EXHIBIT 14
Elfun Traditional and Xxxx IRAs
Disclosure Statement and
Custodial Account Agreement
April 9, 1998
Contents
Introduction p. 1
Section One: Instructions p. 3
Section Two: Disclosure Statement p. 4
Part One: Traditional IRAs p. 4
Part Two: Xxxx IRAs p. 10
Part Three: Rules for Both
Traditional and Xxxx IRAs p. 15
Section Three: Custodial
Account Agreement p. 18
Part One: Traditional IRAs p. 18
Part Two: Xxxx IRAs p. 20
Part Three: Provisions Applicable to
Both Traditional and Xxxx IRAs p. 21
Introduction
What's New in the World of IRAs?
An Individual Retirement Account ("IRA") has always provided an attractive
means to save money for the future on a tax-advantaged basis. Recent changes to
Federal tax law have now made the IRA an even more flexible investment and
savings vehicle. Among the new changes is the creation of the Xxxx Individual
Retirement Account ("Xxxx XXX"), which is available for use after January 1,
1998. Under a Xxxx XXX, the earnings and interest on an individual's
nondeductible contributions grow without being taxed, and distributions may be
tax-free under certain circumstances. Most taxpayers (except for those with high
income levels) are eligible to contribute to a Xxxx XXX. A Xxxx XXX can be used
instead of a Traditional Individual Retirement Account ("Traditional IRA"), to
replace an existing Traditional IRA, or to complement a Traditional IRA you wish
to continue maintaining.
Taxpayers with adjusted gross income of up to $100,000 are eligible to
convert existing Traditional IRAs into Xxxx IRAs. The details on conversion are
found in the description of Xxxx IRAs in this booklet.
Congress has also made significant changes to Traditional IRAs. First,
Congress increased the income levels at which Traditional IRA holders who
participate in employer-sponsored retirement plans can make deductible IRA
contributions. Second, the rules for deductible contributions by a Traditional
XXX xxxxxx whose spouse is a participant in an employer-sponsored retirement
plan have been liberalized. Third, the 10% penalty tax for premature withdrawals
(before age 59 1/2) will no longer apply in the case of withdrawals to pay
certain higher education expenses or certain first-time homebuyer expenses.
May I Revoke My Elfun IRA?
You may revoke a newly established Elfun Traditional or Elfun Xxxx XXX at
any time within seven days after the date on which you receive this Disclosure
Statement. An Elfun Traditional or Elfun Xxxx XXX established more than seven
days after the date of your receipt of this Disclosure Statement may not be
revoked.
What's in This Document?
In this Document you will find detailed information about Xxxx IRAs and
about the changes that have been made to Traditional IRAs.
The first section contains the instructions you will need to open a new
Elfun Traditional or Elfun Xxxx XXX, to transfer from another IRA to an Elfun
IRA, or to convert an Elfun Traditional IRA to an Elfun Xxxx XXX.
The second section contains our Elfun IRA Disclosure Statement. The
Disclosure Statement is divided into three parts:
o Part One describes the basic rules and benefits which are specifically
applicable to your Elfun Traditional IRA.
o Part Two describes the basic rules and benefits which are specifically
applicable to your Elfun Xxxx XXX.
o Part Three describes important rules and information applicable to
both Elfun (Traditional and Xxxx) IRAs.
The third section contains the Elfun IRA Custodial Account Agreement. The
Custodial Account Agreement is also divided into three parts:
o Part One contains provisions specifically applicable to Elfun
Traditional IRAs.
o Part Two contains provisions specifically applicable to Elfun Xxxx
IRAs.
o Part Three contains provisions applicable to both Elfun (Traditional
and Xxxx) IRAs.
What's the Difference Between a Traditional IRA and a Xxxx XXX?
With a Traditional IRA, an individual can contribute up to $2,000 per year
and may be able to deduct the contribution from taxable income, reducing income
taxes. Taxes on investment growth and dividends are deferred until the money is
withdrawn. Withdrawals are taxed as additional ordinary income when received.
Nondeductible contributions, if any, are withdrawn tax-free. Withdrawals before
age 59 1/2 are assessed a 10% penalty in addition to income tax, unless an
exception applies.
With a Xxxx XXX, the contribution limits are essentially the same as
Traditional IRAs, but there is no tax deduction for contributions. All dividends
and investment growth in the account are tax-free. Most important with a Xxxx
XXX: there is NO INCOME TAX on qualified withdrawals from your Xxxx XXX.
Additionally, unlike a Traditional IRA, there is no prohibition on making
contributions to Xxxx IRAs after turning age 70 1/2, and there's no requirement
that you begin making minimum withdrawals at that age.
The chart on the next page highlights some of the major differences between
a Traditional IRA and a Xxxx XXX:
1
CHARACTERISTICS TRADITIONAL XXX XXXX XXX
------------------------------------------------------------------------------------------------------------------------------------
ELIGIBILITY o Individuals (and their spouses) o Individuals (and their spouses)
who receive compensation who receive compensation
o Individuals age 70 1/2 and over o Individuals age 70 1/2 and over
MAY NOT contribute MAY contribute
------------------------------------------------------------------------------------------------------------------------------------
TAX TREATMENT o Subject to limitations, contributions o No deduction permitted for amounts
OF CONTRIBUTIONS are deductible contributed
------------------------------------------------------------------------------------------------------------------------------------
CONTRIBUTION LIMITS o Individuals may contribute up to $2,000 o Individuals may generally contribute up to
annually (or 100% of compensation, if less) $2,000 (or 100% of compensation, if less)
o Deductibility depends on income level for o Ability to contribute phases out at income
individuals who are active participants in an levels of $95,000 to $110,000 (individual
employer-sponsored retirement plan taxpayer) and $150,000 to $160,000
(married taxpayers)
o Overall limit for contributions to ALL IRAs o Overall limit for contributions to ALL IRAs
(Traditional and Xxxx combined) is $2,000 (Traditional and Xxxx combined) is $2,000
annually (or 100% of compensation, if less) annually (or 100% of compensation, if less)
------------------------------------------------------------------------------------------------------------------------------------
EARNINGS o Earnings and interest are not taxed o Earnings and interest are not taxed
when received by your IRA when received by your IRA
------------------------------------------------------------------------------------------------------------------------------------
ROLLOVER/CONVERSIONS o Individuals may rollover amounts held in o Rollovers from other Xxxx IRAs or Traditional
employer-sponsored retirement arrangements IRAs ONLY
(401(k), SEP IRA, etc.) tax free to o Amounts rolled over (or converted) from
Traditional IRA another Traditional IRA are subject to income
tax in the year rolled over or converted
o Tax on amounts rolled over or
converted in 1998 is spread over
four year period (1998- 2001)
------------------------------------------------------------------------------------------------------------------------------------
WITHDRAWALS o Total (principal + earnings) taxable as o Not taxable as long as a qualified
income in year withdrawn (except for distribution--generally, account open for
any non-deductible contributions) 5 years, and age 59 1/2
o Minimum withdrawals must begin o Minimum withdrawals NOT REQUIRED
after age 70 1/2 after age 70 1/2
------------------------------------------------------------------------------------------------------------------------------------
Is a Xxxx or a Traditional IRA Right For Me?
We cannot act as your legal or tax adviser and so we cannot tell you which
kind of IRA is right for you. The information contained in this Document is
intended to provide you with the basic information and material you will need to
decide whether a Traditional or Xxxx XXX is better for you, or if you want to
convert an existing Traditional IRA to a Xxxx XXX. We suggest that you consult
with your accountant, lawyer or other tax adviser, or with a qualified financial
planner, to determine whether you should open a Traditional or Xxxx XXX or
convert any or all of an existing Traditional IRA to a Xxxx XXX. Your tax
adviser can also advise you as to the state tax consequences that may affect
whether a Traditional or Xxxx XXX is right for you.
Other Points to Note.
The Disclosure Statement found in this Document provides you with the basic
information that you should know about Elfun Traditional IRAs and Elfun Xxxx
IRAs. The Disclosure Statement provides general information about the governing
rules for these IRAs and the benefits and features offered through each type of
IRA. However, the Elfun New Account Form and the Custodial Account Agreement are
the primary documents controlling the terms and conditions of your personal
Elfun Traditional or Elfun Xxxx XXX, and these shall govern in the case of any
difference with the Disclosure Statement.
You or your when used throughout this Document refer to the person for whom
the Elfun Traditional or Elfun Xxxx XXX is established. A Xxxx XXX is either an
Elfun Xxxx XXX or any Xxxx XXX established by any other financial institution. A
Traditional IRA is either an Elfun Traditional IRA or a Traditional IRA
established by any other financial institution. As used herein an Elfun
Traditional IRA or an Elfun Xxxx XXX is an IRA offered by GE Investment
Distributors, Inc.
2
Instructions for Opening Your Elfun Traditional IRA
or Elfun Xxxx XXX
1. Read carefully the applicable sections of the Elfun IRA Disclosure
Statement, the Traditional or Xxxx Individual Retirement Custodial Account
Agreement (as applicable), the New Account Form and the Elfun Funds
prospectus. Consult your accountant, lawyer or other tax adviser if you
have any questions about how opening a Traditional IRA or Xxxx XXX will
affect your financial and tax situation.
You may establish only one Elfun Traditional IRA or one Elfun Xxxx XXX with
each New Account Form. Separate forms must be completed if you want to
establish multiple (Xxxx or Traditional) IRA accounts.
2. Complete the New Account Form:
o For an ELFUN TRADITIONAL IRA, check the appropriate box to specify the
type of Traditional IRA you are opening and provide the registration
and mailing address in boxes 2 and 3.
If you are making an annual contribution, check the box for a
Traditional IRA Contributory, complete Part 4 and enclose a check in
the amount of your first contribution. Be sure to indicate whether
this is a contribution for last year or for the current year.
If this is a transfer directly from another IRA custodian or trustee,
check the applicable box to indicate whether the assets transferred
originated from a qualified plan or 403(b) arrangement or an IRA that
held only funds that originated from annual contributions. Complete
Part 5 and sign the Transfer of Assets section at the bottom of the
New Account Form.
If this is an indirect rollover of amounts distributed to you from
another IRA or an employer qualified plan or a 403(b) arrangement,
check the applicable box and complete Part 5. Enclose a check for the
rollover contribution amount.
If this is a direct rollover from a qualified plan or 403(b)
arrangement, check the box for a Traditional IRA Rollover. Complete
Part 5 and sign the Transfer of Assets section at the bottom of the
New Account Form.
o For an ELFUN XXXX XXX, check the appropriate box to specify the type
of Xxxx XXX you are opening and provide the registration information
and mailing address in boxes 2 and 3.
If this is an Elfun Xxxx XXX to which you expect to make contributions
each year, enclose a check in the amount of your first contribution.
Be sure to indicate whether this is a contribution for last year or
for the current year. Annual contribution Xxxx XXX accounts must be
kept separate from a converted or rollover Xxxx XXX account. NOTE:
Xxxx IRAs are available starting January 1, 1998, so you cannot make a
contribution for 1997.
If you are converting an existing Elfun Traditional IRA, indicate your
current Elfun IRA account number and how much you are converting.
Conversion of an existing Traditional IRA will result in the taxable
amount in the existing Traditional IRA being treated as additional
income on your income tax return. NOTE: If a conversion, rollover or
transfer from a Traditional IRA to a Xxxx XXX is being made, only
amounts converted, rolled over or transferred during the same tax year
will be accepted in a single Xxxx XXX. A separate Xxxx XXX must be
established to hold such amounts from a different tax year. Annual
contributions may never be deposited in a Xxxx XXX holding such
converted, rolled over or transferred amounts.
If you are making a rollover or a transfer from an existing
Traditional IRA with a different custodian or trustee to an Elfun Xxxx
XXX, check the box in Part 1 for a Xxxx XXX - Transfer from existing
Traditional IRA. Complete and sign the Transfer of Assets section at
the bottom of the New Account Form. A rollover or transfer from an
existing Traditional IRA will result in the taxable amount in the
existing Traditional IRA being treated as additional income on your
income tax return.
If you are making a rollover or a transfer from another Xxxx XXX with
a different trustee or custodian, check the appropriate box in Part 1
and complete the requested information where indicated in box 2.
o For either type account, indicate your investment choices in Part 4 or
5.
o In Part 6, indicate your Primary and Alternate Beneficiaries. (Spousal
waiver must be signed if beneficiary is not your spouse and you are a
resident of a community property state.)
o Sign and date the New Account Form in Part 7.
o If you are transferring assets from an existing IRA to an Elfun IRA,
complete both sides of the Transfer of Assets section at the bottom of
the New Account Form. DO NOT DETACH.
3. The Custodian fees for maintaining your IRA are listed in the FEES AND
EXPENSES section of Part Three of the Disclosure Statement. Annual fees are
not prorated. A notice of annual fee due will be sent to you, at which time
you may pay the annual fee by check or it will be withdrawn automatically
from your account. Accounts closed or transferred prior to year end will be
assessed the annual maintenance fee at that time.
4. Send the completed forms and checks to:
Elfun IRA
P.O. Box 419631
Kansas City, MO 64141-6631
3
Disclosure Statement
Part One: Traditional IRAs
Special Note
Part One of the Disclosure Statement describes the rules applicable to
Traditional IRAs beginning January 1, 1998. IRAs described in these pages are
called "Traditional IRAs" to distinguish them from the new "Xxxx IRAs" first
available starting in 1998. Xxxx IRAs are described in Part Two of this
Disclosure Statement.
An Elfun IRA offers you the tax advantages of an individual retirement
account while permitting you to direct the investment of account assets in one
or more of the Elfun Funds. Definitions of capitalized terms used in this
Disclosure Statement but not defined herein are set forth in Article VIII of the
Custodial Account Agreement, attached to this Disclosure Statement.
