TRADERS
SERVICES: RETIREMENT PLANS

Every consistently profitable trader should have a retirement plan. Many plans provide for a tax deduction on annual contributions, and this generates immediate tax savings – sort of like an immediate high rate of return on your investment. Plus, you benefit from tax-free compounded returns, which can far exceed taxable returns.

See the incredible savings with a small Mini 401K plan contribution - click here.

Article: Traders, go long your retirement funds. Trading retirement funds can save loads in taxes. This article is the second of two pieces explaining how traders should plan for retirement. See the September 2004 issue of SFO magazine. Click here to learn more.

Article: Do you sincerely want to retire one day? Market forces may force you into “early retirement.” Traders face special rules in retirement planning and you should start (or update) your retirement planning now. Learn how to get significant income savings from tax-deductible retirement-plan contributions while limiting your self-employment taxes. Most likely, you will need an entity to create “earned income,” so learn which type of entity is best suited for your needs. Robert Green's article submitted to SFO Magazine for their August 2004 issue.

Article: Enhance your retirement (accounts) by making prudent investments with asset diversification and liquidity. If you want to use your retirement plan accounts as part of your day or swing trading business, watch out – you could be in for some nasty surprises from the IRS and ERISA! We can explain the rules and some limited ways to navigate around the rules. Robert Green's article for Active Trader magazine in their February 2004 issue.

We help choose the right plan for your needs and customize a trading-business entity or investment company to execute the retirement plan strategy (and other strategies).

IRS Form 5500 ERISA Annual Report: ERISA (retirement) plans must file an annual report to the U.S. Department of Labor (DOL) each year on Form 5500 or Form 5500-EZ. These forms are due by Aug. 1 of the following year (2004 Form 5500 is due Aug. 1, 2005). An extension is allowed on Form 5558; file the extension by Aug. 1 to extend your 5500 or 5500-EZ until Oct. 15th. Mini 401(k) plans are ERISA plans so they must file these forms. IRAs are not ERISA plans so they don't file Form 5500. Click here to learn more.

Hire our firm to plan and establish your Mini 401(k) retirement plan before year-end. You can fund it after year-end, but it must be "papered" before year-end. Note: Traders without any other source of earned income need a trading entity to pay themselves earned income as a basis for a retirement-plan contribution. Click here to learn more about entities for traders. We can help you figure out the maximum tax savings possible versus SE taxes to be paid and how much you can afford to contribute to a retirement plan.

Your cost of forming the entity (needed for a trader-retirement plan), including GTT's fees and state-filing fees, is around $850. In future years, you don't have this one-time cost. Click here to learn about our GTT Entity Formation Services.

If you have a very successful year and can afford to contribute more to your retirement plan, we recommend you contribute the maximum allowed – $42,000 for 2005 and $44,000 for 2006 (to a Mini 401(k) plan or other type of defined contribution plan). In that case, you can expect even greater net savings, and you'll be able to grow more money in a tax-deferred account. You can save even more with a Mini 401(k) defined benefit plan, which is available from a few brokers now (try Pioneer, Schwab and Fidelity; see some links below).

The major tax reason why the Mini 401(k) is the most attractive retirement plan for traders is that you can contribute the maximum $42,000 on a lower fee income (of approximately $148,000). With other profit-sharing retirement plans, you must use the maximum fee compensation allowed of $210,000 to get the $42,000 contribution limit (or just less than $42,000, after deducting half the SE tax). With the Mini 401(k) plan, you save SE taxes (the 2.9% Medicare portion) on the difference in the fee amount, which translates to a savings of around $1,800.

More on the law. Because current tax law treats administration fees as self-employment income, these earnings can be used for making deductible contributions to a Keogh plan. A Keogh plan is a retirement plan—either a traditional defined benefit pension plan or a defined contribution plan, such as a money purchase pension plan or a profit-sharing plan for self- employed individuals. There are some special rules that apply to Keogh plans, but essentially deductible contributions of up to 20% of this income—up to a maximum of $42,000 (for 2005)—may be made to either type of defined contribution Keogh plan. Keogh pension plans are funded in much the same manner as employee pension plans. The amount of income that can be set aside under these plans is substantially the same as under regular employee pension and profit-sharing plans.

