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Navy Federal Simplified Employee Pension
Dear Member:
Enclosed are the documents to establish your Simplied Employee Pension (SEP) at Navy Federal. An SEP
allows a member employed by an employer or a self-employed member to initiate their own retirement
account. The enclosed applications will assist you or your employer to properly establish an SEP plan. By
completing and returning the forms, you can establish an SEP plan and begin saving for your retirement.
Please provide your employer with all forms and deliver a copy to Navy Federal. Be sure to keep a copy for
your records.
Characteristics of an SEP include the following:
Maximum annual contribution of 25 percent of your salary not to exceed $57,000 for 2020 and
$58,000 for 2021
Income tax on all deductible contributions in the account is deferred until you begin withdrawals
For SEP Savings Accounts and SEP IRA Money Market Savings Accounts (MMSAs), some additional
benets include:
no minimum deposit
no Navy Federal penalty for early withdrawal (although the IRS may impose a penalty for
withdrawals under certain circumstances)
easy contribution options
If you have a Traditional/SEP IRA at another nancial institution, you can transfer it to Navy Federal
by completing the enclosed form (IRA Transfer or Direct Rollover). Mail it in along with your application,
and we will take care of the rest.
If you have questions, visit the IRA section, located under the “Checking & Savings” tab on our website at
navyfederal.org, or call us toll-free in the U.S. at 1-888-842-6328. For toll-free numbers when overseas,
visit navyfederal.org. Use 1-703-255-8837 for collect international calls. If you prefer, you may visit your
local branch.
Sincerely,
S. Sutherlin
Manager
Certicate, IRA and Trust Branch
Federally insured by NCUA.
© 2021 Navy Federal NFCU 602C (1-21)
P.O. Box 3001 Merrield, VA 22119-3001
Date Executed (MM/DD/YY) Signature for Employer
Print Name and Title
Page 2 of 19
Name of Employer: ____________________________________________________________________________________________________________________________
__________ __________
© 2020 Ascensus, Inc. (416) (10-19)
© 2021 Navy Federal NFCU 602C (1-21)
Simplied Employee Pension (SEP)
Individual Retirement Accounts Contribution Agreement
Form 5305-SEP Under Section 408(k) of the Internal Revenue Code
DO NOT File with Internal Revenue Service Department of the Treasury Internal Revenue Service Form Rev. December 2004 OMB 1545-0499
makes the following agreement under Section 408(k) of the Internal Revenue Code and the instructions to this form.
Article I–Eligibility Requirements (Check applicable boxes–See Instructions)
The employer agrees to provide discretionary contributions in each calendar year to the individual retirement account or individual retirement annuity (IRA) of
all employees who are at least years old (not to exceed 21 years old) and have performed services for the employer in at least years
(not to exceed three years) of the immediately preceding ve years. This simplied employee pension (SEP) includes does not include employees
covered under a collective bargaining agreement, includes does not include certain non-resident aliens, and includes does not include employees
whose total compensation during the year is less than $650.*
Article II–SEP Requirements (See Instructions)
The employer agrees that contributions made on behalf of each eligible employee will be:
1. based only on the rst $285,000 for 2020 or $290,000 for 2021* of compensation.
2. the same percentage of compensation for every employee.
3. limited annually to the smaller of $57,000 for 2020 or $58,000 for 2021* or 25% of compensation.
4. paid to the employee’s IRA trustee, custodian, or insurance company (for an annuity contract).
Important: Please Read Before Signing
I certify that:
1. I am authorized to establish this SEP plan on behalf of the employer.
2. the employer is eligible to establish this SEP plan.
3. in determining its eligibility to adopt this SEP plan, the employer has relied solely upon the advice of its own advisors.
4. the employer agrees not to hold the nancial organization responsible for any income tax liabilities it may
suffer as a result of being found ineligible to establish this SEP plan.
Instructions
Section references are to the Internal Revenue Code unless otherwise noted.
Purpose of Form
Form 5305-SEP (Model SEP) is used by an employer to make an agreement to
provide benets to all eligible employees under a simplied employee pension
(SEP) described in section 408(k).
Do not le Form 5305-SEP with the IRS. Instead, keep it with your records.
For more information on SEPs and IRAs, see Pub. 560, Retirement Plans for
Small Business (SEP, SIMPLE, and Qualied Plans), Pub. 590-A, Contributions
to Individual Retirement Arrangements, and Pub. 590-B, Distributions from
Individual Retirement Arrangements.
Instructions to the Employer
Simplied employee pension. An SEP is a written arrangement (a plan) that
provides you with an easy way to make contributions toward your employees’
retirement income. Under an SEP, you can contribute to an employee’s
Traditional individual retirement account or annuity (Traditional IRA). You
make contributions directly to an IRA set up by or for each employee with a
bank, insurance company, or other qualied nancial institution. When using
Form 5305-SEP to establish an SEP, the IRA must be a Model Traditional IRA
established on an IRS form or a master or prototype Traditional IRA for which the
IRS has issued a favorable opinion letter. You may not make SEP contributions
to a Roth IRA or a SIMPLE IRA. Making the agreement on Form 5305-SEP
does not establish an employer IRA described in section 408(c).
When not to use Form 5305-SEP. Do not use this form if you:
1. currently maintain any other qualied retirement plan. This does not prevent
you from maintaining another SEP.
2. have any eligible employees for whom IRAs have not been established.
3. use the services of leased employees (described in section 414(n)).
4. are a member of an afliated service group (described in section 414(m)), a
controlled group of corporations (described in section 414(b)), or trades or
businesses under common control (described in sections 414(c) and 414(o)),
unless all eligible employees of all the members of such groups, trades, or
businesses participate in the SEP.
5. will not pay the cost of the SEP contributions. Do not use Form 5305-SEP
for an SEP that provides for elective employee contributions even if the
contributions are made under a salary reduction agreement. Use Form
5305A-SEP or a non-model SEP.
Note: SEPs permitting elective deferrals cannot be established after 1996.
Eligible employees. All eligible employees must be allowed to participate in
the SEP. An eligible employee is any employee who: (1) is at least 21 years old
and (2) has performed “service” for you in at least three of the immediately
preceding ve years.
You can establish less restrictive eligibility requirements,
but not more restrictive ones.
Service is any work performed for you for any period of time, however short.
If you are a member of an afliated service group, a controlled group of
corporations, or trades or businesses under common control, service includes
any work performed for any period of time for any other member of such
group, trades, or businesses.
Excludable employees. The following employees do not have to be covered
by the SEP: (1) employees covered by a collective bargaining agreement
whose retirement benets were bargained for in good faith by you and their
union, (2) non-resident alien employees who did not earn U.S. source income
from you, and (3) employees who received less than $600 for 2020 and $650
for 2021 in compensation during the year.
Contribution limits. You may make an annual contribution of up to 25%
of the employee’s compensation or $57,000 for 2020 and $58,000 for
2021, whichever is less. Compensation, for this purpose, does not include
employer contributions to the SEP or the employee’s compensation in excess
of $285,000 for 2020 and $290,000 for 2021.* If you also maintain a salary
reduction SEP, contributions to the two SEPs together may not exceed the
smaller of $57,000 for 2020 and $58,000 for 2021, or 25% of compensation
for any employee.
You are not required to make contributions every year, but when you do,
you must contribute to the SEP-IRAs of all eligible employees who actually
performed services during the year of the contribution. This includes eligible
employees who die or quit working before the contribution is made.
Contributions cannot discriminate in favor of highly compensated employees.
Also, you may not integrate your SEP contributions with, or offset them by,
contributions made under the Federal Insurance Contributions Act (FICA).
Page 3 of 19
© 2020 Ascensus, Inc. (416) (10-19)
© 2021 Navy Federal NFCU 602C (1-21)
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*For 2022 and later years, this amount is subject to annual cost-of-living adjustments. The IRS announces
the increase, if any, in a news release, in the Internal Revenue Bulletin, and on the IRS website at
www.irs.gov.
If this SEP is intended to meet the top-heavy minimum contribution rules of
section 416, but does not cover all your employees who participate in your
salary reduction SEP, then you must make minimum contributions to IRAs
established on behalf of those employees.
Deducting contributions. You may deduct contributions to an SEP subject to
the limits of section 404(h). This SEP is maintained on a calendar-year basis,
and contributions to the SEP are deductible for your tax year with or within
which the calendar year ends. Contributions made for a particular tax year must
be made by the due date of your income tax return (including extensions) for
that tax year.
Completing the agreement. This agreement is considered adopted when:
1. IRAs have been established for all your eligible employees;
2. you have completed all blanks on the agreement form without modication; and
3. you have given all your eligible employees the following information:
a. A copy of Form 5305-SEP.
b. A statement that Traditional IRAs other than the Traditional IRAs into
which employer SEP contributions will be made may provide different
rates of return and different terms concerning, among other things,
transfers and withdrawals of funds from the IRAs.
c. A statement that, in addition to the information provided to an
employee at the time the employee becomes eligible to participate,
the administrator of the SEP must furnish each participant within 30
days of the effective date of any amendment to the SEP a copy of the
amendment and a written explanation of its effects.
d. A statement that the administrator will give written notication to each
participant of any employer contributions made under the SEP to that
participant’s IRA by the later of January 31 of the year following the
year for which a contribution is made or 30 days after the contribution is made.
Employers who have established an SEP using Form 5305-SEP and have
furnished each eligible employee with a copy of the completed Form 5305-SEP,
and provided the other documents and disclosures described in Instructions
to the Employer and Information for the Employee, are not required to le
the annual information returns, Form 5500, or 5500-EZ for the SEP. However,
under Title I of the Employee Retirement Income Security Act of 1974 (ERISA),
this relief from the annual reporting requirements may not be available to an
employer who selects, recommends, or inuences its employees to choose
IRAs into which contributions will be made under the SEP, if those IRAs are
subject to provisions that impose any limits on a participant’s ability to withdraw
funds (other than restrictions imposed by the Code that apply to all IRAs). For
additional information on Title I requirements, see the Department of Labor
regulation at 29 CFR 2520.104-48.
Information for the Employee
The information below explains what an SEP is, how contributions are made,
and how to treat your employer’s contributions for tax purposes. For more
information, see Pub. 560.
Simplied employee pension. An SEP is a written arrangement (a plan)
that allows an employer to make contributions toward your retirement.
Contributions are made to a Traditional individual retirement account/annuity
(Traditional IRA). Contributions must be made to either a Model Traditional IRA
executed on an IRS form or a master or prototype Traditional IRA for which the
IRS has issued a favorable opinion letter.
An employer is not required to make SEP contributions. If a contribution
is made, however, it must be allocated to all eligible employees according
to the SEP agreement. The Model SEP (Form 5305-SEP) species that
the contribution for each eligible employee will be the same percentage of
compensation (excluding compensation greater than $285,000 for 2020 and
$290,000 for 2021*) for all employees.
Your employer will provide you with a copy of the agreement containing
participation rules and a description of how employer contributions may be
made to your IRA. Your employer must also provide you with a copy of the
completed Form 5305-SEP and a yearly statement showing any contributions
to your IRA.
All amounts contributed to your IRA by your employer belong to you even after
you stop working for that employer.
Contribution limits. Your employer will determine the amount to be
contributed to your IRA each year. However, the amount for any year is limited
to the smaller of $57,000 for 2020 and $58,000 for 2021,* or 25% of your
compensation for that year. Compensation does not include any amount that
is contributed by your employer to your IRA under the SEP. Your employer is
not required to make contributions every year or to maintain a particular level
of contributions.
Tax treatment of contributions. Employer contributions to your SEP-IRA are
excluded from your income unless there are contributions in excess of the
applicable limit. Employer contributions within these limits will not be included
on your Form W-2.
Employee contributions. You may make regular IRA contributions to an IRA.
However, the amount you can deduct may be reduced or eliminated because,
as a participant in an SEP, you are covered by an employer retirement plan.
SEP participation. If your employer does not require you to participate in
an SEP as a condition of employment, and you elect not to participate, all
other employees of your employer may be prohibited from participating. If
one or more eligible employees do not participate and the employer tries to
establish an SEP for the remaining employees, it could cause adverse tax
consequences for the participating employees.
An employer may not adopt this IRS Model SEP if the employer maintains
another qualied retirement plan. This does not prevent your employer from
adopting this IRS Model SEP and also maintaining an IRS Model Salary
Reduction SEP or other SEP. However, if you work for several employers, you
may be covered by an SEP of one employer and a different SEP or pension or
prot-sharing plan of another employer.
SEP-IRA amounts—rollover or transfer to another IRA. You can withdraw
or receive funds from your SEP-IRA if, within 60 days of receipt, you place
those funds in the same or another IRA. This is called a “rollover” and you are
permitted to roll over only one distribution from an IRA (Traditional, SIMPLE,
Roth) in a 12-month period, regardless of the number of IRAs you own.
However, there are no restrictions on the number of times you may make
“transfers” if you arrange to have these funds transferred between the trustees
or the custodians so that you never have possession of the funds.
Withdrawals. You may withdraw your employer’s contribution at any time,
but any amount withdrawn is includible in your income unless rolled over.
Also, if withdrawals occur before you reach age 59
1
2, you may be subject to
a tax on early withdrawal.
Excess SEP contributions. Contributions exceeding the yearly limitations may be
withdrawn without penalty by the due date (plus extensions) for ling your tax return
(normally April 15), but are includible in your gross income. Excess contributions left
in your SEP-IRA after that time may have adverse tax consequences. Withdrawals
of those contributions may be taxed as premature withdrawals.
Financial institution requirements. The nancial institution where your IRA
is maintained must provide you with a disclosure statement that contains the
following information in plain, non-technical language:
1. The law that relates to your IRA.
2. The tax consequences of various options concerning your IRA.
3. Participation eligibility rules, and rules on the deductibility of retirement savings.
4. Situations and procedures for revoking your IRA, including the name,
address, and telephone number of the person designated to receive notice
of revocation. This information must be clearly displayed at the beginning
of the disclosure statement.
5. A discussion of the penalties that may be assessed because of pr ohibited
activities concerning your IRA.
6. Financial disclosure that provides the following information:
a. Projects value growth rates of your IRA under various contribution and
retirement schedules, or describes the method of determining annual
earnings and charges that may be assessed.
b. Describes whether , and for when, the growth projections are guaranteed,
or a statement of the earnings rate and the terms on which the
projections are based.
In addition, the nancial institution must provide you with a nancial statement
each year. You may want to keep these statements to evaluate your IRAs
investment performance.
Paperwork Reduction Act Notice
You are not required to provide the information requested on a form that is
subject to the Paperwork Reduction Act unless the form displays a valid
OMB control number. Books or records relating to a form or its instructions
must be retained as long as their contents may become material in the
administration of any Internal Revenue law. Generally, tax returns and return
information are condential, as required by section 6103.
