Individual Retirement Custodial Account Agreement (Under Section 408(a) of the
Internal Revenue Code)
WITNESSETH:
WHEREAS, the individual establishing the custodial account described herein
(the "Investor") desires to provide for his retirement and for the support of
his beneficiaries upon his death; and
WHEREAS, to accomplish this purpose, the Investor desires to establish an
Individual Retirement Account as described in section 408(a) of the Internal
Revenue Code of 1986, as amended, or any successor statute (hereinafter
referred to as the "Code"); and
WHEREAS, by executing the XXX application attached hereto, the Investor
accepts and agrees to the terms and provisions of this Custodial Agreement,
including the appointment of Investors Fiduciary Trust Company, or its
successors, as Custodian of the custodial account established hereunder (the
"Account");
NOW, THEREFORE, the Investor and the Custodian hereby agree as follows:
ARTICLE I
1. The Custodian will accept contributions in cash from the Investor during a
taxable year of the Investor subject to the limitations of paragraph 2. The
amount of each contribution by or on behalf of the Investor shall be applied to
the purchase of shares of one or more of the of the Vista Funds designated by
the Investor (hereinafter the "Fund(s)"). All dividends and capital gains
distributions received on securities held in the Account shall be reinvested in
additional shares of the designated Fund(s) and credited to the Account.
2. Except in the case of a rollover contribution as that term is described in
Sections 402(a)(5), 402(a)(7), 403(a)(4), 403(b)(8) or 408(d)(3) of the Code, a
direct transfer of assets from another individual retirement account described
under Section 408 of the Code, or as provided under Section 3, below, the
Custodian will not accept contributions on behalf of the Investor in excess of
$2,000 for any taxable year of the Investor.
3. If the Investor is a participating employee in a Simplified Employee
Pension ("SEP") as defined in section 408(k) of the Code, the Custodian will
accept cash contributions from the Investor's employer, which, in any year, are
not greater than the lesser of $30,000 or 15% of the Investor's total
compensation from such employer for that year.
ARTICLE II
Assets held in the Account will be held beneficially for the Investor in the
name of the Custodian or its nominee. The interest of an Investor in the
balance held under the Account shall at all times be nonforfeitable. The
Account is established for the exclusive benefit of the Investor and his or her
beneficiaries.
ARTICLE III
No part of the funds held in the Account shall be invested in life insurance
contracts or in collectibles, as defined in Section 408(m)(2) of the Code, nor
may the assets of the 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).
ARTICLE IV
1. (a) The entire interest of the Investor in the Account must be, or commence
to be, distributed by the April 1st immediately following the close of the
calendar year in which the Investor attains age 70-1/2 (the "Required Beginning
Date"). The minimum required distribution must be calculated separately for
each of the Investor's IRAs, but the amounts so determined may be totalled and
distributed from any one or more of the Investor's IRAs. Not later than the
March 1st immediately preceding the Required Beginning Date, the Investor may
elect, in a form and at such time as may be acceptable to the Custodian, to
have the balance in the Account distributed as follows (subject to the
provisions of Section 3 of this Article IV):
(i) a single sum payment;
(ii) an annuity contract providing equal or substantially equal monthly,
quarterly, semiannual or annual payments commencing not later than the Required
Beginning Date and paid over the life of the Investor;
(iii) an annuity contract providing equal or substantially equal monthly,
quarterly, semiannual or annual payments commencing not later than the Required
Beginning Date and paid over the joint and several lives of the Investor and
his beneficiary;
(iv) equal or substantially equal monthly, quarterly, semiannual or annual
payments commencing not later than the Required Beginning Date and paid over a
period certain not extending beyond the life expectancy of the Investor; or
(v) equal or substantially equal monthly, quarterly, semiannual or annual
payments commencing not later than the Required Beginning Date and paid over a
period certain not extending beyond the joint and last survivor life expectancy
of the Investor and his beneficiary.
(b) (i) If the Investor's entire interest is to be distributed in other than
a lump sum, then the amount to be distributed each year (commencing with the
Required Beginning Date and each year thereafter) must be at least equal to the
quotient obtained by dividing the Investor's benefit by the applicable life
expectancy.
(ii) For calendar years beginning before January 1, 1989, if the
Investor's spouse is not the designated beneficiary, the method of distribution
selected must assure that at least 50% of the present value of the amount
available for distribution is paid within the life expectancy of the Investor.
(iii) For calendar years beginning after December 31, 1988, the amount to
be distributed each year, beginning with the first year for which distributions
are required and then for each succeeding calendar year, shall not be less than
the quotient obtained by dividing the Investor's benefit by the lesser of (1)
the applicable life expectancy or (2) if the Investor's spouse is not the
designated beneficiary, the applicable divisor determined from the table set
forth in Q&A-4 of Section 1.401(a)(9)-2 of the Proposed Income Tax Regulations.
Distributions after the death of the Investor shall be calculated using the
applicable life expectancy as the relevant divisor without regard to Proposed
Regulations Section1.401(a)(9)-2.