If a profit-sharing plan is selected, an additional benefit can be provided through the use of a “solo” or “mini” 401(k) plan. These are one-participant plans that, for 2005, allow for the contribution of up to $14,000 in regular 401(k) contributions, plus an additional $4,000 in catch-up contributions. “Solo” 401(k) plan contributions are subject to the same $42,000 limit on deductible annual contributions as the profit-sharing plan contributions. In effect, the “solo” 401(k) plan contributions would help to fill a portion of the $42,000 deductible contribution limit not used by the profit-sharing plan contributions.

If you are interested in this type of trader-retirement savings plan, contact info@greencompany.com or call us.

We recommend a consultation with Robert A. Green, CPA & CEO. He will review your tax and retirement situation and consult you on the best retirement plan for your needs.

Here are some brokerage firms offering Mini 401(k) plans. Their sites have useful information. We plan to add more links soon, as other brokers should be rolling out these products to meet demand in the marketplace. We don't have any alliances with the below companies nor do we get compensated in any way.

• AIG SunAmerica Funds
• AIM Funds
• American Century
• Fidelity
• Lamaute Capital, Inc. (InvestSafe.com)
• Pioneer Funds
• Seligman Advisors, Inc.
• Sterling-Trust.com
• TD Waterhouse
• The Online 401(k) (Charles Schwab)

NOTE: If your firm offers individual, sole, or mini 401(k) plan services and you wish to be included in the list above, contact info@greencompany.com

IRS Publication 3998: Choosing a retirement solution for your small business.

IRS Publication 560: Retirement Plans for Small Business.

If you have any questions on retirement plans for traders, send us a confidential e-mail at info@greencompany.com or call us.

If you want to set up a GTT retirement plan along with a GTT Trader Entity, purchase the below service:

GTT Trader Entity Formation Service $500

After we form your entity and retirement plan, it is wise to engage our firm to prepare your current tax returns to make sure you execute this entire tax strategy correctly.

GTT Trader Tax Return Preparation Service $500

Trading for your RETIREMENT:

An article by Robert A. Green, CPA, appeared in the February 2004 issue of Active Trader magazine: Trading for your retirement. Many traders want to actively trade their retirement plans. For some it's a bad idea; for others it's a nice way to benefit from tax-deferred cumulative returns. However, there are limitations to what you can do with a retirement account, so take some time to learn the rules before actively trading your retirement plan.

Important update on March 12, 2004: We point out in our below article that there are several limitations in trading your retirement accounts, such as a business-activity (hyperactively). Since writing this article, one more significant limitation has arisen as a result of a recent NASD crackdown on credit abuses in "cash accounts." Click here to learn more.

Here is the original article submitted, before editing by the magazine.

Enhance your retirement (accounts) by making prudent investments with asset diversification and liquidity. If you want to use your retirement plan accounts as part of your day or swing trading business, watch out – you could be in for some nasty surprises from the IRS and ERISA! Learn the rules and some limited ways to navigate around the rules.

By Robert A. Green, CPA

The bear market clawed away at most traders’ working capital. Traders seek new sources of capital to ride the bull (markets) again.

Some traders are interested in joining proprietary trading to gain access to a firm’s trading capital, with a sub-trading account using leverage up to 10 to 1. Proprietary trading firms require a brokerage license and minimum capital of $25,000 or more.

Other traders are interested in forming their own hedge fund to raise capital from investors (friends, family and others) and to make money off “other peoples’ money.” This is a good opportunity for successful traders, but losing traders may have trouble executing this business plan.

A last resort for many traders is closer to home – their own retirement-plan assets. But before you start day trading your retirement assets, you should learn about many restrictions that apply.

