APPENDIX 1:

QUESTIONS AND ANSWERS

Can I do a rollover from my employer’s plan to a Roth IRA?

No. You must first do a rollover to a traditional IRA and then to a Roth IRA.

What items cannot be rolled over to an IRA?

The required mandatory distribution

72t distributions

Inherited IRAs to non-spouse beneficiaries

What is a conduit IRA?

It is an IRA in which you keep segregated funds in order to retain their tax attributes. For example, if you are eligible for ten year averaging on distribution from a qualified plan but choose to roll your qualified plan to an IRA and you keep that IRA separate from all other IRA accounts (thus, a conduit IRA), you may later roll those funds back to a qualified plan and exercise the ten year averaging option.

Can I pledge my IRA as collateral for a loan?

No. Pledging your IRA as collateral constitutes a distribution of the IRA, making it taxable (and subject to penalties if under age 59 ½).

What’s a prohibited transaction?

The following are examples of prohibited transactions with respect to a traditional IRA

• Borrowing money from it.

• Selling property to it.

• Receiving unreasonable compensation for managing it.

• Using it as security for a loan.

• Buying property for personal use (present or future).

Since the penalty for distributions prior to age 59½ don’t apply, why don’t I roll my IRA to 457 and then the age 59½ penalty won’t apply?

Because IRS already has a rule that any IRA funds rolled over to a 457 plan will still be restricted for pre-59½ distributions, and the penalty will apply