<p>I am working on fin. aid forms to go w/ DS's applications and could use some guidance in answering CSS Profile questions about pensions and retirement plans. Here is our situation:</p>
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<li><p>I work for the State and have mandatory deductions from my pay to contribute to my State pension. The deductions appear in Box 14 on my W-2 as pre-tax and there is a designation of 414(h). I am able to take out loans from the portion of the pension I have contributed, but do not have access to the State-contributed portion. I do not get information about the total value of the pension, only a statement of my total contributions.
Questions: Do I identify this as a "tax deferred . . . pension plan?" Section 414(h) is not one of the types of plans identified on the PROFILE as intended to be included. (The 414(h) is not elective like a 401(k), an IRA, or a SEP.) And, if the answer is "yes,"since I am unable to learn the "total current value" of my State pension, what figure do I use? </p></li>
<li><p>After the death of my mother, her IRA, from which she had begun to take distributions, was divided into decedent's IRAs for her children. Because she had begun to to take distributions, I am required to, also. I report those annual distributions as income.
Question: Is this a "tax deferred retirement plan" if I am already taking distributions from it and paying taxes on that income?</p></li>
<li><p>DH has a military pension and receives monthly pension payments, which are required because of his age. He reports these payments as income and pays federal, but not state, tax on them.
Question: Is this pension a "tax deferred pension plan?" </p></li>
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<p>Also, regarding my contributions to my 414(h) state pension plan, my understanding is that my contributions may not be added back in to our income because my participation is mandatory, not voluntary, unlike a 401(k) plan. At least this is how it worked with our fin. aid applications for DS's private secondary school. Any insights?</p>
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<li><p>I have a retirement plan similar to yours, where the benefit is defined and the “value” is unknowable. I check the box that applies, but leave the value question blank. Never had it questioned in 8 CSS Profile cycles.</p></li>
<li><p>The IRA is still “tax-deferred” because the taxes on any earnings it makes inside the plan are deferred. The fact that distributions are taxed does not change the basic nature of the plan as being “tax-deferred.”</p></li>
<li><p>The military pension is not “tax-deferred” because there are no earnings inside the plan for which taxes could be deferred. It is a situation like your question 1, where you check the box for a gov’t plan and leave the value box blank.</p></li>
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<p>dt123 – Thank you. So, I would answer “yes” to the questions about whether we have a State or military retirement plan, but not include the “value” of either pension in the question that asks for the value of tax-deferred retirement plans? The value of the decedent IRA, like the value of a SEP and other IRAs, though, would be reported in response to that question.</p>
<p>dt, or anyone – on the PROFILE, PI-190A reads: “Enter the amount of payments to tax-deferred pension and savings plans your parents made or expect to make in 2009.” For the State pension described in my OP, is it appropriate not to identify the mandatory payroll deductions to this pension? My experience with the similar financial aid applications for DS’s private secondary school has been that what they are looking for (and will attribute to income) are voluntary payments you make to things like 401(k) plans and flexible spending accounts, not these mandatory 414(h) pension plan contributions, although pre-tax. Advice?</p>
<p>I don’t know the exact answer. Not sure anyone does. I have a couple of suggestions.</p>
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<li><p>You can fall back on the question applying only to payments to “tax-deferred” plans. The State plan does not grow based on earnings within the plan, I presume, so like the military retirement, and unlike an IRA, there are no taxes to defer. Thus you could conclude that the State plan is not “tax-deferred,” and therefore you do not have to include the contributions made in your answer. Personally, as long as I had a leg to stand on in case it were questioned, I would go the most favorable way and not look back.</p></li>
<li><p>You can send an email to the College Board asking your question. I did this once concerning what counts as an inheritance, and got back a detailed answer within a day. The answer was highly favorable to our situation, so I was a happy camper. The College Board writes the questions, so it is the authority in resolving ambiguities. There is always a chance however that you get an answer you don’t like.</p></li>
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<p>Thanks, dtp. I’m inclined to assume it would be treated the same as it was by SSS for secondary school,i.e., making a distinction between discretionary and mandatory contributions to a tax-deferred plan. In other words, I have no choice but to make these contributions and there is nothing I could do that would make this $ available to pay toward college, whereas, payments to a 401(k) plan or a SEP are made voluntarily and if I didn’t choose to make those payments, the $ still would be in my income and available for college expenses.</p>
<p>And, yes, I’ll check in w/ College Board if someone else on CC tells me it must be reported, but I figured over the holiday weekend, I’d start w/ the valuable insights on CC. Thanks for your help.</p>