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Subject:  Re: SIMPLE/ Roth questions Date:  2/7/2007  1:15 PM
Author:  TMFPMarti Number:  91829 of 132792

Question 1: I am getting ready to make my 2006 Roth contribution. I just read Pub. 590, which makes it sound like I can contribute $4000 minus any money I put into a SIMPLE IRA.

"This means that your contribution limit is the lesser of:
-$4,000 ($4,500 if you are age 50 or older; for 2006, $4,000 or $5,000, if you are age 50 or older) minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs, or

-Your taxable compensation minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs."

Do the contributions that are deducted out of my paycheck count as employer contributions, or only the matching amount that the company contributes?

If you check Chapter 3 of Pub 590 you'll find that the salary deferrals deducted from your pay are employer contributions to the SIMPLE. None of it counts against your IRA contribution limit, as long as the salary deferrals don't reduce your taxable compensation below $4,000.

This post makes me think that I can still put $4000 in my Roth, but I want to make sure before I end up paying penalties:

Question 2: I started participating in the plan more than 2 years ago. I would like to roll it out of the current fund company and into Vanguard. May I convert all contributions to date to a traditional IRA, or only those made more than 2 years ago?
"Two-year rule. To qualify as a tax-free rollover (or a tax-free trustee-to-trustee transfer), a rollover distribution (or a transfer) made from a SIMPLE IRA during the 2-year period beginning on the date on which you first participated in your employer's SIMPLE plan must be contributed (or transferred) to another SIMPLE IRA. The 2-year period begins on the first day on which contributions made by your employer are deposited in your SIMPLE IRA.

After the 2-year period, amounts in a SIMPLE IRA can be rolled over or transferred tax free to an IRA other than a SIMPLE IRA, or to a qualified plan, a tax-sheltered annuity plan (section 403(b) plan), or deferred compensation plan of a state or local government (section 457 plan)."

I understand from other posts that the fund manager may not allow this, but I'd like to give it a shot if it's ok w/ the IRS

The fund managers must allow you to roll your account anywhere you like. You're right about the 2-year rule. You've already met it.


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