How to Guide: Establishing and Funding IRAs (Webinar Handouts)

Establishing and Funding IRAs

Learning Objectives

After completing this session, you will be able to

define the purpose and tax advantages of Traditional and Roth IRAs,

identify the IRA contribution eligibility requirements,

discuss the process for establishing an IRA application,

discuss the IRA contribution limit and deadline, and

discuss the process for documenting a contribution.

©2012 Ascensus, Inc.

Page 1

Introduction to IRAs

I • Individual

account

• Cannot be owned by a nonperson entity


Page 1


I • Individual

account


R Studies show

most members will need to rely on personal savings for 80 percent of their post-retirement income


Page 1


I • Individual

account


R Studies show

most members will need to rely on personal savings for 80 percent of their post-retirement income

A • One application

= One IRA

• Account can contain several investments


Page 1



Traditional IRA Roth IRA

Page 1

Benefits to Account Holders



Tax-deferred earnings


Page 1





Regular contributions may

be tax-deductible


Page 1





Regular contributions may

be tax-deductible Earnings may be withdrawn

income tax-free


Page 1



Contribution Eligibility

Page 2 ©2012 Ascensus, Inc.


Page 2

Anyone may establish an IRA. Eligibility requirements may limit how much

an individual may contribute to an IRA.


Traditional

IRAs

Roth

IRAs

Earned

Income


Earned income includes

amounts derived from or

received for personal services

rendered (e.g. IRS Form W-2,

Wage and Tax Statement,

Schedule C, Profit or Loss

From Business if self-

employed, or Schedule F, Profit

or Loss From Farming.

Page 2

Anyone may establish an IRA. Eligibility requirements may limit how much

an individual may contribute to an IRA.


Wages

Salaries

Tips

Commissions

Taxable alimony

Professional fees

Bonuses

Combat pay

Royalties*

Interest

Dividends

Rental Income

Unemployment compensation

Disability pay

Child support

Separation & early retirement

AFDC & TANF*



Page 2

Social Security

Wages

Salaries

Tips

Commissions

Taxable alimony

Professional fees

Bonuses

Combat pay

Royalties*

Interest

Dividends

Rental Income


Disability pay

Child support

Separation & early retirement

AFDC & TANF*


Earned Income Not Earned Income


Page 2

Social Security

Traditional IRA

• Earned Income

• Age – An account holder must

not attain age 70½ or older

any time during the year for

which the contribution is made.

Note: Once the account holder

reaches age 70½, they must

begin removing assets from the

IRA. This is called a required

minimum distribution (RMD).

Page 3



Roth IRA

• Earned Income

• Income Limit – An account

holder’s modified adjusted gross

income (MAGI) must not exceed

the IRS limits.

Page 3



Apply Your Knowledge: Contribution Eligibility

1. Meredith is single, 35, and works as a doctor. She receives earned income of $80,000 per year. Can Meredith make a contribution to a Traditional IRA? (Yes or No)


Page 3

[Yes]


2. Derek is married, 38, and is a mechanic. He and his wife file a joint federal income tax return. Their combined earned income is $84,000 per year and they have a combined MAGI of $90,000 per year. Can Derek contribute to a Roth IRA? (Yes or No)


Page 3

[Yes]


3. George is single, 75, and is a maintenance worker. He has earned income of $35,000 per year. Can George contribute to a Traditional IRA? (Yes or No)


Page 3

[No]

Establishing an IRA


Page 4


Establishing an IRA


Page 4

The first step in establishing an IRA with the prospective account holder is to provide information without giving tax advice.

• Explain the rules, but do not apply the rules to the individual’s situation.

• Identify the type of IRA the individual wishes to establish, describe investment options available at the credit union, etc.


Establishing an IRA


Page 4

The first step in establishing an IRA with the prospective account holder is to provide information without giving tax advice.

• Explain the rules, but do not apply the rules to the individual’s situation.

• Identify the type of IRA the individual wishes to establish, describe investment options available at the credit union, etc.

Second, to establish the IRA, the credit union must provide the following documents:


Establishing an IRA

Required Documents • Plan Agreement

• Disclosure Statement

• Financial Disclosure

Regulatory Document • Truth-in-Savings Disclosure

Optional Document

• Application (required by some financial organizations)


Page 4


Establishing an IRA


Page 4

To accurately administer the

IRA, the application requests

the account holder’s

• Legal name, taxpayer

identification number,

address and date of birth.


Required Documents


Pages 8 - 9

Required Documents

The plan agreement serves as

the “contract” between the credit

union and the individual for

whom the IRA is created.


Pages 8 - 9

Required Documents

When establishing an IRA, the credit

union must provide an up-to-date

disclosure statement, which explains

the IRA rules in nontechnical

language.


Pages 8 - 9

Required Documents

The credit union must provide

financial projections as part of the

disclosure statement.

• helps account holders visualize

their IRA investment growth, and

• allows account holder to compare

investments


Pages 8 - 9

Apply Your Knowledge: Establishing an IRA

1. When completing the application the account holder is required to name beneficiaries (Yes or No).


Page 9

[No]


2. The account holder must sign the application to establish the IRA (Yes or No).


Page 9

[Yes]


3. What are the five documents that are required to be given to the account holder upon the opening of an IRA?


Page 9

[Copy of Signed Application, Plan Agreement, Disclosure Statement, Financial Disclosure and TIS]


4. How often must the financial disclosure be given to the account holder?


Page 9

[Once]

IRA Contributions


Pages 10 - 11

IRA Contributions

Contribution Limit

Traditional and Roth IRA Aggregate

Annual Regular Contribution Limits

Tax Year Annual Regular

Contribution Limit

Additional “Catch-Up” Contribution

for Account Holders Age 50 and

Older

2012 $5,000 $1,000 ($6,000 total)


Pages 10 - 11

Example: Contribution Limit Kevin, age 54, has a Traditional and a Roth IRA at ABC Credit Union. Assuming he is eligible to contribute to both IRAs, he could contribute $3,000 to his Traditional IRA and $3,000 to his Roth IRA for tax year 2012.

