Michael Devault

Your ability to contribute to a Roth IRA is not conditioned on participation in an employer sponsored retirement plan, such as a 401(k). It is, however, conditioned on your AGI and your filing status. If you are married and file a joint return, you can contribute if your AGI is below $150,000. You can make a reduced contribution if your AGI is between $150,000 and $160,000. If you're single or filing as head of household, the AGI numbers reduce to $95,000 for a full contribution, which is reduced for AGI between $95,000 & $110,000. You can contribute to a traditional IRA, but your income is such that you won't be able to deduct the contribution, so there's not much advantage to doing so. Also, your total contributions to a Roth IRA plus a traditional IRA cannot exceed $2,000. As far as making too much money, feel free to send me any excess you may have! Hope this helps.

Can anyone tell me where I can find the Life Table 80 CNSMT mortality table? It is a joint life mortality table that can be used for determining a series of substantially equal periodic payment described in IRC section 72(t)(2)(A)(iv). Any help will be appreciated. Thanks!

I suggest that you check with your financial or tax advisor to determine whether or not conversion to a Roth IRA is best for your situation. However, if you do decide to convert, you first must roll your distribution from STRS into a traditional IRA. This rollover will not cause a taxable event. Then, if you wish and meet the eligibility requirements, you may convert all or a part of your traditional IRA to a Roth IRA. You will have to pay tax on the amount converted, but it grows income tax free once into the Roth. Eligibility to convert to a Roth IRA is based on your modified Adjusted Gross Income, which must be less than $100,000 in the year of conversion. Hope this helps. Best of luck to you.

In their own round about way, I believe the Service is using this example to show how a 415 catch up provision can be used to increase a salary reduction contribution that would otherwise be limited. In the second paragraph describing the example, they conclude that Bob can contribute $13,000. In the column to the right, they make the statement that "without the catch-up elections, $12,250 would be the maximum excludable contribution Elm School could makde to a TSA on Bob's behalf for 1999." The contribution is limited by the 415 limit. Then, they go on to show how the use of the year of separation from service limit can be used as a substitute for the 415 limit of $12,250. This increase then permits good ol' Bob to contribute the $13,000 amount stated in the original conclusion in the middle column. Does this make sense? Sometimes, it helps to have a glass of wine or two before you read IRS publications. Then, have two more afterwards! Mike

While nothing's official until we see it from the IRS (last year, it showed up in IRB 1999-46, Nov. 15, 1999), Buck Consultants has predicted that the only changes for 2001 will be: Section 415 defined benefit limit - $140,000 (from $135,000) Section 415 defined contribution limit - $35,000 (from $30,000) Section 457(B) limit - $8,500 (from $8,000)

Your carrier is correct. Contributions to a 403(B) are subject to three limitations: 1. The exclusion allowance, defined in Section 403(B)(2), 2. The section 415 limit, and 3. The elective deferral limit. If contributions are made by elective deferrals, the limit is the smaller of the three. If employer contributions are involved, the total contribution (employer and employee) cannot exceed the smaller of 1 or 2, and employee contributoins cannot exceed 3. There are some catch up provisions for section 415 and one catch up provision for the elective deferral limit. The year of separation from service catch up is a way to exceed the normal 415 limit in the employees final year of service. While it may allow the normal 415 limit to be exceeded, you're still "stuck" with the elective deferral limit of $10,500 (in 2000), with the possibility of a $3,000 catch up on that limit, bringing the maximum that may be contributed by salary reduction to $13,500. Hope this helps.

While the IRS regulations permit employer contributions to a 403(B), there is nothing that requires them. Most 403(B) plans are "salary reduction only" plans, where the employees are permitted to make pre-tax contributions to their own retirement program. Contributions to Roth IRAs are made with after-tax dollars, so you effectively have to earn more to make the same contribution. And, contributions are limited to $2,000 per year, where you can contribute as much as $10,500 to a 403(B). But, once in a Roth IRA, the money can eventually be withdrawn without paying income taxes on the gain. Both plans offer their own set of advantages and disadvantages... I've mentioned only a few. Perhaps a course of action would be to determine if there is a 403(B) funding medium that will provide you with a better return. There is a wider range of investment choices with Roth IRAs, simply because there is a broader market for Roth IRAs. However, most product vendors offer similar opportunities for 403(B) money. Hope this is of some benefit to you. Good luck!!!

