Appleby

Agreeing with earlier comments-Regular Traditional IRA contributions up to $3,000/$3,500 may be contributed to a SEP IRA. But if the only contribution to the account is the regular IRA contribution, then it is not a SEP as it is the employer contribution that makes a Traditional IRA a SEP IRA.

If you mean whether a Coverdell Education Savings Account (CESA) can be established as a certificate of deposit, instead of as a regular deposit account – yes.

Try (202) 622-6070

Tell me about it. It’s RMD season as you know, and more than once I made reference to the RMD rules when the other party was on a different topic. Side-effects of our trade

Actually , the question is about distributions to beneficiaries ( see Jane123’s question). SoCalActuary- the exception would be “due to death” MGB, since it’s actually a require minimum distribution (RMD), it would be a minimum , not a maximum.

Treasury and IRS Propose Retirement Annuity Regulations http://www.treas.gov/press/releases/js2099.htm

SEPs can be rolled or transferred to a Traditional IRA- in fact SEP contributions are made to a Traditional IRA …, any rules that apply to Traditional IRA applies to a SEP.

I don’t think the employer has any cause for worry, since SEP contributions are usually discretionary...an employer that decides to fund the SEP may fund it at zero to 25 percent. Usually, the only notification that the employer provides is the notification to announce the establishing of SEP- so it is very unlikely that the employer made any announcement promising to fund the SEP for 2003. The “taking away” of a benefit usually applies to plans where contributions are mandatory such as money purchase pension, defined benefit and target benefit plans and such. Failing to fund the SEP for a year should not cause any problems for the employer. One of the key benefits ( for employers ) of the SEP is the flexibility to choose not to fund it for a year or few- is situations such as these exists.

Bumping this up a notch to see if anyone has any suggestions/comments

He can definately do that- because he would have satisfied the RMD prior to the rollover

mbozek I agree that the 04 RMD cannot be rolled to an IRA if received in 05 instead of 04. But then, it still cannot be rolled to an IRA if it is received in 04. If the example that stemmed the question, the business owner must distribute the RMD before rolling over the balance to the IRA. If the rollover occurs in 2004, the 2004 RMD must be distributed before the rollover occurs. If the 2004 RMD is delayed until 2005, and the rollover occurs in 2005, both the 2004 and the 2005 RMD must be distributed from the plan before the balance is rolled to the IRA. Failure to distribute the RMD before the rollover will result in an ineligible rollover to the IRA (the ineligible rollover amount being the RMD amount), which is subject to correction by removing the RMD amount from the IRA as a return of excess contribution. See Blinky’s cite above

So are we. I can’t put my hands on one of agreements with the RMD requirement right now--- I am part of a small group discussing these trends and one of the concerns brought up by the group is the requirement for the custodian to distribute the RMD without written request from the account owner. I am trying to get a copy of that agreement. During one of our earlier discussions, we all agreed (with your POV) that since the owner could satisfy the RMD from another 403(b), the requirement does not seem to be reasonable. OTOH, we could have a standing order on file or written confirmation that the RMD is being satisfied elsewhere- quite frankly, we prefer not to do more than provide the annual notification (reminder that RMD is due for the year) that we already provide… I do have a copy of another agreement that places some unusual demands on the custodian. I can send you a copy VIA E-mail. I am not sure if it is OK to place it here.

mbozek, I think you meant to say "MRD as a separate payment not subject to 20% withholding" right?

Just came across this post while searching for something else, and noticed the $100 percent withholding comments, which was addressed in Field Assistance Bulletin 2004-02 ( which you may have already read) which says in part

Good point...especially the getting paid enough part. Unfortunately, those organizations do not agree with you. They are trying to make the custodians responsible and possibly liable. It all comes down to the decision makers. Many custodians would agree that your POV is logical and would wish that you were in charge or making these decisions…but... unfortunately these administrators does not see it your way, and for now, custodians who refuse to play ball are not being allowed to receive contributions into 403(b)s established by employees in the plans they administer.