The time needed to complete this form will vary depending on individual
circumstances. The estimated average time is:
Recordkeeping 1 hr., 40 min.
Learning about the law or the form 1 hr., 35 min.
Preparing the form 1 hr., 41 min.
If you have comments concerning the accuracy of these time estimates
or suggestions for making this form simpler, we would be happy to hear
from you. You can write to the Internal Revenue Service, Attention: Tax
Products Coordinating Committee, Western Area Distribution Center,
Rancho Cordova, CA 95743-0001. Do not send this form to this address.
Instead, keep it with your records.
Page 4 of 19
© 2020 Ascensus, Inc. (97) (4-20)
© 2021 Navy Federal NFCU 602C (1-21)
Traditional IRA Financial Disclosure
Deposits to an IRA are invested in a savings account that earns dividends. The
accompanying charts project possible growth assuming, as an example, that
a dividend rate of 0.10% per annum, compounded monthly, is paid. All values
are computed with the assumption that no interim withdrawals are made. The
values are only projections and are not guaranteed; however, Navy Federal has
never failed to pay dividends at the rates declared in advance.
IRA Savings and Money Market Savings Accounts: Dividends are a division
and distribution of earnings among members after all expenses have been
paid and the required amount has been set aside for reserves. Dividend rates
are declared prospectively by the Board of Directors in the month preceding
the dividend period. These prospective dividend rates may change at the
determination of the Board. Navy Federal also provides the annual percentage
yield (APY) for each dividend rate declared by the Board. Payment of all
dividends is, of course, dependent on the availability of earnings at the end of
the period. Dividends are earned from day-of-deposit to day-of-withdrawal.
Dividends are computed using the monthly balance method, which is applied
to the full amount in your account and credited the last calendar day of the
month in which they are earned. The dividend period is monthly, beginning the
rst calendar day of the month and ending the last calendar day of the month.
The dividend rate and the APY may be obtained by calling Navy Federal toll-
free in the U.S. at 1-888-842-6328 or visiting us online at navyfederal.org.
Fees and charges that may be assessed are disclosed on Navy Federal’s
current Schedule of Fees and Charges. The rst chart projects the cumulative
value of an IRA at the end of each of the rst ve years after establishment of an
IRA Savings or IRA Money Market Savings Account. Column A of Charts I and
II indicates the projected value of an account assuming an annual contribution
of $1,000 at the beginning of each year. Column B of each chart reects the
projected value assuming a one-time rollover (or transfer) contribution of $1,000
is made on the rst of the rst year and no additional funds are contributed.
Chart I
Column A — $1,000 Annual Contribution Contributory Projection
.10% Dividend Rate and .10% APY
At End of Year Projected Value
1 $1,001.00
2 $2,003.00
3 $3,006.01
4 $4,010.01
5 $5,015.03
Column B — One-time $1,000 Contribution Rollover Projection
.10% Dividend Rate and .10% APY
At End of Year Projected Value
1 $1,001.00
2 $1,002.00
3 $1,003.00
4 $1,004.01
5 $1,005.01
Chart II
Column A — $1,000 Annual Contribution Contributory Projection
.10% Dividend Rate and .10% APY
Present Age
Value of Account at End of Year in Which You Reach Age
60 65 70
20 $41,873.00 $47,097.91 $52,349.00
21 $40,831.15 $46,050.83 $51,296.68
22 $39,790.34 $45,004.81 $50,245.41
23 $38,750.57 $43,959.83 $49,195.19
24 $37,711.84 $42,915.89 $48,146.03
25 $36,674.15 $41,873.00 $47,097.91
26 $35,637.49 $40,831.15 $46,050.83
27 $34,601.88 $39,790.34 $45,004.81
28 $33,567.29 $38,750.57 $43,959.83
29 $32,533.74 $37,711.84 $42,915.89
30 $31,501.23 $36,674.15 $41,873.00
31 $30,469.74 $35,637.49 $40,831.15
32 $29,439.29 $34,601.88 $39,790.34
33 $28,409.87 $33,567.29 $38,750.57
34 $27,381.47 $32,533.74 $37,711.84
35 $26,354.11 $31,501.23 $36,674.15
36 $25,327.77 $30,469.74 $35,637.49
37 $24,302.45 $29,439.29 $34,601.88
38 $23,278.16 $28,409.87 $33,567.29
39 $22,254.90 $27,381.47 $32,533.74
40 $21,232.65 $26,354.11 $31,501.23
41 $20,211.43 $25,327.77 $30,469.74
42 $19,191.23 $24,302.45 $29,439.29
43 $18,172.05 $23,278.16 $28,409.87
44 $17,153.89 $22,254.90 $27,381.47
45 $16,136.75 $21,232.65 $26,354.11
46 $15,120.62 $20,211.43 $25,327.77
47 $14,105.50 $19,191.23 $24,302.45
48 $13,091.41 $18,172.05 $23,278.16
49 $12,078.32 $17,153.89 $22,254.90
50 $11,066.25 $16,136.75 $21,232.65
51 $10,055.19 $15,120.62 $20,211.43
52 $9,045.14 $14,105.50 $19,191.23
53 $8,036.10 $13,091.41 $18,172.05
54 $7,028.07 $12,078.32 $17,153.89
55 $6,021.04 $11,066.25 $16,136.75
56 $5,015.03 $10,055.19 $15,120.62
57 $4,010.01 $9,045.14 $14,105.50
58 $3,006.01 $8,036.10 $13,091.41
59 $2,003.00 $7,028.07 $12,078.32
60 $1,001.00 $6,021.04 $11,066.25
Column B — One-time $1,000 Contribution Rollover Projection
.10% Dividend Rate and .10% APY
Present Age
Value of Account at End of Year in Which You Reach Age
60 65 70
20 $1,041.85 $1,047.07 $1,052.32
21 $1,040.81 $1,046.03 $1,051.27
22 $1,039.77 $1,044.98 $1,050.22
23 $1,038.73 $1,043.94 $1,049.17
24 $1,037.69 $1,042.89 $1,048.12
25 $1,036.65 $1,041.85 $1,047.07
26 $1,035.62 $1,040.81 $1,046.03
27 $1,034.58 $1,039.77 $1,044.98
28 $1,033.55 $1,038.73 $1,043.94
29 $1,032.52 $1,037.69 $1,042.89
30 $1,031.48 $1,036.65 $1,041.85
31 $1,030.45 $1,035.62 $1,040.81
32 $1,029.42 $1,034.58 $1,039.77
33 $1,028.39 $1,033.55 $1,038.73
34 $1,027.37 $1,032.52 $1,037.69
35 $1,026.34 $1,031.48 $1,036.65
36 $1,025.31 $1,030.45 $1,035.62
37 $1,024.29 $1,029.42 $1,034.58
38 $1,023.27 $1,028.39 $1,033.55
39 $1,022.24 $1,027.37 $1,032.52
40 $1,021.22 $1,026.34 $1,031.48
41 $1,020.20 $1,025.31 $1,030.45
42 $1,019.18 $1,024.29 $1,029.42
43 $1,018.16 $1,023.27 $1,028.39
44 $1,017.14 $1,022.24 $1,027.37
45 $1,016.13 $1,021.22 $1,026.34
46 $1,015.11 $1,020.20 $1,025.31
47 $1,014.10 $1,019.18 $1,024.29
48 $1,013.08 $1,018.16 $1,023.27
49 $1,012.07 $1,017.14 $1,022.24
50 $1,011.06 $1,016.13 $1,021.22
51 $1,010.05 $1,015.11 $1,020.20
52 $1,009.04 $1,014.10 $1,019.18
53 $1,008.03 $1,013.08 $1,018.16
54 $1,007.02 $1,012.07 $1,017.14
55 $1,006.02 $1,011.06 $1,016.13
56 $1,005.01 $1,010.05 $1,015.11
57 $1,004.01 $1,009.04 $1,014.10
58 $1,003.00 $1,008.03 $1,013.08
59 $1,002.00 $1,007.02 $1,012.07
60 $1,001.00 $1,006.02 $1,011.06
Page 5 of 19
© 2020 Ascensus, Inc. (97) (4-20)
© 2021 Navy Federal NFCU 602C (1-21)
Deposits to an IRA are invested in a Certicate account that earns dividends.
The accompanying charts project possible growth assuming, as an example,
that a dividend rate of 0.10% per annum, compounded daily, is paid. All values
are computed with the assumption that no interim withdrawals are made.
The values are only projections and are not guaranteed; however, Navy Federal
has never failed to pay dividends at the rates declared in advance.
Certicate Accounts: Dividends are a division and distribution of earnings
among members after all expenses have been paid and the required amount
has been set aside for reserves. Dividend rates are declared prospectively
by the Board of Directors in the month preceding the dividend period. These
prospective dividend rates may change at the determination of the Board.
Navy Federal also provides the APY for each dividend rate declared by the
Board. Payment of all dividends is, of course, dependent on the availability of
earnings at the end of the period. Dividends at Navy Federal are earned from
day-of-deposit to day-of-withdrawal.
Dividends are computed using the daily balance method by applying the
daily periodic rate to the full amount in your account at the end of each day.
Dividends are credited the last calendar day of the month in which they are
earned. The dividend period is monthly, beginning the rst calendar day of
the month and ending the last calendar day of the month. The dividend rate
and the APY may be obtained by calling Navy Federal toll-free in the U.S. at
1-888-842-6328 or visiting us online at navyfederal.org. Fees and charges
that may be assessed are disclosed on Navy Federal’s current Schedule of
Fees and Charges. The rst chart projects the cumulative value of an IRA at
the end of each of the rst ve years after establishment of an IRA Certicate.
Column A of Charts III and IV indicates the projected value of an account
assuming an annual contribution of $1,000 at the beginning of each year.
Column B of each chart reects the projected value assuming a one-time
rollover (or transfer) contribution of $1,000 is made on the rst of the rst year
and no additional funds are contributed.
Chart III
Column A — $1,000 Annual Contribution Contributory Projection
.10% Dividend Rate and .10% APY
At End of Year Projected Value
1 $1,001.00
2 $2,003.00
3 $3,006.01
4 $4,010.01
5 $5,015.03
Column B — One-time $1,000 Contribution Rollover Projection
.10% Dividend Rate and .10% APY
At End of Year Projected Value
1 $1,001.00
2 $1,002.00
3 $1,003.00
4 $1,004.01
5 $1,005.01
Chart IV
Column A — $1,000 Annual Contribution Contributory Projection
.10% Dividend Rate and .10% APY
Present Age
Value of Account at End of Year in Which You Reach Age
60 65 70
20 $41,873.03 $47,097.95 $52,349.06
21 $40,831.18 $46,050.88 $51,296.73
22 $39,790.37 $45,004.85 $50,245.46
23 $38,750.60 $43,959.87 $49,195.24
24 $37,711.87 $42,915.93 $48,146.07
25 $36,674.18 $41,873.03 $47,097.95
26 $35,637.52 $40,831.18 $46,050.88
27 $34,601.90 $39,790.37 $45,004.85
28 $33,567.32 $38,750.60 $43,959.87
29 $32,533.77 $37,711.87 $42,915.93
30 $31,501.25 $36,674.18 $41,873.03
31 $30,469.76 $35,637.52 $40,831.18
32 $29,439.31 $34,601.90 $39,790.37
33 $28,409.88 $33,567.32 $38,750.60
34 $27,381.49 $32,533.77 $37,711.87
35 $26,354.12 $31,501.25 $36,674.18
36 $25,327.78 $30,469.76 $35,637.52
37 $24,302.46 $29,439.31 $34,601.90
38 $23,278.17 $28,409.88 $33,567.32
39 $22,254.91 $27,381.49 $32,533.77
40 $21,232.66 $26,354.12 $31,501.25
41 $20,211.44 $25,327.78 $30,469.76
42 $19,191.24 $24,302.46 $29,439.31
43 $18,172.06 $23,278.17 $28,409.88
44 $17,153.90 $22,254.91 $27,381.49
45 $16,136.75 $21,232.66 $26,354.12
46 $15,120.62 $20,211.44 $25,327.78
47 $14,105.51 $19,191.24 $24,302.46
48 $13,091.41 $18,172.06 $23,278.17
49 $12,078.33 $17,153.90 $22,254.91
50 $11,066.25 $16,136.75 $21,232.66
51 $10,055.19 $15,120.62 $20,211.44
52 $9,045.14 $14,105.51 $19,191.24
53 $8,036.10 $13,091.41 $18,172.06
54 $7,028.07 $12,078.33 $17,153.90
55 $6,021.05 $11,066.25 $16,136.75
56 $5,015.03 $10,055.19 $15,120.62
57 $4,010.02 $9,045.14 $14,105.51
58 $3,006.01 $8,036.10 $13,091.41
59 $2,003.00 $7,028.07 $12,078.33
60 $1,001.00 $6,021.05 $11,066.25
Column B — One-time $1,000 Contribution Rollover Projection
.10% Dividend Rate and .10% APY
Present Age
Value of Account at End of Year in Which You Reach Age
60 65 70
20 $1,041.85 $1,047.07 $1,052.32
21 $1,040.81 $1,046.03 $1,051.27
22 $1,039.77 $1,044.98 $1,050.22
23 $1,038.73 $1,043.94 $1,049.17
24 $1,037.69 $1,042.89 $1,048.12
25 $1,036.66 $1,041.85 $1,047.07
26 $1,035.62 $1,040.81 $1,046.03
27 $1,034.58 $1,039.77 $1,044.98
28 $1,033.55 $1,038.73 $1,043.94
29 $1,032.52 $1,037.69 $1,042.89
30 $1,031.49 $1,036.66 $1,041.85
31 $1,030.45 $1,035.62 $1,040.81
32 $1,029.42 $1,034.58 $1,039.77
33 $1,028.40 $1,033.55 $1,038.73
34 $1,027.37 $1,032.52 $1,037.69
35 $1,026.34 $1,031.49 $1,036.66
36 $1,025.32 $1,030.45 $1,035.62
37 $1,024.29 $1,029.42 $1,034.58
38 $1,023.27 $1,028.40 $1,033.55
39 $1,022.24 $1,027.37 $1,032.52
40 $1,021.22 $1,026.34 $1,031.49
41 $1,020.20 $1,025.32 $1,030.45
42 $1,019.18 $1,024.29 $1,029.42
43 $1,018.16 $1,023.27 $1,028.40
44 $1,017.15 $1,022.24 $1,027.37
45 $1,016.13 $1,021.22 $1,026.34
46 $1,015.11 $1,020.20 $1,025.32
47 $1,014.10 $1,019.18 $1,024.29
48 $1,013.08 $1,018.16 $1,023.27
49 $1,012.07 $1,017.15 $1,022.24
50 $1,011.06 $1,016.13 $1,021.22
51 $1,010.05 $1,015.11 $1,020.20
52 $1,009.04 $1,014.10 $1,019.18
53 $1,008.03 $1,013.08 $1,018.16
54 $1,007.02 $1,012.07 $1,017.15
55 $1,006.02 $1,011.06 $1,016.13
56 $1,005.01 $1,010.05 $1,015.11
57 $1,004.01 $1,009.04 $1,014.10
58 $1,003.00 $1,008.03 $1,013.08
59 $1,002.00 $1,007.02 $1,012.07
60 $1,001.00 $1,006.02 $1,011.06
Page 6 of 19
© 2020 Ascensus, Inc. (97) (4-20)
© 2021 Navy Federal NFCU 602C (1-21)
IRA Certicates: The IRA Certicate has a minimum balance requirement as
shown on your IRA application form and will earn dividends for each monthly
dividend period at the dividend rate and APY specied, if held to maturity. If
the balance falls below the minimum requirement, the Certicate will be closed
and the funds transferred to IRA savings. Dividends are computed from day-
of-deposit to day-of-withdrawal on the actual dollar value of the Certicate
using the daily balance method, compounded daily, and credited to the IRA
Certicate monthly on the last calendar day of the month in which they were
earned, unless another dividend distribution option has been chosen. The APY
assumes dividends remain in the account until maturity. Early withdrawals
reduce earnings. The following charts give a projection of the growth of the
value of your IRA by showing the amount available to you at the end of each
year. The rst chart assumes a contribution of $1,000 is made on the rst day
of each year to your IRA. The second chart assumes that the only contribution
to your IRA is a one-time rollover (or transfer) of $1,000 made on the rst day
of the rst year. A loss-of-dividend penalty may be charged on a withdrawal
from an IRA Certicate prior to maturity. These projections assume the penalty
is either a one-month, a three-month, or a six-month loss of dividends on the
entire amount withdrawn.
