October 13, 2012
SIMPLE IRA Employee Notification
Frequently Asked Questions Regarding
No. The option to defer starting your required minimum distribution (RMD) past age 72 until you retire only applies to the amounts that are held with the company that you currently work for.
For the amounts that are held with companies for which you are no longer an employee, your RMD amounts must be taken every year. If your current employer’s plans you to defer starting your RMDs until you retire and it allows rollovers from other plans, you can rollover your balances from those plans from your former employers into the plan held with your current employer. This would allow you to defer your starting your RMDs until you retire. If you are rolling over amounts from amounts held with your former employers, you must take the RMD due for the year before completing the rollover.
Note: The Option to defer RMDs past age 72 does not apply to IRAs, including SEP and SIMPLE IRAs.
Answer provided by “https://www.linkedin.com/in/deniseappleby” Denise Appleby, CISP, CRC, CRPS, CRSP, APA
Even though you participated in the plan for only one month, you are still considered an active participant for the year. Bear in mind, however, that you may still be eligible to claim a deduction (or partial deduction) for your IRA contribution, if your https://www.retirementdictionary.com/definitions/modifiedadjustedgrossincomemagi Modified Adjusted Gross Income (MAGI) is within the limits stated here https://www.retirementdictionary.com/definitions/activeparticipant
If you are not eligible to claim a tax-deduction for your contribution, you can either:
• Make a https://www.retirementdictionary.com/definitions/nondeductiblecontribution nondeductible contribution to your traditional IRA,
• Split your contribution between your traditional IRA and your https://www.retirementdictionary.com/definitions/rothira Roth IRA (your total contribution cannot exceed the limit in effect for the year. Click https://www.retirementdictionary.com/definitions/ira here for the limit in effect for this year)
• Make your contribution to a Roth IRA, if you are eligible. For Roth IRAs, your Modified Adjusted Gross Income (MAGI) would need to be within the limits stated here https://www.retirementdictionary.com/definitions/rothira
For more on this, please see the article https://www.retirementdictionary.com/articles/29/active-participant-statusâcan-you-deduct-your-ira-contribution Active Participant Status–Can You Deduct Your IRA Contribution?
Many small business owners and https://www.retirementdictionary.com/definitions/participant plan participants who either sponsor or participate in https://www.retirementdictionary.com/definitions/simplifiedemployeepensionsepira SEP or https://www.retirementdictionary.com/definitions/simpleira SIMPLE IRA plans question whether or not contributions can be made to these plans after the owner or participant reaches age https://www.retirementdictionary.com/definitions/70andhalfage 72. The answer is yes. In fact, participants turning 72 must be allowed to continue participating. This means that participants must continue to share in employer contributions and, in the case of SIMPLE IRA plans, must be allowed to continue to make salary reduction contributions. The contributions to both SEP and SIMPLE IRA plans are made to IRAs https://www.retirementdictionary.com/definitions/traditionalira traditional IRAs in the case of SEPs. Note that individuals age 72 or older are not permitted to make the regular, annual contributions ($5,000 for 2011 or $6,000 if age 50 or older) to traditional IRAs, whether or not the IRA is part of a SEP plan. (See Code §219.)
Keep in mind that individuals are still required to take RMDs from these accounts, since all IRA owners must start taking RMDs once they have attained age 72.
http://www.irs.gov/pub/irs-pdf/p560.pdf Pub 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans)
http://www.irs.gov/pub/irs-pdf/p590.pdf Pub 590, Individual Retirement Arrangements (IRAs)
*******This Q&A was taken from the IRS’s Summer 2008 Employee Plan Newsletter ******Update to make current with limits
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