(iv) Life expectancy is computed by use of the expected return multiples
in Tables V and VI of Section 1.72-9 of the Income Tax Regulations. Unless
otherwise elected by the Investor by the time distributions are required to
begin, life expectancies shall be recalculated annually. Such election shall be
irrevocable as to the Investor and shall apply to all subsequent years. The
life expectancy of a non-spouse beneficiary may not be recalculated; instead,
life expectancy will be calculated using the attained age of such beneficiary
during the calendar year in which distributions are required to begin pursuant
to this section, and payments for subsequent years shall be calculated based on
such life expectancy reduced by one for each calendar year which has elapsed
since the calendar year life expectancy was first calculated.
(v) If the Investor fails to elect any of the methods of distribution
described above on or before the March 1st immediately following the close of
his taxable year in which he or she attains the age 70-1/2, distribution to the
Investor will commence by the following April 1st under the mode of
distribution set forth under (a)(iv), above, (or under (a)(v), above, if the
Investor has previously designated a beneficiary and such designation was not
revoked prior to the Investor's death). Notwithstanding that distributions may
or may not have commenced pursuant to options (a)(iv) or (a)(v), and regardless
of whether such distributions are made pursuant to the election of the Investor
or upon application of the provisions of this paragraph, the Investor may
receive distribution of any additional portion of the balance in the Account at
any time upon written notice to the Custodian.
2. If the Investor dies before the entire interest in the Account is
distributed, the following provisions shall apply:
(a) If the Investor dies after the Required Beginning Date, the remaining
portion of such interest will be distributed to the Investor's beneficiary or
beneficiaries at least as rapidly as under the method of distribution being
used prior to the Investor's death.
(b) If the Investor dies before the Required Beginning Date, the remaining
portion of the Investor's interest will be distributed in accordance with one
of the following four provisions:
(i) If the Investor's interest is payable to a beneficiary or
beneficiaries designated by the Investor, then the remaining interest will be
distributed in substantially equal installments over a period not exceeding the
life expectancy or life expectancies of the beneficiary or beneficiaries
designated by the Investor commencing no later than December 31st of the year
following the year of the Investor's death. The beneficiary or beneficiaries
may elect at any time to accelerate the receipt of such payments.
(ii) The Investor's remaining interest will be paid to his beneficiary or
beneficiaries at any time on or before December 31st of the year which includes
the fifth anniversary of the Investor's death.
(iii) If the designated beneficiary of the Investor is the Investor's
surviving spouse, the spouse may elect to receive equal or substantially equal
payments over the life or life expectancy of the surviving spouse commencing at
any date prior to the later of (1) December 31 of the calendar year immediately
following the calendar year in which the Investor died and (2) December 31 of
the calendar year in which the Investor would have attained age 70-1/2. Such
election must be made no later than the earlier of December 31 of the calendar
year containing the fifth anniversary of the Investor's death or the date
distributions are required to begin pursuant to the preceding sentence. The
surviving spouse may accelerate these payments at any time, i.e., increase the
frequency or amount of such payments.
(iv) If the designated beneficiary is the Investor's surviving spouse, the
spouse may, by written notice to the Custodian, treat the Account as his or her
own XXX. Such election must be made by the December 31st of the calendar year
in which occurs the fifth anniversary of the Investor's death. This election
will be deemed to have been made if such surviving spouse makes a regular XXX
contribution to the Account or makes a rollover to or from the Account.
For purposes of the above, payments will be calculated by use of the return
multiples specified in Tables V and VI of Section 1.72-9 of the Income Tax
Regulations. At the election of the Investor or the surviving spouse, life
expectancy of the surviving spouse may be recalculated annually. In the event
the Investor fails to elect the method of distribution to his beneficiary or
beneficiaries, such election shall be made by his beneficiary or beneficiaries
but no later than November 30th of the year following the year of the
Investor's death. If the beneficiary or beneficiaries fail to make such an
election in a timely manner, distributions shall be made under item (i), above
(or, if the Investor's beneficiary is his or her surviving spouse, under item
(iii), above as if the election set forth under such item (iii) had been made)
and, if the beneficiary is the Investor's surviving spouse, by recalculating
the life expectancy of such surviving spouse.
3. Notwithstanding any other provision of this Agreement to the contrary, the
amount and timing of the distributions from the Account shall satisfy the
applicable requirements of Code Sections 408 and 401(a) and the regulations
promulgated thereunder.
ARTICLE V
Except in the case of the Investor's death or disability (as defined in Section
72(m)(7) of the Code) or attainment of age 59H, before distributing an amount
from the Account the Custodian shall receive from the Investor a declaration of
the Investor's intention as to the disposition of the amount distributed.
ARTICLE VI
1. The Investor agrees to provide information to the Custodian at such time
and in such manner and containing such information as may be necessary for the
Custodian to prepare any reports required pursuant to Section 408(i) of the
Code and the regulations thereunder.
2. The Investor and the successors of the Investor (including any executor or
administrator of the Investor's estate) shall, to the extent permitted by law,
indemnify the Custodian and its successors and assigns against any and all
claims or actions of the Investor or liabilities of the Custodian to the
Investor or the successors or beneficiaries of the Investor whatsoever
(including, without limitation, all reasonable expenses incurred in defending
against or in settlement of such claims, actions or liabilities) which may
arise in connection with this Agreement or the Custodial Account, except those
due to the Custodian's own bad faith, gross negligence or willful misconduct.