Chart V
Regular IRA Financial Projections
.10% Dividend Rate and .10% APY
No. Years Account Value 3 Mo. Penalty 6 Mo. Penalty 12 Mo. Penalty
1 $1,001.00 $1,000.75 $1,000.50 $1,000.00
2 $2,003.00 $2,002.50 $2,002.00 $2,001.00
3 $3,006.01 $3,005.26 $3,004.50 $3,003.00
4 $4,010.02 $4,009.01 $4,008.01 $4,006.00
5 $5,015.03 $5,013.77 $5,012.52 $5,010.01
6 $6,021.05 $6,019.54 $6,018.04 $6,015.02
7 $7,028.07 $7,026.31 $7,024.56 $7,021.04
8 $8,036.10 $8,034.09 $8,032.08 $8,028.07
9 $9,045.14 $9,042.88 $9,040.62 $9,036.10
10 $10,055.19 $10,052.68 $10,050.17 $10,045.14
11 $11,066.25 $11,063.49 $11,060.72 $11,055.19
12 $12,078.33 $12,075.31 $12,072.29 $12,066.25
13 $13,091.41 $13,088.14 $13,084.87 $13,078.32
14 $14,105.51 $14,101.98 $14,098.46 $14,091.40
15 $15,120.62 $15,116.84 $15,113.06 $15,105.50
16 $16,136.75 $16,132.72 $16,128.68 $16,120.61
17 $17,153.90 $17,149.61 $17,145.32 $17,136.74
18 $18,172.06 $18,167.52 $18,162.97 $18,153.89
19 $19,191.24 $19,186.44 $19,181.65 $19,172.05
20 $20,211.44 $20,206.39 $20,201.34 $20,191.23
21 $21,232.66 $21,227.36 $21,222.05 $21,211.43
22 $22,254.91 $22,249.34 $22,243.78 $22,232.65
23 $23,278.17 $23,272.35 $23,266.54 $23,254.90
24 $24,302.46 $24,296.39 $24,290.31 $24,278.16
25 $25,327.78 $25,321.45 $25,315.12 $25,302.45
26 $26,354.12 $26,347.53 $26,340.94 $26,327.77
27 $27,381.49 $27,374.64 $27,367.80 $27,354.11
28 $28,409.88 $28,402.78 $28,395.68 $28,381.47
29 $29,439.31 $29,431.95 $29,424.59 $29,409.87
30 $30,469.76 $30,462.15 $30,454.53 $30,439.29
31 $31,501.25 $31,493.37 $31,485.50 $31,469.75
32 $32,533.77 $32,525.63 $32,517.50 $32,501.23
33 $33,567.32 $33,558.92 $33,550.53 $33,533.75
34 $34,601.90 $34,593.25 $34,584.60 $34,567.30
35 $35,637.52 $35,628.61 $35,619.70 $35,601.88
36 $36,674.18 $36,665.01 $36,655.84 $36,637.50
37 $37,711.87 $37,702.44 $37,693.01 $37,674.16
38 $38,750.60 $38,740.91 $38,731.23 $38,711.85
39 $39,790.37 $39,780.42 $39,770.48
$39,750.58
40 $40,831.18 $40,820.97 $40,810.77 $40,790.35
41 $41,873.03 $41,862.57 $41,852.10 $41,831.16
42 $42,915.93 $42,905.20 $42,894.47 $42,873.01
43 $43,959.87 $43,948.88 $43,937.89 $43,915.91
44 $45,004.85 $44,993.60 $44,982.35 $44,959.84
45 $46,050.88 $46,039.36 $46,027.85 $46,004.83
46 $47,097.95 $47,086.18 $47,074.40 $47,050.85
47 $48,146.07 $48,134.04 $48,122.00 $48,097.93
48 $49,195.24 $49,182.94 $49,170.65 $49,146.05
49 $50,245.46 $50,232.90 $50,220.34 $50,195.22
50 $51,296.73 $51,283.91 $51,271.09 $51,245.44
51 $52,349.06 $52,335.97 $52,322.88 $52,296.71
52 $53,402.43 $53,389.08 $53,375.73 $53,349.03
53 $54,456.86 $54,443.25 $54,429.63 $54,402.41
54 $55,512.35 $55,498.47 $55,484.59 $55,456.83
55 $56,568.89 $56,554.75 $56,540.60 $56,512.32
56 $57,626.49 $57,612.08 $57,597.67 $57,568.86
57 $58,685.14 $58,670.47 $58,655.80 $58,626.46
58 $59,744.86 $59,729.92 $59,714.98 $59,685.11
59 $60,805.63 $60,790.43 $60,775.23 $60,744.83
60 $61,867.47 $61,852.00 $61,836.53 $61,805.60
61 $62,930.37 $62,914.63 $62,898.90 $62,867.44
62 $63,994.33 $63,978.33 $63,962.33 $63,930.33
Chart VI
Rollover or Transfer IRA Financial Projections
.10% Dividend Rate and .10% APY
No. Years Account Value 3 Mo. Penalty 6 Mo. Penalty 12 Mo. Penalty
1 $1,001.00 $1,000.75 $1,000.50 $1,000.00
2 $1,002.00 $1,001.75 $1,001.50 $1,001.00
3 $1,003.00 $1,002.75 $1,002.50 $1,002.00
4 $1,004.01 $1,003.76 $1,003.51 $1,003.00
5 $1,005.01 $1,004.76 $1,004.51 $1,004.01
6 $1,006.02 $1,005.77 $1,005.52 $1,005.01
7 $1,007.02 $1,006.77 $1,006.52 $1,006.02
8 $1,008.03 $1,007.78 $1,007.53 $1,007.02
9 $1,009.04 $1,008.79 $1,008.54 $1,008.03
10 $1,010.05 $1,009.80 $1,009.55 $1,009.04
11 $1,011.06 $1,010.81 $1,010.56 $1,010.05
12 $1,012.07 $1,011.82 $1,011.57 $1,011.06
13 $1,013.08 $1,012.83 $1,012.58 $1,012.07
14 $1,014.10 $1,013.84 $1,013.59 $1,013.08
15 $1,015.11 $1,014.86 $1,014.61 $1,014.10
16 $1,016.13 $1,015.87 $1,015.62 $1,015.11
17 $1,017.15 $1,016.89 $1,016.64 $1,016.13
18 $1,018.16 $1,017.91 $1,017.65 $1,017.14
19 $1,019.18 $1,018.93 $1,018.67 $1,018.16
20 $1,020.20 $1,019.95 $1,019.69 $1,019.18
21 $1,021.22 $1,020.97 $1,020.71 $1,020.20
22 $1,022.24 $1,021.99 $1,021.73 $1,021.22
23 $1,023.27 $1,023.01 $1,022.75 $1,022.24
24 $1,024.29 $1,024.03 $1,023.78 $1,023.27
25 $1,025.32 $1,025.06 $1,024.80 $1,024.29
26 $1,026.34 $1,026.08 $1,025.83 $1,025.31
27 $1,027.37 $1,027.11 $1,026.85 $1,026.34
28 $1,028.40 $1,028.14 $1,027.88 $1,027.37
29 $1,029.42 $1,029.17 $1,028.91 $1,028.40
30 $1,030.45 $1,030.20 $1,029.94 $1,029.42
31 $1,031.49 $1,031.23 $1,030.97 $1,030.45
32 $1,032.52 $1,032.26 $1,032.00 $1,031.48
33 $1,033.55 $1,033.29 $1,033.03 $1,032.52
34 $1,034.58 $1,034.33 $1,034.07 $1,033.55
35 $1,035.62 $1,035.36 $1,035.10 $1,034.58
36 $1,036.66 $1,036.40 $1,036.14 $1,035.62
37 $1,037.69 $1,037.43 $1,037.17 $1,036.66
38 $1,038.73 $1,038.47 $1,038.21 $1,037.69
39 $1,039.77 $1,039.51 $1,039.25 $1,038.73
40 $1,040.81 $1,040.55 $1,040.29 $1,039.77
41 $1,041.85 $1,041.59 $1,041.33 $1,040.81
42 $1,042.89 $1,042.63 $1,042.37 $1,041.85
43 $1,043.94 $1,043.68 $1,043.42 $1,042.89
44 $1,044.98 $1,044.72 $1,044.46 $1,043.94
45 $1,046.03 $1,045.77 $1,045.50 $1,044.98
46 $1,047.07 $1,046.81 $1,046.55 $1,046.03
47 $1,048.12 $1,047.86 $1,047.60 $1,047.07
48 $1,049.17 $1,048.91 $1,048.65 $1,048.12
49 $1,050.22 $1,049.96 $1,049.70 $1,049.17
50 $1,051.27 $1,051.01 $1,050.75 $1,050.22
51 $1,052.32 $1,052.06 $1,051.80 $1,051.27
52 $1,053.38 $1,053.11 $1,052.85 $1,052.32
53 $1,054.43 $1,054.17 $1,053.90 $1,053.38
54 $1,055.48 $1,055.22 $1,054.96 $1,054.43
55 $1,056.54 $1,056.28 $1,056.01 $1,055.48
56 $1,057.60 $1,057.33 $1,057.07 $1,056.54
57 $1,058.66 $1,058.39 $1,058.13 $1,057.60
58 $1,059.71 $1,059.45 $1,059.19 $1,058.66
59 $1,060.78 $1,060.51 $1,060.24 $1,059.71
60 $1,061.84 $1,061.57 $1,061.31 $1,060.77
61 $1,062.90 $1,062.63 $1,062.37 $1,061.84
62 $1,063.96 $1,063.70 $1,063.43 $1,062.90
Page 7 of 18
1.
2.
3.
4.
Page 1 of 2
Access No.
IRA No. Employee No. Date Processed Effective Date
Name: First MI Last Sufx
Date of Birth (MM/DD/YY) Social Security No. (SSN) Home Phone No. Work Phone No.
_________________________________________________________________
Short
Long Term:
Cash/Check $
Transfer from Savings, Checking, or MMSA Acct. No.: $
Recharacterize from Roth IRA Acct. No.: $
$
Additional information on next page.
© 2019 Navy Federal NFCU 802 (11-19)
Navy Federal
®
Traditional IRA Application
Individual Retirement Account Application
Fax Number: (703) 206-4250 Toll-Free Number: (888) 842-6328
Mail:
P.O. Box 3001, Merrield, VA 22119-3001
Member Information
Navy Federal Products
Please Establish a: Traditional IRA SEP IRA
Contribution Type: Regular-Contribution for Tax Year:
Transfer-Complete NFCU 624
Rollover-Complete NFCU 624 for Direct Rollover OR NFCU 876 for Indirect Rollover
Recharacterization-Complete NFCU 322
Current Prior (If no selection is made, the regular contribution will be applied toward the current tax year.)
Please open an IRA Account:
IRA Savings Account
IRA MMSA
IRA Jumbo MMSA
$50 Min. IRA EasyStart
SM
$500 Min. IRA Variable Cert. (3 Years)
Other
Select Term: 6 months 12 months
18 months 24 months
Or Choose an IRA Certicate Minimum and Term:
Minimum:
$1,000 min. $10,000 min. $20,000 min. $50,000 min. $100,000 min.
Term:
3 months 6 months 9 months 12 months 18 months 24 months
3 years 4 years 5 years 6 years 7 years
Apply Remittance as Follows Contribution Amount Contribution Date (MM/DD/YY)
Total:
Designation of Beneciary
The following individual(s) or entity(ies) shall be my primary and/or contingent beneciary(ies). If neither primary nor contingent is indicated, the individual or entity will be
deemed to be a primary beneciary. If more than one primary beneciary is designated and no distribution percentages are indicated, the beneciaries will be deemed to
own equal share percentages in the IRA. Multiple contingent beneciaries with no share percentage indicated will also be deemed to share equally.
If any primary or contingent beneciary dies before I do, his or her interest and the interest of his or her heirs shall terminate completely, and the percentage share of any
r
emaining beneciary(ies) shall be increased on a pro rata basis. If no primary beneciary(ies) survive(s) me, the contingent beneciary(ies) shall acquire the designated
share of my IRA. If more space is needed, please attach an additional sheet.
Name and Address
Date of Birth
(MM/DD/YY)
Social Security No. Relationship Primary or Contingent Share %
Primary Contingent
Primary Contingent
Primary Contingent
Primary Contingent
Entity Name: (Trust, Estate, or Non-Profit Organization) (If applicable) Tax ID No. (SSN/EIN/TIN)
Primary or Contingent Share %
Primary Contingent
For Ofce Use Only:
*802*
Clear
0.00
Page 8 of 18
© 2019 Navy Federal NFCU 802 (11-19)
Signature of Spouse
Date (MM/DD/YY)
Signature of IRA Owner
Date (MM/DD/YY)
Member’s Signature
Date (MM/DD/YY)
Page 2 of 2
Spousal Consent
This section should be reviewed if either the trust or the residence of the IRA holder is located in a community or marital property state and the IRA holder 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 Status
I Am Not Married—I understand that if I become married in the future, I must complete a new IRA Designation of Beneciary form.
I Am Married—I understand that if I choose to designate a primary beneciary other than my spouse, my spouse must sign below.