For Traditional IRA contributions for 1997 (including contributions made up
to April 15, 1998 but designated as contributions for 1997), there are different
rules for determining the deductibility of your contribution on your federal tax
return. For contributions for 1997, the "active participant" limits on
deductibility (described below) apply if EITHER spouse is an active participant
in an employer-sponsored plan. Also, the adjusted gross income ("AGI") levels
for partially deductible or nondeductible Traditional IRA contributions
(described below) are lower for 1997 ($25,000 for single taxpayers, with no
deduction if your AGI is above $35,000; and $40,000 for married taxpayers filing
jointly, with no deduction if your AGI is above $50,000).
This Part One of the Disclosure Statement describes Traditional IRAs. It
does not describe Xxxx IRAs, a new type of IRA available starting in 1998.
Contributions to a Xxxx XXX are not deductible (regardless of your AGI), but
withdrawals that meet certain requirements are not subject to federal income
tax, so that dividends and investment growth on amounts held in the Xxxx XXX can
escape federal income tax. Please see Part Two of this Disclosure Statement if
you are interested in learning more about Xxxx IRAs.
Your Traditional IRA
This Part One contains information about your Elfun Traditional Individual
Retirement Custodial Account with State Street Bank and Trust Company as
Custodian. A Traditional IRA gives you several tax benefits. Earnings on the
assets held in your Traditional IRA are not subject to federal income tax until
withdrawn by you. You may be able to deduct all or part of your Traditional IRA
contribution on your federal income tax return. State income tax treatment of
your Traditional IRA may differ from federal treatment; ask your state tax
department or your personal tax adviser for details.
Be sure to read Part Three of this Disclosure Statement for important
additional information, including information on how to revoke your Traditional
IRA, investments and prohibited transactions, fees and expenses, and certain tax
requirements.
Eligibility
What are the eligibility requirements for a Traditional IRA?
You are eligible to establish and contribute to a Traditional IRA for a
year if:
o You received compensation (or earned income if you are self employed)
during the year for personal services you rendered. If you received
taxable alimony, this is treated like compensation for IRA purposes.
o You did not reach age 70 1/2 during the year.
Can I contribute to a Traditional IRA for my spouse?
For each year before the year when your spouse attains age 70 1/2, you can
contribute to a separate Traditional IRA for your spouse, regardless of whether
your spouse had any compensation or earned income in that year. This is called a
"spousal IRA." To make a contribution to a Traditional IRA for your spouse, you
must file a joint tax return for the year with your spouse. For a spousal IRA,
your spouse must set up a different Traditional IRA, separate from yours, to
which you contribute.
Are there any other eligibility requirements in choosing investments for my
Elfun Traditional IRA?
To participate in an Elfun Traditional IRA you must be (1) a regular or
senior member of the Elfun Society, (2) the immediate family of those members,
(3) the surviving unremarried spouse of a deceased member, (4) members of the
Board of Directors of General Electric Company ("GE"), and (5) such others as
the trustees of the Funds (the "Trustees") may permit provided that their
participation does not affect the Funds' status as "employees' securities
companies" within the meaning of section 2(a) (13) of the 1940 Act. Regular
members of the Elfun Society are selected from active employees of GE and/or its
majority-owned subsidiaries. Senior members are former members who have retired
from those companies. Immediate family is defined as spouse, children or
step-children. Consult the current prospectus for the Elfun Funds for additional
information.
Contributions
When can I make contributions to a Traditional IRA?
You may make a contribution to your existing Traditional IRA or establish a
new Traditional IRA for a taxable year by the due date (not including any
extensions) for your federal income tax return for the year. Usually this is
April 15 of the following year.
How much can I contribute to my Traditional IRA?
For each year when you are eligible (see above), you can contribute up to
the lesser of $2,000 or 100% of your compensation (or earned income, if you are
self-employed). However, under the tax laws, all or a portion of your
contribution may not be deductible.
4
If you and your spouse have spousal Traditional IRAs, each spouse may
contribute up to $2,000 to his or her IRA for a year as long as the combined
compensation of both spouses for the year (as shown on your joint income tax
return) is at least $4,000. If the combined compensation of both spouses is less
than $4,000, the spouse with the higher amount of compensation may contribute up
to that spouse's compensation amount, or $2,000 if less. The spouse with the
lower compensation amount may contribute any amount up to that spouse's
compensation plus any excess of the other spouse's compensation over the other
spouse's IRA contribution. However, the maximum contribution to either spouse's
Traditional IRA is $2,000 for the year.
If you (or your spouse) establish a new Xxxx XXX and make contributions to
both your Traditional IRA and a Xxxx XXX, the combined limit on contributions to
both your (or your spouse's) Traditional IRA and Xxxx XXX for a single calendar
year is $2,000.
How do I know if my contribution is tax deductible?
The deductibility of your contribution depends upon your income level and
whether you are an active participant in any employer-sponsored retirement plan.
If you are not an active participant, the entire contribution to your
Traditional IRA is deductible.
If you are an active participant in an employer-sponsored plan, your
Traditional IRA contribution may still be completely or partly deductible on
your tax return. This depends on the amount of your income (see table below).
Similarly, the deductibility of a contribution to a Traditional IRA for
your spouse depends upon whether your spouse is an active participant in any
employer-sponsored retirement plan. If your spouse is not an active participant,
the contribution to your spouse's Traditional IRA will be deductible. If your
spouse is an active participant, the Traditional IRA contribution will be
completely, partly or not deductible depending upon your combined income.
An exception to the preceding rules applies to high-income married
taxpayers, where one spouse is an active participant in an employer-sponsored
retirement plan and the other spouse is not. A contribution to the non-active
participant spouse's Traditional IRA will be only partly deductible at an
adjusted gross income level on the joint tax return of $150,000, and the
deductibility will be phased out as described below over the next $10,000 so
that there will be no deduction at all with an adjusted gross income level of
$160,000 or higher.
How do I determine my or my spouse's "active participant" status?
Your (or your spouse's) Form W-2 should indicate if you (or your spouse)
were an active participant in an employer-sponsored retirement plan for a year.
If you have a question, you should ask your employer or the plan administrator.
In addition, regardless of income level, your spouse's "active participant"
status will not affect the deductibility of your contributions to your
Traditional IRA if you and your spouse file separate tax returns for the taxable
year and you lived apart at all times during the taxable year.
What are the deduction restrictions for active participants?
If you (or your spouse) are an active participant in an employer plan
during a year, the contribution to your Traditional IRA (or your spouse's
Traditional IRA) may be completely, partly or not deductible depending upon your
filing status and your amount of adjusted gross income ("AGI"). If AGI is any
amount up to the lower limit, the contribution is deductible. If your AGI falls
between the lower limit and the upper limit, the contribution is partly
deductible. If your AGI falls above the upper limit, the contribution is not
deductible.
FOR ACTIVE PARTICIPANTS -- 1998
IF YOU ARE IF YOU ARE THEN YOUR TRADITIONAL
SINGLE MARRIED FILING JOINTLY IRA CONTRIBUTION IS
------ ---------------------- -------------------
Adjusted Gross Income (AGI) Level
Up to Up to FULLY
Lower Limit Lower Limit DEDUCTIBLE
($30,000 for 1998) ($50,000 for 1998)
----------------------------------------------------------------------------------------------------
More than Lower Limit More than Lower Limit PARTLY
but less than but less than DEDUCTIBLE
Upper Limit Upper Limit
($40,000 for 1998) ($60,000 for 1998)
----------------------------------------------------------------------------------------------------
Upper Limit or more Upper Limit or more NOT
DEDUCTIBLE
The Lower Limit and the Upper Limit will change for 1999 and later years. The
Lower Limit and Upper Limit for these years are shown in the following table.
Substitute the correct Lower Limit and Upper Limit in the table above to
determine deductibility in any particular year. (Note: if you are married but
filing separate returns, your Lower Limit is always zero and your Upper Limit is
always $10,000).
5
TABLE OF LOWER AND UPPER LIMITS
Single Married Filing Jointly
------ ----------------------
Year Lower Limit Upper Limit Lower Limit Upper Limit
---- ----------- ----------- ----------- -----------
1999 $31,000 $41,000 $51,000 $61,000
2000 $32,000 $42,000 $52,000 $62,000
2001 $33,000 $43,000 $53,000 $63,000
2002 $34,000 $44,000 $54,000 $64,000
2003 $40,000 $50,000 $60,000 $70,000
2004 $45,000 $55,000 $65,000 $75,000
2005 $50,000 $60,000 $70,000 $80,000
2006 $50,000 $60,000 $75,000 $85,000
2007 and $50,000 $60,000 $80,000 $100,000
later
How do I calculate my deduction if I fall in the "partly deductible" range?
If your AGI falls in the partly deductible range, you must calculate the
portion of your contribution that is deductible. To do this, multiply your
contribution by a fraction. The numerator is the amount by which your AGI
exceeds the lower limit (for 1998: $30,000 if single, or $50,000 if married
filing jointly). The denominator is $10,000 (note that the denominator for
married joint filers is $20,000 starting in 2007). Subtract this from your
contribution and then round down to the nearest $10. The deductible amount is
the greater of the amount calculated or $200 (provided you contributed at least
$200). If your contribution was less than $200, then the entire contribution is
deductible.
For example, assume that you make a $2,000 contribution to your Traditional
IRA for 1998, a year in which you are an active participant in your employer's
retirement plan. Also assume that your AGI is $57,555 and you are married,
filing jointly. You would calculate the deductible portion of your contribution
this way:
1. The amount by which your AGI exceeds the lower limit
of the partly deductible range:
($57,555-$50,000) = $7,555
2. Divide this by $10,000: $ 7,555 = 0.7555
-------
$10,000
3. Multiply this by your contribution limit:
0.7555 x $2,000 = $1,511
4. Subtract this from your contribution:
($2,000 - $1,511) = $489
5. Round this down to the nearest $10: = $480
6. Your deductible contribution is the greater of this
amount or $200.
Even though part or all of your contribution is not deductible, you may
still contribute to your Traditional IRA (and your spouse may contribute to your
spouse's Traditional IRA) up to the limit on contributions. When you file your
tax return for the year, you must designate the amount of non-deductible
contributions to your Traditional IRA for the year. See IRS Form 8606.
How do I determine my AGI?
AGI is your gross income minus those deductions which are available to all
taxpayers even if they don't itemize. Instructions to calculate your AGI are
provided with your income tax Form 1040 or 1040A.
What happens if I contribute more than allowed to my Traditional IRA?
The maximum contribution you can make to a Traditional IRA generally is
$2,000 or 100% of compensation or earned income, whichever is less. Any amount
contributed to the IRA above the maximum is considered an "excess contribution."
The excess is calculated using your CONTRIBUTION limit, not the DEDUCTIBLE
limit. An excess contribution is subject to excise tax of 6% for each year it
remains in the IRA.
How can I correct an excess contribution?
Excess contributions may be corrected without paying a 6% penalty. To do
so, you must withdraw the excess and any earnings on the excess before the due
date (including extensions) for filing your federal income tax return for the
year for which you made the excess contribution. A deduction should not be taken
for any excess contribution. The earnings must be included in your income for
the tax year for which the contribution was made and may be subject to a 10%
premature withdrawal tax if you have not reached age 59 1/2.
What happens if I don't correct the excess contribution by the tax return due
date?
Any excess contribution not withdrawn by the tax return due date (including
any extensions) for the year for which the contribution was made will be subject
to the 6% excise tax. There will be an additional 6% excise tax for each
subsequent year the excess remains in your account.
Under limited circumstances, you may correct an excess contribution after
tax filing time by withdrawing the excess contribution (leaving the earnings in
the account). This withdrawal will not be includable in income nor will it be
subject to any premature withdrawal penalty if (1) your contributions to all
IRAs do not exceed $2,000 and (2) you did not take a deduction for the excess
amount (or you file an amended return (Form 1040X) which removes the excess
deduction).
How are excess contributions treated if none of the preceding rules apply?
Unless an excess contribution qualifies for the special treatment outlined
above, the excess contribution and any earnings on it withdrawn after tax filing
time will be includable in taxable income
6
and may be subject to a 10% premature withdrawal penalty. No deduction will be
allowed for the excess contribution for the year in which it is made.
Excess contributions may be corrected in a subsequent year to the extent
that you contribute less than your maximum amount. As the prior excess
contribution is reduced or eliminated, the 6% excise tax will become
correspondingly reduced or eliminated for subsequent tax years. Also, you may be
able to take an income tax deduction for the amount of excess that was reduced
or eliminated, depending on whether you would be able to take a deduction if you
had instead contributed the same amount.
Are the earnings on my Traditional IRA funds taxed?
Any dividends on, or growth of, the investments held in your Traditional
IRA are generally tax deferred and will not be taxed until withdrawn by you,
unless the tax deferred status of your Traditional IRA is revoked (this is
described in Part Three of this Disclosure Statement).
Transfers/Rollovers
Can I transfer or roll over a distribution I receive from my employer's
retirement plan into a Traditional IRA?
Almost all distributions from employer plans or 403(b) arrangements (for
employees of tax-exempt employers) are eligible for rollover to a Traditional
IRA. The main exceptions are
o payments over the lifetime or life expectancy of the participant (or
participant and a designated beneficiary);
o installment payments for a period of 10 years or more;
o required distributions (generally the rules require distributions
starting at age 70 1/2 or for certain employees starting at
retirement, if later); and
o payments of employee after-tax contributions.
If you are eligible to receive a distribution from a tax qualified
retirement plan as a result of, for example, termination of employment, plan
discontinuance, or retirement, all or part of the distribution may be
transferred directly into your Traditional IRA. This is called a "direct
rollover." Or, you may receive the distribution and make a regular rollover to
your Traditional IRA within 60 days. By making a direct rollover or a regular
rollover, you can defer income taxes on the amount rolled over until you
subsequently make withdrawals from your IRA.
The maximum amount you may roll over is the amount of employer
contributions and earnings distributed. You may not roll over any after-tax
employee contributions you made to the employer retirement plan. If you are over
age 70 1/2 and are required to take minimum distributions under the tax laws,
you may not roll over any amount required to be distributed to you under the
minimum distribution rules. Also, if you are receiving periodic payments over
your or your and your designated beneficiary's life expectancy or for a period
of at least 10 years, you may not roll over these payments. A rollover to a
Traditional IRA must be completed within 60 days after the distribution from the
employer retirement plan to be valid.
