Appleby

Check other custodians too. There are some that will allow the IRA to invest in restricted and non-publicly traded stocks, provided the requirements under IRC 4975 are met. List of Nonbank Trustees and Custodians available at http://www.unclefed.com/Tax-Bulls/2003/ann03-54.pdf

Yes. You are right

Hi Lynn, In my opinion, that would be a very good reason to roll the assets to the IRA before death. On the other hand , if the participant dies before being eligible to receive a distribution from the plan, and rolling the assets to the IRA before death is not an option, there may still be an attractive option for the beneficiary. In PLR 200244023, the IRS allowed the non-spouse beneficiary of an orphan plan to use the inherited plan assets to purchase a nontransferable variable annuity contract. This in effect, provided similar benefits because the use of the plan assets to purchase the annuity purchase was a non-taxable transaction and the beneficiary was allowed to distribute the assets over his life expectancy. I have a copy of the PLR, but it is too large to be attached to the post

Good question WDIK---we get this one quite often from customers- answer is no, because the RMD is due for the year in which the individuals reached age 70 ½, not at the time the individual reaches age 70 1/2

See http://www.investopedia.com/university/ret...ns/ira/ira2.asp The limit is the same whether the contribution is deductible or not. Also, if the individual contributes to a Roth and a traditional, the limit ( for instnace $3,000) must be split between both IRAs

Technically- it is not a profit sharing contribution. In SIMPLE 401(k), the employer may make either a matching contribution of $1 for $1 up to three percent of the employee’s compensation or a 2% non-elective contribution. The compensation cap ($200,000 for 2003/$205,000 for 2004) applies.

Bear in mind-A SIMPLE cannot be maintained in the same year the employer maintains/ed any other plan, unless the other plan is for employees not covered under the SIMPLE- for instance, employees under a collective bargaining agreement . I.R.C. § 401(k)(11)©]

Question 1- the IRS has allowed beneficiaries to transfer inherited IRAs. Most custodians allow it. Frankly, it would not be good business sense to refuse to accept inherited IRAs as transfers- much moolah. Some custodians may refuse to allow the account to transfer out-, which is unlikely, if the stretch provision is allowed. Question 2- You are right. A non-spouse beneficiary may not rollover inherited assets from a qualified plan Reg § 1.402©-2, Q&A 12. The provisions in the qualified plan document usually determines the distribution options available to the beneficiary of a qualified plan. Question 3- I agree with ty07480 . The 10% penalty to which you refer would not apply to distributions from an inherited IRA, as they already meet the exception by being “death distributions”

Here is an article on a similar topic http://facreceiver.com/faclatimes18jan04.pdf about http://facreceiver.com/

Alternatively, you may consider contributing to a traditional IRA instead. You may be eligible to claim a deduction for the traditional IRA contribution- even if you are not, you would still be funding your retirement nest egg. You may use the same assets/contribution as your traditional IRA contribution. To treat the Roth IRA contribution as a traditional IRA contribution, you would need to recharacterizethe contribution. Your IRA custodian should have a special form to accomplish this transaction. Most will accept an ordinary letter of instructions from you. Check to be sure. The challenge with the recharacterization (if this contribution was made to a Roth IRA that includes assets from other contributions conversions etc) is that you may need to compute the earnings or loss on the contribution. This is because when you recharacterize a contribution, it is treated as if it was originally made to the account to which it is recharacterized. For instance, assume you contributed $3,000 and this amount earned $100 while it was in the Roth IRA---you must recharacterize $3,100 to your traditional IRA. If the $3,000 it lost $100, then you would recharacterize $2,900. If the Roth IRA does not include any other assets other that the contribution, then you could do a full ( total account balance) recharacterization. If you are lucky, you IRA custodian may assist you with the calculation. If not, and you need assistance with computing the earnings/loss on the amount you need to recharacterize see Recharacterizing Your IRA Contribution or Roth Conversion? Know How to Determine The Current Value

