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Past70Guy

Retirement After Age 70

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I will be 70 (and 70 1/2) in 2008 and plan to continue working beyond 2008.

I have a 403(B)7 Account.

 

I have a separate IRA, from a previous job.

 

I know I must take minimum withdrawals from my IRA.

 

But relative to the 403(B)7:

1. Can I continue contributing to it?

2. Must I take a minimum withdrawal from it, even though I'm not retired?

(And I'm not sure the plan will allow a withdrawal while I'm still working, anyway.)

 

I haven't found the correct reference to define this situation -- can someone help?

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Generally, you must begin to take withdrawals from your 403(b) no later than April 1 of the year following the year in which you turn age 70-1/2. If you are still working, you can delay withdrawal from your 403(b) until April 1 following the year in which you retire.

 

Dan Otter

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If you roll your IRA over to your 403(b)(7) account by Dec 31 you avoid a minimum withdrawal from the IRA in 2008 because your IRA account balance will be 0 as of Dec 31, 2007. Employees over 70 1/2 are permitted to make tax free rollovers.

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Guest Sierra

I will be 70 (and 70 1/2) in 2008 and plan to continue working beyond 2008.

I have a 403(B)7 Account.

 

I have a separate IRA, from a previous job.

 

I know I must take minimum withdrawals from my IRA.

 

But relative to the 403(B)7:

1. Can I continue contributing to it?

2. Must I take a minimum withdrawal from it, even though I'm not retired?

(And I'm not sure the plan will allow a withdrawal while I'm still working, anyway.)

 

I haven't found the correct reference to define this situation -- can someone help?

 

Intruder says:

 

"If you roll your IRA over to your 403(b)(7) account by Dec 31 you avoid a minimum withdrawal from the IRA in 2008 because your IRA account balance will be 0 as of Dec 31, 2007. Employees over 70 1/2 are permitted to make tax free rollovers."

 

 

Intruder,

 

This is great fodder for my "Current Pension Topics" Column. But it is suppose to come from people not schooled in the Regs. You present yourself as one that is so schooled. Shame on you for disseminating the wrong information, ONCE AGAIN! Only one more humble pie for you after this one because in this game its three strikes and you are OUT!

 

As Past70Guy asserts he must continue to make minimal withdrawals from his IRA because he is a "past70guy". While it is true that employees over 70-1/2 are free to effectuate tax free rollovers they are not permitted to defer their Required Minimum Distributions, from their IRA, past age 70-1/2.

 

Having said that, he cannot arbitrarily rollover his IRA balance, which is subject to Required Minimimum Distributions at age 70-1/2, to his 403(b) account which is subject to Required Minimum Distributions upon retirement if later than attainment of age 70-1/2.

 

Past70Guy: Keep your IRA separate from your 403(b) while still employed by a 403b employer. Upon retirement after age 70-1/2, feel free to consolidate your two accounts into one. Either rollover the IRA to the 403b or the 403(b) to the IRA. Most rollover employer sponsored retirement plan accounts to IRAs because they want a more complete menu of investment alternatives.

 

Of Note: PLEASE BE ADVISED IF YOU ROLLOVER YOUR IRA TO YOUR 403(b) WHILE WORKING FOR A 403(b) EMPLOYER, YOU MUST SEGREGATE THE IRA PORTION SO THAT YOU WILL BE ABLE TO IDENTIFY THAT PORTION OF THE ACCOUNT THAT IS DERRIVED FROM IRA FUNDS. IN SO DOING YOU WILL BE ABLE TO MAKE THE RMD RELATIVE TO ONLY THE IRA PORTION. THIS IS NOT THE EASIEST OF BOOKKEEPING CHORES AND IF YOU ASK YOUR 403(b) CUSTODIAN TO DO IT THEY MAY VERY WELL SAY NO THANK YOU EVEN IF YOU OFFER TO PAY THEM A REASONABLE FEE. IT IS FOR THESE REASONS THAT I IMPLORE YOU TO WAIT UNTIL YOU SEVER EMPLOYMENT BEFORE YOU CONSOLIDATE THESE TWO RETIREMENT ACCOUNTS.

