Appleby

Just want to add the cites: In accordance with IRC 318, 416(i) and Notice 97-75 ...once you are a 5 percent owner, required minimum distributions must continue even if the employee ceases to be a 5 percent owner Notice 97-75 is attached

And this http://benefitslink.com/cgi/qa.cgi?databas..._id=8&mode=read

Check this out Fraudulent QDROs

mcdonnell, good catch.. I did mean 2002. ...thanks

Felecia, this sounds like a question for the pension plan, and not really an IRA question. From the IRA perspective, the issues are: Can the assets be moved to the governmental pension plan. Answer, generally yes, if the assets are Traditional IRA assets, except for RMD amounts and other non-rollover eligible amounts. How would the movement of assets be treated? Answer, as a direct rollover from the IRA. The 1099-R issued for the IRA would reflect code ‘H’ in box 7. The plan will determine: -If the plan accepts rollovers from IRAs -The origin or source of assets that can be used to purchase past service credit

four01kman…I know you understand this…but I need to add points of clarification for our readers who may not be as familiar with the rules as you are… the distribution is treated as ordinary income the year the distribution occurs, which is not necessarily the year of receipt. For example, if the distribution occurs in December 2002, but the IRA holder receives the check in 2003, the distribution is taxable in 2003. The 10 percent early withdrawal penalty applies if the assets are distributed while the IRA owner is under age 59 ½

Right John…also, IRA holders must be sure to make proper withholding elections when completing Roth IRA conversion requests… because a Roth IRA conversion is technically a distribution and a rollover, the amount leaving the Traditional IRA is treated as a distribution for tax withholding purposes. This means that if the IRA holder does not make a tax withholding election (example elect to have NO taxes withheld), the IRA Custodian/Trustee must withhold 10 percent of the amount being converted for federal taxes. If the Custodian practices withholding for State Tax, these rules would also come into play.

This URL takes you directly to the section of IRS publication 590 that addresses Recognizing Losses on Investments (in Roth IRAs) http://www.irs.gov/formspubs/page/0,,id%3D...31,00.html#T102

The distribution was done in time, therefore there will be no penalties ( excess accumulation penalties). The assets are considered distributed when the check is issued. This means that this is a 2002 transaction for tax reporting purposes.

Apparently the attachments must be done one at a time

Kirk, you are right about Notice 87-16. I could not find anything on Announcement 91-4 . Another reference is Announcement 86-121 Documents are attached

If the IRA owner refuses to cooperate, then the plan has the option to take the matter to court. There have been such instances where the participant refused to reimburse the plan... the plan sued the participant and won. Surely if it was an option the plan would be better served to work with the IRA custodian?

Jaemmons, the IRA custodian cannot disburse assets from the IRA without written permission from the IRA holder . Instead of contacting the IRA trustee/custodian, the plan administrator must work with the IRA owner to have the assets distributed from the IRA and returned to the plan… since the assets are considered ineligible rollover assets, the distribution should be done as a ‘return of excess contribution”, which will not be treated as taxable income, except for any earnings.

IRS Form 1042-S is used to report withholding for a non-resident alien. 1042-s would not be submitted to the state as it is a federal form ...also state tax would not apply to the non-resident alien

Answer is no…Spousal consent is required if the plan balance serving as security exceeds $5,000. Given that only the vested balance can be used to pledge as security for a loan, the $5,000 is limited to the vested balance, not the entire balance.

Somehow, Fishchick I think you are one of us where hard work can translate into fun, if the work is something you enjoy… A couple of points for consideration… 1) Don’t forget that SIMPLE 401(k) plans are not subjected to discrimination testing… 2) The section of 408(d)(7) to which you refer is subsection (A)… the amendment was to subsection (B), which makes reference to paragraphs (4) and (5), which addresses Return of excess contributions from IRAs… PS. You referred to me as "Mr. Appleby” just 'Appleby' is fine, but if you really want to use a prefix, Ms. would be one to use

URL for the IRS Restructuring and Reform Act of 1998 (IRRA) /(P.L. 105-206). http://frwebgate.access.gpo.gov/cgi-bin/ge...publ206.105.pdf

Yes.. given that the two year requirement has been met( i.e. the SIMPLE IRA has been in existence for at least two years, beginning with the first day the employer deposits a contribution.) the SIMPLE IRA assets may now be ROLLED to the QP /EGTRRA 408(d)(3)(G)(ii)

Gary, I just faxed you the page from H.R. 2676 (P.L. 105-206). The exact cite is 6018(B), which provides that 408(d)(7)(B) should be amended to include SIMPLEs

Yes... providing the SIMPLE IRA meets the two-year requirement, i.e. the SIMPLE IRA has been in existence for at least two years, beginning with the first day the employer deposits a contribution.

