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IRA Basics

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Ascensus® and the Ascensus logo are registered trademarks of Ascensus, Inc.

This manual is designed for use in conjunction with seminars conducted by Ascensus. Some areas are not intended to be covered fully, but only highlighted for presentation purposes. It is understood that the publisher is not engaged in rendering legal or accounting services. Every effort has been made to ensure the accuracy of the material presented during the seminar. But retirement plan forms, government regulatory positions and laws are subject to change, so we cannot guarantee the accuracy of the material. The material in this manual reflects the law and regulatory interpretations as of the publication date of June 2014 (v49).

Much of the information contained in this manual is based on the operation of the financial organizations to which we provide services. Some of your procedures may vary if your organization is not a member organization served by us. Ascensus makes no representations regarding compliance of the seminar or guidebook with any state laws or state regulations or federal securities law.

Copyright ©2014 Ascensus, Inc. All rights reserved.

No part of this manual or presentation may be reproduced in any form by audiotape, photocopy or any other means without written

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©2014 Ascensus, Inc. All rights reserved. www.ascensus.com

IRA Basics

Table of Contents

Course Objectives ............................................................................................... 1 Understanding IRAs ............................................................................................ 2 IRA Contributions ................................................................................................ 8 Moving Assets Between IRAs ............................................................................ 15

Rollovers Between Employer‐Sponsored Retirement Plans and IRAs ............... 19 Traditional IRA Distributions .............................................................................. 22 Roth IRA Distributions ....................................................................................... 24

IRA Basics 1 ©2014 Ascensus, Inc. All rights reserved. www.ascensus.com

Course Objective(s)

After participating in this webinar, you will be able to

describe and list the tax benefits of an IRA,

recognize types of annual contributions,

explain contribution eligibility and the deadline to make an annual contribution,

identify the methods of moving assets between IRAs and between employer‐ sponsored retirement plans and IRAs, and

state the early distribution penalty tax exceptions.


Understanding IRAs

An individual retirement arrangement (IRA) is a special domestic trust, custodial account, or

annuity contract established to hold assets for an individual’s retirement.

An IRA is not a certificate of deposit, money market account, or any other type of investment.

I

R

A

Understanding IRAs


One IRA

No Investments

Understanding IRAs


One IRA

Many Investments

Understanding IRAs


Retirement Income Sources

Understanding IRAs


Types of IRAs

There are different kinds of IRAs.

Traditional IRA

Roth IRA

SIMPLE (savings incentive match plan for employees of small employers) IRA

Understanding IRAs


Traditional IRA Tax Implications

Tax deduction (if eligible)

Tax credit (if eligible)

Tax‐deferred earnings

Roth IRA Tax Implications

No tax deduction

Tax credit (if eligible)

Tax‐deferred earnings

Tax‐exempt earnings (for qualified distributions)


IRA Contributions

Traditional IRA Contribution Sources

Traditional IRA

Regular Catch-Up Spousal

SEP

Transfer Recharacterization Rollover

IRA Contributions


Traditional IRA Contribution Eligibility

Regular contribution IRA owner has not attained 70½ year

IRA owner has earned income

Spousal contribution Spouse IRA owner has not attained 70½ year

Married couple has earned income

Married couple files a joint federal tax return

Catch-up contribution IRA owner meets eligibility for either a regular or spousal contribution

IRA owner (or IRA owner’s spouse if married, filing a joint federal tax return) must have earned income to support the amount of

the catch‐up contribution in addition to any regular or spousal contribution

IRA owner attains age 50 or older before the end of the taxable year

IRA Contributions


Roth IRA Contribution Sources

Roth IRA

Regular Catch-Up Spousal

Conversion

Rollover Recharacterization Transfer

IRA Contributions


Roth IRA Contribution Eligibility

Regular contribution No age restrictions

Earned income

For 2014 MAGI is less than $129,000 ($127,000 for 2013) if single or $191,000 ($188,000 for 2013) if married, filing a joint tax return

Spousal contribution No age restrictions

Earned income

Married, filing a joint federal tax return

MAGI is less than $191,000 for 2014 ($188,000 for 2013)

Catch-up contribution IRA owner meets eligibility for either a regular or a spousal contribution

The IRA owner (or IRA owner’s spouse if married, filing a joint federal tax return) must have earned income to support the

amount of the catch‐up contribution in addition to the regular/spousal contribution

IRA owner attains age 50 or older before the end of the taxable year

IRA Contributions


MAGI Limits for Roth IRA Contribution Eligibility

2014 MAGI Limits for Roth IRA Contributions*

Filing Status MAGI for

Full contribution MAGI for Partial

Contribution Ineligible for Roth

Contribution

Single Up to $114,000 $114,000 up to $129,000 Over $129,000

Married, filing jointly

Up to $181,000 $181,000 up to $191,000 Over $191,000

Married, filing separately**

N/A $0 up to $10,000 Over $10,000

*The MAGI limits may be subject to annual cost-of-living adjustments (COLAs), which generally are released in the fourth quarter for the following year.

**IRA owners that do not live with a spouse at any time during the year are considered a single filer for determining Roth IRA eligibility.

