September 1998 Issue

ROTH IRA STILL AVAILABLE TO THOSE WITH SEPS AND SIMPLE IRAS?

Over the last several weeks, I have been researching the Roth IRA for an article I am writing. The article, "Roth or Regular IRA?' in your June issue may contain a factual error in the discussion of the maximum contribution to Roth IRAs. The article states, "Contributions made by or on behalf of an individual under a SEP or SIMPLE IRA are treated as contributions to an IRA. Thus an individual who makes elective contributions and receives matching contributions to a simple IRA equal to $2,000 for the year is not eligible to contribute to a Roth IRA for that tax year."

In my research, I can find nothing to substantiate this claim. Assuming that the individual is eligible for a Roth IRA (i.e., meets all of the eligibility requirements), the only offset I was able to find was that of a traditional IRA. The IRS publication 553 states that, "A traditional IRA is any IRA that is not a Roth IRA, SIMPLE IRA, or Education IRA." The same publication under contribution limits states, "If you contribute to both Roth IRAs and traditional IRAs established for your benefit, the contribution limit for Roth IRAs must be reduced by all contributions to all traditional IRAs." Therefore, the way that I interpret this is that the traditional IRA is the only IRA that offsets the Roth. *

Robert M. Black, CLU, ChFC

Cranford, New Jersey

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