In-Plan Roth Conversion

Transcription

1 Schwab Retirement Technologies, Inc. In-Plan Roth Conversion (Day One Manual Process)

2 Schwab RT Recordkeeping In-Plan Roth Conversion (Manual Process) October, 2010 The material contained herein is proprietary to Schwab and for informational purposes only. The information is not intended to provide tax, legal or investment advice. Schwab does not guarantee the suitability or potential value of any particular information source. Certain information presented herein may be subject to change. The information or material contained in this document may not be copied, assigned, transferred, disclosed or utilized without the express written approval of Schwab. The Charles Schwab Corporation provides services to retirement plans and participants through its subsidiaries: Charles Schwab & Co., Inc.(Member SIPC), Charles Schwab Trust Company, a division of Charles Schwab Bank, Schwab Retirement Plan Services, Inc., Schwab Retirement Plan Services Company and Schwab Retirement Technologies, Inc. (Schwab RT). Schwab RT is engaged in developing and licensing proprietary retirement plan recordkeeping systems to independent Third Party Administrators. For further information, contact Schwab Retirement Technologies, Inc. at Ballantyne Corporate Place, Suite 300, Charlotte, NC 28277, USA, Tel: (800) , Web site: schwabrt.com Schwab Retirement Technologies, Inc. All rights reserved.

3 Setup Steps If necessary, go to Plan Maintenance and add a source where monies are transferred for Roth conversion. It should be a Roth Rollover Source that includes the same funds as the sources involved in the Roth conversion. If necessary, go to Withdrawal Template Maintenance and create a template to use for Roth Conversions. The template hierarchy controls which source and fund balances are transferred in the Roth conversion. If charging a redemption fee on In-Plan Roth conversions, set up tax codes as appropriate in Vendor Maintenance. If using new tax codes for In-Plan Roth conversions, set up Report Tax Map and Enterprise Tax Map as appropriate. If Participant Takes Withholding on Roth Conversion 1. Open the In-Service Withdrawal module. 2. Process In-Service Withdrawal for the withholding amount. This will create batches and LDT for the withholding amount only. In-Plan Roth Conversion Process Step 1: QDRO/Beneficiary Processing Module Open the QDRO/Beneficiary Processing module and complete the following steps: 1. On the Add QDRO/Beneficiary window: a. Create a pseudo QDRO for participant (this a temporary QDRO that will be purged in a later step). b. Select QDRO, clear the Spouse option, enter SSN and Name. c. Change Percentage to 100 % 2. On the Allocate window: a. Select Plan and Withdrawal Template ID to use for Roth Conversion. b. Select Participant requesting Roth conversion. c. Select pseudo QDRO as the QDRO/Beneficiary. d. Enter specific amount or percentage to transfer to the Roth Rollover Source. e. The amount to transfer is spread across sources/funds based on the Withdrawal Template hierarchy. 3. On the Tax Codes window, select tax codes to use for Roth Conversion. 4. Submit and process. October 2010 Schwab Retirement Technologies Page 3 of 5

4 Step 2: Trade Maintenance Module Open the Trade Maintenance module and do the following: 1. Select batches created during the QDRO/Beneficiary process. 2. For each batch/sequence that is associated with the pseudo QDRO: a. Change to the participant requesting conversion. b. Change source position to the Roth Rollover Source. 3. Save changes per sequence/batch. Step 3: Batch Release Module Open the Batch Release module and release the pre-reconciled batches. Step 4: Lump Sum Distributions Module Open the Lump Sum Distributions module, if participant was not fully vested and needs to forfeit unvested portion, and do the following: 1. Select Plan. 2. Under Forfeiture Data, select the Forfeiture Only option. 3. Select the Forfeiture Account. 4. Post lump sum for participant. 5. Creates batches and LDT for the forfeited amount only. Tax Process 1. If participant processed an In-Service Withdrawal for withholding on the Roth conversion, open Tax Form Generation and generate the tax form. 2. Open 1099 Form Maintenance module. a. View the Tax Form created for Withholding (if applicable) and validate the information. b. On the Add Records window, create/edit a 1099 for the Roth conversion amount. Verify Participant Data Launch Participant Maintenance module and do the following: 1. On the Alternate Payee window, if the participant does not have a legitimate QDRO, clear the Pending QDRO option. 2. On the Tax Data window, verify the Basis and Roth Basis amounts. 3. On the Dates window, if there is not a Roth Establishment Date already, enter date of the Roth Conversion. 4. On the Other Dates window (under Scratch Pad Fields), determine which Scratch Pad Date to use to store the Roth Conversion Date, and enter date for Roth Conversion Date. October 2010 Schwab Retirement Technologies Page 4 of 5

5 Clean Up (Purge) Open the Purge Utility and purge the pseudo QDRO. Note about Loans If a participant has an outstanding loan amount, the loan amount from the sources will not be converted with the above process. Loan Maintenance allows movement of the remaining loan amounts from sources to the Roth Rollover Source. Unit Distribution allows movement of money out of the loan fund from the sources. Utility Post allows movement of money into the loan fund in the Roth Rollover source. October 2010 Schwab Retirement Technologies Page 5 of 5