The Custodian shall not be under any duty to take any action not specified in
this Agreement unless the Investor shall furnish it with instructions in proper
form and such instructions shall have been specifically agreed to by the
Custodian, or to defend or engage in any suit with respect hereto unless it
shall have first agreed in writing to do so and shall have been fully
indemnified to its satisfaction.
3. The Custodian agrees to submit reports to the Internal Revenue Service and
the Investor at such time and in such manner and containing such information as
is prescribed by the Internal Revenue Service.
ARTICLE VII
1. Notwithstanding any other provision of this Agreement to the contrary, the
terms and operation of this Agreement shall be subject to the provisions of
Section 408 of the Code.
2. In the event the Account is established hereunder as part of a SEP
established by the Investor's employer pursuant to Section 408(k) of the Code,
and if such SEP is an employee pension benefit plan within the meaning of
section 3(2) of the Employee Retirement Income Security Act of 1974, as Amended
("ERISA"), this Agreement shall be subject to all of the applicable provisions
of Title I of ERISA.
ARTICLE VIII This Agreement shall be amended, from time to time, by Vista
Broker-Dealer Services, Inc. (the "Sponsor"), in order to comply with the
provisions of the Code and regulations thereunder. Such amendments shall be
made upon notice to, but without the consent of, the Investor. Other amendments
may be made, from time to time, by the Sponsor but shall be effective only upon
the consent of the Investor and the Custodian. The Investor's execution of a
new Application Form shall evidence his or her consent to such an amendment.
ARTICLE IX
1. The Custodian is under no duty to compel the Investor to make any
contributions to the Account and shall have no duty to assure that such
contributions are appropriate in amount, are deductible by the Investor, or
meet any other requirement or law. The Custodian shall not incur any liability
or responsibility for any tax imposed on the Investor or the Account resulting
from any contribution or distribution.
2. The Custodian shall deliver, by mail, to the Investor at the Investor's
last address of record, all shareholder notices, reports and other materials
required or permitted to be given by the Custodian. The Custodian shall vote at
all shareholder meetings of the Fund(s) in accordance with written instructions
of the Investor to the extent received by the Custodian.
ARTICLE X
The Custodian shall receive such reasonable compensation for its services
("fees") as from time to time are agreed upon by the Investor. Such fees shall
be paid by the Investor and shall constitute a charge upon the assets in the
Account until paid. Unless otherwise paid, the Custodian shall have the right
to sell sufficient shares of any Fund in which the Account assets are invested
and apply the proceeds to the payment of its annual fees. The Investor hereby
agrees to the schedule of fees of the Custodian in effect at the date of this
Agreement, and to any change therein by the Custodian after receipt of notice
at least 30 days prior to any such change. Any income taxes or other taxes or
penalties of any kind that may be levied or assessed against the Account and
all other reasonable administrative expenses incurred by the Custodian with
respect thereto, including fees for legal services rendered to the Custodian,
may be similarly paid from the assets of the Account and shall not be an
obligation of the Custodian. The annual fee in effect on the date of this
Agreement is set forth under the Application.
ARTICLE XI
The Custodian may resign upon 30 days' notice to the Investor and may be
removed by the Investor upon 30 days' written notice to the Custodian. Upon its
resignation or removal, the Custodian shall transfer the assets of the Account
in such manner as the Investor shall designate, but in the absence of such
designation, the Custodian will use its best efforts to transfer the assets of
the Account to a successor Custodian to be held under an Individual Retirement
Account qualifying under Section 408 of the Code. In the event the Investor
fails to appoint a successor custodian which has accepted its appointment
within 30 days after the Custodian's notice of resignation or the Investor's
notice of removal of the Custodian, the Custodian shall appoint a successor
custodian which satisfies the requirements of Code Section 408(h). The
Custodian shall not be liable for the acts or omissions of any such successor
custodian.
ARTICLE XII
By separate written document, the Investor may designate a method for payment
of benefits in accordance with Article IV of this Agreement and name a
beneficiary for the receipt of such benefit in the event of his/her death. Such
designations may be changed from time to time by the Investor. Should the
Investor die without an effective designation of beneficiary, the Investor's
surviving spouse shall be deemed the beneficiary. In the absence of a surviving
designated beneficiary and a surviving spouse, the assets of the Account shall
be distributed to the Investor's estate in a single payment.
ARTICLE XIII
1. In the event the Investor's contribution to the Account in any year exceeds
$2,000 or such other amount as may be allowed by the Code, the Investor must
notify the Custodian in form satisfactory to it that such excess amount is a
"rollover contribution," a transfer of assets permitted under Section 2 of
Article I of this Agreement, or a "SEP" contribution under paragraph 3 of
Article I of this Agreement.
2. A contribution to the Account is deemed to have been made with respect to
the preceding taxable year if the contribution is made by the deadline for
filing the Investor's income tax return (not including extensions) for such
year and if the Investor designates the contribution as a contribution for the
preceding taxable year in a manner acceptable to the Custodian. The Custodian
will not be liable or responsible for any consequences of postal delays or
delays resulting from an incomplete Application or a designation made in an
unacceptable form. Applications received by the Custodian postmarked after the
deadline and improperly completed applications will be returned to the sender.
ARTICLE XIV
1. This Agreement and the Custodial Account shall be construed, administered
and enforced according to the laws of the State of Missouri.
