Kathy

I agree that you can have a SEP and a Money Purchase Pension plan if you have a prototype SEP plan. However, if you maintain (or ever maintained) a defined benefit plan, you must get a letter ruling on the combination of the two - the question boils down to exactly how are you going to satisfy 415(e)?

Yes, you can and should receive a copy of the plan information. I would suggest sending a letter requesting the information you want (statement of account and perhaps a Summary Plan Description) by way of certified mail and keep a copy for your records. However, if they don't respond within a reasonable time (30 days), you then have to decide your next course of action. Seeking legal advice might be best at that point. The Department of Labor might be interested in your concerns if there are a number of participants affected but they don't have the man-power or money to chase down every individual complaint. I would also like to point out that it is not unusual for plans to postpone distribution until after a break-in-service has occurred or even until after the end of the following plan year. The employer may have told the administrator to pay you out but the adminimstrator is bound by the document and the plan's policies and provisions. The plan administrator may be holding on to the employer's request until the time required by the plan passes. Delays in retirement plan distributions and transfers/direct rollovers don't always signal foul play. One more point. Employer contributions are not due until the tax-return due date of the employer plus extensions. It is possible that they are waiting until all employer contributions have been made and the plan year completely closed before they pay you out. This may not be all bad for you. [This message has been edited by Kathy (edited 06-11-99).]

You will need to find a custodian who will hold real property. There are issues regarding valuation of the property and some EPA rules which make many Custodians of self-directed IRAs hesitant to allow it as an investment option.

I don't think there is any way to defer income earned after the termination date of the plan, even if the election is signed before hand. Furthermore, there are sometimes good reasons to terminate the plan before the new company takes over - different distribution rules kick in so keeping the plan active may not be advantageous either.

I understand that one can only defer income which has not yet been received but I wonder, if the error was the employer's or the administrator's and not the participant's, could the error be corrected under APRSC? This would then include correcting the form W2. [This message has been edited by Kathy (edited 06-11-99).]

Yes - and since $20,000 of the maximum deductible contribution is already used up by the deferrals, the employer may only contribute an additional $127,000.

You are not alone. There is a lot of confusion with regard to Roth IRAs and conversions - just take a look at all the questions on this message board! First of all, although there is no requirement that you rollover or transfer your traditional IRA to another traditional IRA before you convert all or part to a Roth, you are stuck with the procedures and requirements of the Custodian who currently holds your IRA and those of the Custodian to whom you wish to transfer or rollover the money. We are all bound by Federal law, state law and the rules dictated to us by our own systems (which were created long before the exponential growth in IRA types and trasactions). Ok, so you want to invest your IRA differently and you want to convert some, but not all to a Roth. You can do all this and more. You can set up IRAs at different Custodians and have them request a transfer of some or all of the assets in your current IRA to these new accounts - if you do a "Trustee-to-Trustee" transfer, there is no concern about how many times you do this in a year or whether or not to withhold income tax - neater and cleaner. The new Custodian/Trustee usually initiates the transfer based on paperwork you provide him. As for conversions, if your modified adjusted gross income (on your single or joint tax return) is less than $100,000 (and you aren't married filing separately) you can choose the amount of your traditional IRA you want converted to a Roth. The amount you convert will be added to your ordinary income for the year and taxed at your marginal tax rate - keep in mind that, if the conversion is large enough, it could bump you up to the next tax bracket meaning that some of the converted amount could actually be taxed at a higher rate. There are a lot of other tax consequences you will want to consider when determining how much to convert because the conversion amount will increase your AGI, affecting your ability to take other deductions and credits. The good news is that there is no 10% penalty applied to distributions from a traditional IRA which are properly converted to a Roth IRA. [This message has been edited by Kathy (edited 06-04-99).] [This message has been edited by Kathy (edited 06-04-99).]

Good question! Do you know if your plan is covered by ERISA? Did you receive any type of paperwork when you began participating? Did the employer also contribute to the plan? I would read all of the paperwork you have very carefully and then ask TIAA-CREF for more information. I belive that under 90-24 (Rev Rule???) you may transfer your 403(B) assets to another Custodian who accepts the transfer into a 403(B) with similar withdrawal restrictions. You indicate that you have terminated service with the eligible employer. This should be a distributable event meaning that you could take a distribution from the 403(B) and roll it into an IRA - you may lose certain benefits such as the ability to postpone certain required minimum distributions until age 75 - but it might be worth it anyway to get better investment results and have more control. You need to speak with an accountant who knows this area very well. Also, if you do the rollover, you'll want to do it by way of a "Direct Rollover" in order to avoid the 20% mandatory withholding on a distribution from a 403(B). Make sure you read the distribution paperwork very carefully and work with an accountant or finacial advisor who can help to make sure the Direct Rollover is done properly to avoid tax consequences. Good luck! [This message has been edited by Kathy (edited 06-03-99).]

Unfortunately, there probably isn't much the abandoned spouse can do to withdraw money from the other spouse's IRA. An Individual Retirement Account is for the individual who has established it or for his or her beneficiary(ies) upon his or her death. Furthermore, as a general rule, the owner of the IRA does not have to obtain spousal consent to withdraw the funds. If you live in a community or marital property state, you may have some way of preventing that money from being paid out to a beneficiary other than the spouse upon the death of the IRA holder. This sounds like you need to seek legal advice from an attorney in your area who knows your state's laws as well as Federal tax law as it applies to IRAs.

20% - the Profit Sharing deduction is 15%, the MPPP is the 412 minimum funding requirment, the two together can not exceed 25% (so if your MPPP is 20%, you lose on the PS, but if your MPPP is less than 10% you don't get more on the PS side.)

