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Message Boards Digest

November 30, 2022

Here are the most recently added topics on the BenefitsLink Message Boards:

JHalligan created a topic in IRAs and Roth IRAs

IRA Conversion to Roth IRA Was Less Than 5 Years Ago -- Is Distribution Taxable?

"100% of the IRA was converted to Roth, and taxes were paid. Now, a partial distribution is happening, but the 5-year clock has not been satisfied, making it a non-qualifying distribution. Only the earnings are taxable, I think, but can the Roth IRA owner specify that it's a return of capital and not touch the earnings, making it a tax-free and penalty-free distribution?"

1 reply so far   |    Click Here to Add a Reply
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dragondon created a topic in 401(k) Plans

What Is Purpose of Age 65 'Normal Retirement Age' When In-Service Withdrawals Permitted at 59-1/2?

"What is the purpose of Normal Retirement Age in the plan document? There is a section that specifies in-service distributions can begin at 59.5 but then there is another section specifying that normal retirement age is 65. What benefits must start at 65? This does not mean that they have to start taking RMD's at age 65, correct?"

6 replies so far   |    Click Here to Add a Reply

Tax Cowboy created a topic in Defined Benefit Plans, Including Cash Balance

Unit Benefit Formula Says Years of Credited Service Not Taken Into Account After Year 10

"Potential client has had a DB plan for approximately 20 years. The adoption agreement states the following under Unit Benefit Formula:

'(1) Uniform formula. 10 % of Average Compensation multiplied by Years of Credited Service.

(i) Years of Credited Service above 25 will not be taken into account.

(ii) Years of Credited Service above 10 will not be taken into account. [This box is checked.]'

Does this mean on an annual basis any eligible employees are not entitled to a contribution past year 10? Or is this merely part of the actuarial equation the TPA uses for annual valuation purposes?

Client was informed that a non-owner employee/100% vested participant is due $315k if the plan is terminated as of 12/31/22. I'm told there is approx $2 million in various stocks/bonds/some annuities at this time. Only two participants: owner (age 72) and one rank and file employee (age 47) who's worked there for 20 years.

The onwer is just trying to get a handle on whether or not the TPA is accurate is the $315k amount -- he doesn't believe that is the true amount or that any distribution should be lower than."

2 replies so far   |    Click Here to Add a Reply

Egold created a topic in Retirement Plans in General

Individual Can Start Qualified Plan Based on 1099-Type Income?

"The owner of the LLC sold his practice in May 2022. Plans were terminated, all participants paid, final 5500-SF filed.

The former owner is now receiving 1099 income from the new owners. Can the former owner start a new profit sharing plan in 2022 using his 1099 income in determining the contribution?"

2 replies so far   |    Click Here to Add a Reply

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Defined Benefit Analyst  View details

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