 

Peace and hope,

Joel L. Frank

Pension Columnist

The Chief-Civil Service Leader

NYC.

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Joel: I would have been able to understand the reasoning for your post if you had provided some citations of authorty to support your conclusion that MRDs are required from the IRA account balance after it is rolled over to a 403b plan if the employee continues to work for the NP employer maintaining the 403b plan after 70 1/2. In the interest of resolving this dispute I am presenting the citations for my conclusion that the MRDs from the IRA may be postponed until the employee stops working for the NP employer maintining the 403b plan.

 

1. Rev Rule 82-153 allows employees who have attained age 70 1/2 to make a tax free rollover from an IRA.

 

2. IRS Pub 590 P 19-20 states that a tax free rollover is pemitted from an IRA to a 403b annuity.

 

3. Reg 1.408-8Q/A-11 (a) provides that all amounts distributed from an IRA are taken into account in determining whether the IRA MRD requirements are satisfied. A rollover is a tax free distribution of cash or property from one retirement plan to another retirement plan. IRS Pub 590 P 19 col 2. A rollover of the account balance will result in the IRA account balance being reduced to 0.

 

4. Reg 1.401(a)(9)-5 Q/A-3 provide that the benefit used to determine the MRD for a year is the account balance as the end of the prior calendar year. If the IRA account balance as of 12/31/07 is 0 because of a rollover to the 403b plan, the IRD MRD for 2008 and subsequent years will be 0. Reg.1.401(a)(9)-7 provides that for MRD purposes the rollover of an amount from a distributing plan to a recieving plan (the 403b plan) will increase the amount of the benefit of the receiving plan subject to MRD by the amount of the rollover.

 

5. Reg 1.403(b)-10(d) issued July 26, 2007 states that amounts rolled over to a 403b annuity as an eligible rollover distribution (including an IRA) is treated as an amount held under a 403b annuity (other than for the contribution limits) for the purposes of the MRD rules of reg. 1.403(b)-6.

 

6. Reg. 1.403(b)-6(e)(3) issued July 26, 2007 states that the required beginning date for a 403(b) annuity is April 1st of the calendar year following the later of the calendar year in which the employee attains age 70 1/2 or or the calander year the employee retires.

 

Finally I could not find anything in the final 403b regs that required the segregation of rollovers from an IRA that you stated was required. Please provide a cite.

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Guest Sierra

Joel: I would have been able to understand the reasoning for your post if you had provided some citations of authorty to support your conclusion that MRDs are required from the IRA account balance after it is rolled over to a 403b plan if the employee continues to work for the NP employer maintaining the 403b plan after 70 1/2. In the interest of resolving this dispute I am presenting the citations for my conclusion that the MRDs from the IRA may be postponed until the employee stops working for the NP employer maintining the 403b plan.

 

1. Rev Rule 82-153 allows employees who have attained age 70 1/2 to make a tax free rollover from an IRA.

 

2. IRS Pub 590 P 19-20 states that a tax free rollover is pemitted from an IRA to a 403b annuity.

 

3. Reg 1.408-8Q/A-11 (a) provides that all amounts distributed from an IRA are taken into account in determining whether the IRA MRD requirements are satisfied. A rollover is a tax free distribution of cash or property from one retirement plan to another retirement plan. IRS Pub 590 P 19 col 2. A rollover of the account balance will result in the IRA account balance being reduced to 0.

 

4. Reg 1.401(a)(9)-5 Q/A-3 provide that the benefit used to determine the MRD for a year is the account balance as the end of the prior calendar year. If the IRA account balance as of 12/31/07 is 0 because of a rollover to the 403b plan, the IRD MRD for 2008 and subsequent years will be 0. Reg.1.401(a)(9)-7 provides that for MRD purposes the rollover of an amount from a distributing plan to a recieving plan (the 403b plan) will increase the amount of the benefit of the receiving plan subject to MRD by the amount of the rollover.