Note: A qualified plan administrator or 403(b) sponsor must withhold 20% of your
distribution for federal income taxes unless you elect a direct rollover. Your
plan or 403(b) sponsor is required to provide you with information about direct
and traditional rollovers and withholding taxes before you receive your
distribution and must comply with your directions to make a direct rollover.
The rules governing rollovers are complicated. Be sure to consult your tax
adviser or the IRS if you have a question about rollovers.
Once I have rolled over a plan distribution into a Traditional IRA, can I
subsequently roll over into another employer's qualified retirement plan?
Yes. Part or all of an eligible distribution received from a qualified plan
may be transferred from the Traditional IRA holding it to another qualified
plan. However, the IRA must have no assets other than those which were
previously distributed to you from the qualified plan. Specifically, the IRA
cannot contain any contributions by you (or your spouse). Also, the new
qualified plan must accept rollovers. Similar rules apply to Traditional IRAs
established with rollovers from 403(b) arrangements.
Can I make a rollover from my Traditional IRA to another Traditional IRA?
You may make a rollover from one Traditional IRA to another Traditional IRA
you have or you establish to receive the rollover. Such a rollover must be
completed within 60 days after the withdrawal from your first Traditional IRA.
After making a rollover from one Traditional IRA to another, you must wait a
full year (365 days) before you can make another such rollover. (However, you
can instruct a Traditional IRA custodian to transfer amounts directly to another
Traditional IRA custodian; such a direct transfer does not count as a rollover.)
Can I rollover or transfer non-cash assets into an Elfun Traditional IRA?
No. Only cash (in the form of a check) is permitted to be deposited as a
rollover into an Elfun Traditional IRA from a tax qualified retirement plan or
another IRA.
What happens if I combine rollover contributions with my normal contributions in
one Traditional IRA?
If you wish to make both a normal annual contribution and a rollover
contribution, you may wish to open two separate Elfun Traditional IRAs by
completing two New Account Forms and two sets of forms. You should consult a tax
adviser before making your annual contribution to the Traditional IRA you
established with rollover contributions (or make a rollover contribution to the
IRA to which you make your annual contributions). This is because combining your
annual contributions and rollover contributions originating from an employer
plan distribution would prohibit the future rollover out of the IRA into another
qualified plan. If despite this, you still wish to combine a rollover
contribution and the IRA holding your annual contributions, you should establish
the account as a Traditional IRA on the New Account Form (not a Rollover IRA or
Direct Rollover IRA) and make the contributions to that account.
How do rollovers affect my contribution or deduction limits?
Rollover contributions, if properly made, do not count toward the maximum
contribution. Also, rollovers are not deductible and they do not affect your
deduction limits as described above.
Can I convert my Traditional IRA to a Xxxx XXX?
The rules for converting a Traditional IRA to a new Xxxx XXX, or making a
rollover from a Traditional IRA to a new Xxxx XXX, are described in Part Two
below.
7
Withdrawals
When can I make withdrawals from my Traditional IRA?
You may withdraw from your Traditional IRA at any time. However,
withdrawals before age 59 1/2 may be subject to a 10% penalty tax in addition to
regular income taxes (see below).
When must I start making withdrawals?
If you have not withdrawn your entire Traditional IRA by the April 1
following the year in which you reach 70 1/2, you must make minimum withdrawals
in order to avoid penalty taxes. The rule allowing certain employees to postpone
distributions from an employer qualified plan until actual retirement (even if
this is after age 70 1/2) does NOT apply to Traditional IRAs.
The minimum withdrawal amount is determined by dividing the balance in your
Traditional IRA (or IRAs) by your life expectancy or the combined life
expectancy of you and your designated beneficiary. The minimum withdrawal rules
are complex. Consult your tax adviser for assistance.
The penalty tax for failure to make the required minimum withdrawals is 50%
of the difference between the minimum withdrawal amount and your actual
withdrawals during a year. The IRS may waive or reduce the penalty tax if you
can show that your failure to make the required minimum withdrawals was due to
reasonable cause and you are taking reasonable steps to remedy the problem.
Can I withdraw shares of the Elfun Funds from my Elfun Traditional IRA?
In addition to cash withdrawals, you are permitted to withdraw shares of
the Elfun Funds (but not in certificated form) from your Elfun Traditional IRA.
Shares of the Elfun Funds may be withdrawn from an Elfun Traditional IRA
and transferred in book-entry form to such other Elfun account(s) as you may
designate. Shares of the Elfun Funds held in your account may not be withdrawn
in book-entry form by means of a rollover of such shares into a qualified
employer retirement plan or a transfer of such shares to another IRA.
How are withdrawals from my Traditional IRA taxed?
Amounts withdrawn by you are includable in your gross income in the taxable
year that you receive them, and are taxable as ordinary income. Lump sum
withdrawals from a Traditional IRA are not eligible for averaging treatment
currently available to certain lump sum distributions from qualified employer
retirement plans.
Since the purpose of a Traditional IRA is to accumulate funds for
retirement, your receipt or use of any portion of your Traditional IRA before
you attain age 59 1/2 generally will be considered as an early withdrawal and
subject to a 10% penalty tax.
The 10% penalty tax for early withdrawal will not apply if:
o The distribution was a result of your death or disability.
o The purpose of the withdrawal is to pay certain higher education
expenses for yourself or your spouse, child, or grandchild. Qualifying
expenses include tuition, fees, books, supplies and equipment required
for attendance at a post-secondary educational institution. Room and
board expenses may qualify if the student is attending at least
half-time.
o The withdrawal is used to pay eligible first-time homebuyer expenses.
These are the costs of purchasing, building or rebuilding a principal
residence (including customary settlement, financing or closing
costs). The purchaser may be you, your spouse, or a child, grandchild,
parent or grandparent of you or your spouse. An individual is
considered a "first-time homebuyer" if the individual (or the
individual's spouse, if married) did not have an ownership interest in
a principal residence during the two-year period immediately preceding
the acquisition in question. The withdrawal must be used for eligible
expenses within 120 days after the withdrawal. (If there is an
unexpected delay, or cancellation of the home acquisition, a
withdrawal may be redeposited as a rollover). There is a lifetime
limit on eligible first-time homebuyer expenses of $10,000 per
individual.
o The distribution is one of a scheduled series of substantially equal
periodic payments for your life or life expectancy (or the joint lives
or life expectancies of you and your beneficiary). If there is an
adjustment to the scheduled series of payments, the 10% penalty tax
may apply. The 10% penalty will not apply if you make no change in the
series of payments until the end of five years or until you reach age
59 1/2, whichever is later. If you make a change before then, the
penalty will apply. For example, if you begin receiving payments at
age 50 under a withdrawal program providing for substantially equal
payments over your life expectancy, and at age 58 you elect to receive
the remaining amount in your Traditional IRA in a lump-sum, the 10%
penalty tax will apply to the lump sum and to the amounts previously
paid to you before age 59 1/2%.
o The distribution does not exceed the amount of your deductible medical
expenses for the year (generally speaking, medical expenses paid
during a year are deductible if they are greater than 7 1/2% of your
adjusted gross income for that year).
o The distribution does not exceed the amount you paid for health
insurance coverage for yourself, your spouse and dependents. This
exception applies only if you have been unemployed and received
federal or state unemployment compensation payments for at least 12
weeks; this exception applies to distributions during the year in
which you received the unemployment compensation and during the
following year, but not to any distributions received after you have
been reemployed for at least 60 days.
8
How are nondeductible contributions taxed when they are withdrawn?
A withdrawal of nondeductible contributions (not including earnings) will
be tax-free. However, if you made both deductible and nondeductible
contributions to your Traditional IRA, then each distribution will be treated as
partly a return of your nondeductible contributions (not taxable) and partly a
distribution of deductible contributions and earnings (taxable). The nontaxable
amount is the portion of the amount withdrawn which bears the same ratio as your
total nondeductible Traditional IRA contributions bear to the total balance of
all your Traditional IRAs (including rollover IRAs, but not including Xxxx
IRAs).
For example, assume that you made the following Traditional IRA
contributions:
YEAR DEDUCTIBLE NONDEDUCTIBLE
---- ---------- -------------
1995 $2,000
1996 $2,000
1997 $1,000 $1,000
1998 $1,000
------ ------
$5,000 $2,000
In addition, assume that your Traditional IRA has total investment earnings
through 1998 of $1,000. During 1998 you withdraw $500. Your total account
balance as of 12-31-98 is $7,500 as shown below:
Deductible Contributions $5,000
Nondeductible Contributions $2,000
Earnings On IRA $1,000
Less 1998 Withdrawal $ 500
------
Total Account Balance as of 12/31/98 $7,500
To determine the nontaxable portion of your 1998 withdrawal, the total 1998
withdrawal ($500) must be multiplied by a fraction. The numerator of the
fraction is the total of all nondeductible contributions remaining in the
account before the 1998 withdrawal ($2,000). The denominator is the total
account balance as of 12-31-98 ($7,500) plus the 1998 withdrawal ($500) or
$8,000. The calculation is:
Total Remaining
Nondeductible Contributions $2,000 x $500 = $ 125
--------------------------- ------
Total Account Balance $8,000
Thus, $125 of the $500 withdrawal in 1998 will not be included in your
taxable income. The remaining $375 will be taxable for 1998. In addition, for
future calculations the remaining nondeductible contribution total will be
$2,000 minus $125, or $1,875.
A loss in your Traditional IRA investment may be deductible. You should
consult your tax adviser for further details on the appropriate calculation for
this deduction if applicable.
Is there a penalty tax on certain large withdrawals or accumulations in my IRA?
Earlier tax laws imposed a "success" penalty equal to 15% of withdrawals
from all retirement accounts (including IRAs, 401(k) or other employer
retirement plans, 403(b) arrangements and others) in a year exceeding a
specified amount (initially $150,000 per year). Also, there was a 15% estate tax
penalty on excess accumulations remaining in IRAs and other tax-favored
arrangements upon your death. These 15% penalty taxes have been repealed.
Important: Please see Part Three of this Document which contains important
information applicable to ALL Elfun IRAs.
9
Disclosure Statement
Part Two: Xxxx IRAs
Special Note
Part Two of the Disclosure Statement describes the rules generally
applicable to Xxxx IRAs beginning January 1, 1998.
Xxxx IRAs are a new kind of IRA available for the first time in 1998.
Contributions to a Xxxx XXX for 1997 are not permitted. Contributions to a Xxxx
XXX are not tax-deductible, but withdrawals that meet certain requirements are
not subject to federal income taxes. This makes the dividends on and growth of
the investments held in your Xxxx XXX tax-free for federal income tax purposes
if the requirements are met.
Traditional IRAs, which have existed since 1975, are still available.
Contributions to a Traditional IRA may be tax-deductible. Earnings and gains on
amounts while held in a Traditional IRA are tax-deferred. Withdrawals are
subject to federal income tax (except for prior after-tax contributions which
may be recovered without additional federal income tax).
This Part Two does not describe Traditional IRAs. If you wish to review
information about Traditional IRAs, please see Part One of this Disclosure
Statement.
Your Xxxx XXX
Your Xxxx XXX gives you several tax benefits. While contributions to a Xxxx
XXX are not deductible, dividends on and growth of the assets held in your Xxxx
XXX are not subject to federal income tax. Withdrawals by you from your Xxxx XXX
are excluded from your income for federal income tax purposes if certain
requirements (described below) are met. State income tax treatment of your Xxxx
XXX may differ from federal treatment; ask your state tax department or your
personal tax adviser for details.
Be sure to read Part Three of this Disclosure Statement for important
additional information, including information on how to revoke your Xxxx XXX,
investments and prohibited transactions, fees and expenses and certain tax
requirements.
Eligibility
What are the eligibility requirements for a Xxxx XXX?
Starting with 1998, you are eligible to establish and contribute to a Xxxx
XXX for a year if you received compensation (or earned income if you are self
employed) during the year for personal services you rendered. If you received
taxable alimony, this is treated like compensation for IRA purposes.
In contrast to a Traditional IRA, with a Xxxx XXX you may continue making
contributions after you reach age 70 1/2.
Can I contribute to a Xxxx XXX for my spouse?
Starting with 1998, if you meet the eligibility requirements you can not
only contribute to your own Xxxx XXX, but also to a separate Xxxx XXX for your
spouse out of your compensation or earned income, regardless of whether your
spouse had any compensation or earned income in that year. This is called a
"spousal Xxxx XXX." To make a contribution to a Xxxx XXX for your spouse, you
must file a joint tax return for the year with your spouse. For a spousal Xxxx
XXX, your spouse must set up a different Xxxx XXX, separate from yours, to which
you contribute.
Of course, if your spouse has compensation or earned income, your spouse
can establish his or her own Xxxx XXX and make contributions to it in accordance
with the rules and limits described in this Part Two of the Disclosure
Statement.
Are there any other eligibility requirements in choosing investments for my
Elfun Xxxx XXX?
To participate in an Elfun Xxxx XXX you must be (1) a regular or senior
member of the Elfun Society, (2) the immediate family of those members, (3) the
surviving unremarried spouse of a deceased member, (4) members of the Board of
Directors of GE, and (5) such others as the Trustees may permit provided that
their participation does not affect the Funds' status as "employees' securities
companies" within the meaning of section 2(a) (13) of the 1940 Act. Regular
members of the Elfun Society are selected from active employees of GE and/or its
majority-owned subsidiaries. Senior members are former members who have retired
from those companies. Immediate family is defined as spouse, children or
step-children. Consult the current prospectus for the Elfun Funds for additional
information.
Contributions
When can I make contributions to a Xxxx XXX?
You may make a contribution to your Xxxx XXX or establish a new Xxxx XXX
for a taxable year by the due date (not including any extensions) for your
federal income tax return for the year. Usually this is April 15 of the
following year. For example, you will have until April 15, 1999 to establish and
make a contribution to a Xxxx XXX for 1998.
Caution: Since Xxxx IRAs were not available until January 1, 1998, you may
not make a contribution to a Xxxx XXX for 1997.
How much can I contribute to my Xxxx XXX?