Various government agencies regulate retirement-account investments. For the benefit of tax-free deferral or permanent savings, the government insists on investment protection, prudence, diversification, liquidity and no self-dealing.

There are limited ways to navigate around these rules to actively trade your retirement accounts. In all cases, try to follow the spirit of the law; prudence is a virtue and you want to retire one day on these assets. Throwing caution to the wind and losing all your retirement assets in risky day trading is not a wise undertaking anyway.

It’s not a perfect world!

In a perfect world, a business trader has sufficient capital to fund their trading business.

If a reasonable to aggressive return on trading capital is 25 to 50 percent, a trader needs capital of at least $200,000 to generate income of $100,000 – what many traders need to cover their living and business expenses. Certainly, the past few years have not been a perfect world for traders and many have suffered losses to their trading capital. Can you make a good living on trading capital of $25,000 or less?

For many traders their last resort for trading capital is their retirement-plan assets.

Take a cookie from the jar and you will get slapped (with penalties)

It’s not easy finding ways to take money out of your retirement plans to put in your trading accounts.

If you take money out of your retirement plan before retirement age, it's an “early withdrawal” subject to regular income tax (at ordinary tax rates up to 35 percent), plus a nasty excise-tax penalty of 10 percent. Many traders tap into their retirement plans figuring they have no income or losses and can take the distribution into income. They are later surprised and upset about the 10-percent excise-tax penalty (there are some exceptions which you can find at www.irs.gov or http://www.irs.gov/faqs/faq5-3.html).

Most qualified retirement plans allow for loans and you can use the loan proceeds to fund your taxable trading accounts. IRAs are not qualified plans and they do not allow loans.

Leave the money in your plan and benefit from tax-deferred trading

You don’t have to pay taxes and excise-tax penalties on early withdrawals to have access to trading your retirement-plan assets.

There are limited ways to leave the money in your retirement plans and trade it there for continued tax-deferral on the existing money and all the trading gains you generate. Short-term trading on securities is taxed at ordinary tax rates anyway, so when you retire and take distributions, you will have those same ordinary tax rates (tax laws can change the rates when you retire).

Find a financial calculator on the Internet and see the power of tax-free compounded returns. You will be impressed.

If it sounds too good to be true, well, it is. There are many pitfalls, restrictions and possible violations, so read on.

Brokers take a pound of flesh

Barron’s reviews and rates online and direct-access brokerage firms each year and they provide charts showing who has the lowest commissions. They are all low these days, a huge benefit for traders.

The problem is that when it comes to retirement-plan accounts, brokerage firms cover the gamut in terms of commissions (most are very high), number of allowed trades, and other terms and conditions. Some of their terms are based on ERISA and IRS rules and others are simply their own policies. We are doing our own survey now on retirement-plan brokerage accounts and will report on this soon in this column.

I have advocated Mini 401(k) plans (also known as solo or individual 401(k) plans) as a retirement plan of choice for traders, but most brokers still do not offer this product. Mutual fund companies offer Mini 401(k) plans, but most traders prefer a retirement plan they can trade (with efficiency and at low cost).

ERISA – what’s that and why should I care?

ERISA stands for the “Employee Retirement Income Security Act of 1974,” administered by the U.S. Department of Labor. To learn more about ERISA go to http://www.dol.gov/dol/topic/retirement/index.htm.

ERISA was passed to better protect employees’ retirement-plan assets. Far too many companies were abusing their company retirement plans for the benefit of management and shareholders, and not employees.

Before ERISA, companies could purchase only their stock in their retirement plans. Bankrupt companies took jobs and retirement-plan assets, and this could not continue.

ERISA saved the day for employees but makes life difficult for traders
A Department of Labor (DOL) ruling for ERISA on “plan diversification” prevents a company from investing all retirement-plan assets into its own stock, or any one stock. Certainly, this saves the day for employees.

Company administrators are charged with a “fiduciary duty” to diversify investments and manage the risk of losses. Traders are very familiar with this type of risk management.

