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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121592  
Subject: Re: Employer converting pension plan Date: 9/16/2005 12:34 PM
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I've been enrolled in the employers plan since 1987 - a defined benefit 'profit sharing' plan.

Let's be careful, here. "Defined Benefit" and "Profit Sharing" are terms of art for two different kinds of retirement plans. From reading ahead, I suspect you have a Defined Benefit plan, but I'm not certain.

It's the type of plan that causes a check box on my year end W2 and caps eligibility for a TIRA at an income level under my annual salary.

Pretty much any kind of employer sponsored pension plan is going to do that.

However my salary also falls short of the max income levels for a Roth and that's what I've been contributing to.

Good.

Effective 9/30/2005 the employer is closing the defined benefit plan and starting a 401K effective 10/1/05. We will be allowed to roll our accumulated pension benefits to the 401K or move them into a self directed TIRA.

OK. You didn't ask, but I usually recommend taking the option to roll over into an IRA. You'll have more investment choices, and never have to worry about your employer mishandling those funds.

My question: Will the change to a 401k enable me to consider making contributions to a traditional IRA instead of my Roth?

Sorry, but no. It doesn't matter what kind of retirement plan your employer sponsors (defined benefit, profit sharing, money purchase, SEP, SIMPLE, 401k, and probably a couple of others I've missed). ANY plan sponsored by your employer will put that lower limit on your ability to deduct contributions to a traditional IRA.

Are there income caps for a TIRA with the 401k like there were with the defined benefit plan?

Yep. Exactly the same caps.

--Peter
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