For each year when you are eligible (see above), you can contribute up to
the lesser of $2,000 or 100% of your compensation (or earned income, if you are
self-employed).
Annual contributions may be made only to a Xxxx XXX annual contribution
account which does not contain converted or transferred funds from a Traditional
IRA.
Your Xxxx XXX limit is reduced by any contributions for the same year to a
Traditional IRA. For example, assuming you have at least $2,000 in compensation
or earned income, if you contribute $500 to your Traditional IRA for 1998, your
maximum Xxxx XXX contribution for 1998 will be $1,500.
If you and your spouse have spousal Xxxx IRAs, each spouse may contribute
up to $2,000 to his or her Xxxx XXX for a year as long as the combined
compensation of both spouses for the year (as shown on your joint income tax
return) is at least $4,000. If the combined compensation of both spouses is less
than $4,000, the spouse with the higher amount of compensation may contribute up
to that spouse's compensation amount, or $2,000 if less. The spouse with the
lower compensation amount may contribute any amount up to that spouse's
compensation plus any excess of the other spouse's compensation over the other
spouse's Xxxx XXX contribution. However, the maximum contribution to either
spouse's Xxxx XXX is $2,000 for the year.
As noted above, the spousal Xxxx XXX limits are reduced by any
contributions for the same calendar year to a Traditional IRA maintained by you
or your spouse.
For taxpayers with high income levels, the contribution limits may be
reduced (see below).
10
Are contributions to a Xxxx XXX tax deductible?
Contributions to a Xxxx XXX are NOT deductible. This is a major difference
between Xxxx IRAs and Traditional IRAs. Contributions to a Traditional IRA may
be deductible on your federal income tax return depending on whether or not you
are an active participant in an employer-sponsored plan and on your income
level.
Are the earnings on my Xxxx XXX funds taxed?
Any dividends on or growth of investments held in your Xxxx XXX are
generally exempt from federal income taxes and will not be taxed until withdrawn
by you, unless the tax exempt status of your Xxxx XXX is revoked. If the
withdrawal qualifies as a tax-free withdrawal (see below), amounts reflecting
earnings or growth of assets in your Xxxx XXX will not be subject to federal
income tax.
Which is better, a Xxxx XXX or a Traditional IRA?
This will depend upon your individual situation. A Xxxx XXX may be better
if you are an active participant in an employer-sponsored plan and your adjusted
gross income is too high to make a deductible IRA contribution (but not too high
to make a Xxxx XXX contribution). Also, the benefits of a Xxxx XXX versus a
Traditional IRA may depend upon a number of other factors including: your
current income tax bracket versus your expected income tax bracket when you make
withdrawals from your IRA, whether you expect to be able to make nontaxable
withdrawals from your Xxxx XXX (see below), how long you expect to leave your
contributions in the IRA, how much you expect the IRA to earn in the meantime,
and possible future tax law changes.
Consult a qualified tax or financial adviser for assistance on this
question.
Are there any restrictions on contributions to my Xxxx XXX?
Taxpayers with very high income levels may not be able to contribute to a
Xxxx XXX at all, or their contribution may be limited to an amount less than
$2,000. This depends upon your filing status and the amount of your adjusted
gross income (AGI). The following table shows how the contribution limits are
restricted:
XXXX XXX CONTRIBUTION
--------------------------------------------------------------------------------
If You Are If You Are Then You
Single Taxpayer Married May Make
Filing Jointly
--------------------------------------------------------------------------------
Up to Up to Full
$95,000 $150,000 Contribution
--------------------------------------------------------------------------------
More than $95,000 More than $150,000 Reduced Contribution
but less than but less than (see explanation
$110,000 $160,000 below)
--------------------------------------------------------------------------------
$110,000 $160,000 Zero
and up and up (No Contribution)
--------------------------------------------------------------------------------
Adjusted Gross Income (AGI) Level
Remember, your Xxxx XXX contribution limit of $2,000 is reduced by any
contributions for the same year to a Traditional IRA. If you fall in the reduced
contribution range, the reduction formula applies to the Xxxx XXX contribution
limit left after subtracting your contribution for the year to a Traditional
IRA.
Note: If you are a married taxpayer filing separately, your maximum Xxxx XXX
contribution limit phases out over the first $10,000 of adjusted gross income.
If your AGI is $10,000 or more you may not contribute to a Xxxx XXX for the
year.
How do I calculate my limit if I fall in the "reduced contribution" range?
If your AGI falls in the reduced contribution range, you must calculate
your contribution limit. To do this, multiply your normal contribution limit
($2,000 or your compensation if less) by a fraction. The numerator is the amount
by which your AGI exceeds the lower limit of the reduced contribution range
($95,000 if single, or $150,000 if married filing jointly). The denominator is
$15,000 (single taxpayers) or $10,000 (married filing jointly). Subtract this
from your normal limit and then round down to the nearest $10. The contribution
limit is the greater of the amount calculated or $200.
For example, assume that your AGI for the year is $157,555 and you are
married, filing jointly. You would calculate your Xxxx XXX contribution limit
this way:
1. The amount by which your AGI exceeds the lower limit of the reduced
contribution deductible range: ($157,555-$150,000) = $ 7,555
2. Divide this by $10,000: $ 7,555 = 0.7555
-------
$10,000
3. Multiply this by $2,000 (or your compensation for the year, if less):
0.7555 x $2,000 = $1,511
4. Subtract this from your $2,000 limit: ($2,000 - $1,511) = $489
5. Round this down to the nearest $10 = $480
6. Your contribution limit is the greater of this amount or $200.
How do I determine my AGI?
AGI is your gross income minus those deductions which are available to all
taxpayers even if they don't itemize. Instructions to calculate your AGI are
provided with your income tax Form 1040 or 1040A.
There are two additional rules when calculating AGI for purposes of Xxxx
XXX contribution limits. First, if you are making a deductible contribution for
the year to a Traditional IRA, your AGI is reduced by the amount of the
deduction. Second, if you are converting a Traditional IRA to a Xxxx XXX in a
year (see below), the amount includable in your income as a result of the
conversion is not considered AGI when computing your Xxxx XXX contribution limit
for the year. (Note: a bill pending in Congress might affect the first
rule--consult your tax adviser or the IRS for the latest developments.)
What happens if I contribute more than allowed to my Xxxx XXX?
The maximum contribution you can make to a Xxxx XXX generally is $2,000 or
100% of compensation or earned income, whichever is less. As noted above, your
maximum is reduced by the amount of any contribution to a Traditional IRA for
the same year and may be further reduced if you have high AGI. Any amount
contributed to the Xxxx XXX above the maximum is considered an "excess
contribution."
An excess contribution is subject to excise tax of 6% for each year it
remains in the Xxxx XXX.
How can I correct an excess contribution?
Excess contributions may be corrected without paying a 6% penalty. To do
so, you must withdraw the excess and any earnings on the excess before the due
date (including extensions) for filing your federal income tax return for the
year for which you made the excess contribution. The earnings must be included
in your income for the tax year for which the contribution was made and may be
subject to a 10% premature withdrawal tax if you have not reached age 59 1/2
(unless an exception to the 10% penalty tax applies).
11
What happens if I don't correct the excess contribution by the tax return due
date?
Any excess contribution not withdrawn by the tax return due date (including
any extensions) for the year for which the contribution was made will be subject
to the 6% excise tax. There will be an additional 6% excise tax for each
subsequent year the excess remains in your account.
Unless an excess contribution qualifies for the special treatment outlined
above, the excess contribution and any earnings on it withdrawn after tax filing
time will be includable in taxable income and may be subject to a 10% premature
withdrawal penalty.
You may reduce the excess contributions by making a withdrawal equal to the
excess. Earnings need not be withdrawn. To the extent that no earnings are
withdrawn, the withdrawal will not be subject to income taxes or possible
penalties for premature withdrawals before age 59 1/2. Excess contributions may
also be corrected in a subsequent year to the extent that you contribute less
than your Xxxx XXX contribution limit for the subsequent year. As the prior
excess contribution is reduced or eliminated, the 6% excise tax will become
correspondingly reduced or eliminated for subsequent tax years.
Conversion of Existing Traditional IRA
Can I convert an existing Traditional IRA into a Xxxx XXX?
Yes, starting in 1998 you can convert an existing Traditional IRA into a
Xxxx XXX if you meet the adjusted gross income (AGI) limits described below.
Conversion may be accomplished either by establishing a Xxxx XXX and then
transferring the amount in your Traditional IRA that you wish to convert to the
new Xxxx XXX. Or, if you want to convert an existing Traditional IRA with State
Street Bank as custodian to a Xxxx XXX, you may give us directions to convert.
You are eligible to convert a Traditional IRA to a Xxxx XXX if, for the
year of the conversion, your AGI is $100,000 or less. The same limit applies to
married and single taxpayers, and the limit is not indexed to cost-of-living
increases. Married taxpayers are eligible to convert a Traditional IRA to a Xxxx
XXX only if they file a joint income tax return; married taxpayers filing
separately are not eligible to convert.
NOTE: No contributions other than Xxxx XXX conversion contributions made
during the same tax year may be deposited in a single Xxxx XXX conversion
account.
CAUTION: You should be extremely cautious in converting an existing IRA
into a Xxxx XXX early in a year if there is any possibility that your AGI for
the year will exceed $100,000. Although a bill pending in Congress would permit
you to transfer amounts back to your Traditional IRA if your AGI exceeds
$100,000, under the current rules, if you have already converted during a year
and you turn out to have more than $100,000 of AGI, there may be adverse tax
results for you. Consult your tax adviser or the IRS for the latest
developments.
What are the tax results from converting?
The taxable amount in your Traditional IRA that you convert to a Xxxx XXX
will be considered taxable income on your federal income tax return for the year
of the conversion. All amounts in a Traditional IRA are taxable except for your
prior non-deductible contributions to the Traditional IRA.
If you make the conversion during 1998, the taxable income is spread over
four years. In other words, you would include one quarter of the taxable amount
on your federal income tax return for 1998, 1999, 2000 and 2001.
Should I convert my Traditional IRA to a Xxxx XXX?
Only you can answer this question, in consultation with your tax or
financial advisers. A number of factors, including the following, may be
relevant. Conversion may be advantageous if you expect to leave the converted
funds on deposit in your Xxxx XXX for at least five years and to be able to
withdraw the funds under circumstances that will not be taxable (see below). The
benefits of converting will also depend on whether you expect to be in the same
tax bracket when you withdraw from your Xxxx XXX as you are now. Also,
conversion is based upon an assumption that Congress will not change the tax
rules for withdrawals from Xxxx IRAs in the future, but this cannot be
guaranteed.
Transfers/Rollovers
Can I transfer or roll over a distribution I receive from my employer's
retirement plan into a Xxxx XXX?
Distributions from qualified employer-sponsored retirement plans or 403(b)
arrangements (for employees of tax-exempt employers) are NOT eligible for
rollover or direct transfer to a Xxxx XXX. However, in certain circumstances it
may be possible to make a direct rollover of an eligible distribution to a
Traditional IRA and then to convert the Traditional IRA to a Xxxx XXX (see
above). Consult your tax or financial adviser for further information on this
possibility.
Can I make a rollover from my Xxxx XXX to another Xxxx XXX?
You may make a rollover from one Xxxx XXX to another Xxxx XXX you have or
you establish to receive the rollover. Such a rollover must be completed within
60 days after the withdrawal from your first Xxxx XXX. After making a rollover
from one Xxxx XXX to another, you must wait a full year (365 days) before you
can make another such rollover. (However, you can instruct a Xxxx XXX custodian
to transfer amounts directly to another Xxxx XXX custodian; such a direct
transfer does not count as a rollover.)
How do rollovers affect my Xxxx XXX contribution limits?
Rollover contributions, if properly made, do not count toward the maximum
contribution. Also, you may make a rollover from one Xxxx XXX to another even
during a year when you are not eligible to contribute to a Xxxx XXX (for
example, because your AGI for that year is too high).
Can I rollover or transfer non-cash assets into an Elfun Xxxx XXX?
No. Only cash (in the form of a check) is permitted to be deposited as a
rollover into an Elfun Xxxx XXX from another Xxxx or Traditional IRA.
Withdrawals
When can I make withdrawals from my Xxxx XXX?
You may withdraw from your Xxxx XXX at any time. If the withdrawal meets
the requirements discussed below, it is tax-free. This means that you pay no
federal income tax even though the withdrawal includes earnings or gains on your
contributions while they were held in your Xxxx XXX.
When must I start making withdrawals?
There are no rules on when you must start making withdrawals from your Xxxx
XXX or on minimum required withdrawal amounts for any particular year during
your lifetime. Unlike Traditional IRAs, you are not required to start making
withdrawals from a Xxxx XXX by the April 1 following the year in which you reach
age 70 1/2.
12
After your death, there are IRS rules on the timing and amount of
distributions. In general, the amount in your Xxxx XXX must be distributed by
the end of the fifth year after your death. However, distributions to a
designated beneficiary that begin by the end of the year following the year of
your death and that are paid over the life expectancy of the beneficiary satisfy
the rules. If your surviving spouse is your designated beneficiary, the spouse
will then be treated as the depositor.
Can I withdraw shares of the Elfun Funds from my Xxxx XXX?
In addition to cash withdrawals, you are permitted to withdraw shares of
the Elfun Funds (but not in certificated form) from your Elfun Xxxx XXX.
Shares of the Elfun Funds may be withdrawn from an Elfun Xxxx XXX and
transferred in book-entry form to another Elfun account you designate. Shares of
the Elfun Funds held in your account may not be withdrawn in book-entry form by
means of a transfer of such shares to another Xxxx XXX.
What are the requirements for a tax-free withdrawal?
To be tax-free, a withdrawal from your Xxxx XXX must meet two requirements.
