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  1. Hi everyone, I'm a financial planner with a PERS client who has a 415 limit question as part of a plan to buy PERS air time. Facts: 1. 54-year-old client has both a 403b and 457 plan available to her at work. She maxes out on both, AND contributes the $3k catch-up available to her this year. 2. Client wants to buy up to 5 years of PERS "air time," and would prefer to do it through payroll deduction to reduce taxable income. 3. Client believes that the 415 limits of $41,000 (this year) apply to the combined total of all of these payroll deductions, e.g., $13k + $13K + $3k + payments through payroll deduction to buy PERS air time. She doesn't know where she heard this -- perhaps through the PERS presenter who came to her work place -- but is naturally hesitant to commit to the air time purchase without clarification. My #1 question: Is she correct????? If this is TRUE, doesn't it mean that all of my STRS/PERS clients should consider or calculate their regular payroll deduction to STRS/PERS as part of the 415 annual elective deferral limits every year? And does that mean we have to consider the 415 limits before we can determine to do the air-time purchase through payroll deduction vs. transfer from existing 403b/457/IRA account balance? A secondary question (probably for the 457 discussion board, but as long as I'm here...): does the 457 contribution count towards the 415 limits? Thanks, as always, for any help you can give me. Delia Fernandez delfernandez@earthlink.net 562.594.4454
  2. Hi all you 403b Wise Ones, I'm a fee-only financial planner (so am NOT annuity-wise) with a question on behalf of a client. She missed a TSA loan payment in March, ignored subsequent correspondence from AIG SunAmerica, and so just got a letter that said they processed a deemed distribution on 5/14 from her TSA account for the loan payoff amount of $6,700, and will issue her a 1099R next year. [Given that she's under 59 1/2 and it wasn't a qualifying event/hardship withdrawal, she's obviously subject to all the penalties and taxes that go with such a distribution]. My confusion: the letter she got says "due to the restrictions on distributions under IRC Section 403(b)(11), the current loan balance will remain outstanding and continue to accrue interest [!!!]. At which time you become entitled to a distribution an actual withdrawal will be taken from the contract value to pay off the loan." Now I'm very confused. How the heck can a deemed distribution, which apparently was for the purposes of paying off a loan, NOT pay off the loan????? And is she going to find herself owing whole bunches of money on this once she does reach the point where she can legally take distributions? And if so, can we stop this before it gets so big that it takes over her life? The second part of my question is, how can we avoid the penalties and taxes? I was hoping that we could treat this like a 60-day withdrawal from an IRA and simply deposit a similar amount into a rollover and avoid the penalties, but the research dept. of the National Assoc. of Tax Preparers (NATP) said no because it wasn't a withdrawal from an IRA. But I say, how's the IRS going to know? Isn't this just like bleeding an annuity by 10% a year to get out of it, and transferring the money to another plan or IRA rollover? I do that all the time for clients, and it seems to work. My colleague, Scott Dauenhauer, suggested I post this question so I could get a response from all of you. I appreciate any help you can give me; I'm stumped. Delia Fernandez Fernandez Financial Advisory delfernandez@earthlink.net 866-443-3542 toll-free
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