IRA Contributions

Contribution Limit vs. Individual Contribution Limit

If the IRA owner’s earned income is lower than the annual

contribution limit, the IRA owner may be eligible to contribute up to

100 percent of their earned income.


Pages 10 - 11

Example: Individual Limit Julie, age 19, is a single college student who earned $2,500 working in the university bookstore for tax year 2012. Even though the IRS contribution limit is $5,000, her individual limit will be $2,500.

IRA Contributions


Page 11


IRA Contributions

A married account holder who does not

earn any or earns minimal earned

income and files a joint federal income

tax return for a year can treat the

couple’s joint earned income as their

own for purposes of determining the

maximum contribution limit.


Page 11

Spousal Contribution Limit


IRA Contributions

A married account holder who does not

earn any or earns minimal earned

income and files a joint federal income

tax return for a year can treat the

couple’s joint earned income as their

own for purposes of determining the

maximum contribution limit.


Page 11


Husband’s Earned Income

+ Wife’s Earned Income

= Total Earned Income

Husband’s

IRA

Contribution

Wife’s IRA

Contribution


IRA Contributions

Example: Spousal Contribution Limit

Kim and Matt, both 35, are married. Matt is

in graduate school and has no earned

income, and Kim is a dentist. As long as

Kim and Matt file a joint federal tax return,

Matt can use Kim’s earned income to

contribute to his Traditional IRA. If Kim

earns at least $10,000 in 2012, then they

can both contribute $5,000 to their own

IRAs for 2012.


Page 11

Husband’s Earned Income

+ Wife’s Earned Income

= Total Earned Income

Husband’s

IRA

Contribution

Wife’s IRA

Contribution


Apply Your Knowledge: Contribution Limit

1. Edward was born on December 30, 1964. What is his aggregate contribution limit for 2012?


Page 12

[$5,000]


2. Elise was born on April 19, 1962. What is her aggregate contribution limit for 2012?


Page 12

[$6,000]

Contribution Deadline


Page 12 - 13



Page 12 - 13

A current-year regular contribution can be made beginning on January

1 of that year.

The deadline to make regular contributions for a year is the deadline

for filing that year’s federal income tax return, generally April 15.


January 1 December 31

2012 2013


Page 12 - 13


1 of that year.




April 15 January 1 December 31

2012 2013


Page 12 - 13


1 of that year.




April 15

Current Year


2012 2013


Page 12 - 13


1 of that year.




April 15

Current Year Prior Year


2012 2013


Page 12 - 13


1 of that year.




April 15


Page 12 - 13

Prior-Year Regular Contributions

Under federal guidelines, the instruction to attribute a contribution to

the prior year must be in writing and is irrevocable.

• If there is no written instruction, assume the regular contribution is

for the current year.

• A prior-year regular contribution cannot be changed to a current-

year regular contribution.

Apply Your Knowledge: Contribution Deadline

1. What is the last date on which Henry can make a contribution for tax year 2012?


Page 12

[April 15, 2013]


2. If Henry makes his 2012 contribution on February 12, 2013, what methods can he use to provide the written direction for a prior-year contribution?


Page 12

[Any written instruction method accepted by the credit union]

Paul Kern CIS, CIP, CISP

[email protected]

608-229-1794

http://www.nafcu.org/ascensus

Q&A and Contact Information

Thank you for attending!


Learning Objectives

At the completion of this session you will be able to

define the purpose and tax advantages of Traditional and Roth IRAs,

identify the IRA contribution eligibility requirements,

discuss the process for establishing an IRA,

discuss the IRA contribution limit and deadline, and

discuss the process for documenting a contribution.

Icon Activity

Refer to Job Aids section of the material.

Indicates a group exercise.

Personal Objective(s)

I am attending this session so that upon completion I will be able to

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

________________________________________________________________________

Establishing and Funding IRAs © 2012 Ascensus, Inc. www.ascensus.com

Other Resources

20%

Personal Savings

(Including IRAs) 80%

Post-Retirement Income


Definition of an IRA

I__________________

The IRA is an individual account, which means that it can only be owned by one account

holder.

A nonperson entity (e.g., a trust) cannot own an IRA, but a nonperson entity may be

named as an IRA beneficiary.

R_________________

Studies show most members will need to

rely on personal savings for up to 80

percent of their post-retirement income.

Source: www.ssa.gov

A_________________

One application = One IRA

An IRA may contain several investments.


What are the benefits to the account holder?

Earnings are always tax-deferred.

Account holder does not receive an IRS Form 1099-INT, Interest Income for

earnings on an IRA.

Traditional IRA contributions may be tax deductible.

Roth IRA earnings may potentially be withdrawn income tax-free.

1



Anyone may establish an IRA. Eligibility requirements may limit how much an individual

may contribute to an IRA. Account holders are responsible for determining if they are

eligible to make regular contributions.

The account holder must have earned income during the year for which the regular

contribution is made.

Earned income includes amounts derived from or received for personal services

rendered (e.g. IRS Form W-2, Wage and Tax Statement, Schedule C, Profit or Loss

From Business if self-employed, or Schedule F, Profit or Loss From Farming.

Sources of Income


Wages

Salaries

Tips

Bonuses

Taxable alimony

Commissions

Professional fees

Combat pay

Interest

Royalties*

Dividends

Rental Income


Disability pay

Child support

Separation & Early retirement

AFDC & TANF**

Social Security

*Whether royalties are considered earned income is dependent on several factors.

**Aid to Families with Dependent Children and Temporary Assistance for Needy Families

2


Traditional IRA Eligibility

Anyone who meets both the following requirements is eligible

to make contributions to a Traditional IRA.

Earned Income

Age – An account holder must not attain age 70½

or older any time during the year for which the

contribution is made.

Once the account holder reaches age 70½, they must begin

removing assets from the IRA. This is called a required

minimum distribution (RMD).