2. The Investor and the Custodian evidence their acceptance of this Agreement,
and their willingness to be subject to the terms set forth hereunder, by way of
(i) the Investor's execution of the Individual Retirement Account Application
attached hereto, and (ii) the Custodian's acceptance of the Application by way
of written confirmation to the Investor.
Vista Individual Retirement Account Disclosure Statement
The following information is provided to you in accordance with the
requirements of the Internal Revenue Code (the "Code") and Treasury regulations
and should be reviewed in conjunction with the Individual Retirement Custodial
Account Agreement (the "Custodial Agreement"), the Application for your XXX
(the "Application"), and the prospectus for The Vista Family of Mutual Funds
("Vista") that are allowable investments for your XXX. The provisions of the
Custodial Agreement, Application and prospectus govern in any instance where
the Disclosure Statement is incomplete or appears to conflict. This Disclosure
Statement reflects the provisions of the Code in effect on January 1, 1997.
This Disclosure Statement provides a nontechnical summary of the law. Please
consult with your advisor for more complete information and refer to IRS
Publication 590.
I. XXX STATUTORY REQUIREMENTS
An XXX is a trust or custodial account established for the exclusive benefit
of you and your beneficiaries. Current law requires that your XXX agreement be
in
writing and that it meet the following requirements:
1. All contributions must be in cash and, for any taxable year, cannot exceed
100% of your compensation or $2,000, whichever is less, unless the contribution
is a rollover contribution or an employer contribution to a simplified employee
pension plan ("SEP").
2. The custodian or trustee must be a bank or other institution or person
that is approved by the Internal Revenue Service to administer your XXX in
accordance with current tax laws.
3. None of your XXX assets may be invested in life insurance contracts, or
collectibles, or commingled with the assets of other people except in a common
trust fund or common investment fund.
4. Your interest in your XXX account is nonforfeitable.
5. Distribution from your XXX must be in accordance with certain minimum
distribution rules, which are explained in Section VII below.
II. RIGHT TO REVOKE
You may revoke your XXX at any time within seven days of the time your
Application is signed. To revoke your XXX, mail or deliver a written notice
stating "I hereby elect to revoke my Vista XXX." Sign your name exactly as it
appears on your Application, include your social security number, and mail the
notice to the Custodian, Investors Fiduciary Trust Company, x/x Xxxxx Xxxxx,
X.X. Xxx 000000, Xxxxxx Xxxx, Xxxxxxxx 00000-0000.
Your notice will be considered mailed on the date of postmark, or the date of
certification or registration if it is sent by certified or registered mail.
When Investors Fiduciary Trust Company ("IFTC"), the custodian of your XXX,
receives the proper notice of revocation, you will be entitled to a refund of
your full XXX contribution, without any adjustment for expenses or market
fluctuations. If you have any questions concerning your right of revocation,
please call the Custodian at (800) 34-VISTA during regular business hours.
III. ELIGIBILITY
You may make regular contributions to an XXX if you receive compensation from
employment, earnings from self-employment, or alimony, and you have not reached
age 70$ by the end of the tax year for which the contribution is made. In
addition, if you are married and file a joint tax return, you and your spouse
may each make contributions to an XXX whether or not both spouses receive
compensation. You may make a rollover contribution to an XXX if you have
received an eligible rollover distribution from a qualified retirement plan or
tax-sheltered annuity or an eligible distribution from another XXX and complete
the rollover within 60 days after receiving the distribution. You may also
make a trustee-to-trustee transfer from another XXX. Finally, your employer
may contribute to your XXX, and if your employer sponsors a simplified employer
pension ("SEP"), your employer can make contributions to a SEP/XXX on your
behalf.
IV. CONTRIBUTIONS
A. Regular Contributions
You may contribute each year up to $2,000 or 100% of your compensation,
whichever is less, to your XXX. If you are married and each spouse establishes
an XXX, each spouse may contribute up to $2,000 to his or her XXX 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 higher compensated spouse's XXX contribution
may be any amount up to the lesser of that spouse's compensation or $2,000. The
lower compensated spouse's XXX contribution may be any amount up to the lesser
of that spouse's compensation or $2,000. In this case, the lower compensated
spouse's XXX contribution may be any amount up to the couple's combined
compensation, less the amount contributed to an XXX for the higher compensated
spouse.
If your employer contributes to your XXX, the contribution is treated as
compensation paid to you, whether or not the contribution is deductible, unless
the contribution is made under a SEP (see below).
Compensation for these purposes means wages, salaries, professional fees, or
other amounts derived from or received for personal services actually rendered.
It includes earned income from self-employment and alimony or separate
maintenance payments includable in income. It does not include pension or
annuity payments or deferred compensation.
B. Time for Making Regular Contributions
You may make regular contributions to your XXX (and/or your spouse may make
contributions to your spouse's XXX) anytime during a year, up to and including
the due date for filing your tax return for the year (without extensions). No
regular contributions may be made to an XXX for the calendar year in which you
reach age 70-1/2 or later years. No regular contributions to your spouse's XXX
may be made for years in which your spouse is age 70$ or older.
