Michael Devault

I would argue that it's not an exchange because ownership has not changed. The joint annuitant has no control over the terms of the contract. Adding a joint annuitant simply changes the measuring period for income payments when the annuity contract reaches its maturity date. It would be similar in concept to changing the payout period from, for example, a lifetime payout to one that is made over a fixed period. And, when payments begin, the fact that a joint annuitant has been added will impact the exclusion allowance calculation. But aside from that, the joint annuitant shouldn't have any effect on income taxation.

Can you determine how the existing company will report it to the IRS? If they code the 1099-R as a 1035 exchange, you're good to go. Most likely, they will because transfers among spouses are not taxable events. Plus, companies tend to view the "obligee" as the contract owner, since the owner is the one that controls the contract. If they decide not to code it as desired, a potential work-around will be to have the new contract issued with the same annuitant and owner designations. Then, once issued, have the new company re-issue the contract with joint annuitants. HTH

I'm not sure which version of Excel is being used, but the Office 365 version contains the IFS function that checks whether one or more conditions are met and returns a value that corresponds to the first TRUE condition. The syntax is: IFS(logical_test1,value_if_true1,[logical_test2,value_if_true2],[logical_test3,value_if_true3],...) Logical_test1 is required, as is value_if_true1. You can nest up to 127 different conditions.

You might take a look at Regulation 1.401(a)(9)-5, A-1(b) where a Distribution Calendar Year is defined. I believe it will substantiate your position. Hope this helps.

I'll echo Mr. Rigby's comments about RPN. I've used a HP12C for over 20 years and believe it to be a more logical approach to calculations. Moreover, it only takes about 30 minutes of tinkering with the calculator to get used to the concept. But, there's another, hidden advantage to the HP12C. When others in the office find that there is no key on it with an equal sign, they quit asking to borrow it. While other calculators I've had seem to have disappeared, I've been using the same HP12C all these years. Good luck!

Not of which I'm aware. If you withdraw money from the Traditional IRA and don't qualify for one of the exceptions, the 10% penalty will apply.

Here's my attempt at answering your questions using the same reference numbers as your original post: 1. The administrator of the 401(k) plan will send the entire amount of the distribution to the IRA custodian. Because this will be handled as a direct rollover, there will be no income tax liability as a result of the direct rollover. It's important to make sure the money is sent in this manner, otherwise the 401(k) plan will be required to withhold 20% for federal income taxes, much like withholding from earnings is made by an employer. 2. For the remainder of 2007, the rollover must first go into a Traditional IRA. Once there, it may be converted to a Roth IRA. That conversion is what triggers a taxable event. The amount converted will be included in your ordinary income in the year converted. (It may be a consideration to convert part in 2007 and part in 2008 if you want to spread taxes over a couple of years.) If you need to withhold money to pay the taxes, you can withdraw enough from the Traditional IRA before converting it to the Roth IRA. However, keep in mind that the amount withdrawn in cash from the Traditional IRA will likely be subject also to an additional 10% penalty. For example, if you withdraw $1,000, you'll have to pay taxes on that $1,000 PLUS a $100 penalty. 3. No. The Traditional IRA can be converted to a Roth IRA on the same day the Traditional IRA is established. 4. You may convert all or any portion of the Traditional IRA to a Roth IRA, just as long as your adjusted gross income is $100,000 or less and you don't file a separate return if you're married. Hope this helps. Good luck!

It's my understanding that if the penalty is paid, you don't have to take the distribution, too. Keep in mind that the IRS may return the amount paid for the penalty if the RMD wasn't taken because of an error and steps are being taken to rectify that error. In this situation, the RMD would obviously have to be taken, and the penalty paid, in the hope that the IRS would forgive the error and return the penalty payment. I hope this is of some benefit.

It's also clarified in IRS Pub 590 (for IRAs). The most recent version I have is for 2005 returns, and on page 49 it states: "After you reach age 59½, you can receive distributions without having to pay the 10% additional tax." Hope this helps.

On a fixed annuity (in contrast to a variable annuity), there is no distinction between the two. When a policyowner pays a premium, it becomes part of the general assets of the insurance company and is invested as such. Thus, a loan is also part of the general assets of the company. Of course, separate accounting is maintained in order to determine the policyowner's account balance, loan balance, etc., but each policyowner's balance is not identified to a specific investment.

Since you can't roll the plan distribution directly into a Roth IRA, the best way to get to the desired result is to first roll the distribution into a Traditional IRA. You should effect a direct rollover where the money goes directly from your plan to your IRA. This type of rollover will avoid income taxation, mandatory income tax withholding, etc. Then, when the money is in the Traditional IRA, you can convert it to a Roth IRA if you're eligible to do so. In order to be eligible for a conversion, your adjusted gross income has to be less than $100,000 and, if you're married, you have to file a joint return. Upon conversion, you'll have to pay income tax on the amount converted, but no penalties will be asssessed. Some product vendors will handle this as a seamless, one-step transaction. When you select an IRA vendor, tell them that as soon as the Traditional IRA is set up, you want to convert it to a Roth IRA. Then, when they receive the funds from your former employer's plan, they will take care of the administration. Hope this is of some benefit to you.

This is just a guess, but it could stand for Towers, Perrin, Forster & Crosby.

Double or nothing? Placed under arrest?

The amount of taxes you owe are dependent upon a number of things, such as your filing status, exemptions and deductions. But, taxes will be due on the distribution in the year the distribution was made. Based on your roughly $50,500 of gross income ($40,000 earnings plus the $10,500 deemed distribution), let's assume that you'll be in a 25% marginal income tax bracket. Based on that assumption, the deemed distribution will increase your taxes by $2,625 PLUS a penalty of $1,050, for a total of $3,675. Please keep in mind that these are approximations: The actual amount of income tax will be revealed as you complete your income tax return. There's also a possibility that you will incur an additional penalty for under withholding. The $10,000 deemed distribution will increase your taxable income and, therefore, your tax liability. Since the US income tax structure is "pay as you go," the Code imparts penalties on those who don't pay enough during the year in the form of withholding from wages or other payments or by filing quarterly estimated tax payments. I'm not saying that this is certain to apply in your case, but only mention it as a possibility. As for the loan, it will continue to accrue interest until such time it can be offset with a distribution from the plan, as I mentioned in my earlier post. You won't have to pay this interest out of pocket each year, but it will ultimately reduce the amounts you accumulate in your retirement account.

The amounts in default will be treated as "deemed distributions," which will cause them to be included in your gross income, thus taxable. In addition, unless you are age 59½ or meet another exception, there will be a penalty tax equal to 10% of the amount that's included in your gross income. And, until you attain age 59½, sever employment, die or become disabled, the loans will continue to accrue interest. Only when one of the aforementioned events occur will the loan be "offset" by reduction of the accumulated value of your 403(b) account. Finally, the defaulted loans will impair your ability to make future loans from your 403(b). I hope this is of benefit to you.