Appleby

... and that the rollover must not include amounts representing RMDs, non-deductible amounts, and amounts representing excess IRA contributions

...also, you cannot maintain a SIMPLE IRA in any year that you maintain another employer plan

mbozek I would word the FMV piece of your response differently. “For tax purposes the FMV of the distribution is the value of the stock at close on the day the assets leave the IRA” tcunagin , you want to be careful about requesting such a distribution in kind, as market fluctuation could affect the value (FMV) of your distribution- especially if the IRA custodian takes a few days to process you request and/or your request is submitted via mail.

Absolutely, The origin of the funds is not a concern of the IRS. Just make sure you contribute no more than your earned income or the contribution limit ( whichever is less)

If it had been a traditional IRA, you could file your return- stating that you made the contirbution... and then make the contribution afterwards...providing the contirbution is made by April 15

If the in-service is taken as a hardship distribution, it is not rollover eligible and therefore not subjected to the 20% w/h rules

MaryKay Actually, given that the participant died in 1989 and the full amount was required to be distributed by 12/31/94 ( the facts show they were subjected to the 5-year rule ), the 50% penalty is assessed once on the balance remaining after 12/31/94.

Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Puerto Rico, Texas, Washington, and Wisconsin . Spousal signature is required if your client resides in any one of these states. In some states, the spouse's consent must be notarizes

...also, you mentioned that the withholding would not have been done correctly. What do you infer by this statement? If you refer to the 20% withholding, note that the 20% w/h rules does not apply to an RMD amount, because the RMD amount is not rollover eligible

Barbara, Yes. A 5305-SEP cannot be used if the plan sponsor adopts the SEP along with a qualified plan ( refer to IRS Form 5305-SEP). Instead, a prototype SEP must be used. Alternatively, have you considered adding a profit sharing feature to the 401(k) plan? The contributions and deduction limits are same as those for a SEP. Plus you will save money on account fees by consolidating the assets into one account (instead of the required two- one for the SEP and the other for the 401(k))

I agree that the RMD for the qualified plan must be distributed ( in 2002) before the amount is rolled to the IRA. However, if the participant failed to remove the RMD prior to the direct rollover, then the RMD amount is treated as an excess contribution to the IRA. (Treas. Reg. 1.402©-2 defines an RMD amount as a ineligible rollover ) The individual must add the RMD amount to his/her income for the year the direct rollover was done. The amount (representing the RMD) then is not removed from the IRA as a regular RMD distribution, but a return of excess contribution. This prevent the distribution form being taxes twice and taxes care of any earnings/loss attributable to the amount that was ineligible to be contributed to the IRA

No. This is a prohibited transaction unde Code Section 4975

kgsingletary, a typo in the URL http://www.irs.gov/pub/irs-tege/d7002.pdf

1) Yes, you can terminate your MPPP and PSP and roll the assets to a SEP IRA 2) Yes, you can also roll the assets a traditional IRA. However, if you are maintaining a SEP IRA, why bother opening a second IRA? Note that some custodians/trustee do not even make a distinction between traditional and SEP IRAs. 3) No. You are still limited to 25 percent of compensation ( 20 for a sole proprietor that files a schedule C). If you make $40,000, then the most you can contribute to the SEP is $10,000 Note that there IS an income limitation. You may not take into consideration more than $200,000 (index) of compensation for plan purposes

It depends : If the LLC is organized as a partnership- the percentage is 20 ( similar to a sole proprietorship) If the LLC is organized as a corporation, it is 25 percent of W-2 wages.

Actually, the IRA holder may NOT request a 5 % withholding ( well he/she can , but any IRA custodian who knows the rules will not withhold less than 10 %, unless the amount is zero). Had the distribution been a periodic distribution, then the withholding could be 5%. A distribution from an IRA is a non-periodic distribution (i.e. available on demand). The IRS requirement is that the withholding for a non-periodic distribution be zero or > 10%.

Not if the plan allows them to defer until April 1 after the year they separate from service. Note that for a non-incorporated business, a 5 percent owner is defined as an employee who owns more than 5 percent of the capital or profits interest of the employer

dmd, From what I understand, terminating plans must distribute the assets within one year after the termination date ( defined as soon as administrative feasible). If I am right, then what you now have is a frozen plan- and not one that has been terminated.

What the rule says is that $200,000 ( or the compensation cap under IRC Sec. 401(a)(17) ) is the maximum compensation that may be taken into consideration when determining plan contribution limits.

mbozek You are right-

mbozek Mary Kay is right Under the new proposed, as well as the final RMD regs, when calculating the RMD amount, one always use the uniform life table, which assumes the beneficiary to be ten years younger than the participant. There is one exception to this to this rule, i.e. when the participant has a spouse beneficiary more than ten years his/her junior. In this case, the joint tables are used. … the beneficiary is determine as of the first day of the year. Any change made during the, including as a result of death or divorce, does not affect the calculation of the RMD amounts.

mbozek is right Mary Kay, maybe you are thinking of a defined benefit plan?

Yes. The beneficiary is required to remove the excess in accordance with the same rules that would apply to the participant, had she/he not died.

Yes, providing the plans allows him to defer his RBD until he retires.

Providing the plan and the employer provides for it, the employee would not be required to start taking RMD until April 1, following the year he/she separates from service.