Roth IRA Eligibility

Anyone who meets both the following requirements is eligible

to make contributions to a Roth IRA.

Earned Income

Income limit – An account holder’s modified

adjusted gross income (MAGI) must not exceed the

IRS limits.

MAGI Limits for Regular Roth IRA Contributions


1. Meredith is single, 35, and works as a doctor. She receives

earned income of $80,000 per year. Can Meredith make a

contribution to a Traditional IRA? (Yes or No)

2. Derek is married, 38, and is a mechanic. He and his wife file a joint federal income

tax return. Their combined earned income is $84,000 per year and they have a

combined MAGI of $90,000 per year. Can Derek contribute to a Roth IRA? (Yes or

No)

3. George is single, 75, and is a maintenance worker. He has earned income of $35,000

per year. Can George contribute to a Traditional IRA? (Yes or No)

3

70½ Year: The 70½ year is

the year in which a person

reaches 70½ years of age.

For people born between

January 1 and June 30, the

70½ year will be the year

of their 70th

birthday. For

those born between July 1

and December 31, the 70½

year will be the year of

their 71st

birthday.

Modified Adjusted Gross

Income (MAGI): MAGI is

an individual’s adjusted

gross income without

taking into account

Traditional IRA deductions,

student loan interest

deductions, tuition and

fees deductions, certain

foreign income and foreign

housing exclusions and

deductions, certain Series

EE bond interest

exclusions, adoption

expense exclusions, and

domestic production

activities deductions.


Establishing an IRA

The first step in establishing an IRA with the prospective account holder is to provide

information without giving tax advice.

Explain the rules, but do not apply the rules to the individual’s situation.

Identify the type of IRA the individual wishes to establish, describe the IRA

investment options available at the credit union, etc.

Second, to establish an IRA, the credit union must provide the following four

documents.

Plan agreement, disclosure statement, financial disclosure and Truth-In-Savings.

Note: Most credit unions require a member to complete an application when establishing an IRA.

Completing the IRA Application

Ascensus Traditional IRA Application (Form 2300-T)

Note: In today’s training we are going to use the Traditional IRA application. The concepts for completing

the Roth application are similar.

To accurately administer the IRA, the application requests the account holder’s

legal name, taxpayer identification number, address and date of birth.

4


Beneficiary Designation

When establishing the IRA, the account holder may wish to designate beneficiaries.

Account holders are not required to name beneficiaries while completing the

application, but most will want to.

While completing the application in IRAdirect, there are three levels of available

beneficiaries.

Primary Beneficiary – receives first consideration for receiving the IRA assets after

the account holder’s death.

Secondary (or Contingent) Beneficiary – receives the IRA assets after the account

holder’s death if no named primary beneficiary qualifies to receive the assets.

Tertiary Beneficiary – receives the IRA assets after the account holder’s death if no

named secondary beneficiary qualifies to receive the assets.

Note: If the account holder would like to change their beneficiary designation or name one at a later time

they may do so throughout the lifetime of the account.

5


Spousal Consent

Some states have community property or marital property laws that govern the

property rights of married individuals. If the account holder names a primary beneficiary

other than (or in addition to) their spouse, the spouse should sign the Spousal Consent

portion of the IRA application.

The account holder is not required to ask the spouse to sign, waiving their rights. It is

also not required that the spouse sign if asked.

Community/Marital Property States as of January 2012:

*Alaska Arizona **California Idaho

**Louisiana Nevada New Mexico Texas

Washington Wisconsin

* Alaska requires both spouses to “opt in” to community property law.

** While California and Louisiana have community property laws, they do not affect IRA death benefits if

there are designated beneficiaries.

Signatures and Date

It is very important that both the account holder and the credit union representative

sign the application. Without the account holder’s signature, there is no IRA.

6


Plan Agreement

Ascensus Traditional IRA Agreement

The plan agreement serves as the “contract” between the credit union and the

individual for whom the IRA is created.

The purpose of the plan agreement is to disclose both the credit union and the account

holder’s responsibilities. The account holder must receive a copy of the plan agreement

upon opening the account.

Disclosure Statement

Ascensus Traditional IRA Disclosure Statement

When establishing an IRA, the credit union must provide an up-to-date disclosure

statement, which explains the IRA rules in nontechnical language.

The disclosure statement is written in a question and answer format.

It also contains a revocation provision that allows the account holder to revoke the

IRA within seven calendar days of receiving the statement.

Financial Disclosure

Ascensus Financial Disclosure

The credit union must provide financial projections as part of the disclosure statement.

This document must be provided to the account holder at account opening and is not to

be required to be amended even if the investment or rate changes. It is not required to

be in the account holder’s file if other documents state that the account holder

acknowledges receipt of a financial disclosure.


1. When completing the application the account holder is required to name

beneficiaries (Yes or No).

2. The account holder must sign the application to establish the IRA (Yes or No).

3. What five documents must the account holder receive upon the opening of an IRA?

4. How often must the credit union give the financial disclosure to the account holder?

7


IRA Contributions

Contribution Limit

The maximum amount individuals may contribute to their IRAs is referred to as the

“annual regular contribution limit.”

The annual regular contribution limit is determined by the IRS each year and may be

adjusted for COLAs.

Account holders who attain age 50 by December 31 of the year are eligible to

contribute an additional amount called a “catch-up contribution.” The catch-up

contribution can be made any time during the year in which the account holder

attains age 50 and for each subsequent year.

Traditional and Roth IRA Aggregate Annual

Regular Contribution Limits

Tax Year Annual Regular

Contribution Limit

Additional “Catch-Up” Contribution

for Account Holders Age 50 and

Older

2012 $5,000* $1,000 ($6,000 total)

* The $5,000 contribution limit may be adjusted for inflation in future years in $500 increments.

Source: www.irs.gov (Publication 590)

Example: Contribution Limit

Kevin, age 54, has a Traditional and a Roth IRA at ABC Credit Union. Assuming he is

eligible to contribute to both IRAs, he could contribute $3,000 to his Traditional

IRA and $3,000 to his Roth IRA for tax year 2012.