C. Deductibility
Regular XXX contributions are fully deductible unless you or your spouse is an
active participant in a tax-qualified plan of an employer. If you or your
spouse is an active participant in such a plan, then your allowable deduction
for regular XXX contributions is reduced or eliminated if your Adjusted Gross
Income ("AGI") exceeds certain levels. (If you file separately and are married
but live apart from your spouse at all times during the year, you will be
considered to be single when applying the following rules regarding deduction
limitations.) The deductible amount is determined as follows:
1. If you (and your spouse) are not active participants in a tax-qualified
plan, any contribution up to the maximum amount is deductible.
2. If you (or your spouse) are an active participant in a tax-qualified plan,
and
(a) your AGI is $25,000 or less ($40,000 for a married couple filing a joint
return and $0 for a married person filing separately), any contribution up to
the maximum amount is deductible.
(b) your AGI is $35,000 or more ($50,000 for a married couple filing a joint
return and $10,000 for a married person filing separately), no XXX contribution
is deductible.
(c) your AGI is between $25,000 and $35,000 ($40,000 and $50,000 for a
married couple filing a joint return and $0 to $10,000 for a married person
filing separately), the deductible amount is reduced. The reduction is $0.20
for each $1.00 of AGI over $25,000 ($40,000 for a married couple filing a
joint return and $0 for a married person filing separately). The deduction
will not be reduced below $200 unless it is eliminated entirely.
To the extent that the deductibility of XXX contributions is reduced or
eliminated, then nondeductible contributions may be made to your XXX (up to the
applicable contribution limit). Earnings on all XXX contributions, whether or
not the contributions themselves are deductible, are tax-deferred until
receipt. You must designate the amount of nondeductible XXX contributions when
filing your tax return for the year. If you overstate the amount of your
nondeductible contributions you must pay a $100 penalty, unless you can show
that such overstatement was due to reasonable cause. If you fail to report
nondeductible XXX contributions you will be subject to a $50 penalty, unless
your failure was due to reasonable cause.
D. Rollover Contributions
1. Payments from Plans and Tax-Sheltered Annuities that are Eligible for
Rollover
You may make a rollover contribution to your XXX of an "eligible rollover
distribution" from an employer tax-qualified plan (an "employer plan") or a
tax-sheltered annuity (including a 403(b)(7) account). The administrator of
the employer plan or the payor of a distribution from the tax-sheltered annuity
should be able to tell you what portion of your payment is an eligible rollover
distribution. The following types of payments cannot be rolled over:
Non-Taxable Payments. In general, only the "taxable portion" of your payment
is an eligible rollover distribution. If you have made "after-tax" employee
contributions to the plan or annuity, these contributions will be non-taxable
when they are paid to you, and they cannot be rolled over. (After-tax employee
contributions generally are contributions you made from your own pay that were
already taxed.) Payments Spread Over Long Periods. You cannot roll over a
payment if it is part of a series of equal (or almost equal) payments that are
made at least once a year and that will last for
your lifetime (or your life expectancy), or
your lifetime and your beneficiary's lifetime (or life expectancies),
or
a period of ten years or more.
Required Minimum Payments. Beginning in the year you reach age 70-1/2, a
certain portion of your payment cannot be rolled (or transferred) over because
it is a "required minimum payment" that must be paid to you.
2. Direct Rollover
You can choose a direct rollover of all or any portion of your payment from
an employer plan or a tax-sheltered annuity that is an "eligible rollover
distribution," as described above. In a direct rollover, the eligible rollover
distribution is paid directly from the plan or tax-sheltered annuity to your
XXX. If you choose a direct rollover, you are not taxed on a payment until you
later take it out of the XXX.
3. Rollover of Plan Payments Paid To You
A payment to you of an eligible rollover distribution from an employer plan
or tax-sheltered annuity is taxed in the year you receive it unless, within 60
days, you roll it over to an XXX (or another plan that accepts rollovers). If
you do not roll it over, special tax rules may apply. If any portion of the
payment to you is an eligible rollover distribution, the payor is required by
law to withhold 20% of that amount. This amount is sent to the IRS as income
tax withholding.
Sixty-Day Rollover Option. If you have an eligible rollover distribution
paid to you, you can still decide to roll over all or part of it to an XXX (or
another employer plan that accepts rollovers). If you decide to roll over, you
must complete the rollover within 60 days after you receive the payment. The
portion of your payment that is rolled over will not be taxed until you take it
out of the XXX (or the employer plan).
You can roll over up to 100% of the eligible rollover distribution, including
an amount equal to the 20% that was withheld. If you choose to roll over 100%,
you must find other money within the 60-day period to contribute to the XXX or
the employer plan to replace the 20% that was withheld. (On the other hand, if
you roll over only the 80% that you received, you will be taxed on the 20% that
was withheld.)
See the Special Tax Notice Regarding Plan Payments, that must be provided by
the plan administrator or payor of your employer plan or tax-sheltered annuity,
for additional information on the rules governing rollover and taxation of plan
distributions, or consult your tax advisor for more details.
You should maintain a separate XXX account for any rollovers of funds from an
employer plan if you want to preserve your ability to later roll over these
funds and earnings into another employer plan. Similarly, you should maintain
a separate account for any rollover of funds from a tax-sheltered annuity.
If you are the surviving spouse of a deceased plan participant, you can make
a rollover to an XXX from a tax-qualified plan of your spouse's employer if you
received all or a part of your spouse's share as a result of his or her death.