 

5. Reg 1.403(b)-10(d) issued July 26, 2007 states that amounts rolled over to a 403b annuity as an eligible rollover distribution (including an IRA) is treated as an amount held under a 403b annuity (other than for the contribution limits) for the purposes of the MRD rules of reg. 1.403(b)-6.

 

6. Reg. 1.403(b)-6(e)(3) issued July 26, 2007 states that the required beginning date for a 403(b) annuity is April 1st of the calendar year following the later of the calendar year in which the employee attains age 70 1/2 or or the calander year the employee retires.

 

Finally I could not find anything in the final 403b regs that required the segregation of rollovers from an IRA that you stated was required. Please provide a cite.

 

 

Intruder:

 

Prior to TRA '86 neither the Code nor the Regs required a specific time by which distributions had to commence from a 403b account. As a rule of thumb and on an administrative basis, the IRS required 403b distributions to begin no later than at age 75. See Letter Ruling 7913129 issued December 29, 1978).

 

TRA '86 provided a required distribution date that is was generally earlier than age 75. Congress addressed this difference in age in section 1852(a)(3)© of TRA '86 which provided that the new required minimum distribution rules would apply only to benefits accruing after December 31, 1986, in taxable years ending after that date. The effect of this was to bifurcate an employee's account balance into pre-1987 and post 1986 accruals. The employee must be able to indentify pre 1987 and post 1986 balances in order for the pre-1987 balance to be subject to the age 75 "old money rule". If those records are not maintained the entire account balance will be subject to the minimum distribution rules.

 

Let's assume our past70guy retires at age 73 and is able to identify his pre 1987 and post 1986 accruals. Until he retires at age 73 he does not have to make any RMD on his entire account. Upon retirement at age 73 he must make a RMD just on his post 1986 accrual and is free to wait to age 75 to commence his RMD on his pre 1987 accrual.

 

Having said all this, you are wrongly advising him to rollover over his entire IRA balance before 12/31/07 (while working for this 403(b) employer) thus relieving him of his legal obligation to make a RMD from his IRA for 2008. Your erroneous, if not unique, understanding of the Federal Tax Law says: "If the IRA has a zero balance on 12/31/07 then no IRA RMD is due for 2008. WRONG!!! And you continue to write your own set of Income Tax Regulations by re-labeling this IRA as "pre-1987 403b money" which it is clearly NOT!!

 

Let's assume our post70guy remains employed with his 403b employer until age 90 when he retires. You are advising him to rollover his IRA to his 403b in order for his IRA to become subject to the 403b Required Mimimum Distribution rule which says he need not commence RMD until he retires at age 90. Like I previously asserted you are writing your own Federal Tax Law. Please refrain from doing so in the future.

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Joel: The rollover funds are not deferred because they are treated as pre 1987 money but because all rollover funds are treated as 403b funds which can be deferred until the employee retires as permitted under Reg 1.403(b)-6(e)(3). Reg. 1.403(b)-10(d) that I cited above classifies the IRA amounts rolled over to the 403b annuity as an amount held under the 403b annuity for which the MRD can be delayed until the employee retires from the employer maintaining the 403b plan. Under regs 1.401(a)(9)-5 Q/A-3, the MRD for the IRA for years after the IRA balance is reduced to 0 because the MRD is based on a value of the IRA as of Dec 31st of the prior year. As I stated previously please provide a citation that proves your point of view.

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Guest Sierra

Joel: The rollover funds are not deferred because they are treated as pre 1987 money but because all rollover funds are treated as 403b funds which can be deferred until the employee retires as permitted under Reg 1.403(b)-6(e)(3). Reg. 1.403(b)-10(d) that I cited above classifies the IRA amounts rolled over to the 403b annuity as an amount held under the 403b annuity for which the MRD can be delayed until the employee retires from the employer maintaining the 403b plan. Under regs 1.401(a)(9)-5 Q/A-3, the MRD for the IRA for years after the IRA balance is reduced to 0 because the MRD is based on a value of the IRA as of Dec 31st of the prior year. As I stated previously please provide a citation that proves your point of view.