8


Individual Contribution Limit

If the account holder’s earned income is lower than the annual contribution limit, the

account holder may be eligible to contribute up to 100 percent of their earned income.

Note: Once again, this is an aggregate total for all of an account holder’s Traditional and Roth IRAs.

Example: Individual Limit

1. Julie, age 19, is a single college student who earned $2,500 working in the university

bookstore for tax year 2012. Even though the IRS contribution limit is $5,000, her

individual limit will be $2,500.


A married account holder who does not earn any (or earns minimal) earned income and

files a joint federal income tax return for a year can treat the couple’s joint earned

income as their own for purposes of determining the annual contribution limit.

To make a spousal contribution, the following requirements must be met.

The couple must file a joint federal income tax return.

There must be enough in earned income to support contributions for either spouse.

Each spouse who wants to make a contribution must have his (or her) own IRA. For a

Traditional IRA, the account holder must be younger than age 70½. For a Roth IRA,

the account holder must meet the MAGI limitations.

Example: Spousal Contribution Limit

Kim and Matt, both 35, are married. Matt is in graduate school and has no earned

income, and Kim is a dentist. As long as Kim and Matt file a joint federal tax return,

Matt can use Kim’s earned income to contribute to his Traditional IRA. If Kim earns at

least $10,000 in 2012, then they can both contribute $5,000 to their own IRAs for

2012.

9



1. Edward was born on December 30, 1964. What is his aggregate contribution limit for

2012?



Ascensus Traditional IRA Contribution Direction

A current-year regular contribution can be made beginning on January 1 of that year.

The deadline to make regular contributions for a year is the deadline for filing that

year’s federal income tax return, generally April 15.

The IRA contribution deadline is not extended for account holders who receive an

extension for filing their federal income tax returns.

If April 15 falls on a Saturday, Sunday, or legal holiday, the deadline is extended to

the next business day.

A regular contribution made by mail is deemed timely if the envelope is postmarked

by the account holder’s federal tax return deadline and is accompanied by written

direction.

10


Prior-Year Contributions

Ascensus Traditional IRA Contribution Direction

Under federal guidelines, the instruction to attribute a contribution to the prior year

must be in writing and is irrevocable. The account holder may use any written means to

make a prior-year contribution.

To comply with these guidelines, credit unions should adhere to the following

guidelines.

If there is no written instruction, assume the regular contribution is for the current

year.

A prior-year regular contribution cannot be changed to a current-year regular

contribution.

Direct deposit contributions are made for the current-year unless the credit union

receives written instruction before the contribution is made to treat it as a prior-

year contribution.



2. If Henry makes his 2012 contribution on February 12, 2013, what methods can he

use to provide the written direction for a prior-year contribution?

11


In Review

The purpose of an IRA is to help the account holder save for retirement while gaining

certain tax advantages.

1. The eligibility requirements for Traditional IRA contributions

Earned Income – The account holder must receive earned income during the

year for which the contribution is being made or file a joint federal income tax

return with a spouse who receives earned income.

Age – The account holder must be under age 70½, and must not reach age 70½

during the year for which the contribution is being made.

2. The eligibility requirements for Roth IRA contributions

Earned Income – The Roth account holder must receive earned income during

the year for which the contribution is being made or file a joint federal income

tax return with a spouse who receives earning income.

Income Limit – The Roth account holder must have earned income under the

MAGI limit for the year for which the contribution is being made.

3. An eligible individual who reaches age 50 by the end of the calendar year may make

a “catch-up” contribution for that year.

4. An eligible individual may make contributions up to the lesser of 100 percent of

earned income or the annual contribution limit for the tax year.

5. A married person who files a joint federal income tax return may claim a spouse’s

earned income as their own under the spousal contribution rules.

6. The deadline to contribute to an IRA is the account holder’s federal tax return

deadline (usually April 15).

12


Answers to Group Exercises


1. Meredith is single, 35, and works as a doctor. She receives earned income of

$80,000 per year. Can Meredith make a contribution to a Traditional IRA? (Yes)

2. Derek is married, 38, and is a mechanic. He and his wife file a joint federal income

tax return. Their combined earned income is $84,000 per year and they have a

combined MAGI of $90,000 per year. Can Derek contribute to a Roth IRA? (Yes)

3. George is single, 75, and is a maintenance worker. He has earned income of $35,000

per year. Can George contribute to a Traditional IRA? (No)

Establishing an IRA

1. When completing the application the account holder is required to name

beneficiaries. (No)

2. The account holder must sign the application to establish the IRA. (Yes)

3. What five documents must the account holder receive upon the opening of an IRA?

(IRA application, IRA agreement, IRA disclosure statement, financial disclosure,

and Truth-In-Savings).

4. How often must the credit union give the financial disclosure to the account holder?

(Once).

Contribution Limit

1. Edward was born on December 30, 1964. What is his aggregate contribution limit for

2012? ($5,000)


($6,000)



(April 15, 2013)

2. If Henry makes his 2012 contribution on February 12, 2013, what methods can he

use to provide the written direction for a prior-year contribution? (Every written

direction method accepted by the credit union)

13


Job Aids


Sources of Income


Wages

Salaries

Tips

Bonuses

Taxable alimony

Commissions

Professional fees

Jury pay

Directors fees

Combat pay

Interest

Royalties*

Dividends

Rental Income

Unemployment

compensation

Disability pay

Child support

Separation & Early

retirement

AFDC & TANF**

Social Security

*Whether royalties are considered earned income is dependent on several factors.