trishish, It does not appear that you have any cause for concern. As James Patrick explained, the code in Box 7 will be ‘2’, if you are under age 59 ½ when the Roth Conversion occurred. (Code 7 would apply is you were at least age 59 ½ when the conversion occurred). The fact that your 1099-R reflects Code ‘2’ in box 7 shows that the transaction was in fact processed properly- i.e. as a Roth IRA conversion. Generally, a Roth conversion is done at the same custodian (at which the traditional IRA and the Roth IRA are maintained) --and is done in the manner that you explained- one transaction completed as a Roth conversion according to the IRA owner’s instructions or directly between two custodians. A Roth conversion may also be accomplished by distributing assets from the traditional IRA and depositing the assets to the Roth IRA within 60-days after receiving the distribution. My response ( to the first post) was more or less addressing this method---as in many instances, when Roth conversions are accomplished VIA this method, the receiving financial institution deposits and reports the credit as a regular rollover instead of as a conversion. In any event, this would only affect the form 5498, which is issued in May (for the previous year). On Form 5498 a special box is designated for Roth conversions. I should have been more thorough in my response to the first post- my apologies for any confusion caused.

See page 25 of IRS pub 575 at http://www.irs.gov/pub/irs-pdf/p575.pdf. It appears that if the substantially equal distributions does not meet these requirements, then it is rollover eligible and subject to 20-percent withholding

Archimage-I am only a lowly subscriber (don’t work for Panel Publisher) so I don’t have an inside connection. Since your post, they have added the autumn issue of the Journal of Pension Benefits. I will send you the E-mail address for the contact person at Aspen Publishers – I sent her two E-Mails but have not received a response to date. Who knows, with all the E-Mail filters in place, they may not have received the ones I sent.

At first glance, the “as rapidly” would seem to be a contraction in terms. However (IMO), it appears that it is more of a general term, to which distributions from individual accounts are exempted. Q&A 5 of §1.401(a)(9)-2 states For your question, the “individual account” rule under §1.401(a)(9)-5 would apply Q&A 5 of §1.401(a)(9)-5 states Therefore, since the children (obviously) has a longer life-expectancy than the participant, they would take distributions over the “The remaining life expectancy of the employee’s designated beneficiary” Regarding the separate accounting issue- §1.401(a)(9)-8 states A-3. Assuming these requirements are met, each beneficiary would be allowed to use his/her own life expectancy.

Well what do you know Barry- had two clients today who wanted the " stretch IRA." Yes. I sat back, sighed- just a little…then I leaned forward, smiled and said ” I can help you with that!!!! “ .Their current financial institution did not offer this product (they said), so they wanted to transfer their IRA assets to us... Yup. They left happy.

Generally yes. The distributions may be taken over the life expectancy of the beneficiary § 1.401(a)(9)-5, A-5 Distributions should begin by 12/31 of the year following the year the participant died (12/31/2004). If the assets are segregated into separate accounts by 12/31/2004, each beneficiary may use their own life expectancies to calculate post death distributions. To be sure of the options available under this particular plan, you may want to check the plan document.

Agreed Barry…by “Upon the death of the first generation beneficiary, the estate was required to distribute the balance of the IRA (by the end of the year following the year the first generation beneficiary died).” I meant that as directly related to the preceding sentence “Before the stretch IRA concept, many IRA documents required the fist generation beneficiary to designate his/her estate as the beneficiary of the inherited IRA…” I also agree that to have the stretch IRA, from a practical perspective all you need is “a custodian that permits the IRA to be paid out over the maximum time allowed by law.” …but, remember, before the famous PLR was issued, everyone (well most conservative custodians/trustees) though that a beneficiary could not be designated for an inherited IRA. Then the PLR was issued, proving that these conservatives were wrong, and that people like you were right all along. Since then, many financial institutions push the stretch concept as a product (similar to what occurs with the Individual (k) Plan), the product being an inherited IRA being passed on to a succession of beneficiaries, "for the duration of the time allowed by law". For you and I, the document allowing the stretch is sufficient- because we know what this means. However, from a regular customer’s perspective, influenced by what is written in the media and brochures by some financial institutions, they want you to tell them you are offering a stretch (or other appropriate name) IRA product. For most, explaining that it is allowed is not enough. Like anything else in marketing, it’s all about the packaging, the brand, the manner in which it is presented…it is the reason why we pay more for some brands, when the content may be the same as the less popular brand… amfam2 wants to add it ( the stretch) as part of their product line- to effectively sell it as a product- it must be packaged as a product- not just an IRA, but a Stretch IRA ( or other appropiate/allowable name).