Not usually Joel. For most 403(b) and IRAs, the documents are written to place the responsibility for satisfying the RMD on the account owner. Another reason why some organizations are trying to formalize 403(b) relationships with custodians by having them sign hold harmless agreements, which includes a requirement that the custodian takes on a more administrative role, which includes disbursing amounts for RMD when it is due, even without a written request from the account owner

I know I’m very late on this but (checking for something and came across the post) … or maybe I didn’t post because Fishchick already posted the right answer...anyway, it seems your suggestion would be the only workaround franky.

Here ya go.... http://www.aspa.org/edu/study-guide-references.htm

OK . Thanks for clarifying. That makes absolute sense, including the the paying to amend part.

While this seems like a good suggestion, I would be wary of choosing that option for two reasons: 1. Why pay someone to prepare an amendment when you can do it for free by completing the adoption agreement? Depending on the changes, all one has to do is copy most of the information from the original adoption agreement 2. It appears steven55 is using a prototype plan. Using documents prepared by some other party to amend the plan could result in a modification of the adoption agreement that results in the employer now having an individually designed plan, which means he could not rely on the opinion letter issued for the prototype. Much safer to use paperwork that the prototype sponsor provides.

As steve55 indicated, that was the only logical choice on the adoption agreement. For instance, a prototype plan generally has two options, which are: 1) This is a new plan effective this year or 2) This is an amendment and restatement of an existing plan. Option 2 would not necessarily be limited to an amendment and restatement due to legislative changes such as GUST, but would also be used if the employer is changing prototype sponsors or amending features under the plan- I know, it seems somewhat misleading and maybe should have been amendment and/or restatement perhaps? It appears the route that should have been taken was to amend and restate plan # 2, by adding the salary deferral feature, by completing the adoption agreement for the Individual (k) Plan…as it stands now, merging the profit sharing plan into the Individual (k) Plan (as suggested below), seems to be the best option from all perspectives.

Using the 415 approach… From …. Panel Pension Library Deluxe Panel Answer Books 401(k) Answer Book - 2004 Edition Chapter 8 — Contribution Limits Code Section 415—Annual Addition Limits Q 8:42 What are the tax implications of elective contributions that are returned to a participant to correct a Section 415 violation? The tax consequences of returned elective contributions are as follows: 1. The distribution is includible in income for the taxable year distributed. 2. The distribution … 3. The distribution … 4. The distribution is not … 5. No consent …. 6. The distribution is subject to voluntary withholding under Code Section 3405. Thus, it is not considered an eligible rollover distribution. 7. The returned elective …. [Treas. Reg. § 1.415-6(b)(6)(iv); Rev. Proc. 92-93, 1992-2 C.B. 505] Some text deleted for copyright reasons.

I think we agree on when the amount would be taxed. What we appear to disagree about is whether the withholding rules apply to the amount. Let’s separate the two issues. Unless you are saying that because it is taxed in the previous year 3405 does not apply ??? which I do not think is the case … Note that I am not saying that you are wrong…but... At first, I also thought Rev Proc 92-93 only addressed 415 excess amounts. However, it also says… “The distribution of elective deferrals pursuant to section 1.415-6(b)(6)(iv) is a corrective disbursement rather than a distribution of accrued benefits. Thus, it is analogous to distributions under sections 401(k)(8) (distribution of excess contributions), 401(m)(6) (distribution of excess aggregate contributions), and 402(g) (distributions of excess deferrals).”…. Therefore, Rev Proc 92-93 appears to include amounts that are excess deferrals due to failure of nondiscrimination testing. agreed? From the instructions for filing 1099-R and 5498 “To determine your withholding requirements for any designated distribution under section 3405, you must first determine whether the distribution is an eligible rollover distribution. See Direct Rollovers on page R-2 for a discussion of eligible rollover distributions. If the distribution is not an eligible rollover distribution, the rules for periodic payments or nonperiodic distributions apply. For purposes of withholding, distributions from any IRA are not eligible rollover distributions. “ Do you still think the withholding does not apply?

Rev. Rul. 2004-12 attached Rev._Rul._2004_12.pdf

IMHO, Spousal Consent is required… From Revenue Ruling 2004-12 ”a distribution of amounts attributable to a rollover contribution is subject to the survivor annuity requirements of §§ 401(a)(11) and 417...as applicable to the receiving plan."....it would seem then the loans are subject to the same requirements...