You're right about 457 plans. Rollovers are not permitted (under current law) but transfers are. My expanded explanation: Every rule has its exception... please see footnote. Hopefully, we'll get a pension portability bill signed into law one of these days, so my explanation will no longer need this expansion. Mike

I've long used the approach that transfers are intra-plan movements of money. In other words, money goes from one investment to another, but stay a part of the same plan. Rollovers, on the other hand, are made when a plan makes a distribution (or the participant is otherwise eligible to receive a distribution). Thus, the key to being able to make a rollover is that the client must have the ability to actually receive the money. The way I explain it to clients is: In order to make a rollover, you have to be able to be able to roll the money around in your hand. If you can get money out of a plan due to separation from service or another qualifying event, you can do a rollover. Hope this helps.

Take a look at IRS Publication 590. On page 42 of the version for 1999 tax returns, it says that the five year period begins with the first year for which either a regular or conversion contribution is made to the Roth IRA. From that, my interpretation is that there is only one five year period, and that a new one does not start when a contribution is made for the next year. On the same page, there is a reference to an additional tax imposed on withdrawals within the five year period starting with the year a conversion is made. However, this is only to apply an additional 10% tax on withdrawals of converted amounts. From this, I interpret that there may actually be two five year periods if someone makes a contribution in one tax year and subsequently converts a traditional IRA into the same Roth in a later tax year. In that single instance, there are two five year periods. But, if someone converts one year and makes a regular contribution the next, there is only one five year period. Hope this helps.

Yes, you are, if your adjusted gross income doesnt' exceed the IRS' limits. The limit is $160,000 if you file a joint return or $10,000 (yes, that's 10K, not $100,000) if you file separately. There are no restrictions on eligibility conditioned on your participation in another retirement plan. Hope this helps.

I agree that it can't be done, under current law. Take a look at IRC section 408(d)(3)(A)(ii). That seems to limit rollovers to amounts from an employee's trust, as described in 401(a). Since SEPs are not trusts, I would think that rollovers are not permitted. Hope this is of some help to you.

Yes, if the employee is still employed at or after age 70-1/2, the employer is required to contribute to their SEP on the same basis as other qualified employees. The bad news is that the contribution and earnings must be taken into consideration in determining the amount of required minimum distributions for the following year. The IRA account value on the preceding December 31 is used to determine the RMD, and the account would include any SEP contributions and earnings thereon. Now you know why the call it the Code! Hope this helps.

Under current law, I don't believe she can. Distributions pursuant to a QDRO have to be placed into the spouse's IRA, which would cause the husband's conduit IRA to loose it's complexion as a conduit. However, if the proposed tax legislation ever gets out of the Senate and becomes law, there are portability provisions that might allow her to put the IRA into a corporate plan. Hope this is of some benefit.

You can roll the 403(B) into a traditional IRA without paying current income tax on the rollover. However, if you subsequently convert that rollover (traditional) IRA to a Roth IRA, the amount converted is taxable. And, as Matt pointed out, you have to meet certain criteria in order to be able to convert to a Roth. Hope this helps.

It seems that I was incomplete in my response, but technically correct. While the father is alive, he performs two calculations each year on each of his IRAs. One is an RMD calculation which uses the actual joint life expectancy of he and the appropriate son/beneficiary. The other is the MDIB calculation, using a life expectancy using his age and an assumed beneficiary's age no more than 10 years younger. Then, his required distribution is that which is greater. The end result is that, while living, his distribution is obviously based on the MDIB calculation. But, after his death, payments to each beneficiary/son are based on the remaining life expectancy of each son (because of the use of multiple accounts), thereby stretching the payments into multiple generations. Sorry for the confusion. This is one of those rare instances where everyone is right.