* *Aid to Families with Dependent Children and Temporary Assistance for Needy Families

2012 MAGI Limits for Regular Roth IRA Contributions*

Filing Status MAGI for

Full Contribution

MAGI for

Partial Contribution

Ineligible for Roth

Contribution

Single Up to $110,000 $110,000 up to $125,000 Over $125,000

Married, filing jointly Up to $173,000 $173,000 up to $183,000 Over $183,000

Married, filing separately** N/A $0 up to $10,000 Over $10,000

** If the Roth account holder did not live with their spouse at any time during the year,

they are considered a single filer for the purpose of determining Roth IRA eligibility.

* MAGI limits may be adjusted annually by the IRS; changes are posted to the IRA Resource Center.

15

Identifying Info Beneficiary Designation Spousal Consent Signatures

Please Print or Type

___ ___ ___ ___ ___CUID (Credit union will complete.)

___ ___ ___ - ___ ___ - ___ ___ ___ ___IRA Owner’s Social Security Number

IRA Owner’s Birth Date (MM/DD/YYYY) - (required for processing)

Account Number

IRA Owner’s Name (First, Initial, Last)

Street Address

Mailing Address if Different From Street Address

City, State, ZIp

Stock #80008 2300-T (Rev. 1/2010)© 2010 Ascensus, Inc., Middleton, WI

I instruct the credit union to invest this IRA in the following investment: ______________________________________________________________________________________

M This is a Simplified Employee pension (SEp) IRA.

DESIGNATION OF BENEFICIARY (Revocable; see next page for complete instructions)

PRIMARY Beneficiary(ies) — % Column MUST total 100%

% Name Mailing Address Relationship Birth Date SS #

SECONDARY Beneficiary(ies) — % Column MUST total 100%


TERTIARY Beneficiary(ies) — % Column MUST total 100%


SPOUSAl CONSENTThis section should be reviewed if either the trust or residence of the IRA owner is located in a community or marital property state and the IRA owner is married. Due to the important tax consequences of giving up one’s community property interest, individuals signing this section should consult with a competent tax or legal advisor.

Current Marital StatusM I Am Not Married – I understand that if I become married in the future,

I must complete a new Traditional IRA Beneficiary Designation/Change form (Form 2303T).

M I Am Married – I understand that if I choose to designate a primary beneficiary other than my spouse, my spouse must sign below.

Consent of SpouseI am the spouse of the above-named IRA owner. I acknowledge that I have received a fair and reasonable disclosure of my spouse’s property and financial obligations. Due to the important tax consequences of giving up my interest in this IRA, I have been advised to see a tax professional.

I hereby give the IRA owner any interest I have in the funds or property deposited in this IRA and consent to the beneficiary designation(s) indicated above. I assume full responsibility for any adverse consequences that may result. No tax or legal advice was given to me by the Trustee.

XSignature of Spouse Date (MM/DD/YYYY)

XSignature of Witness Date (MM/DD/YYYY)

IRA OWNER’S SIGNATUREI acknowledge receipt of the “Credit Union Traditional IRA Disclosure Statement,” which includes a financial projection table. I also accept the terms and conditions of the “Credit Union Traditional IRA Trust Agreement.”

XIRA Owner’s Signature Date (MM/DD/YYYY)

ACCEPTANCE OF TRUSTEE(for credit union use only)

The credit union hereby establishes a traditional IRA for the above IRA owner under the terms of the “Credit Union Traditional IRA Trust Agreement.”

Credit Union Name

Credit Union Mailing Address (include street address)

City, State, ZIp

XAuthorized Credit Union Signature Date (MM/DD/YYYY)

M Check here if this is an amendment to an existing IRA.

TRADITIONAl IRA TRUST APPlICATION PACKET(FORM 2300-T)

© 2010 Ascensus, Inc., Middleton, WI

Stock #80013 2303T

(Rev. 1/2010)

TRADITIONAL IRA BENEFICIARY DESIGNATION/CHANGE (FORM 2303T)


Credit Union Name


Account Number

I am the beneficiary. (Check this box if you are not the original owner of this account, but instead received it as a beneficiary after the original owner’s death and are now designating your own beneficiaries.)

___________________________________________________________Original IRA Owner’s Name

____ ____ ____ ____ ____ CUID (Credit union will complete.)

____ _____ _____ - _____ _____ - _____ _____ _____ _____ - _____ _____ Social Security Number IRA Suffix

_____ _____ _____ - _____ _____ - _____ _____ _____ _____ - _____ _____ Original IRA Owner’s Social Security Number IRA Suffix

IRA OWNER’S SIGNATURE(This beneficiary designation is not effective unless signed.)

X_____________________________________________________ ________________________________________________________________________________ Original IRA Owner’s/Inherited IRA Owner’s Signature Date (MM/DD/YYYY)

DESIGNATION OF BENEFICIARY (Revocable; see next page for complete instructions)

PRIMARY Beneficiary(ies) — % Column MUST total 100%


SECONDARY Beneficiary(ies) — % Column MUST total 100%


TERTIARY Beneficiary(ies) — % Column MUST total 100%


(This beneficiary designation overrides all previous designations for this IRA. If you have more than one IRA, you must fill out a separate Beneficiary Designation/Change Form for each IRA.)

SPOUSAL CONSENTThis section should be reviewed if either the trust or residence of the IRA owner or inherited IRA owner is located in a community or marital property state and the IRA owner or inherited IRA owner is married. Due to the important tax consequences of giving up one’s community property interest, individuals signing this section should consult with a competent tax or legal advisor.

Current Marital StatusM I Am Not Married – I understand that if I become married in the future, I must complete a new Traditional IRA Beneficiary Designation/

Change form (Form 2303T).M I Am Married – I understand that if I choose to designate a primary beneficiary other than my spouse, my spouse must sign below.

Consent of SpouseI am the spouse of the above-named IRA owner or inherited IRA owner. I acknowledge that I have received a fair and reasonable disclosure of my spouse’s property and financial obligations. Due to the important tax consequences of giving up my interest in this IRA, I have been advised to see a tax professional.

I hereby give the IRA owner or inherited IRA owner any interest I have in the funds or property deposited in this IRA and consent to the beneficiary designation(s) indicated above. I assume full responsibility for any adverse consequences that may result. No tax or legal advice was given to me by the Trustee or Custodian.