I am the spouse of the above-named IRA holder. I acknowledge that I have received a fair and reasonable disclosure of my spouse’s property and nancial 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 holder any interest I have in the funds or property deposited in this IRA and consent to the beneciary 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.
*Community property or marital property laws govern the primary rights of married individuals in some states. In these states, Navy Federal requires spousal
consent when an IRA holder wishes to name someone other than, or in addition to, their spouse as an IRA beneciary.
The following are community property states:
Alaska (if elected)
Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin is presently the only marital property state.
Signatures
Important: Please read before signing.
• The Social Security Number(s) for all designated beneciaries is/are required information. This ensures proper distribution in the event of the IRA holder's death.
• This beneciary designation is subject to all the terms and provisions of the Individual Retirement Trust Account under Section 408(a) of the Internal Revenue Code and shall be
effective only if received prior to my death by Navy Federal Credit Union.
• This designation shall be effective with respect to my entire interest in my IRA plan, which remains unpaid at my death or at the subsequent death(s) of my beneciary(ies).
• If more than one person is named as beneciary, each payment to be made pursuant to this designation shall be paid in equal shares or as otherwise indicated above to such
of the beneciaries who are living at the time such payment becomes due. Payment to contingent beneciaries, if any, will be made only after receipt by Navy Federal of proof of
death of principal beneciary(ies).
• I reserve the right to change this designation at any time or times during my lifetime by ling a new beneciary designation with the trustee.
• Navy Federal Credit Union is hereby authorized to pay any assets remaining in my IRA and any Navy Federal complimentary Life Saving Insurance in force at or after my death
according to the terms of the Trust Agreement to the beneciary(ies) designated above and subject to the conditions above.
Over Age 50 Catch-Up Contributions Conrmation: I certify that I am eligible to make catch-up contributions.
Page 9 of 19
© 2020 Ascensus, Inc. (97) (4-20)
© 2021 Navy Federal NFCU 602C (1-21)
Traditional Individual Retirement Trust Agreement
Form 5305 Under Section 408(a) of the Internal Revenue Code Form (Rev. April 2017)
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 beneciaries 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:
Article I
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 simplied
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 $5,500 per year for tax years 2013 through 2018 and $6,000
per year for 2019 through 2021. For individuals who have reached the age of
50 by the end of the year, the contribution limit is $6,500 per year for tax years
2013 through 2018 and $7,000 per year for 2019 through 2021. For years after
2021, these limits will be increased to reect a cost-of-living adjustment, if any.
Article II
The Grantor’s interest in the balance in the trust account is nonforfeitable.
Article III
1. 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 common investment fund (within the
meaning of section 408(a)(5)).
2. 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.
Article IV
1. 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.
2. 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 70
1
2
. 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 beneciary.
3. 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 beneciary 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 one for each subsequent year; or if
distributions are being made over the period in paragraph (a)(iii) below,
over such period.
(ii) the designated beneciary is not the Grantor’s surviving spouse, the
remaining interest will be distributed over the beneciary’s remaining life
expectancy as determined in the year following the death of the Grantor
and reduced by one for each subsequent year, or over the period in
paragraph (a)(iii) below if longer.
(iii) there is no designated beneciary, 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 one 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 beneciary, 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 beneciary 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 70
1
2
. 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 beneciary’s life expectancy, or in accordance
with (ii) below if there is no such designated beneciary.
(ii) The remaining interest will be distributed by the end of the calendar year
containing the fth anniversary of the Grantor’s death.
4. If the Grantor dies before his or her entire interest has been distributed and if
the designated beneciary is not the Grantor’s surviving spouse, no additional
contributions may be accepted in the account.
5. 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” and is determined as follows:
(a) The required minimum distribution under paragraph 2(b) for any year,
beginning with the year the Grantor reaches age 70
1
2
, 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
beneciary 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)(9)-9. The required minimum distribution for a year under this
paragraph (a) is determined using the Grantor’s (or, if applicable, the
Grantor and spouse’s) attained age (or ages) in the year.
(b) The required minimum distribution under paragraphs 3(a) and 3(b)(i)
for a year, beginning with the year following the year of the Grantor’s
death (or the year the Grantor would have reached age 70
1
2
, if applicable
under paragraph 3(b)(i)) is the account value at the close of business on
December 31 of the preceding year divided by the life expectancy (in
the single life table in Regulations section 1.401(a)(9)-9) of the individual
specied in such paragraphs 3(a) and 3(b)(i).
(c) The required minimum distribution for the year the Grantor reaches age
70
1
2
can be made as late as April 1 of the following year. The required
minimum distribution for any other year must be made by the end of
such year.
6. The owner of two or more Traditional IRAs may satisfy the minimum
distribution requirements described above by taking from one Traditional
IRA the amount required to satisfy the requirement for another in accordance
with the Regulations under section 408(a)(6).
Article V
1. The Grantor agrees to provide the Trustee with all information necessary to
prepare any reports required by section 408(i) and Regulations sections
1.408-5 and 1.408-6.
2. The Trustee agrees to submit to the Internal Revenue Service (IRS) and
Grantor the reports prescribed by the IRS.
Article VI
Notwithstanding any other articles that may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles inconsistent with section 408(a) and the related Regulations will
be invalid.
Article VII
This Agreement will be amended as necessary to comply with the provisions of
the Code and the related Regulations. Other amendments may be made with the
consent of the persons whose signatures appear on the Application.
Article VIII
8.01 Denitions: In this part of this Agreement (Article VIII), the words “you”
and “your” mean the Grantor, the words “we,” “us,” and “our” mean the
Trustee, “Code” means the Internal Revenue Code, and “Regulations”
means the Treasury Regulations.
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8.02 Notices and Change of Address: Any required notice regarding this IRA will
be considered effective when we send it to the intended recipient at the
last address that we have in our records. Any notice to be given to us will
be considered effective when we actually receive it. You or the intended
recipient must notify us of any change of address.
8.03 Representations and Responsibilities: You represent and warrant to us
that any information you have given or will give us with respect to this
Agreement is complete and accurate. Further, you agree that any directions
you give us, or action you take will be proper under this Agreement, and
that we are entitled to rely upon any such information or directions. If
we fail to receive directions from you regarding any transaction, or if we
receive ambiguous directions regarding any transaction, or we, in good
faith, believe that any transaction requested is in dispute, we reserve the
right to take no action until further clarication acceptable to us is received
from you or the appropriate government or judicial authority. We shall not
be responsible for losses of any kind that may result from your directions
to us or your actions or failures to act, and you agree to reimburse us for
any loss we may incur as a result of such directions, actions, or failures
to act. We shall not be responsible for any penalties, taxes, judgments,
or expenses you incur in connection with your IRA. We have no duty to
determine whether your contributions or distributions comply with the
Code, Regulations, rulings, or this Agreement. We may permit you to
appoint, through written notice acceptable to us, an authorized agent
to act on your behalf with respect to this Agreement (e.g., attorney-in-
fact, executor, administrator, investment manager); however, we have
no duty to determine the validity of such appointment or any instrument
appointing such authorized agent. We shall not be responsible for losses
of any kind that may result from directions, actions, or failures to act
by your authorized agent, and you agree to reimburse us for any loss
we may incur as a result of such directions, actions, or failures to act
by your authorized agent. You will have 60 days after you receive any
documents, statements, or other information from us to notify us in writing
of any errors or inaccuracies reected in these documents, statements, or
other information. If you do not notify us within 60 days, the documents,
statements, or other information shall be deemed correct and accurate,
and we shall have no further liability or obligation for such documents,
statements, other information, or the transactions described therein.
By performing services under this Agreement, we are acting as your agent.
Unless otherwise specied in this Agreement, you acknowledge and agree
that nothing in this Agreement shall be construed as conferring duciary
status upon us. We shall not be required to perform any additional
services unless specically agreed to under the terms and conditions
of this Agreement, or as required under the Code and the Regulations
promulgated thereunder with respect to IRAs. You agree to indemnify and
hold us harmless for any and all claims, actions, proceedings, damages,
judgments, liabilities, costs, and expenses, including attorney’s fees
arising from or in connection with this Agreement.
To the extent written instructions or notices are required under this
Agreement, we may accept or provide such information in any other form
permitted by the Code or applicable Regulations.
8.04 Investment of Amounts in the IRA:
Grantor Management of Investment—You have exclusive responsibility
for and control over the investment of the assets of your IRA. All
transactions shall be subject to any and all restrictions or limitations, direct
or indirect, which are imposed by our charter, articles of incorporation,
or bylaws; any and all applicable federal and state laws and regulations;
the rules, regulations, customs, and usages of any exchange, market,
or clearing house where the transaction is executed; our policies and
practices; and this Agreement. After your death, your beneciary(ies) shall
have the right to direct the investment of your IRA assets, subject to
the same conditions that applied to you during your lifetime under this
Agreement (including, without limitation, Section 8.03 of this article). We
shall have no discretion to direct any investment in your IRA. We assume
no responsibility for rendering investment advice with respect to your IRA,
nor will we offer any opinion or judgment to you on matters concerning
the value or suitability of any investment or proposed investment for your
IRA. In the absence of instructions from you, or if your instructions are not
in a form acceptable to us, we shall have the right to hold any uninvested
amounts in cash, and we shall have no responsibility to invest uninvested
cash unless and until directed by you. We will not exercise the voting
rights and other shareholder rights with respect to investments in your
IRA unless you provide timely written directions acceptable to us.
You will select the type of investment for your IRA assets, provided,
however, that your selection of investments shall be limited to those
types of investments that we are authorized by our charter, articles of
incorporation, or bylaws to offer, and do in fact offer for investment in IRAs.
8.05 Beneciary(ies): If you die before you receive all of the amounts in your IRA,
payments from your IRA will be made to your beneciary(ies).
You may designate one or more persons or entities as beneciary(ies) of
your IRA. This designation can only be made on a form provided by or
acceptable to us, and it will only be effective when it is led with us during
your lifetime. Unless otherwise specied, each beneciary designation you
le with us will cancel all previous ones. The consent of (a) beneciary(ies)
shall not be required for you to revoke a beneciary designation. If you
have designated both primary and contingent beneciaries and no primary
beneciary(ies) survive(s) you, the contingent beneciary(ies) shall acquire
the designated share of your IRA. If you do not designate a beneciary,
or if your primary and contingent beneciary(ies) predecease you, your
estate will be the beneciary.
A spouse beneciary shall have all rights as granted under the Code or
applicable Regulations to treat your IRA as his or her own.
We may allow, if permitted by state law, (an) original IRA beneciary(ies) (the
beneciary(ies) who is/are entitled to receive the distribution(s) from
an inherited IRA at the time of your death) to name (a) successor
beneciary(ies) for the inherited IRA. This designation can only be made
on a form provided by or acceptable to us, and it will only be effective
when it is led with us during the original IRA beneciary’s(ies’) lifetime(s).
Unless otherwise specied, each beneciary designation form that the
original IRA beneciary(ies) le(s) with us will cancel all previous ones.
The consent of (a) successor beneciary(ies) shall not be required for
the original IRA beneciary(ies) to revoke (a) successor beneciary(ies)
designation. If the original IRA beneciary(ies) does/do not designate (a)
successor beneciary(ies), his or her/their estate will be the successor
beneciary. In no event shall the successor beneciary(ies) be able
to extend the distribution period beyond that required for the original
IRA beneciary(ies).
8.06 Required Minimum Distributions: Your required minimum distribution is
calculated using the Uniform Lifetime Table in Regulations section 1.401(a)
(9)-9. However, if your spouse is your sole designated beneciary and is
more than 10 years younger than you, your required minimum distribution
is calculated each year using the joint and last survivor table in Regulations
section 1.401(a)(9)-9.
If you fail to request your required minimum distribution by your required
beginning date, we can, at our complete and sole discretion, do any one
of the following:
Make no distribution until you give us a proper withdrawal request;
Distribute your entire IRA to you in a single sum payment; or
Determine your required minimum distribution from your IRA each year
based on your life expectancy, calculated using the Uniform Lifetime
Table in Regulations section 1.401(a)(9)-9, and pay those distributions
to you until you direct otherwise.
We will not be liable for any penalties or taxes related to your failure to
take a required minimum distribution.
8.07 Termination of Agreement, Resignation, or Removal of Trustee: Either
party may terminate this Agreement at any time by giving written notice
to the other. We can resign as Trustee at any time effective 30 days
after we mail written notice of our resignation to you. Upon receipt
of that notice, you must make arrangements to transfer your IRA to
another nancial organization. If you do not complete a transfer of your
IRA within 30 days from the date we mail the notice to you, we have
the right to transfer your IRA assets to a successor IRA custodian or
trustee that we choose in our sole discretion, or we may pay your IRA
to you in a single sum. We shall not be liable for any actions or failures
to act on the part of any successor custodian or trustee, nor for any tax
consequences you may incur that result from the transfer or distribution
of your assets pursuant to this section.
If this Agreement is terminated, we may charge your IRA a reasonable
amount of money that we believe is necessary to cover any associated costs,
including but not limited to, one or more of the following:
Any fees, expenses, or taxes chargeable against your IRA;
Any penalties or surrender charges associated with the early withdrawal
of any savings instrument or other investment in your IRA.
If we are required to comply with Regulations section 1.408–2(e), and we fail
to do so, or we are not keeping the records, making the returns, or sending
the statements as are required by forms or Regulations, the IRS may, after
notifying you, require you to substitute another trustee or custodian.
We may establish a policy requiring distribution of the enti re balance of your IRA
to you in cash or property if the balance of your IRA drops below the minimum
balance required under the applicable investment or policy established.
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8.08 Successor Trustee: If our organization changes its name, reorganizes,
or merges with another organization (or comes under the control of any
federal or state agency), or if our entire organization (or any portion that
includes your IRA) is bought by another organization, that organization
(or agency) shall automatically become the trustee or custodian of your
IRA, but only if it is the type of organization authorized to serve as an IRA
trustee or custodian.
8.09 Amendments: We have the right to amend this Agreement at any time. Any
amendment we make to comply with the Code and related Regulations
does not require your consent. You will be deemed to have consented to
any other amendment unless, within 30 days from the date we mail the
amendment, you notify us in writing that you do not consent.
8.10 Withdrawals or Transfers: Unless you are instructed otherwise, all requests
for withdrawals or transfers shall be in writing on a form provided by or
acceptable to us. The method of distribution must be specied. The tax
identication number of the recipient must be provided to us before we
are obligated to make a distribution. Withdrawals shall be subject to all
applicable tax and other laws and Regulations, including possible early
withdrawal penalties or surrender charges and withholding requirements.
8.11 Transfers from Other Plans: We can receive amounts transferred to this IRA
from the custodian or trustee of another IRA. In addition, we can accept
direct rollovers of eligible rollover distributions from employer-sponsored
retirement plans as permitted by the Code. We reserve the right not to
accept any transfer or direct rollover.
