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.

I don't believe so. The five year period is written in the law in section 403(b)(3), which defines includible compensation.

This provision was added to the Internal Revenue Code by P.L. 99-514 (the Tax Reform Act of 1986) for years beginning after December 31, 1986. I hope this helps.

The "holding" of the ruling states that "If an individual transfers...". The key word is "if." The ruling only addresses the fact that transfers are not taxable if the conditions of the ruling are met. There's nothing in the ruling that requires plan language to permit transfers. Additionally, there's nothing in any other provision of the tax law (at least, to my knowledge) that places a requirement on plans to allow transfers from a 403(b) plan. Thus, if a plan is so structured, participants can be denied the ability to make transfers. Alternatively, if the plan so elects, transfers can be made without current taxation under the provisions of Rev. Rul. 90-24. I would argue that if the plan is silent on the matter of transfers, they are permitted. Hope this helps.

Revenue Ruling 90-24 permits a 403(b) plan participant to transfer funds from one 403(b) account to another without incurring a taxable event. However, the ruling does not require plans or vendors to make the transfer... the ruling is permissive, not mandatory. Also, if your plan and vendor do permit the transfer, the transfer would not be without charge. I suspect that the current account has some form of penalty for the early withdrawal of funds, which you would still incur if you made the transfer. You may want to consider redirecting your current contributions to a new vendor and simply let the current account coast along until withdrawal penalties are gone. Hope this is of some value to you.

You can take advantage of the age 50 catch-up for the entire year during which you attain age 50 or older. Thus, if your 50th birthday is on December 31, 2005, you'll be able to take advantage of the catch-up for the entire calendar year 2005. Hope this helps. Happy holidays!

You might also find the comparison website established by the California State Teachers' Retirement System. The address is www.403bCompare.com This is the comparison website that Cal STRS is required by law to administer. I don't believe that they are required to validate the information that's provided by the various vendors, but it does provide good summary of what's available. I hope it's of use to you.

I contend that you're received inaccurate advice. If you sever your employment during or after the year in which you reach age 55, as you said you plan to do, the law allows you access to your money. And, there is no 10% federal penalty if you receive a portion of your money. Refer to Internal Revenue Code section 72(t)(2)(A)(v). This section specifically exempts distributions that are received after separation from service after attainment of age 55. Any distribution that you receive will be subject to a mandatory 20% federal withholding because the distribution would be eligible for rollover to an IRA or another plan. But, since the distribution would be includible in your gross income if you decide to keep it and spend it, that shouldn't be too much of a burden. It's just like withholding from your paycheck... you prepay your taxes and settle up with Uncle Sam on April 15. So, absent any restrictions that the plan imposes, you should be able to take distributions, after you retire, without any penalty. Hope this helps. Good luck to you.

There are three options that quickly come to mind: 1. Leave the money in the 403(b) account and let it continue to grow on an income tax deferred basis. 2. Roll the money into an IRA. Then, if you so desire and qualify, the IRA could be converted to a Roth IRA. You'll pay tax, but further growth in the Roth IRA will likely be income tax free. 3. Begin taking income distributions. This will result in the amount taken to be treated as ordinary income and, therefore, subject to income tax. But, because you're separating from service during or after the year in which you attain age 55, there will be no 10% federal income tax penalty. I'm sure that others will offer some other suggestions, but I hope these are of some benefit to you.

It's my understanding that the catch-up can be used only during the three tax years ending before he or she attains normal retirement age. The catch-up cannot be used for the year in which he/she attains normal retirement age. Therefore, if he/she attains age 70-1/2 sometime in 2009, for example, they can use the catch-up in 2006, 2007 and 2008, but not in 2009. I'm not aware of any other instances where the catch-up can be used. Hope this is of some help to you.

It is permissible to purchase service credits through salary reduction. However, such purchases may have an impact on the amounts that may be contributed by salary reduction to other plans, since the purchase amount is considered an elective deferral. Hope this helps.