A Safer Retirement and Environment – What We’re Implementing to Help Keep You Safe: READ MORE

Here at Cox Strategic Wealth, we are adhering to state and local guidelines in order to protect both the health and safety of clients and staff. Keeping our clients and staff safe is our highest priority and we’re taking all appropriate measures to ensure a safe environment. Should you prefer to not meet face-to-face, we are continuing to serve our clients through virtual settings such as Zoom or phone calls.

We look forward to continuing to help individuals and families achieve their ideal retirements.

Cox Strategic Wealth
(949) 888-6644

CLOSE

 

QUALIFYING MATCHING CONTRIBUTIONS AND CONVERTING YOUR IRA: TODAY’S SLOTT REPORT MAILBAG

By Jeremy T. Rodriguez, JD
IRA Analyst

Question:

Planning Question – for retirement plans that permit Non Roth After Tax Contributions, could the company use Qualified Matching Contributions (QMACs) for the NHCEs to satisfy the ADP & ACP testing allowing the HCEs to max out their 415(c) ceiling above their own deferrals and company match contribution?

Or, is there a better way for the HCEs to max out up to the 415(c) ceiling?

Rick

Answer:

Rick,

Qualified Matching Contributions, or “QMACs,” are used to help plans pass the Actual Contributions Percentage Test (ACP). Since after-tax contributions are included in the ACP Test, QMACs can be used to help plans pass the ACP Test that fail because of after-tax contributions (i.e., non-Roth) made by highly compensated employees (called “HCEs”). However, annual non-discrimination testing is complicated and involves several different tests. One of those is the 415 test, which you alluded to above. Whether QMACs that are used to pass the ACP Test can also help an individual participant reach the 415 maximum limit will depend on the underlying facts. Finally, keep in mind that in order to be a QMAC, the contribution must meet certain standards set forth in the tax code and should be addressed in the plan document. When it comes to non-discrimination testing, it is best to work with the custodian or a knowledgeable professional.

Question:

Ed, isn’t it true that in order to convert an IRA to a Roth, that ALL of your IRA accounts MUST be converted?  Thanks in advance for your help!

Mark

Answer:

Mark,

That is not true. You can convert one IRA or even a portion of an IRA to a Roth IRA. However, if you do own multiple IRAs, they will all be considered when applying the pro-rata rule. The pro-rata rule is used to determine the taxable and non-taxable portion of a conversion when the individual has both deductible and non-deductible contributions in an IRA.

https://www.irahelp.com/slottreport/qualifying-matching-contributions-and-converting-your-ira-todays-slott-report-mailbag

Ready To Take

THE NEXT STEP?

For more information about any of our products and services, schedule a meeting today.

Or give us a call at (949) 888-6644

Investment advisory services offered through Brookstone Capital Management, LLC (BCM), a registered investment advisor.  BCM and Cox Strategic Wealth are independent of each other.   Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents.  Any comments regarding safe and secure investments, and guaranteed income streams refer only to fixed insurance products. They do not refer, in any way to securities or investment advisory products. Fixed Insurance and Annuity product guarantees are subject to the claims‐paying ability of the issuing company and are not offered by BCM.

The content of this website is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. Investments and/or investment strategies involve risk including the possible loss of principal. There is no assurance that any investment strategy will achieve its objectives.