Life and Death Planning for Retirement Benefits

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Life and Death Planning for Retirement Benefits

 The Ordering Rules matter also for someone who converts a traditional plan to a Roth IRA before reaching age 59½, and then takes a distribution within five years after the conversion and while still under age 59½. The Ordering Rules will apply in determining whether the 10 percent penalty applies to the distribution. See ¶ 5.5.02 . 5.3 How to Fund a Roth IRA; Regular and Excess Contributions This section lists every known way to fund a Roth IRA; explains the rules for “regular” Roth IRA contributions; and tells how you can incur an “excess” Roth IRA contribution. The law provides at least eight ways to fund a Roth IRA. Each method has its own rules and eligibility requirements.  An individual who has compensation income (and whose adjusted gross income is under certain levels) can make a “ regular contribution ” to a Roth IRA. See ¶ 5.3.02 – ¶ 5.3.04 .  A participant who owns a traditional retirement plan or IRA can transfer funds (or “roll over” distributions) from the traditional plan or IRA to a Roth IRA. This is called a “Roth conversion .” See ¶ 5.4 . The eight ways to fund a Roth IRA

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A participant can roll money from a DRAC into a Roth IRA. See ¶ 5.7.08 .

 See ¶ 3.2.04 for the ability of a surviving spouse (or ¶ 4.2.05 for other Designated Beneficiary) to transfer funds from an inherited traditional plan to a Roth IRA.

 Certain U.S. military death gratuities can be contributed to a Roth IRA. For details, see § 408A(e)(2) and IRS Publication 590 (“IRAs”; 2009 ed., p. 63). This type of contribution is not covered in this book.

 A qualified reservist distribution ( ¶ 9.4.12 ) may be contributed to a Roth IRA; see ¶ 2.7.04 (C).

 Certain individuals who received compensation in connection with the Exxon Valdez oil spill can contribute up to $100,000 of their settlement to a Roth IRA or other eligible retirement plan. For details, see § 504 of the Emergency Economic Stabilization Act of 2008 and IRS Publication 590 (“IRAs”; 2009 ed., p. 27–28, 64). This type of contribution is not covered in the Code or in this book.  Certain qualified airline employees can contribute to a Roth IRA (only), within 180 days of receipt, certain payments they receive in connection with the bankruptcy of a “commercial passenger airline carrier.” See § 125 of the Worker, Retiree, and Employer Recovery Act of 2008 and IRS Publication 590 (“IRAs”; 2009 ed., p. 64). This type of contribution is treated as a qualified rollover contribution to the Roth IRA (See ¶ 5.4 ), and is not covered in the Code or in this book.

“Regular” contributions from compensation income