A spouse or former spouse who is a recipient of a distribution made under a
qualified domestic relations order may roll over all or part of the
distribution.
Because complex rules apply to distributions and rollovers of payments from
employer plans and tax-sheltered annuities, you should seek competent tax
advice whenever you contemplate receiving a distribution from a qualified plan
or tax-sheltered annuity or an XXX funded by a rollover from a qualified plan
or tax-sheltered annuity.
4. Rollovers from Other IRAs
You may also make a rollover contribution of amounts held in another XXX.
There are no limits on the amount of rollover contributions made to an XXX from
another XXX, except you may not roll over (or transfer) any required minimum
distribution amount (described in VII.D.). The distribution from the first XXX
must be rolled over within 60 days of receipt. Also, after making a rollover
of a distribution from one XXX to another XXX, you must wait 12 full months
before you can make another XXX-to-XXX rollover.
5. Tax-Deferral on XXX Rollover or Trustee-to-Trustee Transfer
An effective rollover allows you to postpone paying taxes on the amount
distributed from an employer plan, tax-sheltered annuity or XXX until it is
withdrawn from the recipient XXX. You do not report the distribution as income
and you do not take a deduction for the rollover contribution. Earnings on
your rollover XXX are tax-deferred until receipt. (Similarly, a
trustee-to-trustee transfer is not treated as a distribution and the amount
transferred and earnings are tax-deferred until receipt.)
E. SEP Contributions
If your employer has established a simplified employee pension ("SEP"), your
employer may make contributions to your SEP/XXX. If the SEP contains a salary
reduction arrangement, you may elect to reduce your salary by up to the lesser
of 15% of compensation or $9,500 (indexed annually); and have that amount
contributed to your SEP/XXX. The maximum SEP contribution, including salary
reduction amounts and employer contributions, is the lesser of 15% of your
eligible compensation or $30,000. SEP contributions are not included in your
taxable income.
Please note that the tax law provisions permitting salary reduction SEPs were
repealed effective January 1, 1997. Therefore, no further salary reduction SEP
contributions are allowed except under salary reduction SEPs that were already
in existence on December 31, 1996.
V. EXCESS CONTRIBUTIONS
Amounts contributed to an XXX which exceed the maximum allowable contribution
are treated as "excess contributions" and are subject to a nondeductible 6%
penalty tax for each year in which the excess remains in the XXX. Excess
contributions may be corrected and the 6% penalty tax avoided by withdrawal of
the excess and any earnings thereon before the due date (including extensions)
of the tax return for the tax year for which the excess contribution was made.
No deduction may be taken for the excess contributions and the earnings must be
included in taxable income for the year the contribution was made. The
earnings withdrawn may be subject to a 10% premature distribution tax if you
are under age 59$. See Section VII.B.
An excess contribution may be withdrawn after the due date of the tax return
(including extensions) with the following consequences:
(a) If your total contribution for the tax year in which the
excess contribution was made is $2,000 or less (or below the limit of your
employer's SEP contribution), the excess contribution may be withdrawn without
being included in income or being subject to the 10% premature distribution
tax. No deduction may be taken for the excess contribution. Any earnings
withdrawn will be included in income and may be subject to the premature
distribution tax.
(b) If your total contribution for the tax year in which the
excess contribution was made exceeds $2,000 (or, if higher, the limit of your
employer's SEP contribution), any excess contribution and any earnings on the
excess withdrawn after the due date for tax filing (including extensions), will
be includable in income in the year received and will be subject to any 10%
premature distribution tax that may apply. Additionally, no deduction may be
taken for the excess contribution for the year in which it is made.
(c) Any excess contribution withdrawn after the due date for
the tax filing (including extensions) for the year for which the contribution
was made is subject to the 6% penalty tax on the amount of the excess
contribution for the taxable year in which it was made and each tax year that
it is still in your XXX at the end of the year.
You may also correct an excess contribution to your XXX by treating the excess
amount as contributed to your XXX in a subsequent year to the extent that the
excess, when aggregated with your XXX contribution (if any) for the subsequent
year, does not exceed the maximum amount for that year. You may be entitled to
a deduction for the amount of the excess contribution that is applied in the
subsequent year.
VI. INVESTMENT OF ACCOUNT AND FINANCIAL DISCLOSURE
The assets in your XXX will be invested by IFTC in mutual fund shares of Vista
in accordance with your instructions and Article I, Section 1 of the Custodial
Agreement.
Growth in the value of your XXX cannot be guaranteed or projected. However,
the income and operating expenses of each allowable investment that you select
for your XXX will affect the value of its shares and, therefore, the value of
your XXX. The Vista prospectus for such shares contains information regarding
current income and expenses of each of these investments. Reasonable fees and
other expenses of maintaining your XXX may be charged to you or your XXX. The
current annual Custodian's fee is set forth in the Application. A new fee may
be substituted from time to time as provided in Article X of the Custodial
Agreement.
VII. DISTRIBUTIONS
A. Taxation of Distribution as Ordinary Income
In general, you must include distributions from your XXX in your gross income
for the year in which the distributions are received. There is a 10%
additional income tax assessed against premature distributions to the extent
such distributions are includable in income, as described in B. below.
You may exclude from your income that portion of a distribution that
constitutes a return of your properly reported nondeductible contributions.
