jevd

No one else has responded, so let me offer this. The purpose of QACA and EACA is to allow the ER a safe harbor from the annual ADP/ACP testing that would otherrwise be required. SIMPLEs are exempt from these tests already, so why might an employer offering a SIMPLE also want to offer automatic EE contributions? BruceM Thanks for that insight. However in a SARSEP testing is required and the final regulations specifically include SIMPLE IRAs and SARSEPS as eligible plans for the withdrawal safe harbor under 414(w) . ( no penalty etc.) Why if not needed? And where is the authority for an ACA or EACA in those plans? We have the ability to drink(withdraw) but an empty keg! No Party!

Agreed. But if it turns out that the estate becomes the beneficiary then my previous post applies.

Regulations require that the benefit be paid out based on the non-recalculated life expectancy of the deceased account owner as of the year of death. 1.401(a)(9)-5 Q & A 5 ©(3) Annotated Regulations Here

If the beneficiary turns up to be the estate and it normally does under these circumstances, then the brother & sister-in-law may be able to claim under the state's small estate provisions of the probate law as long as they would be the legal beneficiaries of the estate.

Where is the authority for an EACA in a SARSEP or SIMPLE IRA? My original post.

I am having a problem as to how the employer would establish the SIMPLE IRA or SARSEP account for the employee if the employee failed to do so. Where would the contribution be made. There is regulatory basis to establish an IRA for employer SEP purposes for qualification but no other authority for SIMPLE IRAs or SARSEPS.

Agreed.

I can’t tie in the reference in 1.414(w)-1 (e)(1) (iv) & (v) (Final Regs issued 2-24-09) to SARSEPS & SIMPLE IRAS back to a section that establishes the ability of setting up ACAs, or EACAs for those plans. Do the definitions apply to the entire set of regs or just to section 414(w). I thought I was pretty good at interpreting these cross references but it seems something is lacking either in the regs or my understanding. Does anyone have a specific site or cite I can refer to as a basis to allow ACAs or EACAs in SARSEPs or SIMPLEs. Thanks This post has been edited by jevd: Feb 26 2009, 05:02 PM Moved to correct Forum Sorry.

Bump up. I thought somebody might have an opinion or information. Thanks in advance.

I can’t tie in the reference in 1.414(w)-1 (e)(1) (iv) & (v) (Final Regs issued 2-24-09) to SARSEPS & SIMPLE IRAS back to a section that establishes the ability of setting up ACAs, or EACAs for those plans. Do the definitions apply to the entire set of regs or just to section 414(w). I thought I was pretty good at interpreting these cross references but it seems something is lacking either in the regs or my understanding. Does anyone have a specific site or cite I can refer to as a basis to allow ACAs or EACAs in SARSEPs or SIMPLEs. Thanks

Thanks Bird. Any other opinions or cites? I'm leaning towards no reporting and treating as a transfer but still looking for something to back me up other than the short paragraph in Pub 590.

There is no real distinction. All I'm trying to point out is that once a SEP contribution is made to a Traditional IRA, the 5498 should indicate SEP in box 7. This would apply even in a year when a SEP contribution may not have been made. I've been trying to find the documentation but I think it was informal information. Then again, I may be like Sieve and WDIK. I will continue to research and let you know. Stay tuned. Respectfully IRS Manual on SEPS etc. The IRS doesn't make a distinction in their Manual except to say that Traditional IRA accounts set up to accep SEP contributions are often called SEP IRAs. 4.72.17.2 (09-12-2006) Technical Overview The requirements for SEPs are set forth in IRC section 408(k). A SEP is a written arrangement (a plan) that allows an employer to make contributions towards its employees’ retirement without becoming involved in more complex retirement plans. A self-employed individual may also establish a SEP. The contributions are made to traditional Individual Retirement Arrangements (IRAs) (not Roth or SIMPLE IRAs) of the plan participants. Traditional IRAs used to receive contributions under a SEP are often referred to as " SEP-IRAs" , and the SEP participant (IRA owner) can make his or her own regular IRA contributions ($4,000 for 2005, $4,500 if 50 or over) to these IRAs. Under a SEP, IRAs are set up for each eligible employee. They do not have to be set up for excludable employees. These terms are described further below in this section 17. Maybe this is all there is.