This rule presents a problem for many traders. Is active trading in an ERISA covered retirement plan a violation of the plan diversification rules?

There is no clear DOL or ERISA guidance or case law indicating how to apply the 25-percent plan-diversification rule to active trading. Each case should be evaluated on an individual facts and circumstances basis in consultation with a CPA or tax attorney specialized in ERISA and tax regulations. 

Don’t panic, if you have an IRA or individual-level plan, you are exempt from ERISA rules

Before you start worrying about ERISA rules, find out if your retirement plans are even subject to ERISA regulations.

Some retirement-plan types are subject to ERISA rules, and others are not.

Individual retirement accounts, including traditional IRAs, Roth IRAs, Rollover IRAs and education IRAs, are not ERISA covered plans; therefore, IRAs are not subject to this 25-percent plan-diversification rule. 

Even though you are not subject to ERISA rules, other IRS rules may serve to restrict your IRA investment activities. See below.

Mini 401(k) plans are ERISA plans. See Form 5500 rules below.

ERISA plans include all company-level plans including but not limited to 401(k) plans, traditional retirement plans and other qualified retirement plans.

This makes sense. Retirement plans that include third-party employees are covered by ERISA, for the protection of those employees. But plans for individuals without employees have significantly less government oversight and protection. That’s the American way!

Individual-level plans are the plan of choice anyway

I usually advocate individual-level plans for traders; with a Mini 401(k) as the first choice and SEP IRAs as a second choice (if you miss the year-end establishment date on a Mini 401(k) plan).

To have the opportunity to fund a tax-deductible retirement plan, a trader needs to form a simple legal entity. This is done to create earned income, since trading gains are not earned income.

The entity pays the individual trader a fee (which is the earned income) and the trader establishes a retirement plan on the individual level, not the entity level.

All IRA retirement plans effectively navigate a trader around many ERISA rules, including the 25-percent rule for plan diversification.

There are restrictions on IRA investments

IRA investment guidelines limit what investments can be made, and disallow “self-dealing” or “prohibited transactions.”

For more information on these guidelines see “The Dos and Don’ts of IRA Investing” by Robert Preston at http://www.aicpa.org/pubs/jofa/apr2000/preston.htm.

Some IRA investments are prohibited, while others are allowed. However, the ones that are allowed generate “unrelated business income (UBI),” which leads to the payment of taxes (UBIT) on that income – even though the investment is made in a tax-deferred IRA account.

IRAs may not invest in life insurance and collectibles (art works, antiques and most precious metals).

Foreign investments should be limited to ADRs and domestic mutual funds.

Real estate investments are allowed, providing your trustee is a qualified provider, he or she allows it and can navigate around complex rules.

When it comes to brokerage accounts, IRAs are “cash accounts” and may not use margin to buy stocks (or other forms of debt-leverage for purchasing stocks). If an IRA invests in a hedge fund or other investment company that uses leverage, that is tantamount to breaking the rule on the use of leverage. The consequence is the generation of UBI from the income in the hedge fund and taxes on that income (UBIT).

In the above article, Robert Preston writes, “With certain investments, IRA owners face other risks. The IRS can use portions of the IRC (sections 511–514) to tax a not-for-profit or a tax-exempt entity that conducts business unrelated to its original purpose. The rules cover income-producing 'businesses' in tax-exempt entities, including trusts (IRA trusts under section 408(e)(1) that are considered businesses). Investments can lose their tax-exempt status and be taxed as business entities even though they operate in a tax-exempt environment. These rules relate only to investments the IRS considers 'profit- producing' and camouflaged by tax-exempt entities such as using IRA funds to buy an interest in a cattle-breeding operation or to invest in a hedge fund that uses leverage to purchase securities. Both transactions generate unrelated business taxable income (UBIT).”

Do you owe taxes if you day trade your IRA?

Many traders are interested in actively trading their IRA accounts, even though they can’t use margin to buy stocks.

