were released earlier than in years past.

Company A has an ESOP and is being bought out by Company B. Company B is paying cash and all ESOP stock in company A will be paid out in cash to the employees for transfer/rollover to an IRA. The offer is for 2x the value of the ESOP stock. The ESOP will terminate when the deal is closed.

Questions:

1. Are former employees who terminated in the last two years with partial vesting and have not been paid out entitled to become automatically 100% vested?

2. Are those same former employees entitled to the offer price (2x value of ESOP stock) for their shares or can they be cashed out at the pre-sale stock price?

3. Can the company "claim" that the former employee have been paid out prior to the announced sale even if the employee has not received any notification or received any payout funds?

4. Related to #3 above - What constitutes pay out that would "close the books" on a former employee. Is it receipt of the funds by the former employee or is it an accounting entry at the company saying that the employee has been paid out even if the funds have not been disbursed.

Thanks for any help.

I recently left my employment of 13 years and my employer (President, CEO) had the accountant write off the profit sharing plan that was in place from 1995-2001 when we started a 401(k) plan. He was advised to transfert he monies to the 401(k), but he decided to just get rid of it so he doesn't have to file taxes on it anymore. The accountant was filing the 5500 tax form yearly. Is there any recourse in me recovering my portion of the profit sharing plan?

Can an employer make nonelective contributions to a 457(b) plan for 2006 in early 2007, or must these amounts be credited before the end of 2006?

In other words, is there something similar in the 457(b) world akin to 404(a)(6) (which allows payments to be deemed made for deduction purposes in the prior year if made by the time the prior year's tax return is due)?

Or, because there is no concern about the year of deduction, can a 457(b) plan be credited for 2006 in 2007 so long as the applicable dollar amount for 2006 is not exceeded?

We received a nonamender compliance statement in 79 days. No determination letter application, but that timing even included one supplement requested by the IRS. We were shocked at how quickly it was processed.

Anyone think this is what we can begin to expect now, or was it unusual?

My daughter ( <18 yo) has $850 of earned income.

I would like her to invest this in a Roth IRA. I assume this is possible, but am running into problems.

Problem is, Vanguard (where I have all my accounts) has very high minimum investments, and Fidelity has high minimums, and won't issue any Roth accounts to persons under 18 years old (yo).

Assuming persons <18 yo are allowed to establish Roth IRAs (which I don't know if it is true or not), then what we are looking for is:

Goal: Establish a ROTH IRA for a person <18 yo with $850 earned income

Requirements:

1) fund company allows ROTH IRA for persons <18 yo

2) minimum ROTH IRA investment must be under $850

3) money market fund AND/OR passive (not managed) total stock market index fund that tracks Wilshire 5000 or similar index (i.e. not just large caps)

As long as we're asking, we'd prefer:

1) low expense ratio (under 1% preferred)

2) low or no management fees + other advertising fees

Any ideas?

I have been tearing my hair out (there is not much left) because I recall that the calculation of the most valuable benefit (the conversion from the normal form - assumed to be a life annuity for this discussion) uses spousal ages equal to the participants (I thought it was actually in the regulations but can not find it).

Is it permissible to use the actual age of the participant's spouse??

Thanks in advance for any commentary.

Here's the situation:

New 401(k) Plan with deferrals beginning July 1, 2006. Owner makes $30,000 per pay period and deferred $1,250 per pay period. The Plan is a safe harbor plan with a basic matching contribution (100% up to 3% and 50% of deferrals on the next 2%). How do you determine his match?

Do you say that he put in 4.1% of pay each pay period and, therefore, gets a match on that amount for the rest of the year until his match for the year is equal to 4% of $220,000? That would mean that you would match him up to the annual limit on the match. Or do you have to stop his match when his pay for purposes of determining the match exceeds $200,000?

Thanks!

Plan provides for a pre-retirement death benefit equal to the PV of the participants vested benefit.

Payment can be made in a LS or installments.

Owner dies, plan is underfunded, early termination benefit restrictions apply, so the LS payment is not an option. Benefits would therefore have to be paid as installment payments - based on the restricted benefit rules over the life expectancy of the participant.

The plan is then terminated. It is not subject to PGBC coverage, but plan provisions require an allocation of assets based on benefits that would be insured by the PBGC.

MY QUESTION IS -

Would the balance of the (restricted) death benefit be considered a 'pension benefit' for PBGC insurance purposes - and a portion of it guaranteed after adjustment for the dollar limit and substantial owner phase in? Or would the entire balance be excluded because it would not meet the criteria to be a 'pension benefit'?

PBGC Opinion 78-24 deals with a similar question, and seems to imply that the remaining death benefit may not be insured since it was not designed/intended to provide a maintenance income to survivors. If the benefit had not been restricted, I believe Opinion 78-24 would lead me to easily conclude that the benefit is a pre-termination obligation and would/could be paid in full from pre-termination assets. Or if the benefit was defined under the plan as a survivor annuity with a LS option, 78-24 seems pretty clear that the remaining installment payments would be guaranteed. But since the plan provides for a benefit equal to the PV the vested benefit (implied LS normal form), they seem to say that the even if the benefit is converted to installments payable over a lifetime, it is still not a 'pension benefit'.

If none of the benefit is insured, other participants get their full vested benefits and the remaining death benefit falls entirely into the next priority category along with the non-vested/non-insured benefits of all other participants. Given the dollar limit and 30 year phase-in that would apply even if the death benefit is an eligible benefit for PBGC purposes, the difference in the end result may not be very different. But I would still like to get this right......

I have a s/h 401(k) plan that uses the 3% non-elective contribution allocated to all participants.

The plan also has a discretionary profit sharing contribution, integrated, allocated only to participants that are employed at the end of the plan year and work 1000 hours.

I have five non-highly compensated employees that were eligible only for the s/h non-elective.

If I am reading the ERISA outline book correctly, it looks like I can re-structure into component plans to pass coverage? Does that mean that I put the 5 participants in one plan, since no hces benefit, it passes coverage? Then put all the other participants in another plan, all ees benefit..passes coverage?

Is is this even necessary? My concern is the discussion about the design based safe harbor status of the plan.....The allocation rates are not uniform in this situation. If I'm reading it right, it's okay as long as the plan passes coverage....is that correct?

Thanks.

If a small plan holds just cash no money market or goverment bond that is greater than 20% of Assets does it need to be reported on 4i? I can't find anything in any book about holding more than 20% in cash. The main point of this question is to assess prudence of investments practices so to reduce large losses. Yes you won't lose any money holding cash but you wont make any gains, so my thinking is that it se be reported because holding large amounts of cash is not very diversify. Any thoughts? Experiance?