8.12 Liquidation of Assets: We have the right to liquidate assets in your IRA if
necessary to make distributions or to pay fees, expenses, taxes, penalties, or
surrender charges properly chargeable against your IRA. If you fail to direct
us as to which assets to liquidate, we will decide, in our complete and sole
discretion, and you agree not to hold us liable for any adverse
consequences that result from our decision.
8.13 Restrictions on the Fund: Neither you nor any beneciary may sell, transfer,
or pledge any interest in your IRA in any manner whatsoever, except as
provided by law or this Agreement.
The assets in your IRA shall not be responsible for the debts, contracts,
or torts of any person entitled to distributions under this Agreement.
8.14 What Law Applies: This Agreement is subject to all applicable federal
and state laws and regulations. If it is necessary to apply any state
law to interpret and administer this Agreement, the law of our domicile
shall govern.
If any part of this Agreement is held to be illegal or invalid, the remaining
parts shall not be affected. Neither your nor our failure to enforce at any
time or for any period of time any of the provisions of this Agreement shall
be construed as a waiver of such provisions, or your right or our right
thereafter to enforce each and every such provision.
General Instructions
Section references are to the Internal Revenue Code unless otherwise noted.
Purpose of Form
Form 5305 is a model trust account agreement that meets the requirements of
section 408(a) and has been pre-approved by the IRS. A traditional individual
retirement account (Traditional IRA) is established after the form is fully
executed by both the individual (Grantor) and the Trustee, and must be
completed no later than the due date (excluding extensions) of the individual’s
income tax return for the tax year. This account must be created in the United
States for the exclusive benet of the Grantor and his or her beneciaries.
Do not le Form 5305 with the IRS. Instead, keep it with your records.
For more information on IRAs, including the required disclosures the Trustee
must give the Grantor, see Publication 590-A, Contributions to Individual
Retirement Arrangements (IRAs), or Publication 590-B, Distributions from
Individual Retirement Arrangements (IRAs).
Denitions
Trustee. The trustee must be a bank or savings and loan association, as dened
in section 408(n), or any person who has the approval of the IRS to act as trustee.
Grantor. The grantor is the person who establishes the trust account.
Identifying Number
The Grantor’s Social Security Number will serve as the identifying number of his
or her IRA. An employer identication number (EIN) is required only for an IRA
for which a return is led to report unrelated business taxable income. An EIN is
required for a common fund created for IRAs.
Traditional IRA for Nonworking Spouse
Form 5305 may be used to establish the IRA trust for a nonworking spouse.
Contributions to an IRA trust account for a nonworking spouse must be made
to a separate IRA trust account established by the nonworking spouse.
Specic Instructions
Article. Distributions made under this article may be made in a single sum,
periodic payment, or a combination of both. The distribution option should be
reviewed in the year the Grantor reaches age 70
1
2
to ensure that the requirements
of section 408(a)(6) have been met.
Article VIII. Article VIII and any that follow it may incorporate additional provisions
that are agreed to by the Grantor and Trustee to complete the agreement.
They may include, for example, denitions, investment powers, voting rights,
exculpatory provisions, amendment and termination, removal of the Trustee,
Trustee’s fees, state law requirements, beginning date of distributions, accepting
only cash, treatment of excess contributions, prohibited transactions with the
Grantor, etc. Attach additional pages if necessary.
Disclosure Statement
Right to Revoke Your IRA
If you receive this Disclosure Statement at the time you establish your IRA, you
have the right to revoke your IRA within seven (7) days of its establishment. If
revoked, you are entitled to a full return of the contribution you made to your
IRA. The amount returned to you would not include an adjustment for such
items as sales commissions, administrative expenses, or uctuation in market
value. You may make this revocation only by mailing or delivering a written
notice to the Trustee at the address listed on the Application.
If you send your notice by rst-class mail, your revocation will be deemed
mailed as of the postmark date.
We are required to report to the IRS the contributions and distributions from
a revoked IRA.
If you have any questions about the procedure for revoking your IRA, please
call the Trustee at the telephone number listed on the Application.
Requirements of an IRA
A. Cash Contributions—Your contribution must be in cash unless it is a
rollover contribution. Stock certicates will not be allowed.
B. Maximum Contribution—The total amount you may contribute to an IRA
for any taxable year cannot exceed the lesser of 100 percent of your
compensation or $6,000 for 2020 and 2021 with possible cost-of-living
adjustments each year thereafter. If you also maintain a Roth IRA, the
maximum contribution to your Traditional IRAs (i.e., IRAs subject to Internal
Revenue Code (sections 408(a) or 408(b))) is reduced by any contributions
you make to your Roth IRA. Your total annual contribution to all Traditional IRAs
and Roth IRAs cannot exceed the lesser of the dollar amounts described above
or 100 percent of your compensation.
C. Contribution Eligibility—For tax years beginning before 2020, you are
eligible to make a regular contribution to your IRA if you have compensation
and have not attained age 70½ by the end of the taxable year for which the
contribution is made. For 2020 and later tax years, you may make a regular
contribution to your IRA at any age if you have compensation.
D. Catch-Up Contributions—If you are age 50 or older by the close of the
taxable year, you may make an additional contribution to your IRA. The
maximum additional contribution is $1,000 per year.
E. Nonforfeitability—Your interest in your IRA is nonforfeitable.
F. Eligible Trustees—The Trustee of your IRA must be a bank, savings and
loan association, credit union, or a person or entity approved by the
Secretary of the Treasury.
G. Commingling Assets—The assets of your IRA cannot be commingled with
other property except in a common trust fund or common investment fund.
H. Life Insurance—No portion of your IRA may be invested in life insurance
contracts.
I. Collectibles—You may not invest the assets of your IRA in collectibles
(within the meaning of Code section 408(m)). A collectible is dened as any
work of art, rug or antique, metal or gem, stamp or coin, alcoholic beverage,
or other tangible personal property specied by the Internal Revenue
Service (IRS). However, specially minted United States gold and silver
coins, and certain state-issued coins are permissible investments. Platinum
coins and certain gold, silver, platinum, or palladium bullion (as described in
Code section 408(m)(3)) are also permitted as IRA investments.
J. Required Minimum Distributions—You are required to take minimum
distributions from your IRA at certain times in accordance with Regulations
section 1.408-8. Below is a summary of the IRA distribution rules.
1. If you were born before July 1, 1949, you are required to take a minimum
distribution from your IRA for the year in which you reach age 70½ and for
each year thereafter. You must take your rst distribution by your required
beginning date, which is April1 of the year following the year you attain
age 70½. If you were born on or after July 1, 1949, you are required to
take a minimum distribution from your IRA for the year in which you reach
age 72 and for each year thereafter. You must take your rst distribution
© 2020 Ascensus, Inc. (97) (4-20)
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by your required beginning date, which is April 1 of the year following the
year you attain age 72. The minimum distribution for any taxable year is
equal to the amount obtained by dividing the account balance at the end
of the prior year by the applicable divisor.
2. The applicable divisor is generally determined using the Uniform
Lifetime Table provided by the IRS. If your spouse is your sole
designated beneciary and is more than 10 years younger than you,
the required minimum distribution is determined each year using the
actual joint life expectancy of you and your spouse obtained from the
Joint Life Expectancy table provided by the IRS, rather than the life
expectancy divisor from the Uniform Lifetime Table.
We reserve the right to do any one of the following by your required
beginning date:
(a) Make no distribution until you give us a proper withdrawal request;
(b) Distribute your entire IRA to you in a single sum payment; or
(c) Determine your required minimum distribution each year based on
your life expectancy calculated using the Uniform Lifetime Table, and
pay those distributions to you until you direct otherwise. If you fail
to remove a required minimum distribution, an additional penalty tax
of 50 percent is imposed on the amount of the required minimum
distribution that should have been taken but was not. You must le
IRS Form 5329 along with your income tax return to report and remit
any additional taxes to the IRS.
K. Beneciary Distributions—Upon your death, your beneciaries are required
to take distributions according to IRC Sec. 401(a)(9) and Treasury
Regulation 1.408-8. These requirements are described below.
1. Death of IRA Owner Before January 1, 2020—Your designated
beneciary is determined based on the beneciaries designated
as of the date of your death, who remain your beneciaries as of
September30 of the year following the year of your death.
If you die on or after your required beginning date, distributions must be
made to your beneciaries over the longer of the single life expectancy
of your designated beneciaries, or your remaining life expectancy.
If a beneciary other than a person or qualied trust as dened in
the Treasury Regulations is named, you will be treated as having no
designated beneciary of your IRA for purposes of determining the
distribution period. If there is no designated beneciary of your IRA,
distributions will commence using your single life expectancy, reduced
by one in each subsequent year.
If you die before your required beginning date, the entire amount
remaining in your account will, at the election of your designated
beneciaries, either:
(a) be distributed by December 31 of the year containing the fth
anniversary of your death, or
(b) be distributed over the remaining life expectancy of your designated
beneciaries.
If your spouse is your sole designated beneciary, he or she must
elect either option (a) or (b) by the earlier of December 31 of the year
containing the fth anniversary of your death, or December 31 of
the year life expectancy payments would be required to begin. Your
designated beneciaries, other than a spouse who is the sole designated
beneciary, must elect either option (a) or (b) by December31 of the year
following the year of your death. If no election is made, distribution will
be calculated in accordance with option (b). In the case of distributions
under option (b), distributions must commence by December 31 of
the year following the year of your death. Generally, if your spouse
is the designated beneciary, distributions need not commence until
December31 of the year you would have attained age 72 (age 70½ if you
would have attained age 70½ before 2020), if later. If a beneciary other
than a person or qualied trust as dened in the Treasury Regulations is
named, you will be treated as having no designated beneciary of your
IRA for purposes of determining the distribution period. If there is no
designated beneciary of your IRA, the entire IRA must be distributed by
December 31 of the year containing the fth anniversary of your death.
2. Death of IRA Owner On or After January 1, 2020—The entire amount
remaining in your account will generally be distributed by December31
of the year containing the tenth anniversary of your death unless you
have an eligible designated beneciary or you have no designated
beneciary for purposes of determining a distribution period. This
requirement applies to beneciaries regardless of whether you die
before, on, or after your required beginning date.
If your beneciary is an eligible designated beneciary, the entire
amount remaining in your account may be distributed (in accordance
with the Treasury Regulations) over the remaining life expectancy of
your eligible designated beneciary (or over a period not extending
beyond the life expectancy of such beneciary).
An eligible designated beneciary is any designated beneciary who is:
your surviving spouse,
your child who has not reached the age of majority,
disabled (A physician must determine that your impairment can be
expected to result in death or to be of long, continued, and indenite
duration.),
an individual who is not more than 10 years younger than you, or
chronically ill (A chronically ill individual is someone who (1) is unable
to perform (without substantial assistance from another individual) at
least two activities of daily living for an indenite period due to a loss
of functional capacity, (2) has a level of disability similar to the level of
disability described above requiring assistance with daily living based
on loss of functional capacity, or (3) requires substantial supervision to
protect the individual from threats to health and safety due to severe
cognitive impairment.)
A spouse who is the sole designated beneciary of your entire IRA will be
deemed to elect to treat your IRA as his or her own by either (1) making
contributions to your IRA or (2) failing to timely remove a required minimum
distribution from your IRA. Regardless of whether or not the spouse is the
sole designated beneciary of your IRA, a spouse beneciary may roll
over his or her share of the assets to his or her own IRA.
If we so choose, for any reason (e.g., due to limitations of our charter or
bylaws), we may require that a beneciary of a deceased IRA owner take
total distribution of all IRA assets by December31 of the year following
the year of death.
If your beneciary fails to remove a required minimum distribution after
your death, an additional penalty tax of 50 percent is imposed on the
amount of the required minimum distribution that should have been taken
but was not. Your beneciary must le IRS Form 5329 along with his or
her income tax return to report and remit any additional taxes to the IRS.
L. Qualifying Longevity Annuity Contracts and RMDs—A qualifying longevity
annuity contract (QLAC) is a deferred annuity contract that, among other
requirements, must guarantee lifetime income starting no later than age 85.
The total premiums paid to QLACs in your IRAs must not exceed 25 percent
(up to $135,000) of the combined value of your IRAs (excluding Roth IRAs).
The $135,000 limit is subject to cost-of‐living adjustments each year.
When calculating your RMD, you may reduce the prior year end account
value by the value of QLACs that your IRA holds as investments.
For more information on QLACs, you may wish to refer to the IRS website
at www.irs.gov.
M. Waiver of 2020 RMD—In spite of the general rules described above, if you
are an IRA owner age 70½ or older, you are not required to remove an RMD
for calendar year 2020. This RMD waiver also applies to IRA owners who
attained age 70½ in 2019 but did not take their rst RMD before January
1, 2020. In addition, no beneciary life expectancy payments are required
for calendar year calendar year 2020. If the ve-year rule applies to an IRA
with respect to any decedent, the ve-year period is determined without
regard to calendar year 2020. For example, if an IRA owner died in 2017,
the beneciary’s ve-year period ends in 2023 instead of 2022.
Income Tax Consequences of Establishing an IRA
A. IRA DeductibilityIf you are eligible to contribute to your IRA, the amount
of the contribution for which you may take a tax deduction will depend upon
whether you (or, in some cases, your spouse) are an active participant in an
employer-maintained retirement plan. If you (and your spouse, if married)
are not an active participant, your entire IRA contribution will be deductible.
If you are an active participant (or are married to an active participant), the
deductibility of your contribution will depend on your modied adjusted
gross income (MAGI) and your tax ling status for the tax year for which the
contribution was made. MAGI is determined on your income tax return using
your adjusted gross income but disregarding any deductible IRA contribution.
Denition of Active Participant: Generally, you will be an active participant
if you are covered by one or more of the following employer-maintained
retirement plans:
1. A qualied pension, prot sharing, 401(k), or stock bonus plan;
2. A qualied annuity plan of an employer;
3. A simplied employee pension (SEP) plan;
4. A retirement plan established by the federal government, a state, or a
political subdivision (except certain unfunded deferred compensation
plans under Code section 457);
5. A tax-sheltered annuity for employees of certain tax-exempt organizations
or public schools;
6. A plan meeting the requirements of Code section 501(c)(18);
7. A qualied plan for self-employed individuals (H.R. 10 or Keogh Plan); or
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8. A savings incentive match plan for employees of small employers
(SIMPLE) IRA plan or a SIMPLE 401(k) plan.
If you do not know whether your employer maintains one of these plans
or whether you are an active participant in it, check with your employer or
your tax advisor. Also, the IRS Form W-2, Wage and Tax Statement, that
you receive at the end of the year from your employer will indicate whether
you are an active participant.