First, the Xxxx XXX must have been open for 5 or more years before the
withdrawal. Second, at least one of the following conditions must be satisfied:
o You are age 59 1/2 or older when you make the withdrawal.
o The withdrawal is made by your beneficiary after you die.
o You are disabled (as defined in IRS rules) when you make the
withdrawal.
o You are using the withdrawal to cover eligible first time homebuyer
expenses. These are the costs of purchasing, building or rebuilding a
principal residence (including customary settlement, financing or
closing costs). The purchaser may be you, your spouse or a child,
grandchild, parent or grandparent of you or your spouse. An individual
is considered a "first-time homebuyer" if the individual (or the
individual's spouse, if married) did not have an ownership interest in
a principal residence during the two-year period immediately preceding
the acquisition in question. The withdrawal must be used for eligible
expenses within 120 days after the withdrawal (if there is an
unexpected delay, or cancellation of the home acquisition, a
withdrawal may be redeposited as a rollover). There is a lifetime
limit on eligible first-time homebuyer expenses of $10,000 per
individual.
For a Xxxx XXX that you set up with amounts rolled over or converted from a
Traditional IRA, the 5 year period begins with the year in which the conversion
or rollover was made. (Note: a bill pending in Congress might affect this
rule--consult your tax adviser or the IRS for the latest developments.)
For a Xxxx XXX that you started with a normal contribution, the 5 year
period starts with the year for which you make the initial normal contribution.
How are withdrawals from my Xxxx XXX taxed if the tax-free requirements are not
met?
If the qualified withdrawal requirements are not met, a withdrawal
consisting of your own prior contribution amounts to your Xxxx XXX will not be
considered taxable income in the year you receive it, nor will the 10% penalty
apply. To the extent that the nonqualified withdrawal consists of dividends or
gains while your contributions were held in your Xxxx XXX, the withdrawal is
includable in your gross income in the taxable year you receive it, and may be
subject to the 10% withdrawal penalty. All amounts withdrawn from your Xxxx XXX
are considered withdrawals of your contributions until you have withdrawn the
entire amount you have contributed. After that, all amounts withdrawn are
considered taxable withdrawals of dividends and gains.
Note that, for purposes of determining what portion of any distribution is
includable in income, all of your Xxxx XXX accounts are considered as one single
account. Amounts withdrawn from any one Xxxx XXX account are deemed to be
withdrawn from contributions first. Since all your Xxxx IRAs are considered to
be one account for this purpose, withdrawals from Xxxx XXX accounts are not
considered to be from earnings or interest until an amount equal to ALL
contributions made to ALL of an individual's Xxxx XXX accounts is withdrawn. The
following example illustrates this:
A single individual contributes $1,000 a year to his Elfun Xxxx XXX account
and $1,000 a year to the Brand X Xxxx XXX account over a period of ten years. At
the end of 10 years his account balances are as follows:
PRINCIPAL
CONTRIBUTIONS EARNINGS
XXXXX XXXX XXX $10,000 $10,000
BRAND X XXXX XXX $10,000 $10,000
------- -------
TOTAL $20,000 $20,000
At the end of 10 years, this person has $40,000 in both Xxxx XXX accounts,
of which $20,000 represents his contributions (aggregated) and $20,000
represents his earnings (aggregated). This individual, who is 40, withdraws
$15,000 from his Brand X Xxxx XXX (not a qualified withdrawal). We look to the
aggregate amount of all principal contributions--in this case $20,000--to
determine if the withdrawal is from contributions, and thus non-taxable. In this
example, there is no ($0) taxable income as a result of this withdrawal because
the $15,000 withdrawal is less than the total amount of aggregated contributions
($20,000). If this individual then withdrew $15,000 from his Elfun Xxxx XXX,
$5,000 would not be taxable (the remaining aggregate contributions) and $10,000
would be treated as taxable income for the year of the withdrawal, subject to
regular income taxes and the 10% premature withdrawal penalty (unless an
exception applies).
NOTE: If passed, a bill currently pending in Congress will change the rules
and the results discussed above. Under the proposed legislation, in general,
separate Xxxx IRAs established for annual contributions and conversions for
separate years are not aggregated as explained above to determine the tax on
withdrawals. See your tax adviser for more information and the latest
developments.
Taxable withdrawals of dividends and gains from a Xxxx XXX are treated as
ordinary income. Withdrawals of taxable amounts from a Xxxx XXX are not eligible
for averaging treatment currently available to certain lump sum distributions
from qualified employer-sponsored retirement plans, nor are such withdrawals
eligible for taxable gains tax treatment.
Your receipt of any taxable withdrawal from your Xxxx XXX before you attain
age 59 1/2 generally will be considered as an early withdrawal and subject to a
10% penalty tax.
The 10% penalty tax for early withdrawal will not apply if any of the
following exceptions applies:
o The withdrawal was a result of your death or disability.
o The withdrawal is one of a scheduled series of substantially equal
periodic payments for your life or life expectancy (or the joint lives
or life expectancies of you and your beneficiary). If there is an
adjustment to the scheduled series of payments, the 10% penalty tax
will apply. For example, if you begin receiving payments at age 50
under a withdrawal program providing for substantially equal payments
over your life expectancy, and at age 58 you elect to withdraw the
remaining amount in your Xxxx XXX in a lump-sum, the 10% penalty tax
will apply to the lump sum and to the amounts previously paid to you
before age 59 1/2 to the extent they were includable in your taxable
income.
13
o The withdrawal is used to pay eligible higher education expenses.
These are expenses for tuition, fees, books, and supplies required to
attend an institution for post-secondary education. Room and board
expenses are also eligible for a student attending at least half-time.
The student may be you, your spouse, or your child or grandchild.
However, expenses that are paid for with a scholarship or other
educational assistance payment are not eligible expenses.
o The withdrawal is used to cover eligible first time homebuyer expenses
(as described above in the discussion of tax-free withdrawals).
o The withdrawal does not exceed the amount of your deductible medical
expenses for the year (generally speaking, medical expenses paid
during a year are deductible if they are greater than 7 1/2% of your
adjusted gross income for that year).
o The withdrawal does not exceed the amount you paid for health
insurance coverage for yourself, your spouse and dependents. This
exception applies only if you have been unemployed and received
federal or state unemployment compensation payments for at least 12
weeks; this exception applies to distributions during the year in
which you received the unemployment compensation and during the
following year, but not to any distributions received after you have
been reemployed for at least 60 days.
What about the 15 percent penalty tax?
The rule imposing a 15% penalty tax on very large withdrawals from
tax-favored arrangements (including IRAs, 403(b) arrangements and qualified
employer-sponsored plans), or on excess amounts remaining in such tax-favored
arrangements at your death, has been REPEALED. This 15% tax no longer applies.
NOTE: The discussion of the tax rules for Xxxx IRAs in this Disclosure Statement
is based upon the best available information. However, Xxxx IRAs are new under
the tax laws, and the IRS has not issued regulations or rulings on the operation
and tax treatment of Xxxx XXX accounts. Also, if enacted, legislation now
pending in Congress will change some of the rules. Therefore, you should consult
your tax adviser for the latest developments or for advice about how maintaining
a Xxxx XXX will affect your personal tax or financial situation.
IMPORTANT: Please see Part Three of this Document which contains important
information applicable to ALL Elfun IRAs.
14
Disclosure Statement
Part Three: Rules for Both Traditional and Xxxx IRAs
General Information
Establishing your Elfun IRA
To establish an Elfun IRA, you must complete and sign a New Account Form.
By signing the New Account Form, you agree to be bound by the terms of the
Custodial Account Agreement, attached to this Disclosure Statement. There is a
minimum initial purchase of $500 for each new Elfun IRA. Subsequent purchases
may be as little as $100 by check or $25 by systematic purchases such as payroll
deductions or direct deposit. Please review this entire Disclosure Statement for
IRS rules and restrictions on contributions to your Traditional IRA or Xxxx XXX
and the deductibility of such contributions.
Deposits to your Elfun Traditional IRA or Elfun Xxxx XXX should be
transmitted or delivered as follows:
Elfun IRA
P.O. Box 419631
Kansas City, MO 64141-6631
Such deposits should be accompanied or preceded by instructions as to how
such amounts should be invested. Deposits by check should be made payable to
"State Street Bank and Trust Company, IRA Custodian." Under no circumstances
should checks be made payable to the Distributor, or deposits of currency be
made.
IRA requirements
All Elfun IRAs must meet certain requirements. Contributions generally must
be made in cash (in the form of a check). The IRA trustee or custodian must be a
bank or other person who has been approved by the Secretary of the Treasury.
Your contributions may not be invested in life insurance or collectibles or be
commingled with other property except in a common trust or investment fund. Your
interest in the account must be nonforfeitable at all times. You may obtain
further information on IRAs from any district office of the Internal Revenue
Service.
May I revoke my Elfun IRA?
You may revoke a newly established Elfun Traditional or Elfun Xxxx XXX at
any time within seven days after the date on which you receive this Disclosure
Statement. An Elfun Traditional or Elfun Xxxx XXX established more than seven
days after the date of your receipt of this Disclosure Statement may not be
revoked.
To revoke your Elfun Traditional or Elfun Xxxx XXX, mail or deliver a
written notice of revocation to:
Elfun IRA
P.O. Box 419631
Kansas City, MO 64141-6631
Mailed notice will be deemed given on the date that it is postmarked (or,
if sent by certified or registered mail, on the date of certification or
registration). If you revoke your Elfun Traditional or Elfun Xxxx XXX within the
seven-day period, you are entitled to a return of the entire amount you
originally contributed into your Elfun Traditional or Elfun Xxxx XXX, without
adjustment for such items as sales charges, administrative expenses or
fluctuations in market value.
Investments
How are my Elfun IRA contributions invested?
You control the investment and reinvestment of contributions to your Elfun
Traditional or Elfun Xxxx XXX. Investments must be in one or more of the Elfun
Funds available from time to time as listed in the New Account Form for your
Elfun Traditional or Elfun Xxxx XXX. You direct the investment of your Elfun IRA
by giving your investment instructions to the Distributor. If a Service Company
has been designated, instructions may be given to the Service Company rather
than to the Distributor; as of the date of this Disclosure Statement, no Service
Company had been designated. Since you control the investment of your Elfun
Traditional or Elfun Xxxx XXX, you are responsible for any losses; the
Custodian, the Distributor and the Service Company or their affiliates have no
responsibility for any loss or diminution in value occasioned by your exercise
of investment control.
If investment instructions have not been received by the Distributor or the
Service Company, if any, by the time your Elfun Traditional IRA or Elfun Xxxx
XXX contribution has been received, or the instructions are unclear in the
opinion of the party receiving such instructions, or the instructions are for a
transaction that is not permitted by the terms of the Elfun IRA, your
contribution may, at the discretion of the Distributor or Service Company, if
any, either be returned to you or invested and held in the Elfun Money Market
Fund, without any liability on the part of the Distributor or Service Company,
if any, for any resulting loss of income or appreciation or depreciation,
pending receipt of appropriate investment instructions, further clarification or
confirmation of eligibility. If instructions regarding existing assets held in
your Elfun Traditional IRA or Elfun Xxxx XXX are received by the Distributor or
the Service Company, if any, with respect to the purchase or redemption of any
Elfun Fund, receipt or disposition of any dividends or capital gains
distributions on or the proceeds of a redemption or sales of shares of the Elfun
Funds or other transaction which are unclear in the opinion of the party
receiving such instructions, or the instructions are for a transaction that is
not permitted by the terms of the Elfun IRA, the Distributor or Service Company,
if any, may, at its discretion, either refrain from carrying out such
instructions or, in the case of dividends or capital gains distributions on or
the proceeds of a redemption or sale of existing assets, invest and hold such
amounts in the Elfun Money Market Fund, without any liability on the part of the
Distributor or Service Company, if any, for any resulting loss of income or
appreciation or depreciation, pending receipt of appropriate instructions,
further clarification or confirmation of eligibility. No interest or other
investment return will be paid to your Elfun Traditional IRA or Elfun Xxxx XXX
on any cash amounts contributed to or held as assets of your Elfun Traditional
IRA or Elfun Xxxx XXX, except for returns on assets invested in Elfun Funds,
pending receipt of appropriate instructions, further clarification or
confirmation of eligibility.
With respect to the Elfun Funds, purchases and redemptions for your Elfun
Traditional IRA or Elfun Xxxx XXX will generally be effected at the applicable
public offering price or net asset value for shares of the Elfun Fund(s)
involved next determined after the Distributor or the Service Company, if any,
receives proper investment instructions from you. Consult the current prospectus
for the Elfun Fund(s) involved for additional information.
Investments will be made in such amounts and proportions as you may direct
to the Distributor or the Service Company, if any, from time to time, subject to
such minimum investment requirements as may be specified in the prospectuses for
the Elfun Funds.
Because you control the selection of investments for your Elfun Traditional
IRA or Elfun Xxxx XXX, the growth in value of your Elfun Traditional IRA or
Elfun Xxxx XXX cannot be guaranteed or projected. As such, any investment
decision on your part must be made with a complete understanding of the risks
associated with such an investment, including your understanding that:
15
o You are under no obligation to invest in any particular Elfun Fund;
o The Elfun Funds are being made available to you as alternative
investment vehicles without any specific endorsement by General
Electric Company or its affiliated companies, and neither General
Electric Company nor its affiliated companies are acting in an
employment capacity with respect to any individual participating in
the Elfun Traditional or Elfun Xxxx XXX program;
o An investment in any particular Elfun Fund may not be suitable for
your financial goals and objectives or for other reasons; and
o Alternative individual retirement account programs are available for
investment that provide the same tax consequences as the Elfun IRA
program.
Before making any investment in the Elfun Funds, please read carefully the
current prospectus for the Elfun Funds you are considering as an investment for
your Elfun IRA. The prospectus contains information about each Fund's investment
objectives and policies, as well as any minimum initial investment or minimum
balance requirements, management fees and expenses, sales, redemption or other
charges, and other information.
Are there any restrictions on the use of my Elfun IRA assets?
As stated above, the assets in your Elfun Traditional IRA or Elfun Xxxx XXX
may only be invested in the Elfun Funds.