The amount of the distribution excludable from income is the portion that bears
the same ratio to the total distribution that your aggregate nondeductible
contributions (not distributed in prior years) bear to the balance at the end
of the year (calculated after adding back distributions made during the year)
of your XXX. For this purpose, all of your IRAs are treated as a single XXX,
and all distributions from an XXX during a taxable year are to be treated as
one distribution.
In addition, your gross income does not include any distribution from an XXX
that is properly rolled over. Except as provided in D. below, you may roll
over all or any part of property received in a distribution of assets, within
60 days of receipt, into another XXX or individual retirement annuity, and
maintain the tax-deferred status of such assets. A rollover from one XXX to
another may be made once every twelve months. Also, certain qualifying
distributions which were rolled over into an XXX from employer tax-qualified
plans may be rolled over into another employer tax-qualified plan. (You should
seek competent tax advice regarding these rollovers.)
As explained in Section V, certain distributions of excess contributions are
not included in income. In addition, XXX contributions for a taxable year
which do not exceed the contribution limits for such year may also be withdrawn
without being included in income or being subject to a 10% premature
distribution tax, as long as such contributions and earnings thereon are
withdrawn prior to the due date (including extensions) of your federal income
tax return for the tax year for which the contribution was made. The earnings
withdrawn must be included in taxable income for the year in which the
contribution was made and may be subject to the 10% premature distribution tax.
B. Tax on Premature Distributions
To the extent they are included in income, distributions from your XXX made
before you reach age 59$ will be subject to a 10% nondeductible penalty tax (in
addition to being taxable as ordinary income). Exceptions to the 10% penalty
tax include distributions made on account of your death or disability, and
distributions included in a scheduled series of payments over your life
expectancy or the joint life expectancies of you and your beneficiary.
In addition, distributions during a year are not subject to the 10% penalty
tax to the extent that the distributions do 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$% of your adjusted
gross income for the year). Finally, distributions are not subject to the 10%
penalty if they do not exceed the amounts you paid for health insurance
coverage for yourself, your spouse and dependents. This exception is available
only if you have been unemployed and received federal or state unemployment
compensation for at least 12 weeks. Distributions during the year in which you
received the unemployment compensation or the following year are eligible for
this exception, but not any distributions received after you have been
reemployed for at least 60 days.
C. Tax on Excess Distributions
There is a 15% excise tax assessed against annual distributions from
tax-favored retirement plans, including IRAs, which exceed $155,000 (this
amount is for 1996; it is $160,000 for 1997 and is indexed annually for future
cost-of-living changes). To determine whether you have distributions in excess
of this limit, you must aggregate the amounts of all distributions received by
you during the calendar year from all retirement plans, including IRAs.
Certain individuals with account balances or accrued benefits equal to at least
$562,500 as of August 1, 1986, may have made an election to protect the August
1, 1986 balance from the 15% additional tax. Please consult with your tax
advisor for more complete information, if you made such an election.
Under the current tax laws, the 15% excise tax described in the preceding
paragraph will not apply to withdrawals from your XXX by you during the
calendar years 1997, 1998 and 1999 (or to distributions from other kinds of
retirement plans). However, a related 15% excise tax on certain excess amounts
remaining in your IRAs or retirement plan accounts upon your death continues to
apply during these calendar years. Consult your tax adviser to determine
whether it would be advantageous for you to make withdrawals from your XXX (or
receive distributions from other retirement plan accounts) during this
three-year period.
D. Required Minimum Distributions
1. During Your Life
The minimum distribution rules require that for your "70-1/2 year," and each
year thereafter, you must make withdrawals from your XXX accounts that are at
least
equal to the "minimum distribution." Your 70$ year is the calendar year that
contains the date six months after your 70th birthday.
Generally, you must withdraw an amount at least equal to the minimum
distribution by December 31 of each year. However, for your 70$ year, you may
wait to withdraw the minimum distribution until April 1 of the following year.
(This means that if you wait to make your withdrawal for the 70$ year until
April 1 of the following year, your total withdrawal in that year must equal
the minimum distributions for two years - a withdrawal by April 1 that is equal
to the minimum distribution for the 70-1/2 year and a second withdrawal by
December 31 that is equal to the minimum distribution for that year. In each
year thereafter, you must withdraw the minimum distribution for the year by
December 31.)
The amount of the minimum distribution is usually determined by dividing the
account balance of your XXX, as of December 31 of the prior year, by a divisor
(determined by Internal Revenue Service actuarial tables) that is based on your
life expectancy or the joint life and last survivor expectancy for you and your
designated beneficiary. See Article IV of the Custodial Agreement for a more
detailed explanation of how to calculate the minimum distribution. The
distributions must also satisfy the minimum distribution incidental benefit
rule, which generally will require distributions over a period less than the
joint and last survivor expectancy of you and your designated beneficiary
unless your beneficiary is your spouse or is no more than ten years younger
than you. The IRS provides tables for determining the distribution needed to
satisfy incidental benefit requirements.
The minimum distribution required must be calculated separately for each XXX
you own, but the amounts so determined may be totaled and taken from any one or
more of your IRAs.
You will be subject to a 50% excise tax on the amount by which the
distribution you actually received in any year falls short of the minimum
distribution required for the year.
