Current Pension Topics
Roth IRAs Under City 'Deferred Comp'

By JOEL L. FRANK

As promised, the Deferred Compensation Board of the City of New York has launched its Roth NYCE IRA program. The following information comes from the Deferred Compensation Plan's Web site. Please direct all questions you may have to me so that everyone may benefit from the question and answer.

Mr. Frank is a fee-only Retirement Financial Planner and a retired NYC High School Teacher of Accounting. He can be reached by telephone at (732) 536-9472, or via e-mail at rollover@optonline.net .

Contributing to Your Roth NYCE IRA

Making a contribution to your Roth NYCE IRA is easy. After establishing a Roth NYCE IRA, simply send a check or money order for the amount desired, specifying that it is a Roth contribution, along with the NYCE IRA Deposit Form to the address stated on the form. The minimum initial deposit is $100. You can contribute as often as you like, but remember that you are responsible for making sure you do not contribute in excess of the IRA contribution limits.

In addition, you can roll over assets from another retirement plan to your Roth NYCE IRA account. See "Learn more about funding your Roth NYCE IRA using a rollover" for more information.

Contributions can be made to your Roth NYCE IRA at anytime during the year or by the deadline for filing your Federal income tax return for that year, without including extensions. Contributions to the NYCE IRA must be received by the NYCE IRA Administrator prior to the tax-filing deadline.

Unlike a traditional IRA, you cannot deduct contributions to a Roth IRA. But, if you satisfy the requirements, Qualified Distributions are tax free. (See the Roth NYCE IRA Withdrawals section for detailed information.) Contributions can be made to your Roth NYCE IRA after you reach age 70-1/2 and you can leave amounts in your Roth NYCE IRA as long as you live.

Your eligibility to make contributions to the Roth NYCE IRA depends on whether or not you have taxable compensation and your adjusted gross income and tax filing status.

If you are not eligible to contribute to the Roth NYCE IRA, or your Roth contribution is in excess of the maximum annual IRA contribution limit, excess contributions must be distributed from the NYCE IRA prior to the tax return due date for the taxable year. If you fail to remove the amounts, you are subject to an annual 6-percent excise tax on those contributions.

The City of New York, its custodian, and service providers are not responsible for determining or tracking the cost basis (non-taxable contributions) to the Roth NYCE IRA.

A Roth NYCE Spousal IRA can be funded through contributions or rollovers.

- Contributions - Both the employee and the spouse can contribute to the Roth NYCE Spousal IRA as long as the couple files a joint return, and has enough taxable compensation to cover the contribution.

- Rollovers - A spouse can roll over assets into their Roth NYCE Spousal IRA from a Roth 401(k) plan or a Roth IRA. Assets can also be converted from a traditional IRA to the Roth NYCE Spousal IRA. Only retirement plans or IRAs in the spouse's own name are eligible for rollover into the NYCE Spousal IRA.