Appleby

We may have a conflict of interest here- to be safe- check with an attorney

No. Distribution of amounts that represent Roth IRA participant contributions are not subjected to the 10% early withdrawal penalty

Just want to mention- the exception to the penalty is for a one time $10,000 limit and it must be towards the purchase or a primary residence ( for an individual who have not owned a home in the past two years)

File IRS form 5329- this form, and the instructions can be obtained at www.IRA.gov, got to forms and publications, then forms and instructions

It cannot be done as the plan is question was not subjected to the jurisdiction of the United States courts- which means it was not qualified under the internal revenue code etc.

Gary, Upon closer scrutiny- I agree with you. The new compensation cap does apply to SIMPLE IRAs , but to the extend it applies before EGTRRA, which is ONLY to non-elective contributions

wmyer referred page 120 of the conference report-

Gary, Effective 2002, the compensation cap does apply to matching contributions. Moderator's Note: See posts below; as well as second page of posts.

Yes - termination of plan is not a triggering event under a 403(B) plan

'Matching' contributions cannot be made to a SARSEP, so I will assume that you mean 'employer discretionary' contributions. It is true that assets in any SEP, including SARSEP plan can be transferred out ( or even distributed) at any time. This is because all contributions to SEPs are non-forfeitable. However, there is one exception. For salary deferral SEPs, amounts representing deferrals, to the extend they are not amounts in excess of the 402(g) limits, should not be withdrawn until the employer has completed the section 125 tests.

Actually, I just read an intrepretation that would suggest that the loan could be taken now, by the sole proprietor and be granfathered under the new rules. "While this change is effective beginning January 1, 2002, it will apply to a loan made prior to January 1, 2002 if the loan otherwise conforms to the regulatory requirements for plan loans. This means that plan loans can be made available to owner-employees now." See this link for details...... The above quote was taken from here . it was actually posted on this website http://www.kl.com/PracticeAreas/erisa/reconcilact.pdf

I think not. Unlike qualified plans, most 403(B) plans does not, and are not required to have a plan document- therefore... I will double check my sources tommorrow

It depends As the current version of the law stands- 403(B) assets cannot be rolled to ( commingled with )401 (k) asets. however, with the passage of EGTRRA-2001, this will be permissible effective 2002

Payments or distributions subject to federal withholding from an employer deferred compensation plan, an individual retirement plan, or commercial annuity are generally subject to Massachusetts withholding. However, if the recipient has elected against federal withholding under IRC Sec. 3405(a)(2) or 3405(B)(3), the payments are not subject to Massachusetts withholding". This rule is still in effect. The rules for withholding on a QRP are different from those for an IRA. The IRA is straight 5.6 %(for year 2001)- the QRP withholding is determined based on whether the distribution is a 'periodic' or 'nonperiodic' payment. For non-periodic payments, the withholding rate is similar to IRAs (5.6 %). Section 3405(a)(1) of the Code provides that "[t]he payor of any periodic payment (as defined in subsection (d)(2)) shall withhold from such payment the amount which would be required to be withheld from such payment if such payment were a payment of wages by an employer to an employee for the appropriate payroll period." The Massachusetts withholding rules borrows from this Code section The Massachusetts state withholding would be mandatory, only if the distribution was rollover eligible and the participant choose to have the assets paid to him/her directly. The 20-% mandatory would then apply and thus the Massachusetts state withholding

The "and" after the first quote should be 'as'- sorry about that. Let's see if I can make more sense. According to Massachusetts State law, if your gross income for the year is $8,000, then such income is not subjected to state income tax. Therefore, since you will definitely pay no taxes, it is not necessary to file a state income tax return. Distributions from your retirement account are treated as income and are included in the gross income for the year. However, your IRA custodian or plan trustee will have no way of knowing if: The $8,000 is your only income for the year or If this is the only distribution you have taken or will take for the year. Therefore, they must perform the withholding, as stated by the law. According to Massachusetts state law, if you take a distribution from your IRA, state taxes MUST be withheld (at a rate of 5.6% for year 2001), IF you request to have federal taxes withheld. (The withholding rate for QRPs is different and a little more complex) The only way to avoid the state income tax withholding on a distribution then is to waive out of the federal income tax withholding. I really hope this makes more sense. If not- let me know This link will take you to the year 2000 guide for filing you Massachusetts income tax return http://www.dor.state.ma.us/publ/pdfs/tx_gd00.pdf