The tax-exempt status of your Traditional or Xxxx XXX will be revoked if
you engage in any of the prohibited transactions listed in Section 4975 of the
tax code. Upon such revocation, your Traditional or Xxxx XXX is treated as
distributing its assets to you. The taxable portion of the amount in your IRA
will be subject to income tax (unless, in the case of a Xxxx XXX, the
requirements for a tax-free withdrawal are satisfied). Also, you may be subject
to a 10% penalty tax on the taxable amount as a premature withdrawal if you have
not yet reached the age of 59 1/2.
What is a prohibited transaction?
Generally, a prohibited transaction is any improper use of the assets in
your Traditional or Xxxx XXX. Some examples of prohibited transactions are:
o Direct or indirect sale or exchange of property between you and your
Traditional or Xxxx XXX.
o Transfer of any property from your Traditional or Xxxx XXX to yourself
or from yourself to your Traditional or Xxxx XXX.
Your Traditional or Xxxx XXX could lose its tax exempt status if you use
all or part of your interest in your Traditional or Xxxx XXX as security for a
loan or borrow any money from your Traditional or Xxxx XXX. Any portion of your
Traditional or Xxxx XXX used as security for a loan will be treated as a
distribution in the year in which the money is borrowed. This amount may be
taxable and you may also be subject to the 10% premature withdrawal penalty on
the taxable amount.
Fees and Expenses
Custodian's Fees
The following is a list of the fees charged by the Custodian for
maintaining either an Elfun Traditional IRA or an Elfun Xxxx XXX.
o Annual maintenance fee for an Elfun IRA account: $11 for each social
security number.
o Account termination fee for an Elfun IRA account is $15.
General Fee Policies
o Fees may be paid by you directly, or the Custodian may deduct them from
your Elfun Traditional or Elfun Xxxx XXX.
o Fees or waivers of fees may be changed upon 30 days written notice to you.
o The full annual maintenance fee will be charged for any calendar year
during which you have an Elfun Traditional or Elfun Xxxx XXX account with
us. This fee is not pro-rated for periods of less than one full year.
o Termination fees are charged when your account is closed whether the funds
are distributed to you or transferred to a successor custodian or trustee.
o The Custodian may charge you for its reasonable expenses for services not
covered by its fee schedule.
Elfun Fund Fees
Each Elfun Fund in which your Traditional or Xxxx XXX is invested pays fees
for investment advisory, administrative, and other services. These fees are
described in detail in the current prospectus for the Elfun Funds.
Tax Matters
What IRA reports does the custodian issue?
The Custodian will report all withdrawals to the IRS and the recipient on
the appropriate form. For reporting purposes, a direct transfer of assets to a
successor custodian or trustee is not considered a withdrawal.
The Custodian will report to the IRS the year-end value of your account and
the amount of any rollover (including conversions of a Traditional IRA to a Xxxx
XXX) or regular contribution made during a calendar year, as well as the tax
year for which a contribution is made. Unless the Custodian receives an
indication from you to the contrary, it will treat any amount as a contribution
for the tax year in which it is received. It is MOST IMPORTANT that a
contribution between January and April 15th for the prior year be clearly
designated as such.
What tax information must I report to the IRS?
You must file Form 5329 with the IRS for each taxable year for which you
made an excess contribution or you take a premature withdrawal that is subject
to the 10% penalty tax, or you withdraw less than the minimum amount required
from your Traditional IRA. If your beneficiary fails to make required minimum
withdrawals from your Traditional or Xxxx XXX after your death, your beneficiary
may be subject to an excise tax and be required to file Form 5329.
For Traditional IRAs, you must also report each nondeductible contribution
to the IRS by designating it a nondeductible contribution on your tax return.
Use Form 8606. In addition, for any year in which you make a nondeductible
contribution or take a withdrawal, you must include additional information on
your tax return. The information required includes: (1) the amount of your
nondeductible contributions for that year; (2) the amount of withdrawals from
Traditional IRAs in that year; (3) the amount by which your total nondeductible
contributions for all the years exceed the total amount of your distributions
previously excluded from gross income; and (4) the total value of all your
Traditional IRAs as of the end of the year. If you fail to report any of this
information, the IRS will assume that all your contributions were deductible.
This will result in the taxation of the portion of your withdrawals that should
be treated as a nontaxable return of your nondeductible contributions.
16
Which withdrawals are subject to withholding?
Xxxx XXX
Federal income tax will be withheld at a flat rate of 10% of any taxable
withdrawal from your Xxxx XXX, unless you elect not to have tax withheld.
Withdrawals from a Xxxx XXX are not subject to the mandatory 20% income tax
withholding that applies to most distributions from qualified plans or 403(b)
accounts that are not directly rolled over to another plan or IRA.
Traditional IRA
Federal income tax will be withheld at a flat rate of 10% from any
withdrawal from your Traditional IRA, unless you elect not to have tax withheld.
Withdrawals from a Traditional IRA are not subject to the mandatory 20% income
tax withholding that applies to most distributions from qualified plans or
403(b) accounts that are not directly rolled over to another plan or IRA.
Account Termination
You may terminate your Elfun Traditional IRA or Elfun Xxxx XXX at any time
after its establishment by sending withdrawal instructions in a form acceptable
to the Custodian, or a transfer authorization form, to:
Elfun IRA
P.O. Box 419631
Kansas City, MO 64141-6631
Your Elfun Traditional IRA or Elfun Xxxx XXX will terminate upon the first
to occur of the following:
o The date your properly executed withdrawal instructions (as described
above) withdrawing your total Elfun Traditional IRA or Elfun Xxxx XXX
balance are received and accepted by the Custodian.
o The date the Elfun Traditional IRA or Elfun Xxxx XXX ceases to qualify
under the tax code. This will be deemed a termination.
o The transfer of the Elfun Traditional IRA or Elfun Xxxx XXX to another
custodian/trustee.
o The rollover of the amounts in the Elfun Traditional IRA or Elfun Xxxx
XXX to another custodian/trustee.
Any outstanding fees must be received prior to such a termination of your
account or will be deducted from the account.
The amount you receive from your Elfun IRA upon termination of the account
will be treated as a withdrawal, and thus the rules relating to Traditional IRA
or Xxxx XXX withdrawals will apply. For example, if the IRA is terminated before
you reach age 59 1/2, the 10% early withdrawal penalty may apply to the taxable
amount you receive.
IRA Documents
Traditional IRA
The terms contained in Articles I to VII of Part One of the Elfun
Individual Retirement Custodial Agreement have been promulgated by the IRS in
Form 5305-A for use in establishing a Traditional IRA Custodial Account that
meets the requirements of Code Section 408(a) for a valid Traditional IRA. This
IRS approval relates only to the form of Articles I to VII and is not an
approval of the merits of a Traditional IRA or of any investment permitted by a
Traditional IRA.
Xxxx XXX
The terms contained in Articles I to VII of Part Two of the Elfun
Individual Retirement Custodial Account Agreement have been promulgated by the
IRS in Form 5305-RA for use in establishing a Xxxx XXX Custodial Account that
meets the requirements of Code Section 408A for a valid Xxxx XXX. This IRS
approval relates only to the form of Articles I to VII and is not an approval of
the merits of a Xxxx XXX or of any investment permitted by a Xxxx XXX.
Based on legal advice relating to current tax laws and IRS guidance, State
Street Bank, as Custodian for the Elfun IRAs, believes that the use of an Elfun
Individual Retirement Account Document such as this, containing information for
both an Elfun Traditional IRA or an Elfun Xxxx XXX, will be acceptable to the
IRS. However, if the IRS makes a ruling, or if Congress enacts legislation,
regarding the use of different documentation, State Street Bank will forward to
you new documentation for your Elfun Traditional IRA or Elfun Xxxx XXX (as
appropriate) for you to read and, if necessary, an appropriate New Account Form
to sign. By adopting an Elfun Traditional IRA or an Elfun Xxxx XXX using these
materials, you acknowledge this possibility and agree to this procedure if
necessary. In all cases, to the extent permitted, State Street Bank will treat
your IRA as being opened on the date your account was opened using the New
Account Form in this Document.
Additional Information
For additional information, contact your investment professional or call
0 (000) 000-0000.
17
Custodial Account Agreement
Part One: Traditional IRAs
The following provisions of Articles I to VII are in the form promulgated
by the Internal Revenue Service in Form 5305-A for use in establishing an
individual retirement custodial account.
Article I.
The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total contributions are limited
to $2,000 for the tax year unless the contribution is a rollover contribution
described in section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan as described in section
408(k).
Article II.
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
Article III.
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with other
property except in a common trust fund or common investment fund (within the
meaning of section 408(a)(5) of the Code).
2. No part of the custodial 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 and silver coins and coins issued
under the laws of any state.
Article IV.
1. Notwithstanding any provisions of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin
to the Depositor under paragraph 3, or to the surviving spouse under paragraph
4, other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
3. The Depositor's entire interest in the custodial account must be, or
begin to be, distributed by the Depositor's required beginning date, the April 1
following the calendar year end in which the Depositor reaches age 70 1/2. By
that date, the Depositor may elect, in a manner acceptable to the Custodian, to
have the balance in the custodial account distributed in:
(a) A single-sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly, or annual payments over the joint and last survivor
lives of the Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified
period that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified
period that may not be longer than the joint life and last survivor
expectancy of the Depositor and his or her designated beneficiary.
4. If the Depositor dies before his or her entire interest is distributed
to him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her
interest has begun, distribution must continue to be made in accordance
with paragraph 3.
(b) If the Depositor dies before distribution of his or her interest
has begun, the entire remaining interest will, at the election of the
Depositor or, if the Depositor has not so elected, at the election of the
beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the
fifth anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over
the life or life expectancy of the designated beneficiary or
beneficiaries starting by December 31 of the year following the year
of the Depositor's death. If, however, the beneficiary is the
Depositor's surviving spouse, then this distribution is not required
to begin before December 31 of the year in which the Depositor would
have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Depositor's required beginning date, even though payments may actually have
been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in
the account.
5. In the case of distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment for
each year, divide the Depositor's entire interest in the custodial account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life and last survivor expectancy of
the Depositor and the Depositor's designated beneficiary, or the life expectancy
of the designated beneficiary, whichever applies.) In the case of distributions
under paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Depositor and designated
beneficiary as of their birthdays in the year the Depositor reaches age 70 1/2.
In the case of a distribution in accordance with paragraph 4(b)(ii), determine
life expectancy using the attained age of the designated beneficiary as of the
beneficiary's birthday in the year distributions are required to commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
18
Article V.
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations sections 1.408-5 and 1.408-6.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor as prescribed by the Internal Revenue Service.
Article VI.
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and the related
regulations will be invalid.
Article VII.
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the persons whose signatures appear on the New Account Form.
19
Custodial Account Agreement
Part Two: Xxxx IRAs
The following provisions of Articles I to VII are in the form promulgated
by the Internal Revenue Service in Form 5305-RA for use in establishing a Xxxx
Individual Retirement Custodial Account.
Article I.
1. If this Xxxx XXX is not designated as a Xxxx Conversion IRA, then,
except in the case of a rollover contribution described in section 408A(e), the
Custodian will accept only cash contributions (in the form of a check) and only
up to a maximum amount of $2,000 for any tax year of the Depositor.
2. If this Xxxx XXX is designated as a Xxxx Conversion IRA, no
contributions other than IRA Conversion Contributions made during the same tax
year will be accepted.
Article IA
The $2,000 limit described in Article I is gradually reduced to $0 between
certain levels of adjusted gross income (AGI). For a single Depositor, the
$2,000 annual contribution is phased out between AGI of $95,000 and $110,000;
for a married Xxxxxxxxx who files jointly, between AGI of $150,000 and $160,000;
and for a married Xxxxxxxxx who files separately, between $0 and $10,000. In
case of a conversion, the Custodian will not accept IRA Conversion Contributions
in a tax year if the Depositor's AGI for that tax year exceeds $100,000 or if
the Depositor is married and files a separate return. Adjusted gross income is
defined in section 408A(c)(3) and does not include IRA Conversion Contributions.
Article II.
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
Article III.
1. No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial 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 custodial 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 specified statutes, coins issued under the laws of any
state, and certain bullion.
Article IV.
1. If the Depositor dies before his or her entire interest is distributed
to him or her and the Depositor's surviving spouse is not the sole beneficiary,
the entire remaining interest will at the election of the Depositor or, if the
Depositor has not so elected, at the election of the beneficiary or
beneficiaries, either:
(a) Be distributed by December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(b) Be distributed over the life or life expectancy of the designated
beneficiary starting no later than December 31 of the year following the
year of the Depositor's death.
If distributions do not begin by the date described in (b), distribution
method (a) will apply.
2. In the case of distribution method 1(b) above, to determine the minimum
annual payment for each year, divide the Depositor's entire interest in the
account as of the close of business on December 31 of the preceding year by the
life expectancy of the designated beneficiary. Determine that initial life
expectancy using the attained age of the designated beneficiary as of the
beneficiary's birthday in the year distributions are required to commence and
subtract 1 for each subsequent year.
3. If the Depositor's spouse is the sole beneficiary on the Depositor's
date of death, such spouse will then be treated as the Depositor.
Article V.
1. The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under sections 408(i) and
408A(d)(3)(E), and Regulations section 1.408-5 and 1.408-6, and under guidance
published by the Internal Revenue Service.
2. The Custodian agrees to submit reports to the Internal Revenue Service
and the Depositor as prescribed by the Internal Revenue Service.
Article VI.
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408A, the related
regulations, and other published guidance will be invalid.
Article VII.
This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations, and other published guidance.
Other amendments may be made with the consent of the persons whose signatures
appear below.
20
Custodial Account Agreement
Part Three: Provisions applicable to both Traditional IRAs and Xxxx IRAs
Article VIII.
1. As used in this Article VIII the following terms have the following
meanings:
"Account" or "Custodial Account" means the individual retirement account
established using the terms of either Part One or Part Two and, in either event,
Part Three of this Elfun Individual Retirement Custodial Account Agreement and
the New Account Form signed by the Depositor. The Account may be a Traditional
Individual Retirement Account or a Xxxx Individual Retirement Account, as
specified by the Depositor. See Section 24 below.
"Custodian" means State Street Bank and Trust Company.