IRA Contributions


Regular Contribution Limit

The maximum annual regular, spousal, and catch‐up contribution amounts are as follows.

Year

Maximum individual amount

(regular/spousal contribution)

Maximum catch‐up

contribution amount

2014 $5,500 $1,000

The annual regular/spousal contribution limit may be subject to COLAs, while the annual catch‐up contribution limit will remain at $1,000 each year.

What else may an IRA owner need to be concerned about when making a

regular, spousal, or catch‐up contribution?

Individuals with earned income less than their maximum contribution amount may contribute

only an amount equal to or less than their earned income.

Married couples (who file a joint federal tax return) with earned income less than the total of the applicable limits for both spouses may contribute only an aggregate contribution amount equal to their combined earned income, with neither spouse exceeding the applicable individual limit.

An individual may contribute to both a Roth IRA and a Traditional IRA, but the contributions in aggregate cannot exceed the annual contribution limit.

?

IRA Contributions


Regular Contribution Deadline

IRA owners must make regular, spousal, and catch‐up contributions to Traditional and Roth IRAs by the due date of their federal income tax returns for that tax year, not including extensions (April 15 for most individuals). If the deadline falls on a Saturday, Sunday, or legal holiday, individuals will have until the following business day to make their contributions.

2014 2015

January 1 January 1 April 15

Prior‐Year Contribution


Moving Assets Between IRAs

IRA Portability



Transfer

A transfer is a direct movement of assets between like IRAs. A transfer may occur between two

Traditional IRAs, between two Roth IRAs, or between two SIMPLE IRAs. A transfer generally

occurs between two different financial organizations, but may occur between like IRAs at the

same financial organization. The IRA owner must not have actual receipt of the money or

assets. Transfers are nonreportable transactions.



Rollover

An IRA‐to‐IRA rollover is another method of moving assets, tax‐free, from one IRA to another

IRA of the same type. With rollovers, the IRA owner actually receives the assets through a

distribution before rolling it over into another IRA. Rollovers are reportable transactions.



Conversion

A conversion is a taxable, reportable movement of assets from a Traditional IRA or SIMPLE IRA

to a Roth IRA. Any IRA owner may convert all or a portion of his IRA assets to a Roth IRA

without restriction.

Roth IRA SEP

(Traditional IRA)

Roth IRA Traditional IRA

2014 Phase-Out Range

Roth IRA SIMPLE IRA

Two years after first SIMPLE IRA

contribution is received


Rollovers Between Employer-Sponsored Retirement Plans and IRAs

Employer‐Sponsored Retirement Plan‐to‐IRA Rollovers



Traditional IRA‐to‐Employer‐Sponsored Retirement Plan Rollovers



Current Rollover Rules


Traditional IRA Distributions

Distribution Stages of a Traditional IRA

Traditional IRA Distributions


Early Distribution Penalty Tax Exceptions

Taxable Traditional IRA distributions taken before the IRA owner attains age 59½ are subject to

an additional 10 percent penalty tax unless one of the following exceptions applies.

Attainment of age 59½

Death

Disability

Series of substantially equal periodic payments

Medical expenses exceeding 10 percent of adjusted gross income

Health insurance premiums for the unemployed

Higher education expenses

First‐time homebuyer

IRS levy

Qualified reservist distributions

Roth IRA Distributions

Qualified Distributions

For a Roth IRA distribution to be qualified (not subject to tax or penalty), two requirements must

be met.

Five‐year waiting period

AND

Age 59½ or older,

Death,

Disability, or

First‐time homebuyer

Nonqualified Distributions

If a Roth IRA owner is not eligible for a qualified distribution, the tax rules still are fairly liberal.

Some nonqualified Roth IRA distributions are tax‐free, provided they do not exceed the amount

the IRA owner has contributed to his Roth IRA.

Roth IRA Distributions


No Required Minimum Distributions

A Roth IRA owner is never forced to take required minimum distributions (RMDs).

RMDs

Looking for Continuing Education Credits?

Congratulations on completing this webinar. As a retirement services industry professional, you must remain current with law changes, new regulations, and market trends to provide the best service possible to your clients. Continuing your professional education is one way to stay on top of the changes and maintain your competitive edge. Successful candidates who earn industry designations demonstrate their expertise and commitment to retirement plan knowledge. To find out how you can obtain an IRA designation, please contact an Ascensus Sales Representative at (800) 346‐3860.

The webinar you just completed has been submitted and approved for the following continuing education credits:

• Certified IRA Specialist (CIS) – 1 credit

Report Your CE Credits To ensure that your continuing education credits are tracked properly, simply follow the steps below.

• CIS Designation – Complete the enclosed Certificate of Completion, and fax a copy to Ascensus CustomerService at 215‐648‐1588. Ascensus will ensure your continuing education credits are recorded.

If you have any questions regarding CE credits, please contact the Education Department at 800‐346‐3860.

We are pleased you chose to attend this webinar, and we look forward to seeing you at future Ascensus programs.

©2014 Ascensus, Inc. All rights reserved. Ascensus® and the Ascensus logo are registered trademarks of Ascensus, Inc

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