Roth, Rollover, SEP and SIMPLE IRAs FAQ

How much can I contribute?
Roth IRA contributions are limited to the lesser of 100% of earned income or $2000 per individual per year. This maximum amount applies to the total of both Traditional and Roth contributions for the year.

Income limitations:
Single individuals having a Modified Adjusted Gross Income (MAGI) of $95,000 or less may contribute a maximum of $2000. For MAGI ranging between $95,000 -- $110,000, this amount decreases incrementally. Married individuals filing jointly having a MAGI of $150,000 or less may contribute a maximum of $2000 each. For MAGI ranging between $150,000 and $160,000, this amount decreases incrementally. Consult your tax advisor to determine if you qualify for a Roth IRA contribution.

Can I make a contribution for my non-working spouse?
If your spouse does not have earned income, he/she may still establish a Roth IRA account. The Roth IRA is funded with spousal contributions made by the working spouse. The working spouse's earned income must meet or exceed the total of both contributions - each account would still be subject to the income limitations.

Is the contribution deductible?
Roth IRA contributions are NOT tax-deductible.

Can IRA assets be moved?
Yes, under certain circumstances IRA accounts can be moved from one financial institution to another.

Options for moving your IRA Account

1. Withdrawing funds as a distribution at one institution and redepositing them at another institution as a 60-day rollover.
2. Transferring the account directly from one institution to another. You may want to consult your tax advisor before rolling over or transferring your IRA account. Certain tax implications could be involved if done incorrectly.

When am I required to take a distribution from my Roth IRA?
Unlike the Traditional IRA, you are not required to take distributions from your Roth IRA at age 70 ?.

Can I withdraw from my Roth IRA?
One feature of the Roth IRA is that account holder is allowed to remove his/her annual contributions at any time, tax and penalty free. You must satisfy two conditions to remove converted or contributed funds from your Roth IRA without tax or penalty. First, your Roth IRA must be established for 5 years. Secondly, your distribution must be for one of the following reasons: you have reached the age of 59 ?, you are disabled and have provided proof of this, you are using the distributed funds for the first time purchase of a home, or the account holder has died and, as beneficiary, you are removing the funds from the account. Distributions meeting the above requirements are referred to as "Qualified Distributions". Non-qualified Distributions may be subject to tax, penalty, or both. Consult your tax advisor to determine if your Roth IRA distribution will be subject to tax and/or penalty.

Can commissions be paid outside of the Roth contribution?
No commission fees may be paid outside of the Roth IRA account, nor will commission fees be received into the Roth IRA in excess of the maximum annual contribution.

Edited from Ameritrade's Education Center

1. What the procedures are to remove funds from the plan
2. Whether or not you are eligible to roll the funds out of the plan.

Some plans require that you first establish your receiving IRA account and provide them with the account number to facilitate the rollover.  Should this be the case, you may submit your IRA account application to a broker, along with a letter explaining that the equity will follow once the account is opened.

Your Qualified Retirement Plan can be moved into a contributory IRA or a Rollover IRA.  Please contact your tax advisor for assistance in determining the type of IRA that will best suit your needs.  Please be aware that the IRA does not allow Qualified Retirement Plan accounts to be put directly into Roth IRAs. Top

SEP IRAs

Who qualifies for a SEP?
A business owner or a self-employed individual. For more information regarding eligibility, reference IRS Publication 590 or IRS Publication 560.

What are the contribution limits?
SEP Contributions are limited to 15% of the participant's annual income, never to exceed $30,000. Each year the IRS sets a limit on the total compensation amount that the employer can consider. For example, in 1997, only $160,000 of compensation was allowed to be considered for maximum contributions, so this brings the current maximum contribution to $24,000 (15% of $160,000). All SEP contributions are made by the employer (or the self-employed individual).

What is the deadline for SEP contributions?
The deadline for employer SEP contributions is the tax filing deadline of the company, including extensions.

What paperwork is required to open a SEP IRA?
Brokers typically require the following paperwork to establish a SEP IRA: 

1. Completed Account Application
2. Completed IRA Adoption Agreement.  When applying on-line, this form is automatically incorporated into your application.
3. Completed 5305-SEP form Top

SIMPLE IRAs

Who is eligible for a SIMPLE IRA?
Employers having 100 employees or less and who do not maintain another retirement plan are eligible to establish a SIMPLE IRA. For more information on "eligible employees", reference IRS Publication 590 or IRS Publication 560.

What are the contribution limits?
SIMPLE IRA contributions are limited to $6000 in employee deferrals, and $6000 in employer contributions, per year. The employee may elect to have up to $6000 of his annual compensation deferred into a SIMPLE IRA. The employer has the option of either matching the employee's deferrals (up to 3%) or making non-elective contributions (2% or less) to ALL eligible employees regardless of the employees participation.

What is the deadline for SIMPLE IRA contributions?
The deadline for SIMPLE contributions is the tax filing deadline of the company, including extensions. For a previous year contribution, the SIMPLE plan must have been established by October 1 of the year for which the contribution is being made.

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