I stand corrected. The NTE $6,000 appears to be a plan document specification put in place to ensure the employer clearly understands the limits. Notice 98-4 actually states "…up to a limit of $3 percent of the employees compensation…" In effect, the employer can contribute $6,500 for 2001

Barry is right- however, this rule in on a "per distributing IRA basis" Say you have IRA #1- balance $2000 IRA # 2 balance $3000 IRA# 3- balance $1000 You may take a withdrawal from IRA #1and roll it to # 3 within 60 days You may also take a withdrawal from IRA # 2 and also roll it to IRA #3. This can be done anytime (no 12 month period restriction, as the withdrawal is being taken from a separate IRA) Another note- make sure that you IRA custodian process and reports the $4,000 as a 'rollover' contribution

wmyer I agree with IRA specialist. The employer limit as stated has not changed- it is still up to a maximum of $6,000 ( NTE $6,000). This is the key factor. With reference to the page you reference, this is just to confirm that, SIMPLEs are included in the new definition of compensation "to include an individual’s net earnings that would be subject to SECA taxes but for the fact that the individual is covered by a religious exemption" Notice this was an addendum to the aforementioned compensation cap.

A 401(k) plan can include an in-service withdrawal at any age prior to the retirement age as stated in the plan. If the amount is rolled to an IRA and then disturbed, the 10 percent early withdrawal penalty rules will apply. Note however, that some plans may restrict the in-service withdrawal to hardship. If this is the case, the amount is not rollover eligible, to the extent that it includes elective deferrals ( i.e. hardship withdrawals of elective deferrals are not rollover eligible) Effective 2002- all hardship withdrawals will be non-rollover eligible.

A SEP is just an IRA that accepts SEP IRA contributions. All the IRA rules apply- including the portability rules under EGTRRA-2001

Good point David. However, while you are right, the issue in question is based on W-2 wages, as he was employed and receiving W-2 wages from the military. He will now apparently receive form post retirement benefits from his former employer, which cannot be used as compensation for the purposes of making an IRA contribution.

I'll take you up on the offer:- I am sure you already know that letter rulings cannot be used as precedent. [iRC § 6110(j)(3)]- though I will also cite one as a taxpayer who wants to use the rulings to support his or her position may treat the rulings (or reasoning based on the rulings) as “substantial authority.” [Treas Reg §§ 1.6661-3, 1.6662-4(d)] Ineligible rollover contribution assets are automatically deemed a regular year IRA contribution in the year of contribution PLR 8952011). Rolling over any ineligible rollover distribution amounts as defined in Treas. Reg. 1.402©-2, Q&Q 1-4 and 11 may create these ineligible assets

I am not sure about Military retired pay specifically- but generally, for purposes of contribution to a Roth IRA, any payment from your employer (including the one from whose services you have retired) can only be used if it is being reported as taxable wages on form W-2

The instructions for Filing IRS Form 1099-R does state that distributions to beneficiaries must be reported in the tax ID number of the beneficiary- not the deceased.

The ineligible rollover becomes an IRA excess contribution the year it is rolled to the IRA. If the individual is eligible to make an IRA participant contribution and has not already done so for that year, the amount can be redesignated as an IRA participant contribution. In any event, the correction process requires the full excess amount to be redesignated an IRA participant contribution for the year the amount was credited to the IRA. If the amount results in an IRA excess contribution, it must be corrected by tax filing date (including extensions) for the year it was credited to the IRA. The earnings must be removed and will be taxable in the year the contribution was made to the IRA. If it is not corrected by the deadline stated above, a 6 percent penalty would apply for every year the excess remains in the IRA. The client must file IRA Form 5329 to report and pay the 6 percent penalty. No earnings would be removed with the excess amount It is removed after the deadline as stated above, either of two things would happen. 1- If the amount is $2,000 or under, the 6 percent penalty will apply 2- If the amount is over $2,000, the 6 percent penalty will apply PLUS The amount will be added to the individual's taxable income Plus, if the individual is under the age of 59 ½, the 10 percent early withdrawal You want to make sure the excess is timely corrected, especially if it exceeds $2,000 Anytime the 6 percent apply, IRS Form 5329 must be filed