If you are an active participant and are single, and have MAGI within the
applicable phase-out range listed below, the deductible amount of your
contribution is determined as follows: (1) begin with the appropriate phase-
out range maximum for the applicable year (specied below), and subtract
your MAGI; (2) divide this total by the difference between the phase-out
maximum and minimum; (3) multiply this number by the maximum allowable
contribution for the applicable year, including catch-up contributions if you
are age 50 or older. The resulting gure will be the maximum IRA deduction
you may take. For example, if you are age 30 with MAGI of $68,000 in
2021, your maximum deductible contribution is $4,800 (the 2021 phase-out
range maximum of $76,000 minus your MAGI of $68,000, divided by the
difference between the maximum and minimum phase-out range limits of
$10,000, and multiplied by the contribution limit of $6,000).
If you are an active participant, are married to an active participant and
you le a joint income tax return, and have MAGI within the applicable
phase-out range listed below, the deductible amount of your contribution is
determined as follows: (1) begin with the appropriate phase-out maximum
for the applicable year (specied below) and subtract your MAGI; (2) divide
this total by the difference between the phase-out range maximum and
minimum; (3) multiply this number by the maximum allowable contribution
for the applicable year, including catch-up contributions if you are age 50
or older. The resulting gure will be the maximum IRA deduction you may
take. For example, if you are age 30 with MAGI of $110,000 in 2021, your
maximum deductible contribution is $4,500 (the 2021 phase-out maximum
of $125,000 minus your MAGI of $110,000, divided by the difference
between the maximum and minimum phase-out limits of $20,000, and
multiplied by the contribution limit of $6,000).
If you are an active participant, are married, and you le a separate income
tax return, your MAGI phase-out range is generally $0-$10,000. However, if
you lived apart for the entire tax year, you are treated as a single ler.
Tax Year
Joint Filers
Phase-out Range*
(minimum)(maximum)
Single Taxpayers
Phase-out Range*
(minimum)(maximum)
2016
$98,000 – $118,000 $61,000 – $71,000
2017
$99,000 – $119,000 $62,000 – $72,000
2018
$101,000 – $121,000 $63,000 – $73,000
2019
$103,000 – $123,000 $64,000 – $74,000
2020
$104,000 – $124,000 $65,000 – $75,000
2021
$105,000 – $125,000 $66,000 – $76,000
*MAGI limits may be subject to cost-of-living increases each year.
The MAGI phase‐out range for an individual that is not an active participant,
but is married to an active participant, is $196,000-$206,000 for 2020 and
$198,000 to $206,000 for 2021. This limit is also subject to cost‐of‐living
increases for tax years after 2021. If you are not an active participant in an
employer‐sponsored retirement plan, are married to someone who is an
active participant, and you le a joint income tax return with MAGI between
the applicable phase‐out range for the year, your maximum deductible
contribution is determined as follows: (1) begin with the appropriate MAGI
phase‐out maximum for the year and subtract your MAGI; (2) divide this total
by the difference between the phase‐out range maximum and minimum;
and (3) multiply this number by the maximum allowable contribution for the
applicable year, including catch‐up contributions if you are age 50 or older.
The resulting gure will be the maximum IRA deduction you may take.
You must round the resulting deduction to the next highest $10 if the
number is not a multiple of 10. If your resulting deduction is between $0
and $200, you may round up to $200.
B. Contribution Deadline—The deadline for making an IRA contribution is
your tax return due date (not including extensions). You may designate a
contribution as a contribution for the preceding taxable year in a manner
acceptable to us. For example, if you are a calendar-year taxpayer and
you make your IRA contribution on or before your tax ling deadline, your
contribution is considered to have been made for the previous tax year if
you designate it as such.
If you are a member of the Armed Forces serving in a combat zone,
hazardous duty area, or contingency operation, you may have an extended
contribution deadline of 180 days after the last day served in the area. In
addition, your contribution deadline for a particular tax year is also extended
by the number of days that remained to le that year’s tax return as of the
date you entered the combat zone. This additional extension to make your
IRA contribution cannot exceed the number of days between January 1 and
your tax ling deadline, not including extensions.
C. Tax Credit for Contributions—You may be eligible to receive a tax credit for
your Traditional IRA contributions. This credit will be allowed in addition to
any tax deduction that may apply, and may not exceed $1,000 in a given
year. You may be eligible for this tax credit if you are:
age 18 or older as of the close of the taxable year;
not a dependent of another taxpayer; and
not a full-time student.
The credit is based upon your income (see chart below), and will range from
0 to 50 percent of eligible contributions. In order to determine the amount of
your contributions, add all of the contributions made to your Traditional or
Roth IRA and reduce these contributions by any distributions that you have
taken during the testing period. The testing period begins two years prior to
the year for which the credit is sought and ends on the tax return due date
(including extensions) for the year for which the credit is sought. In order to
determine your tax credit, multiply the applicable percentage from the chart
below by the amount of your contributions that do not exceed $2,000.
2020 Adjusted Gross Income*
*Adjusted gross income includes foreign-earned income and income from
Guam, America Samoa, North Mariana Islands, and Puerto Rico. AGI limits are
subject to cost-of-living adjustments each year.
Joint Return
Head of a
Household
All Other
Cases
Applicable
Percentage
$1 - 39,000 $1 - 29,250 $1 - 19,500 50
$39,001 - 42,500 $29,251 - 31,875 $19,501 - 21,250 20
$42,501 - 65,000 $31,876 - 48,750 $21,251 - 32,500 10
Over $65,000 Over $48,750 Over $32,500 0
2021 Adjusted Gross Income*
Joint Return
Head of a
Household
All Other
Cases
Applicable
Percentage
$1 - 39,500 $1 - 29,625 $1 - 19,750 50
$39,501 - 43,000 $29,626 - 32,250 $19,751 - 21,500 20
$43,001 - 66,000 $32,251 - 49,500 $21,501 - 33,000 10
Over $66,000 Over $49,500 Over $33,000 0
D. Excess Contributions—An excess contribution is any amount that is
contributed to your IRA that exceeds the amount that you are eligible to
contribute. If the excess is not corrected timely, an additional penalty tax
of six percent will be imposed upon the excess amount. The procedure
for correcting an excess is determined by the timeliness of the correction as
identied below.
1. Removal Before Your Tax Filing Deadline. An excess contribution may
be corrected by withdrawing the excess amount, along with the earnings
attributable to the excess, before your tax ling deadline, including
extensions, for the year for which the excess contribution was made.
An excess withdrawn under this method is not taxable to you, but you
must include the earnings attributable to the excess in your taxable
income in the year in which the contribution was made. The six percent
excess contribution penalty tax will be avoided.
2. Removal After Your Tax Filing Deadline. If you are correcting an excess
contribution after your tax ling deadline, including extensions, remove
only the amount of the excess contribution. The six percent excess
contribution penalty tax will be imposed on the excess contribution for
each year it remains in the IRA. An excess withdrawal under this method
will only be taxable to you if the total contributions made in the year of
the excess exceed the annual applicable contribution limit.
3. Carry Forward to a Subsequent Year. If you do not withdraw the excess
contribution, you may carry forward the contribution for a subsequent
tax year. To do so, you under-contribute for that tax year and carry the
excess contribution amount forward to that year on your tax return.
The six percent excess contribution penalty tax will be imposed on the
excess amount for each year that it remains as an excess contribution
at the end of the year.
You must le IRS Form 5329 along with your income tax return to report
and remit any additional taxes to the IRS.
E. Tax-Deferred Earnings—The investment earnings of your IRA are not
subject to federal income tax until distributions are made (or, in certain
instances, when distributions are deemed to be made).
F. Nondeductible Contributions—You may make nondeductible contributions
to your IRA to the extent that deductible contributions are not allowed.
The sum of your deductible and nondeductible IRA contributions cannot
exceed your contribution limit (the lesser of the allowable contribution limit
described previously, or 100 percent of compensation). You may elect to
treat deductible IRA contributions as nondeductible contributions.
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If you make nondeductible contributions for a particular tax year, you must
report the amount of the nondeductible contribution along with your income
tax return using IRS Form 8606. Failure to le IRS Form 8606 will result in a
$50 per failure penalty.
If you overstate the amount of designated nondeductible contributions
for any taxable year, you are subject to a $100 penalty unless reasonable
cause for the overstatement can be shown.
G. Taxation of Distributions—The taxation of IRA distributions depends on
whether or not you have ever made nondeductible IRA contributions. If you
have only made deductible contributions, any IRA distribution will be fully
included in income.
If you have ever made nondeductible contributions to any IRA, the following
formula must be used to determine the amount of any IRA distribution
excluded from income.
(Aggregate Nondeductible Contributions)
x (Amount Withdrawn) = Amount Excluded from Income
Aggregate IRA Balance
Note: Aggregate nondeductible contributions include all nondeductible
contributions made by you through the end of the year of the distribution
(which have not previously been withdrawn and excluded from income).
Also note that the aggregate IRA balance includes the total balance of all of
your Traditional and SIMPLE IRAs as of the end of the year of distribution
and any distributions occurring during the year.
H. Income Tax Withholding—Any withdrawal from your IRA is subject to federal
income tax withholding. You may, however, elect not to have withholding
apply to your IRA withdrawal. If withholding is applied to your withdrawal, not
less than 10 percent of the amount withdrawn must be withheld.
I. Early Distribution Penalty Tax—If you receive an IRA distribution before you
attain age 59½, an additional early distribution penalty tax of 10percent will
apply to the taxable amount of the distribution unless one of the following
exceptions apply.
1. Death. After your death, payments made to your beneciary are not
subject to the 10 percent early distribution penalty tax.
2. Disability. If you are disabled at the time of distribution, you are not
subject to the additional 10 percent early distribution penalty tax. In
order to be disabled, a physician must determine that your impairment
can be expected to result in death or to be of long, continued, and
indenite duration.
3. Substantially equal periodic payments. You are not subject to the
additional 10 percent early distribution penalty tax if you are taking
a series of substantially equal periodic payments (at least annual
payments) over your life expectancy or the joint life expectancy of you
and your beneciary. You must continue these payments for the longer
of ve years or until you reach age 59½.
4. Unreimbursed medical expenses. If you take payments to pay for
unreimbursed medical expenses that exceed a specied percentage of
your adjusted gross income, you will not be subject to the 10 percent
early distribution penalty tax. For further detailed information and
effective dates you may obtain IRS Publication 590-B, Distributions from
Individual Retirement Arrangements (IRAs), from the IRS. The medical
expenses may be for you, your spouse, or any dependent listed on your
tax return.
5. Health insurance premiums. If you are unemployed and have received
unemployment compensation for 12 consecutive weeks under a federal
or state program, you may take payments from your IRA to pay for
health insurance premiums without incurring the 10 percent early
distribution penalty tax.
6. Higher education expenses. Payments taken for certain qualied
higher education expenses for you, your spouse, or the children
or grandchildren of you or your spouse, will not be subject to the
10percent early distribution penalty tax.
7. First-time homebuyer. You may take payments from your IRA to use
toward qualied acquisition costs of buying or building a principal
residence. The amount you may take for this reason may not exceed a
lifetime maximum of $10,000. The payment must be used for qualied
acquisition costs within 120days of receiving the distribution.
8. IRS levy. Payments from your IRA made to the U.S. government in
response to a federal tax levy are not subject to the 10percent early
distribution penalty tax.
9. Qualied reservist distributions. If you are a qualied reservist
member called to active duty for more than 179 days or an indenite
period, the payments you take from your IRA during the active duty
period are not subject to the 10percent early distribution penalty tax.
10. Qualied birth or adoption. Payments from your IRA for the birth of
your child or the adoption of an eligible adoptee will not be subject to the
10 percent early distribution penalty tax if the distribution is taken during
the one-year period beginning on the date of birth of your child or the
date on which your legal adoption of an eligible adoptee is nalized. An
eligible adoptee means any individual (other than your spouse’s child)
who has not attained age 18 or is physically or mentally incapable of
self-support. The aggregate amount you may take for this reason may
not exceed $5,000 for each birth or adoption.
You must le IRS Form 5329 along with your income tax return to the
IRS to report and remit any additional taxes or to claim a penalty tax
exception.
J. Rollovers and Conversions—Your IRA may be rolled over to another
IRA, SIMPLE IRA, or an eligible employer-sponsored retirement plan of
yours, may receive rollover contributions, or may be converted to a Roth
IRA, provided that all of the applicable rollover and conversion rules are
followed. Rollover is a term used to describe a tax-free movement of cash
or other property to your IRA from another IRA, or from your employer’s
qualied retirement plan, 403(a) annuity plan, 403(b) tax-sheltered annuity,
or 457(b) eligible governmental deferred compensation plan. Conversion is
a term used to describe the movement of Traditional IRA assets to a Roth
IRA. A conversion is generally a taxable event. The rollover and conversion
rules are summarized below. These transactions are often complex. If
you have any questions regarding a rollover or conversion, please see a
competent tax advisor.
1. Traditional IRA to Traditional IRA Rollovers: Assets distributed from
your Traditional IRA may be rolled over to the same Traditional IRA or
another Traditional IRA of yours if the requirements of Code Sec. 408(d)
(3) are met. A proper IRA‐to‐IRA rollover is completed if all or part of the
distribution is rolled over not later than 60 days after the distribution is
received. In the case of a distribution for a rst‐time homebuyer where
there was a delay or cancellation of the purchase, the 60‐day rollover
period may be extended to 120 days.
You are permitted to roll over only one distribution from an IRA (Traditional,
Roth, or SIMPLE) in a 12‐month period, regardless of the number of IRAs
you own. A distribution may be rolled over to the same IRA or to another
IRA that is eligible to receive the rollover. For more information on rollover
limitations, you may wish to obtain IRS Publication 590-B, Distributions
from Individual Retirement Arrangements (IRAs), from the IRS or refer to
the IRS website at www.irs.gov.
2. SIMPLE IRA to Traditional IRA Rollovers: Assets distributed from
your SIMPLE IRA may be rolled over to your IRA without IRS penalty
tax provided two years have passed since you rst participated in a
SIMPLE IRA plan sponsored by your employer. As with Traditional IRA
to Traditional IRA rollovers, the requirements of Code Sec. 408(d)(3)
must be met. A proper SIMPLE IRA to IRA rollover is completed if all
or part of the distribution is rolled over not later than 60 days after the
distribution is received.
You are permitted to roll over only one distribution from an IRA (Traditional,
Roth, or SIMPLE) in a 12‐month period, regardless of the number of IRAs
you own. A distribution may be rolled over to the same IRA or to another
IRA that is eligible to receive the rollover. For more information on rollover
limitations, you may wish to obtain IRS Publication 590-B, Distributions
from Individual Retirement Arrangements (IRAs), from the IRS or refer to
the IRS website at www.irs.gov.
