Call from client, asking about rolling over an IRA they had while in Nat'l Guard into a state retirement plan. I don't see why not, do you? I suggested trustee to trustee. There is no basis in the one owned now. They said something about buying in the state plan in order to have retirement sooner. I said I didn't know anything about that.
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JG -
IRA rollover to employer plan
Personally, I prefer to keep my IRAs separate from any employer sponsored plan, simply because you have complete control over the investments, and can take it out at anytime for any reason (taxes and penalties of course still apply). An employer plan requires some kind of real hardship or leaving the job before you have any chance at getting the money out. But I suppose if padding a new employer’s plan gives you some kind of new early retirement benefit, that might be a reason to roll an IRA into an employer plan. I’ve never heard of that before, though. You might want to have your client double check to make sure it really will help the new employer plan. -
LOANS from Plan
A client teacher was notified that they had never collected a loan she had taken out 20 years ago. Forget that she had forgotten to since no notification had ever reminded her. She agreed to fransfer IRA funds to pay off the loan-which also gave her some vesting $$ amounts plus. It was still questionable how everyone had forgotten about the loan for 20 years.Comment
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doesn't sound right
Something doesn't sound right. Can you borrow from an employer plan, then keep that money tax-free while you repay with a rollover from an IRA? I doubt there is such a giant loophole. In fact, I'm not sure you can even rollover from an IRA to an employer plan, I wonder if the teacher's old government pension really is a qualified plan, and I don't understand why the loan didn't default after five years.Comment
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No??
I thought I read you can. Please explain a little more.Originally posted by jainenJGComment
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missed that change
Okay, fair enough. I kind of missed that change for 2002. I said I wasn't sure. It's not my main question anyway, though I suppose the loan did default and become a taxable distribution 20 years ago. If so, I have no problem with the plan allowing her to restore her account.Comment
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qualified plan loans
Originally posted by JON
Section 72(p)(2) requires that a loan from a qualified plan be repaid within 5 years, or else it becomes a taxable distribution. So the forgotten loan has to be considered a taxable distribution. All the IRA rollover is doing is restoring the balance in the employer plan to a higher level. I’m not sure that it would have anything to do with vesting, since the rollover money has to be fully vested regardless of the history of any other funds in the account. And since the loan money has to be treated as being distributed, I'm not sure why there would be any purpose in repaying it now. A qualified plan cannot base vesting on any kind of account balance. Vesting is based on the amount of time, not the amount of money in the account.Comment
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I agree
This was the state teacher's - they do what they want. The amount was increased by interest-teachers have the best deals and they were I think embrassed that the accounting had messed it up. Did give the client a written agreement, because she and the husband were upset, to satisfy pension accounting. She had taken the loan out in the early 80s-, husband gets a job in Kansas-they move and live there four 4 years. They come back to the original state and she starts teaching again, 13-14 years later they notify her of the loan - she should have remembered, but did not. They suggested the IRA showing how well that worked. Husband was over heated and had a couple of meetings with them. Evenually rolled the IRA with the signed agreement and it did imporve the overall retirement picture-they could call it interest, when you rolling IRA who cares.
The mechanics were trustee to trustee with the 1099R marked rollover. I can not remember which brokerage house had it, but was done easily. The loan was small, but with interest ended up being a few thousand.
This was your STATE Bees.Comment
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Not my fault
Hey, don't blame me. This state also elected a professional wrestler as governor a few years back. Wasn't my fault. Blame Armando, he voted for him...Originally posted by JONComment
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Rollover
Reading these posts reminds me of my earlier experiences in a state teachers' retirement system. When I first started my education career in Michigan, I had 11 years of education experience in Indiana, Colorado, and Nebraska. When I left these states I cashed out my retirement contributions, but while in Michigan decided to buy this experience in the Michigan public schools employees retirement system. In addition I was able to purchase 4 years of military experience in the Michigan system. This was quite expensive since it was based on a percentage of the current salary. Yet this purchase was the best thing I ever did, since the total time added up to 30 years of service. I have been receiving that pension since I retired and also the beneficiary of one of the finest health insurance programs around.
My 401K plan I still have and am still taking RMD's from it. It suffered losses with the technology decline of the 90's. Yet now it seems to be recovering somewhat. In addition to the 401K I made some major contributions (the Limits) while employed by a church owned university and built up a housing allowance as provided for retired, ordained clergy. This income was then received as tax exempt until it was depleted.
I would have never considered merging these plans and kept them separate.
Pardon my ramblings but your posts brought to mind my situation.Comment
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