X_____________________________________________________ ________________________________________________________________________________ Signature of Spouse Date (MM/DD/YYYY)

X_____________________________________________________ ________________________________________________________________________________ Signature of Witness Date (MM/DD/YYYY)

Sample

of 10


Form 5305 under Section 408(a) of the Internal Revenue Code FORM (rev. March 2002).

The grantor named on the application is establishing a traditional individual retirement account under section 408(a) to provide for his or her retirement and for the support of his or her beneficiaries after death.

The trustee named on the application has given the grantor the disclosure statement required by Regulations section 1.408-6.

The grantor has assigned the trust account the sum indicated on the application.

The grantor and the trustee make the following agreement:

1. CONTRIBUTION LIMIT

Except in the case of a rollover contribution described in section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), an employer contribution to a simplified employee pension plan as described in section 408(k) or a recharacterized contribution described in section 408A(d)(6), the trustee will accept only cash contributions up to $3,000 per year for tax years 2002 through 2004. That contribution limit is increased to $4,000 for tax years 2005 through 2007 and $5,000 for 2008 and thereafter. For individuals who have reached the age of 50 before the close of the tax year, the contribution limit is increased to $3,500 per year for tax years 2002 through 2004, $4,500 for 2005, $5,000 for 2006 and 2007, and $6,000 for 2008 and thereafter. For tax years after 2008, the above limits will be increased to reflect a cost-of-living adjustment, if any.

2. NONFORFEITABLE

The grantor’s interest in the balance in the trust account is nonforfeitable.

3. INVESTMENT LIMITATIONS

3.1 No Life Insurance or Asset Commingling. No part of the trust account funds may be invested in life insurance contracts, nor may the assets of the trust account be commingled with other property except in a common trust fund or a common investment fund (within the meaning of section 408(a)(5)).

3.2 Restriction on Collectibles. No part of the trust account funds may be invested in collectibles (within the meaning of section 408(m)) except as otherwise permitted by section 408(m)(3), which provides an exception for certain gold, silver, and platinum coins, coins issued under the laws of any state, and certain bullion.

4. REQUIRED MINIMUM DISTRIBUTIONS

4.1 Distributions Must Comply With Tax Laws. Notwithstanding any provision of this agreement to the contrary, the distribution of the grantor’s interest in the trust account shall be made in accordance with the following requirements and shall otherwise comply with section 408(a)(6) and the regulations thereunder, the provisions of which are herein incorporated by reference.

4.2 Post 70½ Distributions. The grantor’s entire interest in the trust account must be, or begin to be, distributed not later than the grantor’s required beginning date, April 1 following the calendar year in which the grantor reaches age 70½. By that date, the grantor may elect, in a manner acceptable to the trustee, to have the balance in the trust account distributed in:

(a) A single sum; or

(b) Payments over a period not longer than the life of the grantor or the joint lives of the grantor and his or her designated beneficiary.

4.3 Death Benefits. If the grantor dies before his or her entire interest is distributed to him or her, the remaining interest will be distributed as follows:

(a) If the grantor dies on or after the required beginning date and:

(i) the designated beneficiary is the grantor’s surviving spouse, the remaining interest will be distributed over the surviving spouse’s life expectancy, as determined each year until such spouse’s death, or over the period in paragraph (a)(iii) below if longer. Any interest remaining after the spouse’s death will be distributed over such spouse’s remaining life expectancy as determined in the year of the spouse’s death and reduced by 1 for each subsequent year, or, if distributions are being made over the period in paragraph (a)(iii) below, over such period.

(ii) the designated beneficiary is not the grantor’s surviving spouse, the remaining interest will be distributed over the beneficiary’s remaining life expectancy as determined in the year following the death of the grantor and reduced by 1 for each subsequent year, or over the period in paragraph (a)(iii) below if longer.

(iii) there is no designated beneficiary, the remaining interest will be distributed over the remaining life expectancy of the grantor as determined in the year of the grantor’s death and reduced by 1 for each subsequent year.

(b) If the grantor dies before the required beginning date, the remaining interest will be distributed in accordance with (i) below or, if elected or there is no designated beneficiary, in accordance with (ii) below:

(i) The remaining interest will be distributed in accordance with paragraphs (a)(i) and (a)(ii) above (but not over the period in paragraph (a)(iii), even if longer), starting by the end of the calendar year following the year of the grantor’s death. If, however, the designated beneficiary is the grantor’s surviving spouse, then this distribution is not required to begin before the end of the calendar year in which the grantor would have reached age 70½. But, in such case, if the grantor’s surviving spouse dies before distributions are required to begin, then the remaining interest will be distributed in accordance with (a)(ii) above (but not over the period in paragraph (a)(iii), even if longer), over such spouse’s designated beneficiary’s life expectancy, or in accordance with (ii) below if there is no such designated beneficiary.

(ii) The remaining interest will be distributed by the end of the calendar year containing the fifth anniversary of the grantor’s death.

4.4 No Contributions to Inherited IRA. If the grantor dies before his or her entire interest has been distributed and if the designated beneficiary is not the grantor’s surviving spouse, no additional contributions may be accepted in the account.

4.5 Computation of the RMD. The minimum amount that must be distributed each year, beginning with the year containing the grantor’s required beginning date, is known as the “required minimum distribution” (RMD) and is determined as follows:

(a) Post 70½ RMD. The required minimum distribution under paragraph 4.2(b) for any year, beginning with the year the grantor reaches age 70½, is the grantor’s account value at the close of business on December 31 of the preceding year divided by the distribution period in the uniform lifetime table in Regulations section 1.401(a)(9)-9. However, if the grantor’s designated beneficiary is his or her surviving spouse, the required minimum distribution for a year shall not be more than the grantor’s account value at the close of business on December 31 of the preceding year divided by the number in the joint and last survivor table in Regulations section 1.401(a)

CREDIT UNION TRADITIONAL IRA TRUST AGREEMENT (rev. 1/2010)

Sample

of 10


This publication discusses traditional individual retirement accounts (IRAs) in general, and your credit union-sponsored traditional IRA in particular. This publication only discusses the federal tax rules, and you should consult your tax advisor concerning the tax laws of your state. Your credit union is referred to as “we” in this document.