3. Employer-Sponsored Retirement Plan to Traditional IRA Rollovers:
You may roll over, directly or indirectly, any eligible rollover distribution
from an eligible employer-sponsored retirement plan. An eligible rollover
distribution is dened generally as any distribution from a qualied
retirement plan, 403(a) annuity, 403(b) tax-sheltered annuity, 457(b)
eligible governmental deferred compensation plan, or federal Thrift
Savings Plan unless it is a required minimum distribution, hardship
distribution, part of a certain series of substantially equal periodic
payments, corrective distributions of excess contributions, excess
deferrals, excess annual additions and any income allocable to the
excess, deemed loan distribution, dividends on employer securities,
the cost of life insurance coverage, or a distribution of Roth elective
deferrals from a 401(k), 403(b), governmental 457(b), or federal Thrift
Savings Plan.
If you elect to receive your rollover distribution prior to placing it in an
IRA, thereby conducting an indirect rollover, your plan administrator will
generally be required to withhold 20 percent of your distribution as a
payment of income taxes. When completing the rollover, you may make
up the amount withheld, out of pocket, and roll over the full amount
distributed from your employer-sponsored retirement plan. To qualify
as a rollover, your eligible rollover distribution must be rolled over to
your IRA not later than 60 days after you receive distribution. In the
case of a plan loan offset due to plan termination or severance from
employment, the deadline for completing the rollover is your tax return
due date (including extensions) for the year in which the offset occurs.
Alternatively, you may claim the withheld amount as income, and pay
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the applicable income tax, and if you are under age 59½, the 10 percent
early distribution penalty tax (unless an exception to the penalty applies).
As an alternative to the indirect rollover, your employer generally must
give you the option to directly roll over your employer-sponsored
retirement plan balance to an IRA. If you elect the direct rollover option,
your eligible rollover distribution will be paid directly to the IRA (or other
eligible employer-sponsored retirement plan) that you designate. The 20
percent withholding requirements do not apply to direct rollovers.
4. Beneciary Rollovers from Employer-Sponsored Retirement
Plans: If you are a spouse or nonspouse beneciary of a deceased
employer-sponsored retirement plan participant, or the trustee of an
eligible type of trust named as beneciary of such participant, you
may directly roll over inherited assets from a qualied retirement
plan, 403(a) annuity, 403(b) tax-sheltered annuity, or 457(b) eligible
governmental deferred compensation plan to an inherited IRA, as
permitted by the IRS. The IRA must be maintained as an inherited IRA,
subject to the beneciary distribution requirements.
5. Traditional IRA-to-SIMPLE IRA Rollovers. Assets distributed from
your Traditional IRA may be rolled over to a SIMPLE IRA if the
requirements of IRC Sec. 408(d)(3) are met and two years have
passed since you rst participated in a SIMPLE IRA plan sponsored
by your employer. A proper Traditional IRA‐to‐SIMPLE IRA rollover is
completed if all or part of the distribution is rolled over not later than 60
days after the distribution is received. In the case of a distribution for
a rst‐time homebuyer where there was a delay or cancellation of the
purchase, the 60‐day rollover period may be extended to 120 days.
You are permitted to roll over only one distribution from an IRA
(Traditional, Roth, or SIMPLE) in a 12‐month period, regardless of the
number of IRAs you own. A distribution may be rolled over to the same
IRA or to another IRA that is eligible to receive the rollover. For more
information on rollover limitations, you may obtain IRS Publication
590-B, Distributions from Individual Retirement Arrangements (IRAs),
from the IRS or refer to the IRS website at www.irs.gov.
6. Traditional IRA to Employer-Sponsored Retirement Plan: You may
roll over, directly or indirectly, any eligible rollover distribution from
an IRA to an employer’s qualied retirement plan, 403(a) annuity,
403(b) tax-sheltered annuity, or 457(b) eligible governmental deferred
compensation plan so long as the employer-sponsored retirement plan
accepts such rollover contributions. An eligible rollover distribution is
dened as any taxable distribution from an IRA that is not a part of a
required minimum distribution.
7. Traditional IRA to Roth IRA Conversions: If you convert to a Roth
IRA, the amount of the conversion from your Traditional IRA to your
Roth IRA will be treated as a distribution for income tax purposes,
and is includible in your gross income (except for any nondeductible
contributions). Although the conversion amount generally is included
in income, the 10 percent early distribution penalty tax will not apply
to conversions from a Traditional IRA to a Roth IRA, regardless of
whether you qualify for any exceptions to the 10 percent penalty tax.
If you are age 70½ or older, you must remove your required minimum
distribution before converting your Traditional IRA.
8. Qualied HSA Funding Distribution: If you are eligible to contribute
to a health savings account (HSA), you may be eligible to take a
one-time, tax-free qualied HSA funding distribution from your IRA
and directly deposit it to your HSA. The amount of the qualied HSA
funding distribution may not exceed the maximum HSA contribution
limit in effect for the type of high deductible health plan coverage (i.e.,
single or family coverage) that you have at the time of the deposit, and
counts toward your HSA contribution limit for that year. For further
detailed information, you may wish to obtain IRS Publication 969,
Health Savings Accounts and Other Tax-Favored Health Plans.
9. Rollovers of Settlement Payments from Bankrupt Airlines: If you
are a qualied airline employee who has received a qualied airline
settlement payment from a commercial airline carrier under the approval
of an order of a federal bankruptcy court, you are allowed to roll over up
to 90 percent of the proceeds into your Traditional IRA within 180 days
after receipt of such amount, or by a later date if extended by federal
law. If you make such a rollover contribution, you may exclude the
amount rolled over from your gross income in the taxable year in which
the airline settlement payment was paid to you. For further detailed
information and effective dates, you may obtain IRS Publication 590-A,
Contributions to Individual Retirement Arrangements (IRAs), from the
IRS or refer to the IRS website at www.irs.gov.
10. Rollover of Exxon Valdez Settlement Payments: If you receive a
qualied settlement payment from Exxon Valdez litigation, you may
roll over the amount of the settlement, up to $100,000, reduced by the
amount of any qualied Exxon Valdez settlement income previously
contributed to a Traditional or Roth IRA or eligible retirement plan in
prior taxable years. You will have until your tax return due date (not
including tax extensions) for the year in which the qualied settlement
income is received to make the rollover contribution. To obtain more
information on this type of rollover, you may wish to visit the IRS
website at www.irs.gov.
11. Rollover of IRS Levy: If you receive a refund of eligible retirement plan
assets that had been wrongfully levied, you may roll over the amount
returned up until your tax return due date (not including extensions) for
the year in which the money was returned.
12. Repayment of Qualied Birth or Adoption Distribution: If you have
taken a qualied birth or adoption distribution, you may generally
repay all or a portion of the aggregate amount of such distribution to
an IRA, as permitted by the IRS. For further information, you may wish
to obtain IRS Publication 590-A, Contributions to Individual Retirement
Arrangements (IRAs), by visiting www.irs.gov on the internet.
13. Written Election: At the time you make a proper rollover to an IRA, you
must designate in writing to us your election to treat that contribution
as a rollover. Once made, the rollover election is irrevocable.
I. Transfer Due to Divorce—If all or any part of your IRA is awarded to your
spouse or former spouse in a divorce or legal separation proceeding,
the amount so awarded will be treated as the spouse’s IRA (and may
be transferred pursuant to a court-approved divorce decree or written
legal separation agreement to another IRA of your spouse), and will not
be considered a taxable distribution to you. A transfer is a tax-free direct
movement of cash and/or property from one Traditional IRA to another.
J. Recharacterizations—If you make a contribution to a Traditional IRA and
later recharacterize either all or a portion of the original contribution to a
Roth IRA along with net income attributable, you may elect to treat the
original contribution as having been made to the Roth IRA. The same
methodology applies when recharacterizing a contribution from a Roth IRA
to a Traditional IRA. The deadline for completing a recharacterization is your
tax ling deadline (including any extensions) for the year for which the original
contribution was made. You may not recharacterize a Roth IRA conversion.
Limitations and Restrictions
A. SEP Plans—Under a simplied employee pension (SEP) plan that meets
the requirements of Code section 408(k), your employer may make
contributions to your IRA. Your employer is required to provide you with
information which describes the terms of your employer’s SEP plan.
B. Spousal IRA—For contributions made for tax years beginning before
2020, if you are married and have compensation, you may contribute to
an IRA established for the benet of your spouse for any year prior to
the year your spouse turns age 70½, regardless of whether or not your
spouse has compensation. For contributions made for 2020 and later tax
years, you may contribute to an IRA established for the benet of your
spouse regardless of your spouse’s age, if you are married and have
compensation. You may make these spousal contributions even if you are
age 70½ or older. You must le a joint income tax return for the year for
which the contribution is made.
The amount you may contribute to your IRA and your spouse’s IRA is the
lesser of 100 percent of your combined eligible compensation or $12,000
for 2019 and 2020. This amount may be increased with cost-of-living
adjustments each year. However, you may not contribute more than the
individual contribution limit to each IRA.
If your spouse is age 50 or older by the close of the taxable year, and
is otherwise eligible, you may make an additional contribution to your
spouse’s IRA. The maximum additional contribution is $1,000 per year.
C. Deduction of Rollovers and Transfers—A deduction is not allowed for
rollover contributions or transfers.
D. Gift Tax—Transfers of your IRA assets to a beneciary made during your
life and at your request may be subject to federal gift tax under Code
section 2501.
E. Special Tax Treatment—Capital gains treatment and 10-year forward
income averaging authorized by Code section 402 do not apply to IRA
distributions.
F. Prohibited Transactions—If you or your beneciary engage in a prohibited
transaction with your IRA as described in Code section 4975, your
IRA will lose its tax-deferred status, and you must include the value of
your account in your gross income for the taxable year you engage in
the prohibited transaction. The following transactions are examples of
prohibited transactions with your IRA: (1) taking a loan from your IRA; (2)
buying property for personal use (present or future) with IRA funds; or (3)
receiving certain bonuses or premiums because of your IRA.
G. Pledging—If you pledge any portion of your IRA as collateral for a loan, the
amount so pledged will be treated as a distribution and will be included in
your gross income for the taxable year in which you pledge the assets.
Page 16 of 19
© 2020 Ascensus, Inc. (97) (4-20)
© 2021 Navy Federal NFCU 602C (1-21)
Federal Tax Penalties
A. Early Distribution Penalty—If you receive an IRA distribution before you
attain age 59½, an additional early distribution penalty tax of 10percent
will apply to the taxable amount of the distribution unless one of the
following exceptions apply.
1. Death. After your death, payments made to your beneciary are not
subject to the 10 percent early distribution penalty tax.
2 Disability. If you are disabled at the time of distribution, you are not
subject to the additional 10 percent early distribution penalty tax. In
order to be disabled, a physician must determine that your impairment
can be expected to result in death or to be of long, continued, and
indenite duration.
3. Substantially equal periodic payments. You are not subject to the
additional 10 percent early distribution penalty tax if you are taking
a series of substantially equal periodic payments (at least annual
payments) over your life expectancy or the joint life expectancy of you
and your beneciary. You must continue these payments for the longer
of ve years or until you reach age 59½.
4. Unreimbursed medical expenses. If you take payments to pay for
unreimbursed medical expenses that exceed a specied percentage of
your adjusted gross income, you will not be subject to the 10 percent
early distribution penalty tax. For further detailed information and
effective dates you may obtain IRS Publication 590-B, Distributions from
Individual Retirement Arrangements (IRAs), from the IRS. The medical
expenses may be for you, your spouse, or any dependent listed on your
tax return.
5. Health insurance premiums. If you are unemployed and have received
unemployment compensation for 12 consecutive weeks under a federal
or state program, you may take payments from your IRA to pay for
health insurance premiums without incurring the 10 percent early
distribution penalty tax.
6. Higher education expenses. Payments taken for certain qualied
higher education expenses for you, your spouse, or the children
or grandchildren of you or your spouse, will not be subject to the
10percent early distribution penalty tax.
7. First-time homebuyer. You may take payments from your IRA to use
toward qualied acquisition costs of buying or building a principal
residence. The amount you may take for this reason may not exceed a
lifetime maximum of $10,000. The payment must be used for qualied
acquisition costs within 120days of receiving the distribution.
8. IRS levy. Payments from your IRA made to the U.S. government in
response to a federal tax levy are not subject to the 10percent early
distribution penalty tax.
9. Qualied reservist distributions. If you are a qualied reservist
member called to active duty for more than 179 days or an indenite
period, the payments you take from your IRA during the active duty
period are not subject to the 10percent early distribution penalty tax.
10. Qualied birth or adoption. Payments from your IRA for the birth of
your child or the adoption of an eligible adoptee will not be subject to the
10 percent early distribution penalty tax if the distribution is taken during
the one-year period beginning on the date of birth of your child or the
date on which your legal adoption of an eligible adoptee is nalized. An
eligible adoptee means any individual (other than your spouse’s child)
who has not attained age 18 or is physically or mentally incapable of
self-support. The aggregate amount you may take for this reason may
not exceed $5,000 for each birth or adoption.
You must le IRS Form 5329 along with your income tax return to the
IRS to report and remit any additional taxes or to claim a penalty tax
exception.
B. Excess Contribution Penalty—An additional tax of six percent is imposed
upon any excess contribution you make to your IRA. This additional tax
will apply each year in which an excess remains in your IRA. An excess
contribution is any amount that is contributed to your IRA that exceeds the
amount that you are eligible to contribute.
C. Excess Accumulation Penalty—As previously described, if you were born
before July 1, 1949, you are required to take a minimum distribution
from your IRA for the year in which you reach age 70½ and for each year
thereafter. If you were born on or after July 1, 1949, you are required to take
a minimum distribution from your IRA for the year in which you reach age 72
and for each year thereafter. Your beneciary(ies) is required to take certain
minimum distributions after your death. An additional tax of 50 percent is
imposed on the amount of the required minimum distribution which should
have been taken but was not.
D. Penalty Reporting—You must le IRS Form 5329 along with your income
tax return to the IRS to report and remit any additional taxes.
Other
A. IRS Plan Approval—The Agreement used to establish this IRA has been
approved by the IRS. The IRS approval is a determination only as to form. It
is not an endorsement of the plan in operation or of the investments offered.
B. Additional Information—You may obtain further information on IRAs from your
District Ofce of the IRS. In particular, you may wish to obtain IRS Publication
590-A, Contributions to Individual Retirement Arrangements (IRAs), or
Publication 590-B, Distributions from Individual Retirement Arrangements
(IRAs), by calling 1-800-TAX-FORM (1-800-829-3676), or by visiting www.irs.gov
on the internet.
C. Important Information About Procedures for Opening a New Account—To
help the government ght the funding of terrorism and money laundering
activities, federal law requires all nancial organizations to obtain, verify,
and record information that identies each person who opens an account.
Therefore, when you open an account, you are required to provide your
name, residential address, date of birth, and identication number. We may
require other information that will allow us to identify you.