You may take your distribution in:
a lump sum;
equal or substantially equal payments over a specified period no longer
than your life expectancy or the joint life and last survivor expectancy of you
and your designated beneficiary.
Also, as described in Section VII.A., you may roll over an eligible
distribution to purchase an individual retirement annuity payable in equal or
substantially equal payments over your life or the joint and last survivor
lives of you and your designated beneficiary. (See Article IV of the Custodial
Agreement and IRS Publication 590 for a full description of permissible
distribution methods.)
2. After Your Death
If you die before you reach age 70-1/2, distribution must be made to your
beneficiary by December 31 of the fifth year following the year of your death
unless, by December 31 of the year following your death, your designated
beneficiary begins receiving distributions over a period not extending beyond
your beneficiary's life expectancy. When your beneficiary is your spouse,
however, distributions can be postponed until December 31 of the year in which
you would have reached age 70-1/2, at which time your spouse must take them
over a period not extending beyond his or her life expectancy. See Article IV
of the Custodial Agreement and XXX Publication 590 for a more detailed
explanation of how to calculate the minimum distribution.
If you die after your required beginning date, the balance in the Custodial
Account must continue to be paid at least as rapidly as under the method of
payment being used prior to your death.
If your beneficiary is your spouse, your beneficiary can elect to treat your
XXX as his or her own XXX.
The minimum distribution required must be calculated separately for each XXX
you own, but the amounts so determined may be totalled and taken from any one
or more IRAs.
A payee is subject to a 50% excise tax on the amount by which a distribution
for the year falls short of the minimum distribution required.
Your beneficiary may take his or her distribution in:
a lump sum;
equal or substantially equal payments over a specified period no longer
than his or her life expectancy.
Also, as described in Section VII.A., a spousal beneficiary may roll over a
lump sum distribution to purchase an individual retirement annuity payable in
equal or substantially equal payments over his or her life expectancy. (See
Article IV of the Custodial Agreement and IRS Publication 590 for a full
description of permissible distribution methods.)
3. Further Information. This explanation only summarizes the minimum
distribution rules. Other rules and exceptions may apply to you that are not
discussed in this summary, including rules which, in some cases, would prevent
you from using certain options described above. You should consult your
personal tax advisor or IRS Publication 590 for more detailed information.
VIII. LOSS OF TAX-EXEMPT STATUS OF XXX
If you engage in any of the prohibited transactions listed in Section 4975 of
the Code (such as any sale, exchange, or leasing of any property between you
and your XXX) or if you take a loan from your XXX, your account will be
disqualified and the entire balance of your account will be treated as if it
had been distributed to you as of the first day of the year in which the
prohibited transaction occurred. The fair market value of your XXX will be
included in income in the year the prohibited transaction takes place and, if
you are under age 59$ at the time, you may be subject to the 10% penalty tax on
premature distributions. Should you or your beneficiary pledge all or any
portion of your XXX as security for a loan, the portion so pledged will be
treated as if distributed to you, will be included in your income, and may be
subject to the 10% premature distribution penalty during the year in which the
pledge occurred.
IX. OTHER TAX CONSIDERATIONS
A. Federal Income Tax Withholding
Federal income tax will be withheld on amounts distributed from your XXX
unless you elect not to have withholding apply. Generally, tax will be
withheld at a 10% rate. At the time of distribution from your XXX, you will be
notified of your right to elect not to have withholding apply and will be
provided with the appropriate election form. If your XXX distribution is to be
delivered outside of the U.S., you may elect not to have withholding apply only
if you certify to the Custodian that you are not a U.S. citizen residing
overseas or a "tax avoidance expatriate" as described in Section 877 of the
Internal Revenue Code. (The distribution may also be subject to state
withholding laws.)
B. Distribution not Eligible for Lump-Sum Averaging or Capital Gains Treatment
No distribution to you or anyone else from your account can qualify for
capital gains treatment under the federal income tax laws or for the five- or
ten-year averaging available with respect to certain lump sum distributions
from other types of retirement plans. The distribution is taxed to the person
receiving it as ordinary income.
C. Gift Tax
If you elect during your lifetime to have all or any part of your account
payable to a beneficiary at or after your death, the election will not subject
you to any gift tax liability.
D. Reporting for Tax Purposes
You must report deductible XXX contributions and distributions on your tax
Form 1040 or 1040A for the taxable year in which the contributions or
distributions were made. If you make any nondeductible contributions, you must
include the amount of such nondeductible contributions and the aggregate
account balance of all your IRAs as of the end of the calendar year on Form
8606. Additional reporting is required in the event that special taxes or
penalties described herein are due. You must file Form 5329 with the IRS for
each taxable year in which the contribution limits are exceeded, a premature
distribution takes place, less than the required minimum amount is distributed
from your XXX, or excess distributions are made.
X. IRS APPROVAL & INFORMATION
The Custodial Agreement which governs your XXX has been approved by the IRS as
to its form. Such IRS approval is a determination as to form only and does not
represent a determination of the merits of your account. This Disclosure
Statement provides only a summary of the laws governing IRAs. You should
consult your personal tax advisor or IRS Publication 590, Individual Retirement
Arrangements, for more detailed information. This publication is available
from your local IRS office or by calling 0-000-XXX-XXXX.
