LOSAP account

Submitted by Douglas Bauerband on Mon, 2023-12-18 16:05

Have client who has an LOSAP with Lincoln financial.

Questions:
1. Is an LOSAP a qualified account?
2. Can an LOSAP be rolled over to or transferred to an IRA?
3. He retired but it shows a contribution for 2023…can the company he retired from continue to add to this?

Thank you,
Douglas



Submitted by Alan - IRA critic on Mon, 2023-12-18 16:44

They are not qualified plans and are not eligible for rollover. Contribution rules vary by adopting employer and by state law.

Submitted by Douglas Bauerband on Mon, 2023-12-18 16:55

1. Does the LOSAP have to stay with Lincoln annuity or can it be transferred to another annuity that he wants to go with?2. The cost basis would just be transferred as well to the new annuity company, correct?3. are there any other problems with these type of investments?Thank you,Douglas

Submitted by Alan - IRA critic on Mon, 2023-12-18 18:26

  • Any transfer would have to be to another provider of LOSAPs, and there might not be very many. There is no cost basis because the plan contributions were made pre tax. Following is a link to Lincoln describing how distributions are reported by them (Form W-2, not 1099R). As such, in retirement or after the plan balance is vested, a distribution would be taxable similar to wages, but without FICA. While no IRA rollover is allowed, if the distribution is reported in Box 1 of the W-2, it would be earned income that could be used to support an IRA or Roth IRA regular contribution. There are few IRS Regs for these public sector plans, so if another provider was located, they might not even report distributions the same as Lincoln does.
  • f400b677-b69d-4110-b1e8-78406f51d5dd.pdf (fmgsuite.com)

Submitted by Douglas Bauerband on Fri, 2024-01-05 16:04

We called Lincoln and this is what they stated:1. the client can do a rollover to an IRA. If they are stating they allow it, can he do a rollover?2. he can rollover up to 90% into an IRA and keep the contract with Lincoln going, which will allow the $1200 per year contribution from the State Fire Department to continue until he retires or doesn’t acheive enough credits for the $1200 from the State.3. In retirement the FICA wouldn’t matter since he is not working any longer, correct?4. the Balance left in his LOSAP is still part of his RMD at 73, correct?Thank you,Douglas

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