D. Qualied Reservist Distributions—If you are an eligible qualied reservist
who has taken penalty-free qualied reservist distributions from your IRA
or retirement plan, you may recontribute those amounts to an IRA generally
within a two-year period from your date of return. For further detailed
information, you may wish to obtain IRS Publication 590-B, Distributions
from Individual Retirement Arrangements (IRAs).
E. Charitable Distributions—If you are age 70½ or older, you may be eligible
to take tax-free IRA distributions of up to $100,000 per year and have these
distributions paid directly to certain charitable organizations. Special tax
rules may apply. This provision applies to distributions during tax years
2008 and 2009, or until such later time as extended by Congress. For
further detailed information, you may wish to obtain IRS Publication 590-B,
Distributions from Individual Retirement Arrangements (IRAs).
F. Disaster Related Relief—If you qualify (for example, you sustained an
economic loss due to, or are otherwise considered affected by, certain IRS
disasters designated by Congress), you may be eligible for favorable tax
treatment on distributions, rollovers, and other transactions involving your
IRA. Qualied disaster relief may include penalty-tax free early distributions
made during specied timeframes for each disaster, the ability to include
distributions in your gross income ratably over multiple years, the ability
to roll over distributions to an eligible retirement plan without regard to
the 60-day rollover rule, and more. For additional information on specic
disasters, including a complete listing of disaster areas, qualication
requirements for relief, and allowable disaster-related IRA transactions,
you may wish to obtain IRS Publication 590-B, Distributions from Individual
Retirement Arrangements (IRAs), from the IRS or refer to the IRS website at
www.irs.gov.
Page 17 of 19
© 2020 Ascensus, Inc. (97) (4-20)
© 2021 Navy Federal NFCU 602C (1-21)
Navy Federal IRA Investment Information,
Fees, and Penalties
Navy Federal has no annual service fee for maintaining your IRA.
IRA Disclosure Statement
IRA Savings and IRA Money Market Savings Account (MMSA) Dividends:
The IRA MMSA does not earn/accrue dividends on days when the account
balance falls below $2,500. The IRA Jumbo MMSA will earn dividends at the
IRA savings rate on balances from $0-$99,999.99. Balances of $100,000 or
greater will earn the IRA Jumbo MMSA rate. Dividends are a division and
distribution of earnings among members after all expenses have been paid
and the required amount has been set aside for reserves. Navy Federal also
provides the APY for each dividend rate declared by the Board. Rates are
subject to change weekly. Payment of all dividends is dependent on the
availability of earnings at the end of the period. Dividends at Navy Federal are
earned on deposits from day-of-deposit to day-of-withdrawal at the specied
rate. Dividends for IRA Savings Accounts and IRA MMSAs are credited the last
day of the period they are earned and are compounded monthly.
IRA Certicate Dividends: The IRA Certicate has a minimum balance
requirement and will earn dividends for each monthly dividend period at the
dividend rate and APY specied. Dividends are a division and distribution
of earnings among members, after all expenses have been paid and the
required amount has been set aside for reserves. Payment of all dividends is
dependent on the availability of earnings at the end of the period. Dividends
are earned from day-of-deposit to day-of-withdrawal at the specied rate.
Dividends are computed using the daily balance method by applying the
daily periodic rate for the full amount in your account at the end of each day.
Dividends are credited on the last calendar day of each month in which they
are earned unless another dividend distribution option has been chosen. The
APY assumes dividends remain in the account until maturity. Early withdrawals
reduce earnings. Rates for three-year Variable Rate Certicates may change on
the Certicate’s anniversary dates (at 12 and 24 months) and are based on the
one-year Constant Maturity Treasury (CMT). Navy Federal guarantees that the
Certicate’s dividend rate will never decrease more than one-half percentage
point (0.50%) below the dividend rate at the time the Certicate was purchased
or renewed, and there is no upper limitation on dividend rate changes.
Penalties for Early Withdrawal: (a) If the term to maturity is one year (or less),
the amount forfeited is equal to the lesser of: (1) all dividends for 90 days on the
amount withdrawn, or (2) all dividends on the amount withdrawn since the date
of issuance or renewal. (b) If the term to maturity is greater than one year, the
amount forfeited is equal to the lesser of: (1) all dividends for 180 days on the
amount withdrawn, or (2) all dividends on the amount withdrawn since the date
of issuance or renewal. For three-year Variable Rate Certicates, penalties are
calculated based on the rate of the certicate at the time of the withdrawal. (c)
If the term to maturity is ve years or greater, the amount forfeited is equal to
the lesser of: (1) all dividends for 365 days on the amount withdrawn, or (2) all
dividends on the amount withdrawn since the date of issuance or renewal. (d)
In the case of an early withdrawal that brings the remaining Certicate balance
lower than the minimum balance requirement, the Certicate will be closed,
and the above penalties will be imposed on the entire principal amount. (e)
In accordance with Federal Reserve Regulation D, withdrawals made within
the rst six days of a new Certicate purchase (not renewed) are subject to
a seven-day, early-withdrawal dividend penalty. (f) There are no IRA Savings
or IRA MMSA penalties for early withdrawal. (g) The IRS imposes penalties for
withdrawals prior to age 59½ for Traditional/SEP IRAs and for non-qualied
withdrawal purposes for Roth IRAs, unless an exception applies (see Federal
Tax Penalties).
Special and Limited Offerings: Navy Federal may offer “Limited-Time or
Special Certicate Offerings.” Navy Federal will provide a notice to the owner
specifying the terms, conditions, or any additional requirements.
Penalty Exceptions: Penalties will not be applied to any of the following: (a)
withdrawals of dividend payments only, (b) withdrawals subsequent to the
death of any owner of the IRA Certicate, (c) withdrawals made as a result of
the voluntary or involuntary liquidation of the Credit Union, or (d) withdrawals of
Required Minimum Distributions (RMDs) (Traditional and SEP IRAs only).
Maturing Certicates: At least 20 days prior to each IRA Certicate’s maturity,
Navy Federal will provide a notice specifying the terms under which the Credit
Union proposes to renew the IRA Certicate or otherwise make the funds
available to the owner. Each IRA Certicate will be automatically renewed as
specied in the maturity notice unless the owner noties Navy Federal to the
contrary on or before the maturity date.
Grace Period: You have 21 calendar days from the maturity date to change
the conditions under which the IRA Certicate will be renewed. During this
period, the balance in the IRA Certicate will earn dividends at the prevailing
offering rate. If no changes are made within this period, your IRA Certicate will
be renewed as specied in the renewal notice and will continue earning at the
prevailing rate.
Insurance: Separate from your share accounts, IRA Savings Accounts and
IRA MMSAs combined with IRA Certicates are insured up to $250,000 by the
National Credit Union Administration (NCUA), a U.S. government agency.
Governing Laws: Your Navy Federal accounts are maintained and governed
in accordance with federal law and the laws of the Commonwealth of Virginia,
as amended. Property may be transferred to the appropriate state if there has
been no activity within the time period specied by state law.
Transferability: Navy Federal IRA Certicates are not transferable, are not
negotiable, and may not be pledged as collateral on a loan.
Final Payment: All non-cash purchases will be credited subject to nal
payment.
Change in Terms: Navy Federal reserves the right to discontinue or change the
terms of IRA Certicate offerings within 30 days prior notice; however, once issued,
the terms of an IRA Certicate may not be changed without the owner’s consent.
Note: This account is subject to all terms and provisions dened in NFCU 602
(for Traditional), 602A (for Roth), or 602C (for SEP). Unless otherwise noted, any
beneciary designation(s) currently on le will remain in effect.
Deposits: You may make additional deposits to IRA Savings Accounts or IRA
MMSAs at any time. If your IRA Certicate accepts additional deposits and the
IRA Certicate has not exceeded its maximum balance, additional deposits can
be made by cash, check, or periodic transfer(s) from a Navy Federal savings
account, checking account, or MMSA. Deposits may be held for up to ve
business days.
Current Rates: Dividend rates and APY may be obtained by calling
Navy Federal toll-free in the U.S. at 1-888-842-6328 or visiting us online at
navyfederal.org. For toll-free numbers when overseas, visit navyfederal.org.
Use 1-703-255-8837 for collect international calls.
How We May Contact You: If you provide a mobile telephone number,
Navy Federal has your permission to place automated non-marketing calls
and text messages at that number. Message and data rates may apply. You
also expressly consent that we may send email messages regarding your
account to your email address.
Further Information: If you would like additional information regarding legal
requirements and regulations of IRAs, you may contact any local ofce of the
Internal Revenue Service (IRS). For further information regarding Navy Federal’s
IRA program, please call toll-free in the U.S. at 1-888-842-6328. For toll-free
numbers when overseas, visit navyfederal.org. Use 1-703-255-8837 for collect
international calls. An Account Specialist will be happy to assist you. Please visit
our website at navyfederal.org.
Page 17 of 18
Please provide Navy Federal with the Fair Market Value of the transferring IRA as of Dec. 31 of the prior year: $ ____________________________
Name of Current Custodian (other financial institution): Custodian’s Telephone No. Custodian’s Fax No.
Custodian’s Address: Street City State Zip Code
IRA Account number at current custodian:
$
________________________
*
/ /
Access No.
Name: First MI Last Suffix
Address: Street City State Zip Code
Social Security No. (SSN) Date of Birth (MM/DD/YY) Daytime Phone No.
Name of Distributing Plan: Distributing Plan’s Telephone No. Distributing Plan’s Fax No.
Distributing Plan’s Address: Street City State Zip Code
________________________________
Account Number of Distributing Plan: Name of Employer:
$
_______________
*
/ /
Additional Information on Reverse
Page 1 of 2
*Penalties or fees may apply.
© 2020 Navy Federal NFCU 624 (2-20)
Navy Federal
®
IRA Transfer or Direct Rollover
Fax Number: (703) 206-4250 Toll-Free Number: (888) 842-6328
Mail:
P.O. Box 3001, Merrield, VA 22119-3001
Instructions: Use this form to request an IRA Transfer from another nancial institution or a Direct Rollover from an Employer’s Plan to
an IRA with Navy Federal Credit Union. Please be advised that the entire process normally takes two to six weeks to complete. This time
frame is contingent on the processing time of your current custodian or distributing plan.
Complete the appropriate Sections and return the form to Navy Federal for the processing of your request.
IRA Transfer: Complete Sections A, B, C, E, F, and G Direct Rollover: Complete Sections A, D, E, F, and G
A. Member Information
B. IRA Transfer Request
(IRA funds from another nancial institution)
Current Custodian’s Information:
Asset Liquidation Instructions:
Transfer from the following type of plan:
Traditional IRA Roth IRA SEP IRA
Liquidate: Entire Account
Partial Amount:
Transfer: Immediately
At Maturity:
This IRA transfer:
will close the Account(s) will not close the Account(s)
C. Required Minimum Distribution (RMD)
70½ (date of birth on or before 6/30/1949), 72 (date of birth on or after 7/1/1949) or older
AND transferring a Traditional or SEP Plan
Please distribute my Required Minimum Distribution prior to transferring my Traditional or SEP account to Navy Federal.
Please transfer my Traditional or SEP account, including my Required Minimum Distribution.
D. Direct Rollover Request (funds from an Employer’s Plan)
Distributing Plan’s Information:
Asset Liquidation Instructions:
Direct Rollover request from the following type of plan:
401(k) 403(b) 457(b) Other:
Liquidate: Entire Account Partial Amount:
If 70½ (date of birth on or before 6/30/1949), 72 (date of birth on
or after 7/1/1949) or older, RMD cannot be part of the rollover.
Rollover: Immediately
At Maturity:
This Plan Rollover:
will close the Account(s) will not close the Account(s)
Clear
Page 18 of 18
_____________________________________ __________________________________________
Amount
$
___________________________________________________
Short
Long Term:
Signature of IRA Holder/Member
Date (MM/DD/YY)
Page 2 of 2
© 2020 Navy Federal NFCU 624 (2-20)
_____________________________________
Name of Receiving IRA Custodian IRA Holder/Member IRA Account Number
Printed Name of Navy Federal Representative
Authorized Signature of Navy Federal Representative
Date (MM/DD/YY)
Signature Guarantee
Employee No.
E. Navy Federal Products
IRA Type (check only one)
Traditional IRA SEP IRA Roth IRA
Please open an IRA Account:
IRA Savings Account
IRA MMSA
IRA Jumbo MMSA
$50 Min. IRA EasyStart
SM
$500 Min. IRA Variable Cert. (3 Years)
Other
Select Term: 6 months 12 months
18 months 24 months
Or, choose an IRA Certicate Minimum and Term:
Minimum:
$1,000 min. $10,000 min. $20,000 min. $50,000 min. $100,000 min.
Term:
3 months 6 months 9 months 12 months 18 months 24 months
3 years 4 years 5 years 6 years 7 years
F. Member Signature
By signing this section, I certify that:
1. I have established an IRA with Navy Federal Credit Union as the Custodian.
2. I agree to contact my present Custodian or Plan Administrator from whom I am requesting a Transfer/Direct Rollover to determine if specic
documentation or additional paperwork is r
equired.
3. I understand that I am responsible for determining my eligibility for all Transfers or Direct Rollovers.
4. I agree to hold the Custodian harmless against any and all situations arising from an ineligible Transfer or Direct Rollover.
5. I understand if I am or will be 70½ (date of birth on or before 6/30/1949), 72 (date of birth on or after 7/1/1949) or older in the current year, I must distribute my
Requir
ed Minimum Distribution prior to the Direct Rollover of my retirement assets.
6. I acknowledge that Navy Federal Credit Union does not provide legal advice and I agree to consult with my own tax professional for advice.
7. I authorize Navy Federal Credit Union to act on my behalf in contacting the current Custodian or Plan Administrator to facilitate the Transfer/Direct
Rollover of my r
etirement assets.
8. I understand that if I intend to have a beneciary designated on my IRA account, I must complete applicable forms separately, in order to designate principal
beneciary(ies) and, if desired, contingent beneciary(ies).
G. Payment Instructions for the Other Financial Institution
Make check or wire payable to:
Navy Federal Credit Union
, for benefit of IRA No.
On the check or wire, please specify if it is a Rollover or Transfer.
IRA Type:
Traditional
Roth
SEP
Mail check to: Regular Mail: Navy Federal Credit Union
P.O. Box 3001
Merrifield, VA 22119-3001
Overnight Mail: Navy Federal Credit Union
Attention: IRA Dept.
820 Follin Lane
Vienna, VA 22180-1111
Wire Instructions: Navy Federal Routing Number: 256074974
Navy Federal Credit Union
820 Follin Lane
Vienna, VA 22180-1111
For Ofce Use Only
Letter of Acceptance for Transfer or Direct Rollover
Navy Federal agrees to accept the funds listed above that are being transferred or directly rolled over into an IRA account on behalf of the above-named individual.
Navy Federal agrees to serve as Custodian of those assets.
For Branch Ofce Use Only
Was the form sent to the other Financial Institution? Yes No
Was a notation left on the account? Yes No