Borsley

The usual situation required when the sponsor of a retirement plan has to correct their mistake, is to make affected individuals "whole". That would include vesting schedules. The rub here though is the 25% penalty isn't a vesting schedule setup in the plan, it is an IRA excess tax for early withdrawal and it is based on when the funds were actually deposited in the IRA. Maybe someone will have a different take, but my advice would be to talk to a CPA or tax professional and see what they can tell you about options, if any, to get out of the 25% excess tax.

IRS issued Q&A guidance today: https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-recharacterization-of-roth-rollovers-and-conversions

PenServ which publishes an IRA newsletter came out yesterday and indicated that they'd been informed by "an official IRS source" that 2017 conversions can be recharacterized until October 15, 2018. This only applies to conversion made during 2017 and will not extend to conversions done on or after January 1, 2018.

This is unfortunate, but errors happen even within the best companies. This is just my opinion (and based on some anecdotal experience), but I believe this why confirming transactions when you receive confirmation statements and/or quarterly statements is so important. I believe this will be the firm's stance/protection against having to reimburse you for expenses. Often times these documents even state that you must notify the company within X time period (e.g....90 days) if the statements don't reflect your intentions. As to notifying regulators, I believe the most they'll do (if anything) is to verify that you as the client were given confirmation/statements that should have allowed you to see this error and notify them to correct on a timely basis.

I don't believe a distribution should ever be made to a person that is known to be deceased. If it was, can you return the check indicating the IRA owner is deceased and then work through the process the custodian requires for the beneficiary to take a distribution, rollover, or setup inherited IRA? If person is deceased, assume the check isn't cashed?

Related: where do you find information on when the IRS requires individually designed SEP plans to be updated for new laws and regulations? The previous comment mentioned the need to update in 2002 for EGTRRA. If I'm not mistaken, there was a later requirement to update to changes related to PPA. I could be wrong about that. Bottom-line - is there a one-stop source that would list out the updates and when they were required?

In Bobrow vs Commissioner, the Tax Court ruled against the taxpayer that was using a "bridge" strategy (i.e...using IRA funds for other circumstances) even though the strategy was found in IRS Pub 590 at the time. I think if you asked Mr and Mrs Bobrow this question, their wallets would answer the question for you as to how wise following such a strategy would be even if you don't think you can find letter-of-the-law reference that disallows it.

Allow me a moment to editorialize. It is because individuals continue to try and manipulate the intent of tax-favor laws, that the rest of us have to deal with the expense associated with dealing with pages and pages of regulations. While many of us are out here fighting and trying to make arguments for fewer burdensome and costly regulations, examples like this remind us why regulators continued to feel empowered to do more.

I read recently that some believe that passage of a PERMANENT QCD deduction in 2014 is still a possibility. Speculation that this might be only thing passed by the lame duck congress. Stay tuned...

Only congress, not the IRS, has the authority to extend the Qualified Charitable Distribution exemption.

I would just add - if you are looking for tax advice for your specific situation (which is what this is) , you're best to consult a tax or legal advisor rather than the annuity account provider. In my experience going to the provider you're going to get one of two things. 1) an answer provided by a call center employee who's appraisal goals include providing "first call" resolution to questions as quickly and efficiently as possible (and who will not be there to assist you if you're audited), OR, 2) a response from the annuity provider essentially telling you that they can not provide tax or legal advice so you'll need to consult with your tax advisor for your particular situation.

I thought this as a requirement now for all financial institutions: http://www.amstock.com/shareholder/Cost_Basis_Reporting_2013.pdf

I think it is always wise for the sponsor of the SIMPLE IRA plan to at least due a cursory consultation with their tax or legal advisor....especially in an instance like the one being discussed where the financial advisor is far from an expert in this area. Yes these are "simple", but there are still considerations regarding the plan operation and tax considerations. For example, a SIMPLE IRA plan can incur operational defects (e.g...excess contributions) that should be addressed through the IRS EPCRs program. The problem I normally see with SIMPLE plans is that no one with any real expertise is involved UNTIL something gets missed or goes wrong. You can expect only limited (or no) assistance from the fund company as they are only be used for their investment products. They are not being paid to administer or consult when potential issues arise. This can be a real source of frustration for the plan sponsor when no one advises them proactively that neither the financial advisor or the fund company have the expertise to handle 100% of the aspects of their retirement plan. Having the proper professionals (plural) advising on the front end will hopefully avoid any issues down the road or at the very least, have established this relationship so this is in place should something come up. Good luck.

Have there been any required changes to SEP Plan Documents since that the last required updates were needed per EGTRRA?

Not addressing question but as an aside , it seems like you might have some potential copyright issues cut/pasting to this extent. Unless you've received premission from the source (and properly credited it), IMO you should remove all but a few of the opening sentences and then link to the source for the remaining part of the text.

I'm unable to locate any definitive source to answer this question. What is the deadline for employee contributions to a SEP-IRA for any particular tax year? Note I'm not referring to contributions made by self-employeed individuals as those are considered Employer contributions and are reported in Box 8 of Form 5498. Also, I'm not referring to elective deferral contribution to a SARSEP which are also reported in Box 8 Those deadlines seem clear to me. What isn't clear is the deadline an employee has to make a contribution to their SEP-IRA for the previous tax year. These contributions are reported in box 1 of the Form 5498 and following the annual dollar limit of §219. From my understanding, they are treated like traditional IRA contributions. Because of this, it seems to me then that logicially the deadline to make contribution for the previous tax year would be April 15th (just as one would do with their regular stand alone traditional IRA). However, every source I reference simply states that the deadline to make SEP contribution is tax filing deadline plus extensions with no seperate mention being made (or at least acknowlegement of) that the deadline for box 1 employee contributions made to a SEP-IRA still needing to follow the April 15th deadline of a traditional IRA. Just hoping someone can confirm and possible cite a source so I can be 100% confident on this answer.

