Defined Benefit Conversion To Roth
I have a client with a defined benefit plan. He questions if he can convert his monies to a Roth IRA? Obviously he can terminate the plan, roll the monies to an IRA and then do the conversion. Could he amend his plan to allow for in service withdrawals, and then take his present moniesand convert them? Does he have to do the same for each off the people covered in the plan?
Might he not be better terminating his plan, and funding future payments to a life Insurance policy if tax rates are projected to increase? Why defer moniesin a 35% braket when overe the next 3 -5 years the income tax bracket could potentially be 50% OR greater?
Your thoughts are appreciated
Permalink Submitted by mk foss on Fri, 2010-04-30 02:03
If a plan is amended to allow inservice distributions, all participants would have the same ability to take them. The plan could be amended in such a way that only the owner is likely to qualify for an inservice distributions – by making them available only to people over age 60 or only to people who have participated in the plan (or worked for the employer) 10 years.
Hoever, defined benefit plans are much more complicated than a profit sharing type plan such as a 401(k). You really need to consult with an expert in plan design and administration. So few people are creating defined benefit plans these days that it may be easier than usual to find an expert to consult.
Permalink Submitted by Martin Helmer on Fri, 2010-04-30 13:59
See Form 5626 and Publication 6392, item II c.