Some traders will enter and exit trades on a daily basis, similar to how they operate their day trading business in “taxable” accounts.

This raises an important question of great concern to many traders. Will the IRS consider day or swing trading in an IRA account a camouflaged “profit-producing” activity that is subject to UBIT?

Many traders may not mind paying taxes on their day trading gains in their IRA account, since they would have to pay similar taxes anyway in a taxable account.  Their goal may be to tap additional sources of trading capital and they don’t mind losing the tax-deferral benefits. If a trader stops trading, then the future profit growth is tax-deferred in the IRA account.

“Prohibited transactions” and “self dealing” will cost you dearly

The IRS does not allow “self-dealing” or “prohibited transactions” between your retirement-plan assets and yourself.

For example, if you actively trade your retirement-plan assets (ERISA or not), you may not pay yourself a management or administration fee. That will be deemed “self dealing” and be subject to “prohibited transaction” tax penalties. The initial tax on a prohibited transaction is 15 percent.

That’s not your only problem. You also have an “early withdrawal” subject to ordinary taxation plus a 10 percent excise-tax penalty (Form 5329).

Here are other self dealing and prohibited transaction to stay clear of:

Your retirement plan may not be a partner in your trading entity.

You can’t sell securities from your taxable accounts to your retirement accounts.

You and your family members may not invest their retirement plan assets into your own hedge fund.

Based on a more aggressive interpretation of the law, some CPAs and attorneys may not categorize an owner’s IRA investment in their own hedge fund as a self-dealing prohibited transaction, providing the following facts and circumstances apply: The managing member does not earn any revenue from his own IRA (i.e., fees at zero); the IRA capital may not be material enough to help the managing member launch the hedge fund (showing others the fund has other investors of certain magnitude); the IRA does not help pay the fund expenses in a material manner.

Taking this more-aggressive approach may give you the answer you want to hear, but recognize that you may turn your tax-deferred or tax-exempt IRA into a taxable account. We do not suggest this aggressive approach.

Solo traders with ERISA plans are stuck with the 25-percent rule
Traders may raise the following question: "I don’t have any employees so why should this ERISA plan diversification rule apply to me?"

Tough luck. If you have an ERISA plan the rule applies to you even if you don’t have any employees.

If you trade an ERISA plan that only includes yourself (no employees), you may think "What’s the risk if no employees can sue me for ERISA violations?"

You should also consider that if you get divorced and it’s contested, your spouse’s attorney can allege ERISA violations. A spouse may be entitled to half or another portion of your ERISA retirement plan assets and deserve the protection of ERISA.

A conservative approach to the 25-percent rule
In my prior Active Trader articles on this subject, “A Special K," February 2003, and "The Proof is in the Return," April 2003, I stated a conservative approach to the 25-percent rule as advocated by our attorney who specializes in ERISA and tax law.

Both articles mentioned that traders should only actively trade 25 percent of their ERISA plan assets and conservatively invest the other 75 percent.

Many traders have written our firm and posted questions on popular message boards asking for more detailed information on the 25-percent rule and ways to possibly navigate around it. I explain the rules above and ways to navigate around it below.

Traders and their CPAs looked for the 25-percent rule in the tax code but it's not there. The 25-percent rule is an ERISA rule, not a tax-code rule.

Our retirement plan attorney recommends that traders only actively trade (with risk) 25 percent of their ERISA plan assets. To achieve required plan diversification, she recommends prudently investing the remaining 75 percent in mutual funds, interest-rate and other types of non-stock investments.

Our attorney based her recommendations on research of ERISA and DOL court cases. DOL raised the stock investing argument in a few litigations. However, our attorney’s informal opinion is that ERISA case law supports the following: "a high concentration of plan investments in stocks was prudent for a fiduciary and not an ERISA violation" and "there is support (in the ERISA case law) for day traders to self-direct plan (ERISA) investments."

If there is a will there is a way (around the 25-percent rule).
Consider the following example of trading in an ERISA plan.