How about Derelict?

My POV… Technically, all your organization needs to do is allow your IRA document to include a provision for a first generation beneficiary to ‘name a beneficiary’ (second generation beneficiary) for the inherited IRA and the second to name a third and so on. As you know, the stretch IRA concept is simply allowing the IRA to continue after the death of the first generation beneficiary. Before the stretch IRA concept, many IRA documents required the fist generation beneficiary to designate his/her estate as the beneficiary of the inherited IRA. Upon the death of the first generation beneficiary, the estate was required to distribute the balance of the IRA (by the end of the year following the year the first generation beneficiary died). Implementing the stretch provision allows the second-generation beneficiary, and any subsequent generations of beneficiaries, to continue distributions over the life expectancy of the first generation beneficiary, regardless of when the first generation beneficiary dies. As long as you (and your staff) understands the concept, and you incorporate the language in your IRA plan document, then you can produce some customer friendly brochures to push the “New Stretch IRA”- careful, I hear the “Stretch IRA” name is copyrighted. Maybe you could call yours “The Elastic IRA” or “The Rubber-band IRA” As far as reporting, nothing much would change. The FMV reporting requirement would still apply, and distributions must be reported in the name and TIN of the beneficiary to whom paid ( i.e. first generation beneficiary, should he/she die, second generation and so on.). Administratively, if you handle the calculation for the accounts, just bear in mind that all calculations must be based on the first generation beneficiary. I hope this helps. Let's see if anyone else will post some good ideas.

Hi lgolgen, This has not changed. A non-spouse beneficiary may not transfer inherited retirement assets to his/her own IRA. “their IRAs” in the post above, should be “their inherited IRAs”…thanks for catching that.

Roth IRAs are not subject to withholding Code Section §3405(e)(1)(B)…yet some custodians insist on treating it similar to traditional IRAs for withholding purposes. cnyc , you may have had a Roth IRA with a custodian that applies withholding to Roth IRA distributions…, i.e. 10% if no withholding election is made [$2113 x.1= $211)…which means that you may have failed to male a withholding election. ..Your distribution request form may have included the statement that the withholding rules would apply… Another apparent error is that the custodian is treating the fee as part of the distribution, as they applied the withholding to the gross amount, instead of the gross less fees. you may want to check your 1099-R and make sure that the amount is Box 1 does not include the fee of $110.

I vote "Nameless coward"

All distributions that occur after the death of the IRA owner must be reported in the name and tax ID # of the beneficiary. The beneficiaries should first transfer the assets to their IRAs and then take distributions from those IRAs… Some financial institutions are able to distribute the assets from the same account- than was held by the deceased- while complying with the reporting requirements, i.e. reporting the distributions in the name and TIN of the beneficiary…semantics really…

The reason a loan becomes defaulted is because payments are not made at least quarterly (exceptions apply) – not because there is no triggering/distributable event. If the loan is in default, and there is no distributable event, then the distribution (deemed distribution) is deferred until a triggering event occurs. When the participant who has no triggering event at the time of default has a triggering event ( afterwards), the loan must then be treated as a deemed distribution, and reported with a code-L in box 7 of the form 1099-R. In this particular situation, it is a deemed distrbution. Not an offset

I agree. Whether the loan is treated as a deemed distribution or an offset is determined by whether the loan was in default. If the loan was in default, then the only option is to deem. Treating it as an offset would be in effect saying that all payments were made timely and so on... which is not the case