 

 

You literally make this stuff up as you write. As Scott asks, what are you smoking? Stop this crap! The rollover funds are derived from an IRA. It is illegal for you to treat them as pre-1987 403b money. YOU ARE WRONG, CASE CLOSED!

 

OF NOTE: IF "PAST70GUY" FOLLOWS YOUR ADVICE HIS 403(b) CUSTODIAN WILL SIMPLY LABEL THE ROLLED OVER FUNDS AS COMING FROM AN IRA AND EFFECTUATE A RMD EACH YEAR BASED ON THE "IRA PORTION" OF THE 403(b) ACCOUNT.

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To recap, the suggestion made is that the participant roll his IRA money into his 403(b) account (assuming that the 403(b) plan accepts rollovers). Please correct me if that is not being suggested.

 

The reason for the suggestion is to avoid the RMD requirement that is due for 2007 (due either on 12/31/2007 if the participant turned 70.5 before 2007, or, due on 4/1/2008 if the participant turned 70.5 during 2007). Please correct me if that is not the goal/intent. No RMD is due from the 403(b) because the participant is still working for the employer through which the 403(b) is established. Please correct me if that is incorrect.

 

Hmmm, that concept sure works fine with 401(k), profit sharing, money purchase, defined benefit, ESOP, etc. plans. I have not yet searched for this special prohibition that may apply to 403(b)'s according to Joel.

 

So, Joel, do you want to ask the experts at Benefitslink again, like you did with the 457(b) maximum question? I think that might help clear things up.

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I am unsure as well, I was unaware that IRA money had to be recordkept separately within a 403(b), though I know it must with a 457(b). I might be wrong on this, but can't recall seeing anywhere where IRA must be kept separate if transferred.

 

I also am not sure if this strategy would work this year. If their was money in the IRA in 2006 and the client has distribution that is required, I think the distribution must happen regardless of it is transferred into the 403(b) or not (and if so, it must be done before being transferred to the 403(b)). Though in future years I don't think the money would be subject.

 

This might be a Michael Devault question, Michael where are you?!!!

 

I am stuck on this one as I did think you could roll an IRA into a 403(b) and not have it subject to RMD, I know that is different with 457.

 

ScottyD

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Guest Sierra

To recap, the suggestion made is that the participant roll his IRA money into his 403(b) account (assuming that the 403(b) plan accepts rollovers). Please correct me if that is not being suggested.

 

The reason for the suggestion is to avoid the RMD requirement that is due for 2007 (due either on 12/31/2007 if the participant turned 70.5 before 2007, or, due on 4/1/2008 if the participant turned 70.5 during 2007). Please correct me if that is not the goal/intent. No RMD is due from the 403(b) because the participant is still working for the employer through which the 403(b) is established. Please correct me if that is incorrect.

 

Hmmm, that concept sure works fine with 401(k), profit sharing, money purchase, defined benefit, ESOP, etc. plans. I have not yet searched for this special prohibition that may apply to 403(b)'s according to Joel.

 

So, Joel, do you want to ask the experts at Benefitslink again, like you did with the 457(b) maximum question? I think that might help clear things up.

 

 

John: I am not your keeper. If you think we need their "final" determination on this matter then with all due respect you are quite capable of posting on the benefitslink site yourself. I find it strange that you "invite" me and not "intruder" to pose the question to benefitslink. Do you have an agenda here apart from a "final determination" in this matter?

 

Re: SEP/403(b) subject to separate 415 limits when person making SEP contributions does not have a controlling interest in the employer offering 403(b) plan. [/b]

 

John, you were conspicuously absent from this thread. Does this silence mean you agree that our intruder should eat the humble pie that I set out for him? If I am correct why didn't you publicly state so. What motivates you to post your opinion when you disagree with me but remain silent when you agree with me?

 

 

 

 

 

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Yikes!

 

Joel stated: "Do you have an agenda here apart from a "final determination" in this matter?"

 

Yes, I'll state exactly my agenda for participation in any post I make. 1) to learn 2) to teach/share info, and 3) although rare, to add levity when possible and where appropriate or needed.

