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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.

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: ____________________________________________________________________________________________________________________________

__________ __________

☐

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

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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

⁄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 IRA’s

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

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

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

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

□ □

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.

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

$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

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

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

□

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

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

⁄

. 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

⁄

. 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

⁄

, 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

⁄

, 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).

⁄

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.

Page 10 of 19

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.

Page 11 of 19

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

⁄

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

Page 12 of 19

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

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 Deductibility—If 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

Page 13 of 19

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.

Page 14 of 19

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

Page 15 of 19

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

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