Maybe this will help: source: http://www.retirementdictionary.com/definitions/224/form5498orirsform5498or5498

Is this a relevant cite? The scenario was a transfer, not a "total distribution". Doesn't this refer to a total liquidation of the IRA? In the case, the IRA just moved from one financial institution to another. Funds were not distributed out of the IRA. IRA rollovers (distributions and eventual rollover to another financial institution) require tax reporting of the event. Trustee-to-trustee transfers do not involve any tax reporting (1099r or 5498) related to the transfer. There is no taxable event, so the IRS does not care (for instance) that you moved your IRA from Fidelity to Vanguard. As to reporting the FMV on 12/31, that would fall on the institution that held the IRA at the time. Note: there are alternatives to reporting FMV on 5498s such as showing it on a year-end statement instead.

** edit -- I was assuming the IRA was in pay status when crafting my response here. I see from another's comment (posted while I was typing up mine) that maybe that is not the case. ** I'm assuming this is a traditional IRA and not a Roth IRA inherited annuity. I believe the applicable cite is Code Section 401(a)(9)(B) which essentially states that after that IRA owner dies, the remaining portion of the account must be distributed at least as rapidly as under the method used prior to the IRA owners death. Related directly to the questions. Q1: The insurance company can only offer the products they sell. That said, if you were to transfer to an IRA (non-anniuty) presumedly with another financial institution, you'd need to be sure it is set up as an inherited IRA and associated RMDs are set up correctly. I would think that would be part of their processes in setting up an inherited IRA? Q2: Since 401(a)(9)(B) requiries payment to be at least as rapid as prior to death, I believe using the lifetime expectency of the bene would only be an option if the original RMD was calculated using the bene life expectancy as part of the calucuation (which I believe is allowed under applicable RMD rules found in 401(a)(9)(A) In the end, if the insurance company provides an illustration for the SPIA (Single Premium Immediate Annuity - which I assume is what is being referred to here) and the guarantee payments are "at least as rapid", then I'd assume this would be fine. Q3: I'm not an expert but did notice you didn't mention anything about protecting principal, guaranteeing income streams, looking for possible death benefit, etc. These would all be features of annuities so maybe consider that observation into your equation when deciding what makes sense long-term for these inherited IRAs. Good luck!

I don't think this is allowed. (Pls someone correct me if I'm wrong) What type of tax reporting did the custodian provide (i.e...Form 5498 & 1099R)? That should be interesting. The $6k recharacterization of the contribution should be allowed as long as it was done prior to the taxpayer's tax filing deadling plus extensions but I'm not sure there is an allowable method for converting a Roth IRA to a Traditional IRA. Hopefully someone can be a bit more definitive than I am on this.

I don't have your answer but will make one small comment. If allowed, money coming from a qualified plan (i.e. 401(k) would have to move via a rollover (direct or indirict), not a transfer. Also, normally the following assets are NOT allowed to be rolled over from an employer qualified plan to an IRA: * RMDs * Hardship Distributions * Corrective refunds/distributions (excess deferrals/contributions) * Payments that are a part of a series of substantially equal periodic payments. None of these are probably your situation (I assume he'd be using the distribution as part of meeting the retirement age for the plan), but thought I'd list just in case.

Thanks much!! That might be a more aggressive approach, but I like options and believe this is worth presenting to the client as a potential alternative assuming they can get their legal advisor on board. For future reference and to close the loop on this thread, after posting my question, I did find an older thread that discusses a similar scenerio: http://benefitslink.com/boards/index.php?showtopic=37374 Also, again for reference, a couple related links to IRS website on the topic: http://www.irs.gov/retirement/article/0,,id=255770,00.html http://www.irs.gov/retirement/article/0,,id=111420,00.html#8

I searched the threads and don't believe I've seen this question asked. I also don't find an answer to my question on the IRS website. Situation: Company A sponsors a SIMPLE IRA Company B sponsors a 401(k) Effective 09/01/2012, Company A is merging into Company B and thus Company A will no longer exist as an entity onto itself. The desire by the parties involved is that the SIMPLE IRA can terminate on 08/31/12 (the merger date) and that the former employees of Company A will then be eligible to immediately contribute to the 401(k) plan (the 401k provisions will be analyzed to be sure this can be accomplished from that end). The problem/question - I can't find any guidance that addresses this situation. Every source indicates that without exception SIMPLE IRA plans must be maintained for the full year before terminating. It seems odd that the new entity would have to somehow administer/sponsor the SIMPLE IRA through the end of 2012. The merger date is quickly approaching. Any advice or thoughts would be most appreciated!

Was the money invested in the SEP per participant in the same investmests as would have occured had the money been correctly deposited in the 401K) plan? If not, you may need to consider issues with potential in lost earnings. I agree that something like this should be correctable, but extreme care needs to be taken to be sure all plan participants are made whole. Files should be properly documented to account for the mistake and how it was corrected as well as how procedures have been tightened so as to not allow this type of thing to happen again in the future. IMO, some time should be spent looking at the IRS EPCRS correction program for some guidance. http://www.irs.gov/retirement/article/0,,id=96907,00.html

Due to late tax law changes, it is my understanding that firms had an extension until Feb 15, 2012 this year to mail out 1099R's.