Thanks Christine! I was totally unaware (should I admit that in writing?) of the rules to which the IRS referred in that announcement until now. I appreciate your looking into it further!

First of all, thanks for pointing this out - this is the kind of stuff that helps us all look like shining stars! So, I read the article (probably wouldn't have gotten to it until Saturday if you hadn't pointed it out) and I'm still confused. Although the IRS did neglect to tell people that they could recharacterize after 4/15/99 if they extended their tax return, the basic info they gave seems pretty on target to me. I went back and read the regs again and they clearly say "This recharacterization election can be made only if the trustee-to-trustee transfer from the first IRA to the second IRA is made on or before the due date (including extensions) for filing the individual's Federal income tax return for the taxable year for which the contribution was made to the first IRA." Now, I know that for minimum funding purposes (section 412) we treat everyone as if they filed for an extension on their tax return, even if they didn't. Is that what the IRS is saying here? I think maybe the IRS was too conservative in its first statement and now the Wall Street Journal might be slanted more the other direction. Or, maybe there is a later announcement out there that we both missed - it could happen!

Nope - rules are rules. If your document says you have to have worked for at least 3 of the last 5 years then no one meets the requirements. If you want the employees to be eligible, you can not require prior years. You can, however, amend your SEP on January 1 next year to require one year and amend it the following January 1 to require 2 years.....

You may not borrow against your IRA - that is a prohibited transaction which basically blows your whole IRA out of the "tax advantaged pool." You may take your own Roth IRA contributions out without tax or penalty but then you lose the wonderful potential for tax-free, compounding growth for retirement. You can avoid penalties on premature distributions from either type of IRA if you use the money for qualified education expenses, first-time home purchase, disability, certain medical expenses or health insurance for unemployed in addition to the "substantially equal periodic payments no less frequently than annually" which must continue until the later of the day you turn 59 1/2 or five full years have passed. I would speak with an accountant if any of these seem like they might fit your situation.

Welcome to the world of IRAs! You have a million choices and there is a ton of information about all of them right here on the web! You can open an IRA with just about any bank, mutual fund, brokerage, etc... Part of your decisions depend upon your age, desired retirement age, risk tolerance and your other investments. Since you are new to the arena, you might want to solicit the help of a financial planner in your area who can help you look at your own situation and then get information for you on the types of investments best suited for you. You can also check out the Fund Spot for a whole list of mutual funds with links to their info available on line: http://www.fundspot.com/main.shtml The key is to invest early and invest as aggressively as you can tolerate for the long term! Good Luck!

Cool! Thanks for the info!!

Probably not - Is it an IRA contribution if the trustee (who is supposed to purchase the assets and hold them at the direction of the investor) doesn't know about it or report it? However, there are situations where the mutual fund family is set up to capture any contribution and distribution info. and provide it to the trustee for reporting if it is that mutual fund family's IRA. So, are you trying to bypass the trustee for some reason (avoiding fees?) or are you concerned because someone has written a contribution check to the mutual fund rather than their trustee (which is how it works with our funds)?

If I remember correctly, the family aggregation rules (for 401(a)(17) at least) never did apply to SEP plans - until the IRS issued LRMs which required that a husband/wife group's compensation had to be limited to $150,000 in order to get approval for a prototype SEP - despite the fact that the law didn't say that anywhere.

I'm not sure but wouldn't failing to follow the rules in a SIMPLE 401(k) simply blow it out of the water (the qualifed plan pool)? Don't the rules say the employer must make good on the promised contributions? Maybe we're confusing SIMPLE 401(k) with safe harbour 401(k)? Life has gotten way too confusing in the retirement plan arena. [This message has been edited by Kathy (edited 05-21-99).]

Just to add a few more questions (to which I don't have the answers) I don't think overfunding to the plan is one of the valid reasons to return money to the employer - mistake in fact? probably not. Secondly, isn't there an excise tax on nondeductible contributions? Once it is put into the trust, it is a contribution and if it exceeds the 412 minimum funding requirement, it's not deductible is it? [This message has been edited by Kathy (edited 05-25-99).]

Yes, pay taxes and perhaps penalties on the gains unless you satisfy one of the exceptions to the penalties. (Check with your state to see what the tax consequences are there too.) Or, you could recharacterize (assuming you extended your tax return) your contributions to traditional IRA contributions if you want to at least defer the taxes on the earnings. However, if you do this and then want to withdraw your nondeductible contributions later, they will be treated as partially a return of your basis in the IRA and partially as a return of taxable earnings and previously deducted contributions. Just something else to think about.

The trustee is appointed as such by the trust document and must accept the position and related responsibilities by signing the trust document which spells them out. It can be a bank, the employer, a group of employees, or another type of paid trustee. This is probably only part of the answer so hopefully more will add to it.

Also, if you have any old statements from the 401(k), they may prove helpful. We always request a copy of the most recent statement for an idea of what amount will be rolled over and from whom to expect it, etc...

We've always rounded the self-employed individual's contribution to 13.04% of Net business income minus 1/2 self-employement tax which equates to about 15% of that same income after the contribution is also deducted. A 25% contribution (MPPP and PS or just MPPP) works out to 20% of net business income minus 1/2 self-employment tax.

Yes, you can recharacterized a nondeductible IRA contribution (plus related earnings) to a Roth IRA contribution as long as: 1. You do it before the due date of the return (plus extensions) and 2. You otherwise meet the eligibility criteria for making a Roth IRA contribution for the tax year for which you originally made the traditional IRA contribution.