This trader is actively trading 100 percent of ERISA plan assets but may not be in violation of the 25-percent plan-diversification rule.

A business trader actively trades 10 stocks on a daily basis and he does not keep any positions overnight (day trading). This trader hedges his positions and monitors risk very closely, using stops and other available methods. This trader is diversified and, notwithstanding the perceived risk of day trading, this trader is consistently profitable.

The spirit of the 25-percent plan-diversification rule calls for risk management, liquidity and diversification. It does not specifically state that active trading is prohibited. It can be argued that this trader is not "buying and holding" one or a few stocks with great market risk. In fact the trader is very diversified and trading with plenty of risk management.

What can be argued as risky is the pursuit of day trading, a known high-risk activity. A profitable trader can argue that consistent profitability proves that day trading is not high risk for them.

Of course this trader may not need to tap into retirement-plan assets; a consistent losing trader may need to tap these retirement-plan assets and hence they may have a problem with this argument.

This more aggressive approach is based on theory and has not been tested under the law, so proceed with caution and at your own risk. Consult with an expert to better assess this risk.

Consider the reverse example: A consistent losing trader actively trades stocks in his ERISA plan in a very risky manner without the use of stop losses or hedging. An argument can be made that this trader violated ERISA rules by not diversifying out of risky swing and day trading activities.

You can’t get trader tax status benefits from just trading your retirement accounts

Now that you solved how to actively trade your retirement-plan accounts without ERISA or tax trouble, keep in mind that you are still lacking trader tax status unless you actively trade a taxable account as well.

Retirement-plan trading does not count for trader tax status (business tax treatment). You need trader tax status in order to deduct all your trading business expenses.

If you just trade retirement-plan accounts and no taxable accounts, all your expenses are matched to your retirement-plan income, which is tax-deferred; that makes your expenses also tax-deferred. It will be difficult (but possible) to keep appropriate records so that when you retire and take taxable distributions, you can reduce that income by the deferred expenses. An administrator will not allow you to record those tax-deferred expenses in the retirement account.

To protect against deferral of your expenses, achieve trader tax status on at least a small taxable trading account. Within reason, you can allocate all your business expenses to the taxable account and not be stuck with any expense deferral. You will then get the best of both worlds.          

Bottom line
If you want to actively trade your retirement-plan accounts, first determine which EIRSA and IRS rules may apply to your trading plan. It’s a minefield with gray areas and you need to protect yourself against ordinary taxation on “unrelated business income” or “early withdrawals,” plus 10-percent excise tax penalties on early withdrawals, plus 15-percent tax penalties on “prohibited transactions” on “self-dealing.” Ask yourself is it worth these extra costs, uncertainties and headaches to put your retirement (accounts) at great risk? For some the answer may be yes, so do your homework and try to stay clear of these extra costs and gray areas. Consult with a CPA and/or tax attorney with expertise in the retirement plan and trading areas. If you are talking big bucks, it may pay to engage an expert firm to prepare a file for a private letter ruling with both the IRS and DOL.

No credit or margin is allowed in retirement-plan accounts, because they are "cash accounts."

Important update on March 12, 2004:
We point out in our above article that there are several limitations in trading your retirement accounts such as a business-activity (hyperactively). Since writing this article, one more significant limitation has arisen as a result of a recent NASD crackdown on credit abuses in "cash accounts."

All retirement plan accounts are "cash accounts," whereas business trading accounts are "margin accounts." Business traders, who fall under the "pattern day trader rules" are allowed 4-to-1 margin; investors are allowed 2-to-1 margin. Cash accounts are not permitted any credit or margin. Herein lies the problem with the recent NASD crackdown.

NASD argues that many brokerage firms are allowing credit in cash accounts, where no credit is allowed by law. NASD is not claiming brokers are using margin in cash accounts, but claiming credit infraction over a technicality – using proceeds for purchases before the proceeds' settlement date. For example, if you sell a stock and re-purchase another stock before the first stock sale settles (3 days later), NASD claims your broker is lending you the funds and that's a violation on cash accounts.