There are two types of IRAs. This document primarily discusses the original IRAs that were created in 1974, which are called “traditional IRAs.” The second type was created by Congress in 1997, and these are called “Roth IRAs.” Roth IRAs are discussed in this document only to the extent they relate to traditional IRAs. Many rules are the same for both traditional and Roth IRAs, and the discussion of these rules will refer simply to “IRAs.” For more information about Roth IRAs, ask for the Credit Union Roth IRA Disclosure Statement.

1. CAN I REVOKE MY IRA AFTER I HAVE SIGNED THE APPLICATION?

Right to Revoke. You can revoke an IRA within seven days after you receive this disclosure statement (except that you cannot revoke your IRA if you received this disclosure statement seven or more days before you set up your IRA). We are required to report to the IRS the contributions to and distributions from a revoked IRA.

How to Revoke. You can revoke an IRA by calling us, writing to us, or stopping by our office. Calls should be placed during normal business hours. Mailed notices are timely if postmarked within the seven-day period. If you revoke your IRA, the entire amount of any contributions you have made will be returned to you.

2. HOW MUCH CAN I CONTRIBUTE TO A TRADITIONAL IRA?

There are two limits on the regular contributions you can make to a traditional IRA for a year. Your regular traditional IRA contributions are limited to the lower of these limits. All regular contributions for the same year to all of your traditional IRAs must be combined for purposes of meeting the contribution limits. A regular traditional IRA contribution is any contribution that does not qualify as a direct transfer, rollover, direct rollover, recharacterization, SEP or SIMPLE contribution.

(a) Compensation Limit. In general, your total regular IRA contributions for a year (both to Roth and traditional IRAs) cannot exceed the amount of your compensation earned during that year. If you file a joint federal income tax return and earn less compensation than your spouse, you can treat as compensation the joint compensation of you and your spouse, less the IRA contributions made by your spouse. Your compensation for a year is the total

taxable income you receive during the year for performing services or that you receive as taxable alimony or separate maintenance payments. Amounts excluded from taxable income are generally not treated as compensation. The only exception is that all combat pay earned by military personnel is treated as compensation, even though most combat pay is not taxable. Compensation does not include income from property, such as interest, dividends, rent, or capital gains. You compute your net income from performing services by adding:

• The wages, salary, tips, bonuses, professional fees, consulting fees, and other amounts you receive for providing personal services as an employee (you can use the amounts shown in the “wages, tips, other compensation” box of the IRS Forms W-2 that you receive); plus

• The net income from a business you own and operate as a sole proprietor or your share of partnership income, but only if you actively provide services in connection with the business.

(b) Annual Contribution Limit. Your regular traditional IRA contributions for a year cannot exceed the annual contribution limit (which is the amount stated in the following table). The annual contribution limit is higher in the year you reach age 50 and in each subsequent year. For example, if you reach age 50 by December 31, 2007, then this limit is $5,000 for 2007.

Contributions For Under Age 50 Age 50+ 2006–2007 $4,000 $5,000 2008 $5,000 $6,000

In 2009 and later years, the $5,000 contribution limit for individuals under age 50 will be subject to an inflation adjustment. The annual contribution limit for individuals age 50 or older will be $1,000 more than the adjusted amount for individuals under age 50.

3. WHEN CAN I MAKE CONTRIBUTIONS?

You can make regular IRA contributions up until the time prescribed by law for filing the tax return for the year, not including filing extensions. If you report income on a calendar tax year basis, the deadline for making a regular IRA contribution for a year is April 15 of the following year. If April 15 is a weekend or a legal holiday at the address to which you mail your federal tax return, then the deadline is the next business day. You can make a regular IRA contribution before this deadline even if you have already filed your tax return for the year (this may require you to file an amended return). There is no special time during this period for making a regular IRA contribution. You can make regular IRA contributions periodically during the year, or in a single contribution for the year.

4. HOW MUCH OF MY TRADITIONAL IRA CONTRIBUTION CAN I DEDUCT?

This answer discusses the amount that you can deduct for making regular contributions to a traditional IRA. The amount that you can contribute is discussed in answer 2.

Factors Affecting Deduction. The amount you can deduct depends on whether you and your spouse (if you are married) are active participants in a retirement plan, and your modified adjusted gross income (MAGI) for federal income tax purposes.

An active participant in a retirement plan is someone who is an active participant in an IRC 401 pension, profit-sharing, or stock-bonus plan; a Keogh plan; a SEP plan; a SIMPLE plan; a government retirement plan (other than Social Security); an IRC 403(b) annuity or mutual fund plan; or an employee savings plan operated under IRC 501(c)(18). The following retirement plans are ignored in making this determination: (1) Service as a member of a reserve or national guard unit of less than 91 days of active duty during the year (other than active duty for training), or (2) Service as a volunteer firefighter, if the accrued benefits as of the beginning of the year are not more than an annual benefit of $1,800 (single life annuity commencing at age 65).

Your MAGI is your adjusted gross income before taking any deduction for IRA contributions, and without taking into account certain foreign income, foreign housing exclusions, and series EE bond interest. Use your joint MAGI if you file a joint income tax return.

If You Are NOT an Active Participant. You can deduct all of your regular traditional IRA contributions regardless of your income if you are single or if your spouse is also not an active participant in a retirement plan. But if your spouse is an active participant in a retirement plan, then the maximum amount you can deduct is phased out between $150,000 and $160,000 of MAGI for 2006, and between $156,000 and $166,000 of MAGI for 2007. Use the MAGI on the tax return you file, whether it is a joint or separate return.

