jevd

The SEP plan is a year to year plan that may be terminated at any time. The employer contributions are funded through a traditional IRA and they are the participants's funds to do with as they please. The employer has no control over the funds once they are contributed to the participants IRA plan . If a participant chopses, they may roll their SEP $ to the 401(k) providing the 401(k) will accept the rollover. It is an individual choice.

As a somewhat interested Coloradan with not much to cheer about in several years, I do appreciate the discourse and banter from the folks from the East. I hope you all have an enjoyable Super Bowl Sunday.

What your friend may have been told is that the earnings if withdrawn would be taxable since the deposit had not been in the account for five years and misunderstood what was said. That being said, the agent he first talked to may have been incorrect or misunderstood the circumstances.

There has never been a problem with this practice. In fact, several years ago there was a PLR addressing the issue of redepositing IRA funds back in the same institution they were withdrawn from. The IRS doesn't care as long as you follow the rules. See publication 590 on rollovers from one IRA to another.

http://www.irs.ustreas.gov/pub/irs-drop/rp-03-44.pdf Check section 6.10 of above rev proc. This ithe only definitive information I have been able to find. The Rev Proc deals with the various corection programs under EPCRS

You must rollover the QP distribution to a traditional IRA first then convert to a ROTH. See pub 590 for special rules regarding conversions to ROTH and when penalities apply. The conversion should not be penalized but a withdrawal may be if not held for 5 years etc. Also ou must qualify for the conversion. See Pub 590 for AGI limits.

Check publication 590 to see if you qualify for any penalty exceptions. Talk to your tax professional. All distributions from Tradeitional IRAs are ordinary income unless you have established a basis through non-deductible (After tax)contributions.

http://www.reish.com/practice_areas/Techni...ps/IRStip71.cfm Check this site also

that is my understanding. Here is Noel Ice's site and commentary on the regs http://www.trustsandestates.net/MRDRegs/MR...htm#_Toc9937165

Currently you cannot convert from a qualified plan to a ROTH IRA without first Rolling to a Traditional IRA. Distributions from an IRA containing non-deductible contributions are subject to the prorata rules. (See form 8606 & instructions) Why not take complete distribution, rollover traxable and retain non-taxable amount.Then deposit to ROTH as an annual contribution. This assumes you qualify for the ROTH. In the event your non-taxable amount is greater than the annual ROTH contribution limit you could rollover all to traditional and convert all $. I don't see an easy way except over multiple years to get just all non-taxable amounts into a ROTH if amounts are over limit

401(a) (9) Regs 2.2 Q-2. For purposes of section 401(a)(9)©, what does the term required beginning date mean? A-2. (a) Except as provided in paragraph (b) of this A-2 with respect to a 5-percent owner, as defined in paragraph © of this A-2, the term required beginning date means April 1 of the calendar year following the later of the calendar year in which the employee attains age 70½ or the calendar year in which the employee retires from employment with the employer maintaining the plan. (b) In the case of an employee who is a 5-percent owner, the term required beginning date means April 1 of the calendar year following the calendar year in which the employee attains age 70½. © For purposes of section 401(a)(9), a 5-percent owner is an employee who is a 5-percent owner (as defined in section 416) with respect to the plan year ending in the calendar year in which the employee attains age 70½. (d) Paragraph (b) of this A-2 does not apply in the case of a governmental plan (within the meaning of section 414(d)) or a church plan. For purposes of this paragraph, the term church plan means a plan maintained by a church for church employees, and the term church means any church (as defined in section 3121(w)(3)(A)) or qualified church-controlled organization (as defined in section 3121(w)(3)(B)). (e) A plan is permitted to provide that the required beginning date for purposes of section 401(a)(9) for all employees is April 1 of the calendar year following the calendar year in which an employee attains age 70½ regardless of whether the employee is a 5-percent owner I believe once a 5% owner in the year age 70.5 acheived, always a 5% owner for purposes of RMD. Once RBD is established, it can't be changed IMHO. Also, check plan for plan's definition of RBD Also, key employee status is one thing. 5% owner is another. Your client is not a 5% owner in the year he turns 70 1/2 so according to the regs and definition of 5% owner in 416, he is allowed to delay until 4/1 of year after retirement

See today's benefits buzz for several articles on this issue.

I would assume a code L alone would indicate that the participant is over 59 1/2

G Burns Check bottom page 3 of instructions for 2005 W4-P Nonperiodic payments—10% withholding. Your payer must withhold at a flat 10% rate from nonperiodic payments (but see Eligible rollover distribution—20% withholding on page 4) unless you choose not to have federal income tax withheld. Distributions from an IRA that are payable on demand are treated as nonperiodic payments. You can choose not to have income tax withheld from a nonperiodic payment by submitting Form W-4P (containing your correct TIN) to your payer and checking the box on line 1. Generally, your choice not to have income tax withheld will apply to any later payment from the same plan. You cannot use line 2 for nonperiodic payments. But you may use line 3 to specify an additional amount that you want withheld. Caution. If you submit a Form W-4P that does not contain your correct TIN, the payer cannot honor your request not to have income tax withheld and must withhold 10% of the payment for federal income tax.

Appleby, I think it is an IRS oversight. Not suprising.

John G. It seems these questions come up fairly often in various shapes and sizes. You always have great information for these newbies. How about writing a short article on the subject and get Dave to post it for ready reference. Then you can save a little time and just refer these folks to the article. Just a thought.

I agree as long as there are no Affiliated Service group or Control Group issues.

another from long ago: "The Koala Tea of Mercy is not Strained"

Mine is It's a Hickory Daquiri Doc !

This is the minimum amount as stated in the 401(a)(9) regulations. The regulations do not allow for a change in the distribution period when a beneficiary names a beneficiary. As far as plan language is concerned, if the plan doesn't allow for the next beneficiary to continue the payout, then the options must be at least as rapidly. Lump sum etc as long as each years distribution meets the original minimum.

It is A. A beneficiary naming a beneficiary does not change the required distribution period which is established at the death of the original account owner. The marketing term "Stretch IRA" sometimes gives a misconception that life expectancies are extended. ( not part of your question I know)

'There are lies Damn Lies and Statistics" Mark Twain.

And everybody said AMEN!

IRS Newsletter

I wonder if George S. slapped ARod's wrist or shook his hand for a nice try???