Appleby

No. It does not. You are eligible to make your regular IRA contribution providing you have eligible compensation . See page 8 of IRS publication 590 available at http://www.irs.gov/pub/irs-pdf/p590.pdf

Can attach only one file per post Private_Letter_Ruling_8439066.pdf

That reminds me: the PLRs attached Private_Letter_Ruling_8527083.pdf

Technically, a direct transfer is a non-reportable transfer ( movenemt of assets) that occurs between trustees/custodians or plans. These are never reported as distributions ( on 1099-Rs). A direct transfer ( trustee-to-trustee transfer) can only occur between similar types of plans, for instance between two traditional IRAs or between two QRPs maintained by the same employer.. To move assets from an IRA to a qualified plan, it must be done as a direct rollover- not a transfer. A 1099-R must be issued for the distribution from the IRA

In the name of customer service, surely the custodian can consider waiving the fee under the circumstances. To answer your question though, amounts paid for fees are not treated as distributions and should not be included on the 1099-R (can’t find this in the 1099-R instructions, but confirmed in the Pension Answer Book) ...Technically, $3 should be added to the account so that the fee can be collected and the account closed…or maybe the custodian could make an exception and charge only $12??.

http://www.irs.gov/pub/irs-tege/simple__checklist.pdf

New member announcement ---member by the name of " No Name". What do you think? Nomination worthy?

leclark, The IRS has updated Publication 590 to reflect the correct amount and deleting the sentence you quoted above. Yes, they were tardy, which as I said before, is expected at this time of year… but in the interim I received four calls from them in response to my letter… incidentally, three of the responses said the publication was right ( as it was in your quote) and one said it was in fact incorrect and that it would be changed as soon as possible. The change has been made. The new version is at http://www.irs.gov/pub/irs-pdf/p590.pdf

You have been doing the right thing. Your friend has the explanation transposed. The income limits apply to contributing to your Roth IRA, not establishing a Roth IRA. You can always transfer or rollover existing Roth IRA balances to your new Roth IRA- no income limits apply to these transactions. But for years that your income exceeds the limits, you are not eligible to contribute (new funds) to your Roth IRA.

No Explanations necessary- Most of us use this board just to save time. This was not changed by EGTRRA. The SIMPLE deferral was always part of 402(g) since it’s inception (1997).

My initial reaction was to say yes, because the only two references (PLRs) I could find on the topic disallowed the contribution for the year of death- not for the prior year. However, language in at least one PLR states that since the contribution is for retirement, the contribution is not allowed for the deceased. This led me to conclude that whether the contribution applies to the current or previous year, it is not allowed for a deceased... In PLR 8439066, the IRS ruled that the estate could not contribute to the IRA of the deceased for the year of death, if the contribution is being made after the individual died. Had the amount be contributed before death, it would have been OK. The question then becomes, would the contribution be allowed for the previous tax-year if the individual died after the end of the year? It appears not. In the same PLR, the IRS stated that “Since the taxpayer is deceased, the contribution made by the deceased’s Estate would not be a contribution for retirement purposes”, which would suggest that any contribution after death is not allowed. Another quote from the PLR is “Section 1.408-2(a) of the Income Tax Regulations specifies the person who may establish and maintain an IRA to include an individual, an employer, or an employee association. The regulations do not provide that the decedent’s personal representatives, the decedent’s estate, or beneficiaries of the decedent’s estate can establish or maintain and IRA on behalf of an individual. This is because the primary purpose of the IRA is for retirement.” If the wife wanted to make a spousal IRA contribution on her behalf, based on her deceased’s husband income, then that would be allowed. PLR 8527083. I am out of the office today. Tomorrow I will attach the PLRs so you can review them and make your own interpretation

I am inclined to agree to some extent -especially since the request was for the total balance in the account. However, if it has been more than 6-months since the employee/participant requested the distribution, I would be cautious, as it appears that the withholding notice for a Nonperiodic distribution should not be more than 6-months old. See Temp Treas Reg § 35.3405-1, Q&A D9

See http://www.ustreas.gov/press/releases/js1073.htm for some guidance

If he is a corporation, what is his DOB- the date of incorporation? Did he meet the age requirement under the plan? Plans usually define participants as individuals who have met the age and service requirements. OTH, playing advocate … Technically, the definition of an individual could be defined as non-person- including a corporation- IRC § 7701(a)(30)(B)-© defines a corporation as U.S. person ... assuming the payee is a corporation, does that exempt the corporation from withholding? I am not sure, but I am leaning to no. IMO, there are no provisions to exempt a payee from withholding from a QP if the distribution is rollover eligible. Take a look at Treas Reg § 1.1441-1©(2) …what do you think?

All my co-workers use pseudonyms…and they think I am silly for using my real name – I wonder Do we recall when Dave just revamped the message board? It included a requirement that displayed the poster’s IP address (I found out then that one member was my co-worker and was able to tell who she is by the IP address- albeit her pseudonym… ). For us, we didn’t want to post then, because our firm is very conservative and we are cautious about our comments being misconstrued as responses provided by our employer, instead of us-as simple wannabe experts. As Chip said, paranoia runs deep. Using a pseudonym gives you anonymity from the general public- so you may be covered in that respect. …but make sure you make no threats; reveal secrets; make incriminating comments etc… as Dave or any party who maintains the board can determine your identity through your IP address, which is always available, even if we can’t see it on the post.

I can’t put my hands on the reference now, but I know that the advisory fee is not a taxable transaction, because it is considered an administrative fee. The custodian should be able to use an invoice from the money manager, along with written permission from you ( the IRA owner) to make the payment as a non-reportable transaction. Many custodians handle this type of request.

