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Thanks, That helps. I stilll think I saw a PLR or GCM on the subject. I'll keep looking and advise if I find one.

I remember seeing a PLR or GCM that stated proceeds from a class action suit or similar settlement involving the investment within a plan may be deposited in the plan without being considered a contribution. I did find the PLRs regarding restoratiive payments from employers but I'm unable to find any regarding class actions regarding investments etc. This particular case involves an investment within an IRA. Thanks for any information that you have.

Thanks again for clarification Appleby. I had thought the earnings were tracked separately for the conversion. Apparently not. It does make tracking easier.

That is my understanding. Each conversion has its own 5 year holding period. The conversion amount has already been taxed. The earnings are subject to tax if withdrawn before the 5 year holding period. See instructions to form 8606 and the form itself to determine tax free basis and earnings subject to tax. As you are over 59 1/2 the 10% penalty for early distributtion doesn'y come into the picture.

You may not be subject to the 10% early distribution penalty on the amounts you rolled over in 2003 at age 62, however each conversion has its own 5 year holding period and if you withdraw earnings on the conversion, you may be subject to taxation on them. The original deposits in 1998 and 2003 and the earnings on the original 1998 deposit may be withdrawn tax and penalty free. See IRS Pub 590

Yes. The IRA Contribution dollar limit is not affected by the active participation in a qualified plan. However, deductibility of the contribution for the individual is determined by their Adjusted Gross Income. See IRS Pub 590.

The way the employer handled the plan, it sounds more like a SAR-SEP than a SEP funded with employer contributions. That brings in a multitude of questions. 1. Was there a SAR-SEP document signed by the employer. 2. Were deferral agreements signed by the employees. 3. Was the plan started before SAR-SEPS were discontinued. 4. Were contributions made within 402(g) limits each year. It could be that the employer has a lot more to worry about besides the issues you mentioned regarding notificatioon. I'd say get thee to an ERISA Attorney. FAST!

Appleby, I thought age 50

Thanks for the clarification.

Check IRS PUB 560 top of page 6 third column regarding excess SEP contributions. They are considered employee contributions subject to Traditional IRA contribution limits and rules for return. They are also considered income to the employee. That still doesn't allow a return to the employer.

You may wish to check out some of the posts on 72t.net. They have addressed this issue as well.

Remember the annual contribution limits and qualification requirements as well. $ 3000 a year may not be enough to accomplish what you want to do.

See legal help. Check www.dol.gov

If you made contributions to your ROTH IRA, you should have received a 5498 indicating the contribution amount. This would also include any Rollover trannsactions. You may be able to contact your custodians and request a copy of those forms if you failed to retain them. You may also wish to contact your tax preparer as JohnG suggested to see if he/she retained them.

See final regulations under 1.401(a)(9).

You may wish to check that the asset is registered correctly to the plan and not the individual as the tax id used was not the plan's.

I went back and read the instructions again for Line 2 and it would appear that you include that non-taxable basis on line 2 without further explanation. I assume then that it could be reconciled with the 1040 reporting of the Rollover on the 1040 however there is no difference in reporting the rollover of taxable v non-taxable amounts.

Thank You. I believe that the basis should be established as soon as possible and I also would hope the IRS would resolve this shortly. Thanks again.

Has anyone seen any information regarding the tracking of the basis in an IRA when after tax dollars are rolled in from a Qualified Plan. The 8606 and instructions don't seem to address the issue. Thanks for any input.

New Nomination: "ROSEBUD" whispered softly from Xanadu.

How about GP for Gov Publication How many times do we refer folks to PUB 590, 560, 571, 575 etc etc

Mike, I thought the discussion and difference of opinion was the definition of earned income. My understanding is that earned income for the self employed is calculated by subtracting 1/2 the SE tax from the bottom line of Sch C and also then multiplying that number by the contribution conversion factor for SEs subject to the $ limit under 415 to arrive at the contribution amount. The contribution is then subtracted from the prior adjusted number to get the EI. That is the number that is then subject to the 200K limit on Compensation. At least that is my understanding. I think that is where the difference in the calculation in MBOZEK's example is.

My understanding is that it is counted from the day the first dollar is contributed. See page 66 PUB 590 lower right corner.

Am I missing something from this discussion. The definition of earned income is in 401©(2): c) Definitions and rules relating to self-employed individuals and owner-employees For purposes of this section - (1) Self-employed individual treated as employee (A) In general The term ''employee'' includes, for any taxable year, an individual who is a self-employed individual for such taxable year. (B) Self-employed individual The term ''self-employed individual'' means, with respect to any taxable year, an individual who has earned income (as defined in paragraph (2)) for such taxable year. To the extent provided in regulations prescribed by the Secretary, such term also includes, for any taxable year - (i) an individual who would be a self-employed individual within the meaning of the preceding sentence but for the fact that the trade or business carried on by such individual did not have net profits for the taxable year, and (ii) an individual who has been a self-employed individual within the meaning of the preceding sentence for any prior taxable year. (2) Earned income (A) In general The term ''earned income'' means the net earnings from self-employment (as defined in section 1402(a)), but such net earnings shall be determined - (i) only with respect to a trade or business in which personal services of the taxpayer are a material income-producing factor, (ii) without regard to paragraphs (4) and (5) of section 1402©, (iii) in the case of any individual who is treated as an employee under sections [2] 3121(d)(3)(A), ©, or (D), without regard to paragraph (2) of section 1402©, (iv) without regard to items which are not included in gross income for purposes of this chapter, and the deductions properly allocable to or chargeable against such items, (v) with regard to the deductions allowed by section 404 to the taxpayer, and (vi) with regard to the deduction allowed to the taxpayer by section 164(f). For purposes of this subparagraph, section 1402, as in effect for a taxable year ending on December 31, 1962, shall be treated as having been in effect for all taxable years ending before such date. ------------------------------------------------------------------------------ The calculation for the ees contribution is based on their w-2 comp or other definition as determined by the plan and deducted by the SE employer on sch C prior to calculating SE contribution. Again. Am I missing something

I third the nommination for nameless coward as I am one also with just initials