For defined contribution plans, in which the contributions are discretionary, you are considered an active participant for any year you actually receive a contribution… Note that this is so even if the contribution is being made for another year.

The IRS does NOT allow you to move assets directly from a 401(k) plan or any other qualified plan to a Roth IRA. The assets must first be rolled to a Traditional IRA and then converted to a Roth IRA. If all the assets are truly non-taxable, then you can convert them (the assets) to a Roth IRA and take a tax and penalty free distribution anytime after the conversion,

Just to be sure, let me summarize some points. Yes. As long as he meets the eligibility requirements and have sufficient compensation/income, she may fund both plans. Converting the amounts that are contributed to the IRA as SEP-Employer contributions does not negate the tax benefits (tax deductions for contributions made) an employer enjoys from funding a SEP. Once the SEP Employer contributions is made to the SEP IRA. It assumes the identity of regular Traditional IRA assets. These IRA assets, including other traditional IRA assets, may be converted to a Roth IRA at anytime for any year that your wife’s MAGI does not exceed $100,000. This $100,000 cap is the same for single filers as well as married individuals filing a joint tax return. Assets converted to a Roth IRA may be taxed as ordinary income in the year the conversion is done. There is no limit on the balance/value of Traditional IRA assets that may be converted to a Roth IRA. If your wife has a balance of $100,000,000+, she may convert this amount to a Roth IRA, providing she meets the income limit and does not file a separate tax return. This means that you can fund a Roth IRA with an unlimited amount of funds/assets in any given year- as long as you meet the eligibility requirements. The key benefits your wife would realize by converting the IRA assets to a Roth IRA is paying the taxes due now and for the earnings to accrue on a tax-free basis ( earnings are not taxed if distributions meet certain requirements)... as opposed to a Traditional IRA, where assets accrue on a tax-deferred basis.

Absolutely… your ‘active participant status’ does not affect the amount your may contribute to a Roth or Traditional IRA. You may already know that in order for you to make a catch-up contribution, you must first contribute the regular amount, i.e. $3,000. Any amount in excess of the $3,000 (up to $3,500) will be a catch-up contribution- assuming you are at least age 50 by the end of the year for which the contribution is being made. If you decide to contribute to a Roth IRA, make sure you do not exceed the income limit ( meet the eligibility requirements)

Hopewell, I like your way of thinking… however, this is not a loophole. Yes. Your wife may contribute the maximum amount to both the SEP and the Roth IRA (assuming she meets the eligibility requirements and have sufficient income). A maximum dollar amount of $3,000 for the Roth ($3,500 if she is at least age 50 by the end of the year for which the contribution is being made) and a maximum dollar amount of $40,000 for the SEP IRA. There are rules that may reduce this amount, depending on her income (or - adjusted net business income (ANBI) if she is she operates as a sole proprietorship). However, you must look at this as two separate animals (sic). Making an employer contribution to a SEP IRA, even if this amount is later converted to a Roth IRA, is not in effect allowing you to exceed the $3,000 Roth contribution limit. The Roth IRA is a plan that is funded with after tax assets, by an individual taxpayer. The SEP (employer contribution) if funded by a business entity (including sole proprietorships), which takes a deduction for the SEP contributions it makes. Once the SEP employer contributions is deposited to the SEP IRA, it is treated as regular IRA assets, and will be treated as ordinary income for the year the assets are converted to the Roth IRA. When choosing between two retirement plans… …an individual taxpayer may decide between a Traditional and a Roth IRA… …a business may decide between a SEP , a SIMPLE or a qualified plan ( e.g. 401(k), profit sharing etc.) Note:Remember that you are not allowed to convert your IRA assets to a Roth IRA in any year that your Modified Adjusted Gross Income (MAGI) is more than $100,000 and/or if your are married and file a separate tax return from your spouse.