Michael Devault

There's no reason to keep the deferral percentage at 16%. That was set back in the days of the Exclusion Allowance and when elective deferrals were not considered part of includible compensation. EGTRRA changed things by eliminating the Exclusion Allowance calculation, adding catch-up provisions for participants over age 50 and increasing the 415 limit. If the plan isn't changed to reflect the new law, the only thing that is accomplished is placing an unneeded (and perhaps unwanted) restriction on the ability of employees to contribute. Hope this is of some benefit to you.

I believe that this was changed by the Small Business Job Protection Act of 1996. Amounts deferred under a deferred compensation plan maintained by a state or local government must be held in a trust (or custodial account) for the benefit of the plan participants. Look at IRC section 457(g). Hope this helps.

I agree with maverick. The language of section 72(t)(2)(A)(v) reads: (v) made to an employee after separation from service after attainment of age 55. In order for the exception to apply, you have to separate from service in or after the year in which you attain age 55. If you separate from service at 54, for example, you are forever unable to use the "age 55" exception to avoid the 10% penalty.

They are likely talking about the new Tax Savers Credit. It's an income tax credit allowed for making contributions to a retirement plan. The amount of the credit is based on your tax filing status and your adjusted gross income. Complete details can be found in IRS announcement 2001-106, which appears on page 416 of Internal Revenue Bulletin 2001-44. This bulletin is available on the IRS' web site. Hopefully, you can find it at: http://www.irs.ustreas.gov/pub/irs-irbs/irb01-44.pdf

It's my understanding that, since 2002 is her first distribution calendar year, she could take the distribution at any time during 2002 and include it in her income for 2002. Alternatively, she could wait until April 1 of 2003 to take the distribution, which would be included in income for 2003. Hope this helps.

Sure. Keep in mind that a SEP is nothing more than an IRA. So, you may do anything with it that you can do with an IRA, including rolling or transferring it into another IRA. Hope that helps.

The limit applies to all of your accounts in total. During 2002, you may not contribute more than $3,000 in aggregate to all of your Roth IRAs and traditional IRAs. Hope this helps.

I don't believe so. Section 1.403(B)-3, A2 of the final regulations is pretty specific. It indicates that the RMD rules apply only to 403(B) benefits accruing after December 31, 1986. There is nothing that gives a similar exemption for 457 plans. Hope this helps.

IRC section 408(a)(3) says that an IRA cannot contain elements of life insurance. Treas. Reg. section 1.72-16©(4) indicates that the net amount at risk (the death benefit minus the surrender value) is treated as life insurance proceeds under IRC section 101(a) IF the PS58 costs are paid with after-tax contributions or are included in taxable income, as in your case. Section 101(a) excludes the death benefits from income. Hope this helps you. Mike

I'm not sure if it ever goes away. However, in the instances I've seen, the employer simply stops making contributions and freezes the 403(B) plan. This seems to do the trick for all practical purposes. I would guess that when all participants with frozen accounts retire or die, the plan goes way for good. But that's just speculation on my part.

Yes, its still the case. In order for the 403(B) assets to be merged, it would require that the 403(B) plan be terminated. There is no authority or procedures for terminating a 403(B) plan. Hope this helps.

Look at IRS Publication 575 (Pension and Annuity Income). The "age 55" exception and others are listed there. (The reason the "age 55" exception is not in Pub. 590 is because it doesn't apply to IRAs and the other plans discussed in that publication.)

In answer to your questions: 1. The contribution limit for Roth IRAs and traditional IRAs increased on January 1, 2002 to $3,000. 2. You can contribute to both, but the total contributions to both cannot exceed the $3,000 limit. 3. The entire $3,000 contribution to a traditional IRA may be deductible, depending on whether you're covered by another retirement plan at work. By the way, if you're 50 years old or older, there's a $500 catch-up available, making the total contribution $3,500 this year. Hope this helps.

If Adjusted Gross Income is $95,000 or below, you may make a full contribution. The amount of contribution is reduced for AGI between $95,000 and $110,000. If your AGI is more than $110,000, no contribution may be made. Hope this helps.

Prop. Reg. 1.401(a)(9)-5, Q4 says you use the distribution period based on "the employee's age as of the employee's birthday in the relevant distribution calendar year." Since the first distribution in this case will be for the 2002 distribution year, you would use the employee's age on their birthday this year. Hope this helps.

Absolutely! In addition to contributions to IRAs, the Saver's Tax Credit is applicable for contributions to salary reduction contributions to the following types of plans: 401(k) (including a SIMPLE 401(k)) 403(B) governmental 457 SIMPLE IRA Salary Reduction SEP

It's my understanding that governmental 457 plans are exempt from ERISA's reporting requirements. However, tax-exempt nongovernmental employer plans are not exempt from the reporting requirements of ERISA. Hope this is of some benefit to you.

When you contribute the $2,000 for 2001, make sure that the custodian understands that it is a contribution for the calendar year 2001. Otherwise, they'll likely code it as a 2002 contribution.

If you plan on having a cocktail session after the presentation, here's a limerick that you can try, if you like. Wouldn't make in part of the formal presentation, however. Here is a quick little tip-a, 'Bout a law that's known as HIPAA. My advice is to try, Real hard to comply, Or else a new one they'll rip ya!

You may contribute the full $11,000 (or $12,000 if over 50) into your 403(B) account. The $11,000 limit is for elective deferrals. Under section 402(g)(3)(D) of the Internal Revenue Code, contributions which are made pursuant to a one-time irrevocable election made at the time of initial eligibility to participate are not considered elective deferrals for measuring the annual limit. Therefore, mandatory contributions to ORP and TRS don't count against the limit. Hope this is of some benefit to you.

You might take a look at Private Letter Ruling 200050046, which has an almost identical set of circumstances. In the ruling, the Service concluded that the split didn't cause a modification of the series of payments, thus no penalty was imposed. Hope this is of some benefit to you.

You can establish the IRA for the employee. Proposed regulation section 1.408-7(d)(2) permits this in order to safeguard the tax qualification of the SEP for other employees. You'll have to provide the employee notice, either in person or by mail. I suggest mail, return receipt requested, in order to have evidence of the notice. You should also set it up at a bank or similar institution where there are no fees and/or charges. That way, if the employee surrenders the IRA for cash, they will have the entire contribution (less taxes and penalty, of course). Hope this helps.

Mkelly: You can find this written on page 58 of the current version of Publication 590. It specifically says, "You are not required to take distributions from your Roth IRA at any age." Hope this helps!

For 2001, the maximum is still $2,000. For 2002, the maximum will increase to $3,000. In addition, if you're 50 years old or older, you can make a catch-up contribution of $500, for a total of $3,500.

There are two types of distributions from Roth IRAs: Qualified distributions and non-qualified distributions. Qualified distributions are those made after a 5 year "holding period" AND made on account of death, disability, after attaining age 59-1/2 or for first time homebuyers. These distributions are not included in income and are, therefore, income tax free. Other distributions are included in income to the extent of any gain in the Roth IRA, after principal is withdrawn. Further, there may be a 10% penalty on the amount included in income. One exception to the 10% penalty is for certain educational expenses for you, your spouse or your children. So, while you can use the money to pay for educational expenses, any gain you withdraw from the Roth IRA will be subject to income tax, but not penalties. Take a look at IRS Publication 590 for more information. It's available on the IRS' website. Hope this helps.