My interpretation of the instructions is that you should use code L with a 1 or 2, as appropriate. The use of the L would distinguish the distribution as a defaulted loan, and the 1 or 2 would indicate whether or not it is subject to the 10% premature distribution penalty, as well. Hope this helps.

You're to be congratulated for planning for your retirement at such an early age. Too many people start planning too late in life and wind up sorry for the procrastination. The main difference between a savings account and a CD is the interest rate and minimum size. Most CDs have a larger minimum size, therefore they generally credit a slightly higher rate. CDs are also less liquid, but that shouldn't be too much of a concern right now for your retirement dollars. Since you're not inclined to take much risk, mutual funds might not be a consideration. However, a number of insurance companies offer fixed rate annuities that currently have higher rates than bank instruments. However, they also have high minimums. Depending on the size of your contribution, you may want to put it into a savings account or CD until you have sufficient accumulations to place it into a vehicle that credits a higher interest rate. And, who knows... some day, you may want to take a little more risk with mutual funds or other equity based investments. Hope this helps. Best of luck to you!

The exclusion allowance calculation is made over a "limitation year," which is generally the calendar year. If you have two eligible employers in the same limitation year, you must make separate exclusion allowance calculations for each employer. You cannot combine salaries, etc. into one calculation. So, you can only use the salary with your current employer. The only coordination of calculations is with the elective deferral limit. You can only defer a maximum of $10,500 per year, regardless of the number of employers. Hope this is of help.

I've read a couple of articles on the matter. It's really quite simple: You maintain separate IRA accounts for each beneficiary. For example, if the father has three sons, he keeps three IRAs, each with one his sons as beneificary. When RMDs are made, the calculations are made on each IRA using the joint life expectancy of the father and the appropriate son. Then, at the father's death, the remaining balance is distributed over each sons' life, and each son names a new beneficiary. Hope this helps.

You might take a look at http://www.rothira.com for information on Roth IRAs. The person at the bank, when mentioning risk tolerance, was likely trying to get a feel for the type of investment that would be most suitable for you. You can invest your contributions to a Roth IRA in bank savings accounts, annuities, mutual funds, etc. Each has its own risk/reward ratio. With some, you have no fear of losing your principal, but the return on those types of investments generally is lower. With others, while you risk the loss of principal, the return is higher. There is a wide range of investment choices... the bank is trying to find a proper fit for you. Hope this helps. Good luck! And, congratulations on deciding to start saving early for your future.

Distributions prior to age 59-1/2 will be subject to ordinary income tax PLUS a 10% premature distribution penalty. The section to which you refer is a way to avoid the 10% penalty. Under that provision, if you take a series of substantially equal periodic payments, the Service views it as taking a retirement income from the TSA, which is not subjected to the penalty. However, once you begin receiving payments, you must continue to receive them, at least annually, for the later of 5 years or when you attain age 59-1/2. The Service has three "approved" methods of determining what consitutes a series of substantially equal periodic payments. It is contained in IRS Notice 89-25. Hope this helps.

Section 403(B)(7) refers to custodial accounts which satisfy the requirements of section 401(f)(2). This latter section refers to "custiodial accounts held by a bank or another person who demonstrates, to the satisfaction of the Secretary, that the manner in which he will hold the assets will be consistent with the requirements of this section." This typically includes banks, insurance companies, mutual fund companies, and some trust companies. I'll bet that your client, when opening his 403(B)(7) account, signed a custodial agreement which specifies that the fund company is the custodian of the account. (It's generally in the fine print... get out your magnifying glass!) Hope this helps.

I'm not sure if this information is available on-line, but the Ohio Department of Insurance's website is: http://www.ins.state.oh.us/ Good luck!

I would think that the new loan would not qualify as a residential loan because it is not being used to acquire the participant's residence. Section 72(p)(2)(B)(ii) states that the exception to the 5 year rule applies "to any loan used to acquire any dwelling unit which within a reasonable time limit is to be used (determined at the time the loan is made) as the principal residence of the participant." Since the dwelling unit has already been acquired, I don't see how the loan could qualify for this exception. What does the plan administrator have to say about this issue?