"Distributor" means GE Investment Distributors, Inc. which has a contract
with the Elfun Funds to serve as distributor of the shares of such Funds.
In any case where there is no Distributor, the duties assigned hereunder to
the Distributor may be performed by the Elfun Funds, or by an entity that has a
contract to perform management, administrative or investment advisory services
for the Fund(s).
"Elfun Fund(s) or Fund(s)" means a mutual fund or registered investment
company which is specified in the Application, or which is designated by the
Distributor named in the Application, as being available as an investment for
the Custodial Account; provided, however, that such a mutual fund or registered
investment company must be legally offered for sale in the state and country of
the Depositor's residence in order to be an Elfun Fund hereunder.
"Service Company" means any entity employed by the Custodian or the
Distributor, including the transfer agent for the Fund(s), to perform various
administrative duties of either the Custodian or the Distributor.
In any case where there is no Service Company, the duties assigned
hereunder to the Service Company will be performed by the Distributor or by an
entity specified in the paragraph following the definition of the term
"Distributor," and references herein to Service Company shall be deemed to be
references to such Distributor or to such other entity.
"Sponsor" means GE Investment Distributors, Inc. and its affiliates.
2. The Depositor may revoke the Custodial Account established hereunder by
mailing or delivering a written notice of revocation to the Custodian within
seven days after the Depositor receives the Disclosure Statement related to the
Custodial Account. Mailed notice is treated as given to the Custodian on date of
the postmark (or on the date of Post Office certification or registration in the
case of notice sent by certified or registered mail). Upon timely revocation,
the Depositor's initial contribution will be returned, without adjustment for
administrative expenses, brokerage fees or commissions, sales or advisory
charges, fluctuations in market value or other changes.
The Depositor may certify in the New Account Form that the Depositor
received the Disclosure Statement related to the Custodial Account at least
seven days before the Depositor signed the New Account Form to establish the
Custodial Account, and the Custodian may rely upon such certification.
3. All contributions to the Custodial Account shall be invested and
reinvested in full and fractional shares of one or more Elfun Funds, provided
that investments in one or more Elfun Funds are available unless the Depositor
fails to meet any of the eligibility requirements specified in the then
effective prospectus for such Elfun Fund(s).
Such investments shall be made in such proportions and/or in such amounts
as Depositor from time to time in the New Account Form or by other written
notice to the Service Company (in such form as may be acceptable to the Service
Company) may direct.
The Service Company shall be responsible for promptly transmitting all
investment directions by the Depositor for the purchase or sale of shares of one
or more Elfun Funds hereunder to the Elfun Funds' transfer agent. However, if
investment directions with respect to the investment of any contribution
hereunder are not received from the Depositor as required or, if received, are
unclear or incomplete in the opinion of the Service Company, or the instructions
are for a transaction that is not permitted by the terms hereof, such
contributions may, at the discretion of the Service Company, either be returned
to the Depositor or invested and held in the Elfun Money Market Fund, without
any liability on the part of the Service Company for any resulting loss of
income or appreciation or depreciation, pending receipt of appropriate
investment instructions, further clarification, or confirmation of eligibility.
If instructions regarding existing assets held in the Custodial Account are
received by the Service Company with respect to the purchase or redemption of
any Elfun Fund, receipt or disposition of any dividends on or the proceeds of a
redemption or sale of shares of the Elfun Funds or other transaction, which are
unclear or incomplete in the opinion of the Service Company, the Service Company
may, at its discretion, either refrain from carrying out such instructions, or,
in the case of dividends on or the proceeds of a redemption or sale of existing
assets, invest and hold such amounts in the Elfun Money Market Fund, without any
liability on the part of the Service Company for any resulting loss of income or
appreciation or depreciation, pending receipt of appropriate instructions,
further clarification or confirmation of eligibility. No interest or other
investment return will be paid to the Custodial Account on any cash amounts
contributed to or held as assets in the Custodial Account, except for returns on
assets invested in Elfun Funds, pending receipt of appropriate instructions,
further clarification or confirmation of eligibility.
All investment directions by Depositor will be subject to any minimum
initial or additional investment or minimum balance rules applicable to Elfun
Funds as described in its prospectus.
All dividends and capital gains or other distributions received on the
shares of any Elfun Fund held in the Depositor's Account shall be (unless
received in additional shares) reinvested in full and fractional shares of such
Elfun Fund (or of any other Elfun Fund offered by the Sponsor, if so directed).
4. Subject to the minimum initial or additional investment, minimum balance
and other exchange rules applicable to Elfun Funds, the Depositor may at any
time direct the Service Company or the Distributor, as applicable, to exchange
all or a specified portion of the assets in the Depositor's Account for shares
and fractional shares of one or more Elfun Funds. The Depositor shall give such
directions by written notice acceptable to the Service Company or the
Distributor, as applicable, and the Service Company or the Distributor, as
applicable, will process such directions as soon as practicable after receipt
thereof (subject to the third paragraph of Section 3 of this Article VIII).
5. Any purchase or redemption of shares of Elfun Funds for or from the
Depositor's Account will be effected at the public
21
offering price or net asset value of such Fund (as described in the then
effective prospectus for such Fund) next established after the Service Company
has transmitted the Depositor's investment directions to the transfer agent for
the Fund(s).
Any purchase, exchange, transfer or redemption of shares of an Elfun Fund
or from the Depositor's Account will be subject to any applicable sales,
redemption or other charge as described in the then effective prospectus for
such Fund.
6. The Service Company shall maintain adequate records of all transactions
transmitted by it. Any account maintained in connection herewith shall be in the
name of the Custodian for the benefit of the Depositor. All assets of the
Custodial Account shall be registered in the name of the Custodian or of a
suitable nominee. The books and records of the Custodian shall show that all
such investments are part of the Custodial Account.
The Custodian shall maintain or cause to be maintained adequate records
reflecting transactions of the Custodial Account. In the discretion of the
Custodian, records maintained by the Service Company with respect to the Account
hereunder will be deemed to satisfy the Custodian's recordkeeping
responsibilities therefor. The Service Company agrees to furnish the Custodian
with any information the Custodian requires to carry out the Custodian's
recordkeeping responsibilities.
7. Neither the Custodian nor any other party providing services to the
Custodial Account will have any responsibility for rendering advice with respect
to the investment and reinvestment of Depositor's Custodial Account, nor shall
such parties be liable for any loss or diminution in value which results from
Depositor's exercise of investment control over his Custodial Account. Depositor
shall have and exercise exclusive responsibility for and control over the
investment of the assets of his Custodial Account, and neither Custodian nor any
other such party shall have any duty to question his directions in that regard
or to advise him regarding the purchase, retention or sale of such assets.
8. The Depositor may in writing appoint an investment adviser with respect
to the Custodial Account on a form acceptable to the Custodian and the Service
Company. The investment adviser's appointment will be in effect until written
notice to the contrary is received by the Custodian and the Service Company.
While an investment adviser's appointment is in effect, the investment adviser
may issue investment instructions to the Service Company, and the Service
Company will be fully protected in carrying out such investment directions or
orders to the same extent as if they had been given by the Depositor.
The Depositor's appointment of any investment adviser will also be deemed
to be instructions to the Custodian and the Service Company to pay such
investment adviser's fees to the investment adviser from the Custodial Account
hereunder without additional authorization by the Depositor or the Custodian.
9. Distribution of the assets of the Custodial Account shall be made at
such time and in such form as Depositor (or the Beneficiary if Depositor is
deceased) shall elect by written order to the Custodian. Depositor acknowledges
that any distribution of a taxable amount from the Custodial Account (except for
distribution on account of Depositor's disability or death, return of an "excess
contribution" referred to in Code Section 4973, or a "rollover" from this
Custodial Account) made earlier than age 59 1/2 may subject Depositor to an
"additional tax on early distributions" under Code Section 72(t) unless an
exception to such additional tax is applicable. For that purpose, Depositor will
be considered disabled if Depositor can prove, as provided in Code Section
72(m)(7), that Depositor is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment which can
be expected to result in death or be of long-continued and indefinite duration.
It is the responsibility of the Depositor (or the Beneficiary) by appropriate
distribution instructions to the Custodian to insure that any applicable
distribution requirements of Code Section 401(a)(9) and Article IV above are
met. If the Depositor (or Beneficiary) does not direct the Custodian to make
distributions from the Custodial Account by the time that such distributions are
required to commence in accordance with such distribution requirements (to the
extent applicable), the Custodian (and Service Company) shall assume that the
Depositor (or Beneficiary) is meeting the minimum distribution requirements from
another individual retirement arrangement maintained by the Depositor (or
Beneficiary) and the Custodian and Service Company shall be fully protected in
so doing. The Depositor (or the Depositor's surviving spouse) may elect to
comply with the applicable distribution requirements in Article IV using the
recalculation of life expectancy method, or may elect that the life expectancy
of the Depositor and/or the Depositor's surviving spouse, as applicable, will
not be recalculated; any such election may be in such form as the Depositor (or
surviving spouse) provides (including the calculation of minimum distribution
amounts in accordance with a method that does not provide for recalculation of
the life expectancy of one or both of the Depositor and surviving spouse and
instructions for withdrawals to the Custodian in accordance with such method).
Notwithstanding paragraph 2 of Article IV, unless an election to have life
expectancies recalculated annually is made by the time distributions are
required to begin, life expectancies shall not be recalculated. Neither the
Custodian nor any other party providing services to the Custodial Account
assumes any responsibility for the tax treatment of any distribution from the
Custodial Account; such responsibility rests solely with the person ordering the
distribution.
10. The Custodian assumes (and shall have) no responsibility to make any
distribution except upon the written order of Depositor (or Beneficiary if
Depositor is deceased) containing such information as the Custodian may
reasonably request. Also, before making any distribution or honoring any
assignment of the Custodial Account, Custodian shall be furnished with any and
all applications, certificates, tax waivers, signature guarantees and other
documents (including proof of any legal representative's authority) deemed
necessary or advisable by Custodian, but Custodian shall not be responsible for
complying with any order or instruction which appears on its face to be genuine,
or for refusing to comply if not satisfied it is genuine, and Custodian has no
duty of further inquiry. Any distributions from the Account may be mailed,
first-class postage prepaid, to the last known address of the person who is to
receive such distribution, as shown on the Custodian's records, and such
distribution shall to the extent thereof completely discharge the Custodian's
liability for such payment.
11. (a) The term "Beneficiary" means the person or persons designated as
such by the "designating person" (as defined below) on a form acceptable to the
Custodian for use in connection with the Custodial Account, signed by the
designating person, and filed with the Custodian. The form may name individuals,
trusts, estates, or other entities as either primary or contingent
beneficiaries. However, if the designation does not effectively dispose of the
entire Custodial Account as of the time distribution is to commence, the term
"Beneficiary" shall then mean the designating person's estate with respect to
the assets of the Custodial Account not disposed of by the designation form. The
form last accepted by the Custodian before such distribution is to commence,
provided it was received by the Custodian (or deposited in the U.S. Mail or with
a reputable delivery service) during the designating person's lifetime, shall be
controlling and, whether or not fully dispositive of the Custodial Account,
thereupon shall revoke all such forms previously filed by that person. The term
"designating person" means the Depositor during his/her lifetime; after the
Depositor's death, it also means the Depositor's spouse, but only if the spouse
elects to treat the Custodial Account as the spouse's own Custodial Account in
accordance with applicable provisions of the Code.
(b) When and after distributions from the Custodial Account to the
Depositor's Beneficiary commence, all rights and obligations assigned to the
Depositor hereunder shall inure to, and be enjoyed and exercised by, the
Beneficiary instead of the Depositor.
22
12. (a) The Depositor agrees to provide information to the Custodian at
such time and in such manner as may be necessary for the Custodian to prepare
any reports required under Section 408(i) or Section 408A(d)(3)(E) of the Code
and the regulations thereunder or otherwise.
(b) The Custodian or the Service Company will submit reports to the
Internal Revenue Service and the Depositor at such time and manner and
containing such information as is prescribed by the Internal Revenue Service.
(c) The Depositor, Custodian and Service Company shall furnish to each
other such information relevant to the Custodial Account as may be required
under the Code and any regulations issued or forms adopted by the Treasury
Department thereunder or as may otherwise be necessary for the administration of
the Custodial Account.
(d) The Depositor shall file any reports to the Internal Revenue Service
which are required by law (including Form 5329), and neither the Custodian nor
Service Company shall have any duty to advise the Depositor, concerning or
monitor the Depositor's compliance with, such requirement.
13. (a) The Depositor retains the right to amend this Custodial Account
document in any respect at any time, effective on a stated date which shall be
at least 60 days after giving written notice of the amendment (including its
exact terms) to the Custodian by registered or certified mail, unless the
Custodian waives notice as to such amendment. If the Custodian does not wish to
continue serving as such under this Custodial Account document as so amended, it
may resign in accordance with Section 17 below.
(b) The Depositor delegates to the Custodian the Depositor's right so to
amend, provided (i) the Custodian does not substitute other investments for
existing investments under this Custodial Agreement and (ii) the Custodian
amends in the same manner all agreements comparable to this one, having the same
Custodian, permitting comparable investments, and under which such power has
been delegated to it; this includes the power to amend retroactively if
necessary or appropriate in the opinion of the Custodian in order to conform
this Custodial Account to pertinent provisions of the Code and other laws or
successor provisions of law, or to obtain a governmental ruling that such
requirements are met, to adopt a prototype or master form of agreement in
substitution for this Agreement, or as otherwise may be advisable in the opinion
of the Custodian. Such an amendment by the Custodian shall be communicated in
writing to the Depositor, and the Depositor shall be deemed to have consented
thereto unless, within 30 days after such communication to the Depositor is
mailed, the Depositor either (i) gives the Custodian a written order for a
complete distribution or transfer of the Custodial Account, or (ii) removes the
Custodian and appoints a successor under Section 17 below.
Pending the adoption of any amendment necessary or desirable to conform
this Custodial Account document to the requirements of any amendment to any
applicable provision of the Internal Revenue Code or regulations or rulings
thereunder, the Custodian and the Service Company may operate the Depositor's
Custodial Account in accordance with such requirements to the extent that the
Custodian and/or the Service Company deem necessary to preserve the tax benefits
of the Account.