Cannot handle as a distribution, unless you receive written instructions, including the necessary withholding election from participant. I vote, take instructions from the employer to either reopen the existing account or open a new account…unless you can find the employee in time to provide the instructions.. The employer is allowed to open a SIRA on the employee’s behalf, in the even[t] the employee cannot be located or refuses to sign necessary paperwork to establish the IRA

It depends on which withholding you refer to. I think Earl is addressing the 20 % mandatory withholding ( for eligible rollover distributions from QPs),... this would not apply. You (Pensions in Paradise) may be referring to the 10 percent withholding , which applies if the necessary waiver is not provided. Reminder to self- Must get copy of ERISA Outline Book- especially since everyone keeps referring to it and seems to think it is such a great reverence tool

It appears not...The eligible rehired employee should be notified of his/her eligibility to participate in the plan during a special election period, which is 60 days, beginning on or before the day the employee is rehired. As a result, the rehired employee need not wait until the next election period (under the plan) to participate.

It depends. If you have made at least $4,500 in regular contributions, conversions or both, and have not taken any distributions from the Roth IRA to date, then the amount will definitely be tax and penalty free. Otherwise, we would need more details to provide an accurate response ( of course , based on the information provided) . See the thread at http://benefitslink.com/boards/index.php?showtopic=19386&hl= for additional information

If the individual is a nonresident alien, then the IRA custodian is required to withhold 10-percent for federal tax (under IRC 3405) from non-periodic distributions ( or the periodic rate for periodic distributions). The IRA owner may elect to waive this withholding, but then becomes subject to withholding under IRC 1441, which is 30 percent or the treaty rate- for this purpose, the individual must provide Form W-P and Form W-8BEN. For withholding under IRC 1441 , the distribution is reported on Form 1042-S, not Form 1099-R…this is so even if the treaty rate is zero.

I am a little confused by your post, Appleby. In the context of Lynn's question we are talking about a participant that rolled over the RMD amount and the penalties that could apply. I am not sure how the 10% early distribution penalty would come into play here since the participant is definitely over age 59 1/2. Am I missing or misunderstanding something? There are only two penalties that I can think of that one might we worried about here. 50% penalty for not satisfying the RMD requirement - In this case the RMD requirement is satisfied because the first payments out of the plan are treated as satisfying the RMD requirement in a year in which there is a RMD required. Even if the entire amount is rolled over, the RMD requirement has been met by the plan. Treas Reg 1.402©-2, Q&A 7. The only problem is that a portion of the amount distributed is ineligible for rollover. I agree that there should be 2 1099R's from the plan. One for the RMD amount and the other for the remaining rollover amount. Which brings into play the second penalty...6% penalty on an excess contribution to an IRA. To avoid the penalty the ineligible rollover plus earnings must be removed from the IRA before 4/15. The earnings must be included here or they will be subject to the penalty. TBob, Your statement was ....You are right is saying there are no penalties…it however appeared you were referring to the 6-percent excise penalty. Also, your reference to earnings can only apply to earnings accrued on the excess while it was in the IRA, since it only becomes an excess in the IRA and only then earnings are distributed with the amount.. . The issue of earnings would not apply to the Q.P. Therefore, my comment was in response to the meaning portrayed in your comment. mbozek – I have to agree with TBob about ‘looking at it from the plan’s perspective’, because he/she is right. As you know, the first amount distributed from the plan (regardless of to what of whom paid), includes the RMD amount. As you know, an RMD amount is not rollover eligible. Therefore, the error is that the RMD amount was rolled to the IRA. Your position is that the direct rollover is technically not a distribution to the IRA owner…but it is… Look at 408(d)(5)(B), which provides for the correction of an ineligible rollover, if the ineligible rollover is due to erroneous information. This supports the position that an amount rolled to the IRA can be a distribution, if it is ineligible to be rolled over…and that it can be corrected by removing the amount from the IRA-not by returning the amount to the plan as you suggested. Further, under this Code Section, the ineligible rollover amount returned to the IRA owner is non-taxable…which is not the case for other excess IRA contributions. .. the amount is non-taxable because any taxable treatment would have been applied to the funds when it was distributed from the plan…

I just came across this post and though I would update my comments… Under the Consolidated Appropriations Act of 2001 [PL 106-554], retroactively effective to January 1, 1998, distributions from Roth IRAs(with one exception) are not designated distributions, and therefore are not subject to withholding. The exception applies to earnings on excess contributions returned timely to the IRA owner. Code Section §3405(e)(1)(B), has also been updated as follows “ For purposes of clause (ii), any distribution or payment from under an individual retirement plan (other than a Roth IRA) shall be treated as includible in gross income”

There is no withholding, as the withholding rules do not apply to a direct rollover

I agree with Barry. I vote that you try the custodian route (second choice) first. If the IRA custodian caused the error, then it is very likely that they (the custodian) will accommodate a request to make a correction. The third custodian (the one currently holding the assets) may require some written confirmation from the custodian at which the error occurred, that they have completed any required corrective tax reporting. For instance, if the assets were transferred from a Roth IRA at U.S Bank, to a traditional IRA at let’s say ABC Custodian, ABC custodian may need to correct any tax reporting they did for the IRA…This will help to correct the audit trail so that it reflects all Roth IRA related activity and tax-reporting. The third custodian would move (adjust) the assets from the traditional IRA to the Roth IRA as a non-reportable transaction(so it is not reported on Forms 1099-R and 5498 as a Roth conversion)…and should make adjustment to any tax reporting that they handled for the account for 2003- for instance, the fair market value (FMV) report. One precedence is Wood v. Commissioner, 93 T.C. 114 (1989).