1. Clay H. Sorrick, Jr., CLU, ChFC, MSFS Legacy Wealth Partners
Estate Planning Council October A Survey of Section 408 plans (A.K.A. IRAs) But no section 401 a, k or 403b
Clay H. Sorrick, Jr., CLU, ChFC, MSFS
Legacy Wealth Partners

2. IRAs (Individual Retirement Plans) (trustee/custodian)
Regular IRAs (both deductible and non deductible)
Rollover IRAs and Conduit IRA (temporary regular)
Spousal IRAs
Education IRAs
SIMPLE IRAs (not so simple!) – sort of an IRA for employees and employer
SEP IRAs – an IRA for individuals still but sponsored by a business
Inherited IRAs
Not discussed: Individual Ret Annuity, Employer IRA
How presentation will benefit audience: Adult learners are more interested in a subject if they know how or why it is important to them.
Presenter’s level of expertise in the subject: Briefly state your credentials in this area, or explain why participants should listen to you.

3. Regular IRAs
Limit is $5500 (catch up total is $6500) no income limit if no qualified retirement plans during this year for either you, single or with spouse
Single and head of household: If you are in a Q.P. IRA eligibility phases out if income AGI $62-72k
Married filing jointly and you are in a Q.P. phase out $99-$119
Married filing jointly: if you not in plan but spouse is in a Q.P. IRA phase out is AGI $186-$196
If not eligible to deduct then you can still do a non deductible IRA and file form IRS 8606 and get tax deferred growth –watch payout %s
Lesson descriptions should be brief.

4. Roth IRA Conversion from regular to ROTH IRA: no income limit
Contribute to a ROTH ($5500/$6500) if:
Single or HH phase out eligibility is $118-$133
Married filing jointly phase out is $186-$196
Does not matter if you are in QP or spouse is
No deduction, tax deferred growth, tax free withdrawals
No RMD at 70 ½ and ideal for passing wealth to heirs
Regular IRA deduct and deferral and tax at distribution
Roth no deduct still deferral no tax at distribution
Example objectives
At the end of this lesson, you will be able to:
Save files to the team Web server.
Move files to different locations on the team Web server.
Share files on the team Web server.

5. IRA Tax thoughts
Maximum bracket still graduated to 39.6 plus 4.63% flat rate CO
Taxpayers still hate to pay taxes!
Young persons or low bracket taxpayers ideal for a Roth
If you have multiple past employers may be better to manage old plans in a roll over IRA to coordinate investments; not lose track of assets
Costs for an IRA may be more than a qualified plan investment choices
IRA usually has far more in variety of investments choices (ETFs)
If a choice between an IRA or a QP the QP often has higher limits and/or a match

6. Spousal IRA
If you have enough income but spouse does not have any and you are otherwise eligible
AND you have enough income to fund both if you fund your own
Looks like - smells like a regular IRA
$5500 ($6500) limits up to income for joint return
Must be less than 70 ½ for regular or spousal IRA
No age limit for Roth IRA for you or spouse
Spousal: Has to be a separate account from taxpayer with income
Must file married/joint

7. Education IRA (Coverdell Education Savings account)
Often known as an E.S.A.
Not nearly as common as 529 plan for education funding
Contributions not deductible, can open for student under age 18
Eligibility income limit is $110,000 single; $220,000 married jointly
Contribution limit is $2000 annually – non qual withdraw income +10%
Grows tax free, must be withdrawn by age 30 unless special needs
Withdrawals for qualified education expenses tax free
OK to use for elementary and secondary school expense (not 529s!)

8. Inherited IRA
If you get an IRA from your spouse at death the two are combined
Generally the same rules for distributions
If you get an IRA from a non-spouse (brother, mother) then:
You must take distributions as a lump sum, over 5 years or lifetime
Lifetime spread is often called a “stretch” IRA
Use special single life expectancy table
Age 30 factor is 53.3 or 1.87% must be withdrawn
No rollover occurs if non spouse
But an inherited ROTH has required distribution before anytime

9. SIMPLE IRA (not so simple after all)
Employer establishes, can be a sole proprietor
Complete IRS form SIMPLE to establish
Can have a wait for up to two years prior year employment
Wait measured by up to $5000 prior yr. comp & expects $5000 curr. yr.
Salary or income deferral limit $12,500 ($3000 catch up)
All catch ups for all IRA plans require taxpayer to be age 50 by 12/31
Employer must put in 3% match (provision for “bad” years)
Or Employer puts in 2% for all employees even if not participating

10. More on SIMPLEs
No loans (loans common but not required in 403b and 401k plans)
No tax return (5500) for the plan which are required for 401k plans
No T.P.A. (Third Party Administrator or CPA to keep plan records)
Must be established for the current year no later than October 1
Contribution limit for employee coordinated with 401k $18k limit
Early withdrawals/rollovers subject to penalty tax of 25% for 2 years
Withdrawals after 2 yr. have the same 10% withdrawal tax up to 59 ½
Cannot have any other qualified plan except the SIMPLE
No more than 100 EEs but most common for very small employers

11. SEPs – Simplified Employee Pensions (Section 408) (k)
A SEP has no limits on employee count but commonly is for small employers
A SEP can have contributions of 25% of salary or 20% of self employed net
Example: Self employed net 100k and contribution 20% = $20,000
Example Salary 80K and 25% = $20,000
Contributions based on ERISA salary cap of $270,000 in 2017
So 20% of $270,000 equals $54,000 (no catch ups as $$ are all ER $$!)
Then eligible employees get 20% also or can integrate with social security
In a 401k plan may allow no ER $$ for employees who leave, not in SEP

12. More on SEPs
Employees must be in the plan if they work longer than 3 years in last 5
Age 21
Earned at least $600 in compensation in prior years (LOW)
Not good if you regularly have same seasonal employees
You and your employees are always fully vested
No Employee contributions allowed
Can I be in a SIMPLE and 401k plan? Yes, but combined deferrals
Can I be in a SEP and 401k plan – yes as SEP $ are not deferrals
SEP: Assumes you have regular job and side job so two employers

13. Section 408 plans Are all “Individual” retirement plans
None have TAX reporting (5500) or TPA, CPA record keeping
Have the same rules for distributions except Roth's & ESAs, Inherited
59 ½ can take ½ must take
Death, divorce (QDRO or possible taxation)
If 70 ½ can give up to 100k direct to public charities w/o taking into income
Charitable Q.C.D. satisfies the RMD and does not increase A.G.I.
Charitable Q.C.D. must be acknowledged by the charity (no SIMPLE or Inh.)
Disability, First home (120 days 10K), qualified reservist 179+ days
“Substantially” equal payments 5 yr. or 59 ½ if retired before 59 ½ (72 (t)(2)
Waits are measured by prior year compensation in SIMPLE/SEPs

14. Section 408 plans
Watch out in Simple or SEP for a wait that excludes you or your spouse
Distributions required and not taken can have 50% excise tax
If you miss and there is a reasonable error file IRS form 5329
Be careful to use the correct distribution table (Pub 590B)
One table you or your spouse (starts at age 70 ½ at 27.4 divisor)(3.65%)
Another table (single life) for inherited IRA
No formal IRS monitoring
Even if you roll over a 401k/401a to an IRA you will receive a 1099R

15. Section 408 Plans
Questions please?
Thank you!