There is really no distinction. As we all know a Traditional IRA may hold Traditional Contributions, Rollover Contributions and Employer SEP Contributions. Once a SEP contribution is made to an account, it is a SEP IRA for purposes of 5498 Reporting. See instructions for Box 1,7, & 8 regarding how to report contributions to A SEP account. That is our general understanding. I believe that we have informal responses from the IRS as well. IRS Instructions for form 5498 HERE: INSTX 5498 & 1099R

I believe also that once a SEP contribution is made to a Traditional IRA account it is required to be reported by the trustee/custodian as a SEP account. Some custodians/trustees may require that the funds are kept in separate accounts.

A self-directed IRA plan holds various investments including an annuity. The client takes distribution of the annuity changing it from one under the umbrella of the IRA custodian to a non-qualified Annuity owned directly by the Individual. The annuity is not being annuitized at this point. Without discussing the approprietness of holding an Annuity within a custodial/trusteed self directed IRA, how does one report that transaction. I'm aware of the paragraph in publication 590 that discusses the IRA custodian or trustee purchasing an annuity for an IRA account owner and it not being taxable until the annuity company distributes it to the owner. I'm not questioning taxability but the actual reporting on form 1099-R of the removal of the annuity from the IRA and the change of ownership to a non-qualified annuity. Is it reported? If so is there any special code for box 7. ( i can't locate one) This is not a 1035 exchange in my opinion. Does checking the "taxable amount not determined" box place the issue in the hands of the individual. Or is the answer to treat it as a trustee/custodial transfer and not report it at all? I've put this questions privately to other colleagues in the industry, some of who may participate on this board and I appreciate their opinions. I'd just like to get a broader view of this type of transaction. Thank You.

Page 24 IRS PUB 590 These are the only exceptions otherwise a ruling request is required.

At this point it isn't likely that the bank can correct the 2009 withholding. It might be easier for the individual to pay the IRS directly when he pays his taxes. I believe the deadline for them to report withholding for 2008 is today. Financial institutions are generally reluctant to change withholding records after the tax year is over.

Remove excess plus earnings by 2008 tax filing date plus extensions to avoid a 6% penalty tax for 2008 excess. 2007 excess is now subject to 6% penalty. Remove principal amount only & file form 5329 for 2007 excess. Contact the trustee/custodian for their forms and procedure.

Is the amount (and the estate) small enough to qualify under the state's "small estate" probate law.

What's all this stuff about liquidating assets. Can't an individual take a distribution "In Kind" so they don't have to take an actual loss? I know sometimes that isn't allowed due to proprietary funds and for other reasons but I think for the most part liquidations are not required. Please enlighten me if I'm wrong about this. JEVD

The 75 year old may set up a SIMPLE IRA as long as he/she otherwise qualifies, however the RMD rules apply immediately and distributions must start in the year following the year in which the first contribution is made as he/she will have a prior year 12/31/ balance at that time.

"Dittos" to all. Merry Christmas and Happy Holidays as well. I've been this business since Pre-Erisa. That's over 30 years to you youngsters and I have never had a resource that was more helpful than this one. Thanks Dave.!!

sage advice on the separate account. I converted shs at $20 & into an account already established. I thought that was bottom. Now shs are valued at $2 but the rest of the account only lost 35%. Worst thing to do other than the conversion is to re-characterize as I would be moving tax free assets back to tax deferred and paying taxes again. Any gain acheived would probably not be worth it. I'll take the hit on taxation on the original transaction (not that much) and hope some day ( 10 years or so ) that it won't matter as much.

My point was not with the OP but with the discussion of an IRA excercising warrants owned by the IRA account owner as an individual and whether the transfer of rights to the IRA account by the individual was a PT or at least an overcontribution in kind of the warrants to the IRA account.

Ancira states the principle that the employee can act as a conduit to transmit IRA funds to facilate the IRA's purchase the of stock from an issuer. There is no PT if the IRA, as permitted in Ancira purchases the stock with its own funds directly from the company under the terms of the stock purchase agreement since there is no value transferred from the employee to the IRA to facilitate the purchase. Why cant the stock be offered by the company to the IRA at the same discount offerred to other participants? Please describe the PT, including the name of the disqualified person under IRC 4975(e)(2) in this transaction. This is why the the tax adviosr must read the stock purchase agreement to determine if the IRA can make a direct purchase of stock from the company. If the employee has to transfer rights to the IRA in order to purchase the stock then there is a PT. I think we agree.