Roanoke Times Copyright (c) 1995, Landmark Communications, Inc. DATE: MONDAY, June 18, 1990 TAG: 9006180007 SECTION: BUSINESS PAGE: B5 EDITION: METRO SOURCE: Mag Poff DATELINE: LENGTH: Medium
A: The designation 403(b) is the federal code section that applies to pension plans for teachers and other people employed by non-profit organizations.
Harry Schwarz, a certified public accountant with H. Schwarz & Co. in Roanoke, said a 403(b)(8) plan is comparable to the more familiar 401(k).
Schwarz said the same roll-over rules apply to a 403(b) plan as to any qualified retirement plan. You can roll over into an IRA under the same general rules governing 401(k) plans.
Don't put the money in an existing IRA. You must put it into the qualified plan of a new employer or into a special IRA.
If you are retiring, you face a choice between roll-over versus forward averaging, regardless of whether you have a 401(k) or a 403(b). Your decision would have important tax ramifications and cannot be changed.
Anyone planning to roll over from one qualified pension plan to another should talk to the plan's administrator about tax questions. Or you can consult your accountant, lawyer or other tax adviser.
Evaluation under way
Q: We do most of our banking with CorEast Savings but are concerned if our money is safe. They are eliminating the employees' jobs in our area.
Would you recommend removing our savings to another bank?
A: CorEast Savings Bank exceeded the new and stricter government standards for capital strength on Dec. 31, the last period for which its figures are available.
CorEast is undergoing the same type of strict federal audit experienced by other banks, so those figures could change.
Federal authorities have three ratios to measure capital.
At the end of December, CorEast reported a ratio of 8.76 percent for risk-weighted assets versus the required 6.4 percent. Its core capital ratio was 3.49 percent compared to the standard of 3 percent, and its 1.99 percent for tangible capital topped the required 1.5 percent.
Steve Whitley, who heads branch operations for CorEast, said it is evaluating staffing in relation to the business at each office.
In your area, he said, the bank eliminated one job at a branch and a part-time position at the other branch. Every branch operates as a separate "store," he said, and the level of business did not justify the former staffing level.
Ronald Dietz, president, said CorEast has more employees today than it did a year ago.
Dietz said CorEast has shifted people among jobs as it continues to merge operations of the three separate thrifts from which it was formed. As an example, the bank's consumer loan collection department was recently consolidated in Roanoke with jobs transferred from Richmond and Lynchburg. Other jobs have gone from Roanoke to Richmond.
Don't waste tax shelter
Q: I am 64 and have a Keogh plan in a deferred annuity. Can a Keogh plan be rolled over? If so, what would be a good investment to put it in with higher interest rates to draw out when I am 70 1/2?
A: You can change the type of investment inside your Keogh plan or, if you must, roll over into another Keogh account.
Don't roll over into an Individual Retirement Account.
Hope Player, certified public accountant and financial planner, said you can still use forward averaging later when you make a distribution from a Keogh account. A roll-over into an IRA precludes the option of forward averaging later.
Earnings on Keogh accounts, which are retirement plans for the self-employed, and on annuities are both tax-deferred. Thus you are wasting one of the tax shelters.
Diversify your Keogh account as you would any other investment portfolio. You can put a portion in bank certificates of deposit and a share into one or more mutual funds.
***CORRECTION***
Published correction ran on June 25, in the Money Matters column\ Correction
Last week's Money Matters column said that 403(b) retirement plans, like the more popular 401(k) programs, are eligible for five or 10 year income averaging.
Andrew Hudick, a fee-only financial planner with Elliott & Associates, said 403(b) plans used by employees of non-profit organizations are not eligible for this tax option. He said the two plans are alike in the manner of making contributions during working years.
When it comes to distributions, however, 403(b) retirement plans are more like Individual Retirement Accounts. Distributions are taxed as ordinary income without the benefit of five or 10 year averaging.
Keogh plans for self-employed persons can be rolled over into so-called conduit IRAs, Hudick said. These funds should not be mingled with money in any other IRA. Keogh money rolled into a conduit IRA remains eligible for later five or 10 year tax averaging.
Memo: correction