The consequence of this "waiting for settlement date" rule is that "cash account" holders will have to wait longer to turnover capital in their cash accounts. This can be a significant problem for active traders.

WASHINGTON, March 11 /PRNewswire. PRESS RELEASE: NASD Fines Ameritrade, Datek and iClearing $10 Million for Improperly Extending Credit and Allowing Trades. Click here to read this story.

A leading brokerage firm recently sent the below e-mail (redacted) to one of our GTT pros, which explained this policy change on her retirement account.

E-mail: Thank you for choosing XXCo.

Thank you for your e-mail regarding your buying power. In order to comply with a more strict interpretation of trade settlement regulations, XXCo. has changed its policy towards cash account trading as of 12/19/03.

In a cash account such as yours and for trades placed on our website, all proceeds from a sale will not be available for reinvestment until the trade has settled. However, customers can purchase securities, through one of our brokers, if sufficient funds from a sell order will settle on or before the settlement date of the purchase (system changes will make these trades available on our website in the near future. In the meantime a broker assist fee will not apply). Regular way settlement for stocks is going to be the day of the trade plus three business days, options settle just one business day after the trade, and for mutual funds please consult the funds prospectus. For example, if you sold your stocks on Tuesday, the funds would be available for reinvestment on Friday.

Alternatively, once you sold your stock on Tuesday you would be able to use those funds for re-investment if you call us at the number below and one of our brokers placed this trade for you. A broker assist fee will not apply. If you choose to purchase additional stock through a broker, please note that this stock cannot be re-sold within the settlement period. Doing so will result in a free riding violation on your account. Two free-riding violations in a cash account may result in it being closed. It is your responsibility not to sell stock that will cause a violation. We understand that this has changed the fundamental manner in which you are able to trade within your account and we apologize for the inconvenience and hope to educate you on the changes.

These cash settlement regulations affect only cash accounts; however, trading within margin accounts remains unaffected. If you are considering upgrading your account to margin, please note that there are risks involved with establishing and using a margin account. Ultimately you would have to determine whether or not a margin account would be suitable for your investment objectives. Please note that margin is not allowed on retirement or custodial accounts.

IRS Form 5500 ERISA Annual Report: ERISA (retirement) plans must file an annual report to the U.S. Department of Labor (DOL) each year on Form 5500 or Form 5500-EZ. These forms are due by Aug. 1 of the following year (2004 Form 5500 is due Aug. 1, 2005).

An automatic 2.5-month extension for filing employee plan returns is obtained if a properly completed Form 5558 is filed by the due date of the Form 5500 Series return/report. The IRS will not return an approved copy of the extension request to the taxpayer. The taxpayer must attach a photocopy of the completed Form 5558 to the Form 5500.

Individual Retirement Accounts (IRAs) are not ERISA plans so no annual report (Form 5500 or any other form) is required for IRAs (including but not limited to traditional IRAs, Roth IRAs, SEP IRAs and education IRAs).

ERISA-based plans include but are not limited to 401(k) plans, Mini 401(k) plans, Keogh plans, profit-sharing plans, money-purchase plans and defined benefit plans.

Many ERISA plan administrators prepare a Form 5500 or 5500-EZ for their clients. If not, use the below resources to file the form on your own, or you can ask our firm for this assistance.

Our tax software (Lacerte) has all these forms, so we can prepare your 5500, 5500-EZ and extension Form 5558. Please contact us (or your GTT tax preparer) by July 25 if you want us to file your extension.

One person or husband/wife plans file 5500-EZ. It's fairly simple to prepare with very basic plan information.

Here are some resources to learn more:

www.irs.gov/retirement/article/0,,id=110293,00.html

www.efast.dol.gov/ – US Department of Labor (DOL) Employee Benefits Security Administration (Form 5500)

www.dol.gov/ebsa/ – US Department of Labor (DOL) Employee Benefits Security Administration.

(800) 829-3676 DOL toll-free.