Fred Payne

I've had no luck in finding a stand-alone program that does the cross-testing. Our Relius Administration software will only perform tests once the allocation has already been determined. It's no help in trying to determine what the allocation should be. Consequently, I'm forced to write my own. I'm receptive to any input from experienced practitioners who can "spec out" what a spreadsheet should involve.

Our business has decided to get more involved in cross-testing; previously, we have sub-contracted the actual cross-testing to a law firm. Consequently, we are not as familiar with the calcs as we would like. I'm building some macro-driven spreadsheets to handle the cross-tested calcs. So far, I only have limited examples of plans that have been cross-tested for use in confirming my calculations. Once I'm confident of the calculations, I'll both expand the spreadhseet to accomodate a variety of situtions, i.e., 401ks, and complete the automation. I have attached the zipped Excel spreadsheet I am developing. I would appreciate anyone confirming my calcs by comparing its results against calcs you have undertaken. Alternatively, if you could send me your calcs, I'll run the numbers. I consider myself a top-notch spreadhseet writer, and my finished product should be a productive tool. Anyone who helps me trouble-shoot my spreadhseet and/or can answer questions about cross-testing I will undoubtedly have, can have a copy of the spreadhseet when I have completed it.

If death had occurred in year 2000, the distributions could have fallen under the new regs since the first ANNUAL required distributions need not occur until Dec 31, 2001. Since death occurred in 1999 and the first ANNUAL required distribution must have occurred by 12/31/2000, that year's distribution will fall under the old regs. Will future distributions fall under new regs? THe IRS must clarify this. Had death occurred before the IRA owner's required beginning date, the 5 year rule could apply. But failure to take the required annual distribution in 2000 would preclude any benefit of relief under the new regs.

RMD distributions to the Trust should, by the terms of the Trust, be construed as "principal." Earnings on the principal would then become taxable income that ordinarily gets distributed to the Trust's income beneficiary. Distribution of principal is restricted by the terms of the trust.

The particular Roth the non-spouse beneficiary inherits itself need not have been inexistence for five years. The Five Year rule is based on ANY Roth IRA the decedant owns. The 5 year holding period is measured from the 1st day of the first calendar year in which a ROTH was established. A Roth established on December 31, 1999 measures its 5 year holding period from January 1, 1999. Any distributions from the Roth prior to the expiration of the 5 year period are considred Income with Respect to a Decedant (IRD) and eligible for Section 691© deduction.

Barry, your answer suggests that for each withdrawal, 10% is recovery of basis. I have only looked at the Form 8606 briefly recently, but it seems to me that each calendar year one must perform the calculation anew. Given a declining basis and market fluctuations, the percentage recovered each year as tax-free could change.

Can anyone recommend a stand-alone software program for calculating contributions to a cross-tested plan?

If a trust as beneficiary of an IRA fails to meet certain standards and thus has "defects", then that IRA is deemed to have no Designated Beneficiary and all distributions to the trust are subject to the 5 Year Rule (if death occurred prior to the Required Beginning Date) or must be distributed over the IRA Owner's single life expectancy (if death occurred after the Required Beginning Date). In other words, the much longer life expectancies of the trust's beneficiaries could not be used for distribution purposes. In most cases, the beneficiary of an IRA or qualified plan should be the individual, not a trust. If naming a trust, getting a real good attorney who will put his E&O insurance on the line by confirming the resulting distribution period.