(c) Notwithstanding the provisions of subsections (a) and (b) above, no
amendment shall increase the responsibilities or duties of the Custodian without
its prior written consent.
(d) This Section 13 shall not be construed to restrict the Custodian's
right to substitute fee schedules in the manner provided by Section 16 below,
and no such substitution shall be deemed to be an amendment of this Agreement.
14. (a) Custodian shall terminate the Custodial Account if this Agreement
is terminated or if, within 30 days (or such longer time as the Custodian may
agree) after resignation or removal of the Custodian under Section 17, Depositor
or Sponsor, as the case may be, has not appointed a successor which has accepted
such appointment. Termination of the Custodial Account shall be effected by
distributing all assets thereof in a single payment in cash or in kind to the
Depositor, subject to the Custodian's right to reserve funds as provided in
Section 17.
(b) Upon termination of the Custodial Account, this custodial account
document shall have no further force and effect (except for Sections 15(f),
17(b) and (c) hereof which shall survive the termination of the Custodial
Account and this document), and the Custodian shall be relieved from all further
liability hereunder or with respect to the Custodial Account and all assets
thereof so distributed.
15. (a) In its discretion, the Custodian may appoint one or more
contractors or service providers to carry out any of its functions and may
compensate them from the Custodial Account for expenses attendant to those
functions. In the event of such appointment, all rights and privileges of the
Custodian under this Agreement shall pass through to such contractors or service
providers who shall be entitled to enforce them as if a named party.
(b) The Service Company shall be responsible for receiving all
instructions, notices, forms and remittances from the Depositor and for dealing
with or forwarding the same to the transfer agent for the Fund(s) or the
Custodian, as appropriate.
(c) The parties do not intend to confer any fiduciary duties on the
Custodian, Service Company or the Sponsor (or any other party providing services
to the Custodial Account), and none shall be implied. None of such parties shall
be liable (or assumes any responsibility) for the collection of contributions,
the proper amount, time or tax treatment of any contribution to the Custodial
Account or the propriety of any contributions under this Agreement, or the
purpose, time, amount (including any minimum distribution amounts), tax
treatment or propriety of any distribution hereunder, which matters are the sole
responsibility of the Depositor and Depositor's Beneficiary.
(d) Not later than 60 days after the close of each calendar year (or after
the Custodian's resignation or removal), the Custodian or Service Company shall
file with the Depositor a written report or reports reflecting the transactions
effected by it during such period and the assets of the Custodial Account at its
close. Upon the expiration of 60 days after such a report is sent to the
Depositor (or the Beneficiary), the Custodian or Service Company shall be
forever released and discharged from all liability and accountability to anyone
with respect to transactions shown in or reflected by such report except with
respect to any such acts or transactions as to which the Depositor shall have
filed written objections with the Custodian or Service Company within such 60
day period.
(e) The Service Company shall deliver, or cause to be delivered, to the
Depositor all notices, prospectuses, financial statements and other reports to
shareholders, proxies and proxy soliciting materials relating to assets credited
to the Custodial Account. No shares shall be voted, and no other action shall be
taken pursuant to such documents, except upon receipt of adequate written
instructions from the Depositor.
(f) The Depositor shall always fully indemnify the Service Company,
Distributor, Sponsor, Custodian, and Elfun Funds and save them harmless from any
and all liability whatsoever which may arise either (i) in connection with this
Agreement and the matters which it contemplates, except that which arises
directly out of the Service Company's, Distributor's, Xxxxxxx's, Custodian's or
Elfun Funds' bad faith, gross negligence or willful misconduct, (ii) with
respect to making or failing to make any distribution, other than for failure to
make distribution in accordance with an order therefor which is in full
compliance with Section 10, or (iii) actions taken or omitted in good faith by
such parties. Neither the Service Company nor the Custodian shall be obligated
or expected to commence or defend any legal action or proceeding in connection
with this Agreement or such matters unless agreed upon by that party and the
Depositor, and unless fully indemnified for so doing to that party's
satisfaction.
23
(g) The Custodian and the Service Company shall each be responsible solely
for performance of those duties expressly assigned to it in this Agreement, and
neither assumes any responsibility as to duties assigned to anyone else
hereunder or by operation of law.
(h) The Custodian, Distributor, Elfun Funds, Sponsor and Service Company
may each conclusively rely upon and shall be protected in acting upon any
written order from the Depositor or the Beneficiary, or any investment adviser
appointed under Section 8, or any other notice, request, consent, certificate or
other instrument or paper believed by it to be genuine and to have been properly
executed, and so long as it acts in good faith, in taking or omitting to take
any other action in reliance thereon. In addition, the Custodian will carry out
the requirements of any apparently valid court order relating to the Custodial
Account and will incur no liability or responsibility for so doing.
16. (a) The Custodian, in consideration of its services under this
Agreement, shall receive the fees specified on the applicable fee schedule. The
fee schedule originally applicable shall be the one specified in the New Account
Form or Disclosure Statement, as applicable. The Custodian may substitute a
different fee schedule at any time upon 30 days' written notice to Depositor.
The Custodian shall also receive reasonable fees for any services not
contemplated by any applicable fee schedule and either deemed by it to be
necessary or desirable or requested by the Depositor.
(b) Any income, gift, estate and inheritance taxes and other taxes of any
kind whatsoever, including transfer taxes incurred in connection with the
investment or reinvestment of the assets of the Custodial Account, that may be
levied or assessed in respect to such assets, and all other administrative
expenses incurred by the Custodian in the performance of its duties (including
fees for legal services rendered to it in connection with the Custodial Account)
shall be charged to the Custodial Account. If the Custodian is required to pay
any such amount, the Depositor (or Beneficiary) shall promptly upon notice
thereof reimburse the Custodian.
(c) All such fees and taxes and other administrative expenses charged to
the Custodial Account shall be collected either from the amount of any
contribution or distribution to or from the Account, or (at the option of the
person entitled to collect such amounts) to the extent possible under the
circumstances by the conversion into cash of sufficient assets held in the
Custodial Account (without liability for any loss incurred thereby).
Notwithstanding the foregoing, the Custodian or Service Company may make demand
upon the Depositor for payment of the amount of such fees, taxes and other
administrative expenses. Fees which remain outstanding after 60 days may be
subject to a collection charge.
17. (a) Upon 30 days' prior written notice to the Custodian, Depositor or
Sponsor, as the case may be, may remove the Custodian from its office hereunder.
Such notice, to be effective, shall designate a successor custodian and shall be
accompanied by the successor's written acceptance. The Custodian also may at any
time resign upon 30 days' prior written notice to the Sponsor, whereupon the
Sponsor shall notify the Depositor (or Beneficiary) and shall appoint a
successor to the Custodian. In connection with its resignation hereunder, the
Custodian may, but is not required to designate a successor custodian by written
notice to the Sponsor or Depositor (or Beneficiary), and the Sponsor or
Depositor (or Beneficiary) will be deemed to have consented to such successor
unless the Sponsor or Depositor (or Beneficiary) designates a different
successor custodian and provides written notice thereof together with such a
different successor's written acceptance by such date as the Custodian specifies
in its original notice to the Sponsor or Depositor (or Beneficiary); provided
that the Sponsor or Depositor (or Beneficiary) will have a minimum of 30 days to
designate a different successor.
(b) The successor custodian shall be a bank, insured credit union, or other
person satisfactory to the Secretary of the Treasury under Code Section
408(a)(2). Upon receipt by the Custodian of written acceptance by its successor
of such successor's appointment, the Custodian shall transfer and pay over to
such successor the assets of the Custodial Account and all records (or copies
thereof) of the Custodian pertaining thereto, provided that the successor
custodian agrees not to dispose of any such records without the Custodian's
consent. The Custodian is authorized, however, to reserve such sum of money or
property as it may deem advisable for payment of all its fees, compensation,
costs, and expenses, or for payment of any other liabilities constituting a
charge on or against the assets of the Custodial Account or on or against the
Custodian, with any balance of such reserve remaining after the payment of all
such items to be paid over to the successor custodian.
(c) Any Custodian shall not be liable for the acts or omissions of its
predecessor or its successor.
18. References herein to the "Internal Revenue Code" or "Code" and sections
thereof shall mean the same as amended from time to time, including successors
to such sections.
19. Except where otherwise specifically required in this Agreement, any
notice from the Custodian to any person provided for in this Agreement shall be
effective if sent by first-class mail to such person at that person's last
address on the Custodian's records.
20. The Depositor or Depositor's Beneficiary shall not have the right or
power to anticipate any part of the Custodial Account or to sell, assign,
transfer, pledge or hypothecate any part thereof. The Custodial Account shall
not be liable for the debts of the Depositor or Depositor's Beneficiary or
subject to any seizure, attachment, execution or other legal process in respect
thereof except to the extent required by law. At no time shall it be possible
for any part of the assets of the Custodial Account to be used for or diverted
to purposes other than for the exclusive benefit of the Depositor or his/her
Beneficiary except to the extent required by law.
21. When accepted by the Custodian, this Agreement is accepted in and shall
be construed and administered in accordance with the laws of the state where the
principal offices of the Custodian are located. Any action involving the
Custodian brought by any other party must be brought in a state or federal court
in such state.
If in the New Account Form, the Depositor designates that the Custodial
Account is a Traditional IRA, this Agreement is intended to qualify under Code
Section 408(a) as an individual retirement custodial account and to entitle the
Depositor to the retirement savings deduction under Code Section 219 if
available. If in the New Account Form the Depositor designates that the
Custodial Account is a Xxxx XXX, this Agreement is intended to qualify under
Code Section 408A as a Xxxx individual retirement custodial account and to
entitle Depositor to the tax-free withdrawal of amounts from the Custodial
Account to the extent permitted in such Code section.
If any provision hereof is subject to more than one interpretation or any
term used herein is subject to more than one construction, such ambiguity shall
be resolved in favor of that interpretation or construction which is consistent
with the intent expressed in whichever of the two preceding sentences is
applicable.
However, the Custodian shall not be responsible for whether or not such
intentions are achieved through use of this Agreement, and the Depositor is
referred to the Depositor's financial or legal adviser for any such assurances.
22. The Depositor should seek advice from the Depositor's attorney
regarding the legal consequences (including but not limited to federal and state
tax matters) of entering into this Agreement, contributing to the Custodial
Account, and ordering the Custodian to make distributions from the Account. The
Depositor acknowledges
24
that the Custodian and Service Company (and any company associated therewith)
are prohibited by law from rendering such advice.
23. If any provision of any document governing the Custodial Account
provides for notice, instructions or other communications from one party to
another in writing, to the extent provided for in the procedures of the
Custodian, Service Company or another party, any such notice, instructions or
other communications may be given by telephonic, computer, other electronic or
other means, and the requirement for written notice will be deemed satisfied.
24. The legal documents governing the Custodial Account are as follows:
(a) If in the New Account Form the Depositor designated the Custodial
Account as a Traditional IRA under Code Section 408(a), the provisions of
Part One and Part Three of this Agreement and the provisions of the New
Account Form are the legal documents governing the Depositor's Custodial
Account.
(b) If in the New Account Form the Depositor designated the Custodial
Account as a Xxxx XXX under Code Section 408A, the provisions of Part Two
and Part Three of this Agreement and the provisions of the New Account Form
are the legal documents governing the Depositor's Custodial Account.
(c) In the New Account Form the Depositor must designate the Custodial
Account as either a Xxxx XXX or a Traditional IRA, and a separate account
will be established for such IRA. One Custodial Account may not serve as a
Xxxx XXX and a Traditional IRA (through the use of subaccounts or
otherwise).
25. Articles I through VII of Part One of this Agreement are in the form
promulgated by the Internal Revenue Service as Form 5305-A. It is anticipated
that, if and when the Internal Revenue Service promulgates changes to Form
5305-A, the Custodian will amend this Agreement correspondingly.
Articles I through VII of Part Two of this Agreement are in the form
promulgated or approved by the Internal Revenue Service as Form 5305-RA. It is
anticipated that, if and when the Internal Revenue Service promulgates changes
to Form 5305-RA, the Custodian will amend this Agreement correspondingly.
The Internal Revenue Service has endorsed the use of documentation
permitting a Depositor to establish either a Traditional IRA or Xxxx XXX (but
not both using a single New Account Form), and this Document complies with the
requirements of the IRS guidance for such use. If the Internal Revenue Service
subsequently determines that such an approach is not permissible, or that the
use of a "combined" New Account Form does not establish a valid Traditional IRA
or a Xxxx XXX (as the case may be), the Custodian will furnish the Depositor
with replacement documents and the Depositor will if necessary sign such
replacement documents. The Depositor acknowledges and agrees to such procedures
and to cooperate with the Custodian to preserve the intended tax treatment of
the Account.
26. If the Depositor maintains an Individual Retirement Account under Code
section 408(a), the Depositor may convert or transfer such other IRA to a Xxxx
XXX under Code section 408A using the terms of this Agreement and the New
Account Form by completing and executing the New Account Form and giving
suitable directions to the Custodian and the custodian or trustee of such other
IRA. Alternatively, the Depositor may convert or transfer such other IRA to a
Xxxx XXX by use of a reply card or by telephonic, computer or electronic means
in accordance with procedures adopted by the Custodian or Service Company
intended to meet the requirements of Code section 408A, and the Depositor will
be deemed to have executed the New Account Form and adopted the provisions of
this Agreement and the New Account Form in accordance with such procedures.
27. The Depositor acknowledges that he or she has received and read the
current prospectus for each Elfun Fund in which his or her Account is invested
and the Elfun Individual Retirement Account Disclosure Statement related to the
Account. The Depositor represents under penalties of perjury that his or her
Social Security number (or other Taxpayer Identification Number) as stated in
the New Account Form is correct.
25
Elfun Funds
0000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
[LOGO]
--------------------------------------------------------------------------------
Distributed by GE Investment Distributors, Inc., member NASD and SIPC
ELF-IRA-31