 

Let's hope that answer is good enough, because that's all I got (rather short agenda isn't it - it doesn't even sound like much of a plan at all)! I also make the assumption that my best friends, spouse, my parents, and my kids are reading everything I write, because civility is paramount (IMHO) in having a successful discussion, as this is a discussion board.

 

I imagine your agenda may be very similar, but I'll let you speak to that if you think you need to; not that it is necessary for anyone to really have an agenda here at all, right?

 

Thanks for asking Joel! I wish you much success!

 

And now for the listeners at home, back to the question at hand. I honestly have not looked into this, so without the research, I am hesitant to respond. IMHO, it is more important to be able to admit when you do not have an answer (yet), then to jump into a potential incorrect conclusion without looking it up first. So, in this case, as I am particularly interested in this one, I am going to pay a law firm for a written opinion. It may be a while, but I will post their response.

 

Meanwhile back to Joel's cacophony. Regarding a topic not even related to this thread: I have no interest in that issue - either way it ends up makes no difference for me, so do you want me to jump in on that other thread anyway (seems kinda silly to me)? I'll let experts like you handle that, Joel. Thanks again for asking!

 

"What motivates you to post your opinion when you disagree with me but remain silent when you agree with me?"

My agenda (see above) is what motivates me. -Thanks!

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Guest Sierra

To recap, the suggestion made is that the participant roll his IRA money into his 403(b) account (assuming that the 403(b) plan accepts rollovers). Please correct me if that is not being suggested.

 

The reason for the suggestion is to avoid the RMD requirement that is due for 2007 (due either on 12/31/2007 if the participant turned 70.5 before 2007, or, due on 4/1/2008 if the participant turned 70.5 during 2007). Please correct me if that is not the goal/intent. No RMD is due from the 403(b) because the participant is still working for the employer through which the 403(b) is established. Please correct me if that is incorrect.

 

Hmmm, that concept sure works fine with 401(k), profit sharing, money purchase, defined benefit, ESOP, etc. plans. I have not yet searched for this special prohibition that may apply to 403(b)'s according to Joel.

 

So, Joel, do you want to ask the experts at Benefitslink again, like you did with the 457(b) maximum question? I think that might help clear things up.

 

 

John: Clarification: Post 70 Guy is currently employed by an employer offering a 403(b) Plan. Post 70 Guy also is the owner of an IRA which is subject to Required Minimum Distributions. Post 70 Guy does not know when he will retire from his 403b employer but knows that Required Minimum Distributions do not have to start until he does retire from his 403b employer.

 

Intruder advises Post 70 Guy as follows: Assuming your 403b plan accepts an IRA rollover, roll your IRA balance over to your 403(b) account so that your IRA balance will become subject to Required Minimum Distributions when you retire from your 403b employer. In other words even though this IRA was not derived from 403(b) employment it may be treated as 403(b) money simply by rolling it over to your 403(b) account. Once it is in the 403b account the IRA portion along with the 403b portion will be subject to RMD when you retire from your 403b employer.

 

I trust I have helped you understand the exact nature of the advice Intruder is giving our post 70 guy.

 

Peace and hope,

Joel L. Frank

Pension Columnist

The Chief-Civil Service Leader

NYC

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John: I am not your keeper. If you think we need their "final" determination on this matter then with all due respect you are quite capable of posting on the benefitslink site yourself. I find it strange that you "invite" me and not "intruder" to pose the question to benefitslink. Do you have an agenda here apart from a "final determination" in this matter?

 

Re: SEP/403(b) subject to separate 415 limits when person making SEP contributions does not have a controlling interest in the employer offering 403(b) plan. [/b]

 

John, you were conspicuously absent from this thread. Does this silence mean you agree that our intruder should eat the humble pie that I set out for him? If I am correct why didn't you publicly state so. What motivates you to post your opinion when you disagree with me but remain silent when you agree with me?

 

 

Joel:

 

Why should I pose the question? I have provided you with all of the citations necessary to determine the answer and you have only responded with references to inapplicable IRC provisions and hyperbole.

 

With regard to your question Re SEP/403b

 

From the governator: "I'eil be baack".

 

From Intruder: Do you feel lucky today?

 

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