If You ARE an Active Participant. The deduction for an active participant who is single is phased out between $50,000 and $60,000 of MAGI for 2006, and between $52,000 and $62,000 of MAGI for 2007. The deduction for an active participant who files a joint return is phased out between $75,000 and $85,000 of joint MAGI for 2006, and between $83,000 and $103,000 of joint MAGI for 2007. The deduction for a married active participant who files a separate return is phased out between zero and $10,000 of joint MAGI. Most of these phase-out ranges will be adjusted for inflation in subsequent years.

CREDIT UNION TRADITIONAL IRA DISCLOSURE STATEMENT (rev. 1/2010)

Sample

© 2009 Ascensus, Inc., Middleton, WI

ABC CREDIT UNION

1,010

1,020

1,030

1,041

1,051

1,062

1,072

1,083

1,094

1,105

1,116

1,127

1,138

1,149

1,161

1,173

1,184

1,196

1,208

1,220

1,232

1,245

1,257

1,270

1,282

1,295

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

1,010

2,030

3,060

4,101

5,152

6,214

7,286

8,369

9,462

10,567

11,683

12,809

13,947

15,097

16,258

17,430

18,615

19,811

21,019

22,239

23,472

24,716

25,973

27,243

28,526

29,821

This page contains projections of the future value of your IRA based on these assumptions: 1. The investment terms and fees described below remain the same throughout the projection period.2. You withdraw the entire IRA at the end of the accumulation period.3. The single contribution column assumes that $1,000 was contributed at the beginning of the year (the 1st year).4. The annual contribution column assumes that $1,000 was contributed at the beginning of each year starting this year (the 1st year).

The three columns below list the projected values at the end of each year. To find the value at the end of a particular year, locate the years in the accumulated periodchart. Then go left to get the single contribution value, right to get the annual contribution value. Use the chart at the right to find the accumulation period until the endof the year you reach age 60, 65, or 70. These are only projections, not guaranteed amounts. The future value of your IRA will depend on many factors.

***FINANCIAL PROJECTIONS***

ACCUMULATED PERIOD CHARTYears Until You Reach

69686766656463626160595857565554535251504948474645444342414039383736353433323130292827262524232221201918

12345678910111213141516171819202122232425262728293031323334353637383940414243444546474849505152

60 65 70AGENOW

1234567891011121314151617181920212223242526272829303132333435363738394041424344454647

123456789101112131415161718192021222324252627282930313233343536373839404142

SINGLECONTRI-BUTIONVALUE

ANNUALCONTRI-BUTIONVALUE

YEARS

WITHDRAWAL PENALTY (DAYS)

ENROLLMENT FEE

ANNUAL FEE

WDL/TERM FEE

DAYS IN YEAR

0

.00

.00

.00

365

NOMINAL EARNINGS RATE 1.0000

CompoundCALCULATION METHOD

QuarterlyCOMPOUNDING FREQUENCY

1.0038EFFECTIVE ANNUAL YIELD

DaysTERM IN

NUMBER OF DAYS 365

SINGLECONTRI-BUTIONVALUE

ANNUALCONTRI-BUTIONVALUE

YEARS 1,308

1,321

1,335

1,348

1,361

1,375

1,389

1,403

1,417

1,431

1,445

1,460

1,474

1,489

1,504

1,519

1,534

1,549

1,565

1,580

1,596

1,612

1,628

1,645

1,661

1,678

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

51

52

31,129

32,450

33,785

35,133

36,494

37,869

39,258

40,660

42,077

43,508

44,953

46,412

47,886

49,375

50,879

52,398

53,932

55,481

57,046

58,626

60,223

61,835

63,463

65,108

66,769

68,447

___ ___ ___ ___ ___

___ ___ ___ - ___ ___ - ___ ___ ___ ___ - ___ ___CUID (Credit union will complete.)

Social Security Number IRA Suffix

TRADITIONAL IRA CONTRIBUTION DIRECTION (FORM 2315)

We report all traditional IRA contributions as regular contributions for the current year, unless we are instructed to report a contribution in a different manner. You can use this form to give us this instruction in two situations.

When you make a regular contribution between January 1 and your tax return deadline (usually April 15), you can instruct us to report the contribution as being attributed to the previous year. You can do this by completing the Regular Contribution section. After you give us this instruction, you cannot change back to having us report the contribution as being for the current year. It is not necessary to instruct us to report a regular contribution for the year in which it is made, since we do this automatically if we do not receive a contrary instruction.

You should tell us whenever you make a simplified employee pension (SEP) contribution so we can report it correctly. You can do this by completing the SEP Contribution section. We are required to report a SEP contribution in the year in which it is made, even if it is based on the earnings in a prior year.

You should complete a Traditional IRA Rollover and Transfer Contributions (Form 2314T) to instruct us that a contribution is a direct transfer or rollover from another traditional IRA or a direct rollover or rollover from a traditional qualified retirement plan.

You should complete an IRA Contribution Recharacterization (Form 2319) to instruct us that a contribution is a recharacterization of a contribution originally made to your Roth IRA.

GENERAL INFORMATION

Stock # 80022 2315 (Rev. 12/2009)© 2009 Ascensus, Inc., Middleton, WI


Credit Union Name


Account Number

REGULAR CONTRIBUTION

$____________________________________________ _____________________________________________ Amount of Contribution Tax Year to Which Contribution Applies (YYYY)

IRA OWNER’S SIGNATURE

________________________________________________ _____________________________________________ IRA Owner’s Signature Date (MM/DD/YYYY)

For Credit Union Use Only

_____________________________________ ____________________________________________Name of Credit Union Employee Who Took Deposit Date of Deposit (MM/DD/YYYY)

SEP CONTRIBUTION

$____________________________________________ _____________________________________________ Amount of Contribution Calendar Year Contribution was Made (YYYY)

X

Sample

How to Guide: Establishing and Funding IRAs (Webinar Handouts)

Economy & Finance

Transcript of How to Guide: Establishing and Funding IRAs (Webinar Handouts)