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These Terms of Use ("Terms of Use") are made between the undersigned user ("you") and Lord, Abbett & Co. ("we" or "us"). They become effective on the date that you electronically execute these Terms of Use ("Effective Date").

A. You are a successful financial consultant that markets securities, including the Lord Abbett Family of Funds;

B. We have developed the Lord Abbett Intelligence System (the "Intelligence System"), a state of the art information resource that we make available to a limited community of broker/dealers through the Internet at a secure Web site (the "LAIS Site"); and

C. We wish to provide access to the Intelligence System to you as an information tool responsive to the demands of your successful business pursuant to these Terms of Use. Accordingly, you and we, intending to be legally bound, hereby agree as follows:]

1. Overview. · Scope. These Terms of Use (which we may amend from time to time) govern your use of the Intelligence System. · Revisions; Changes. We may amend these Terms of Use at any time by posting amended Terms of Use ("Amended Terms of Use") on the LAIS Site. Any Amended Terms of Use will become effective immediately upon posting. Your use of the Intelligence System after any Amended Terms of Use become effective will be deemed to constitute your acceptance of those Amended Terms of Use.We may modify or discontinue the Intelligence System at any time, temporarily or permanently, with or without notice to you. Purpose of the Intelligence System. The Intelligence System is intended to be an information resource that you may use to contribute to your business research. The Intelligence System is for broker/dealer use only; it is not to be used with the public in oral, written or electronic form. The information on the Intelligence System and LAIS Site is for your information only and is neither the tax, legal or investment advice of Lord Abbett or its third-party sources nor their recommendation to purchase or sell any security.

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· Survival. This Section 8 will survive any termination of these Terms of Use or your use of the Intelligence System. The undersigned hereby signs these Terms of Use. By electronically signing and clicking "Accept" below, these Terms of Use will be legally binding on me. To sign these Terms of Use, confirm your full name and enter your User ID and Password (as your electronic signature) in the fields indicated below and click the “I Accept” button.

 

Retirement Products

Rollover IRA

Lord Abbett makes it easy to open a Rollover IRA. Anyone receiving a distribution from a qualified plan can take advantage regardless of your income or whether or not you are continuing to participate in a qualified plan. Find out about a no custodial fee Lord Abbett rollover IRA.

This material is intended as general information only and is not intended as legal or tax advice. Some of this information may be quite complex and we strongly suggest you consult with your advisor or tax professional based on your individual situation.

What is a Lord Abbett Rollover IRA?

When you retire or leave a job, your former employer is required to give you distribution options, one of them being the option of having an eligible distribution transferred directly, penalty- and tax-free, to an IRA or another qualified plan. Our no-cost rollover IRA should be considered.

How does it work?

To start the IRA rollover process, it is generally a good idea for you to contact your former employer (owner, plan contact, or human resource representative) about any forms required to move the money. Some entities simply ask you to go to a Website and generate the request and/or the paperwork. If you are married, depending on the type of plan and/or its provisions, your spouse may need to sign a consent form to allow the rollover distribution.

You may be asked to complete an online or paper Distribution Election Form, which notifies your former employer how your assets should be distributed. If a paper form is used, it should be completed and returned as soon as possible to your former employer.  

Completing a Lord Abbett Rollover IRA application will establish an IRA account and generate an account number. Your former employer may need the account number before transferring your account balance. Click here to access Lord Abbett's IRA rollover forms.

Your former employer will issue a check (or wire) payable to the new custodian. When Lord Abbett is the recipient, the check should be made payable to "Lord Abbett Family of Funds, IRA for [Your name]." To ensure a smooth transition, the newly established account number and the words "Direct Rollover" should appear on the check.

Who should consider a Rollover IRA?

  • If you are eligible to receive a distribution from a retirement plan on which you do not wish to pay current taxes.

  • If you wish to continue tax deferral on your retirement savings.

  • If you are separating from service after you turned 55, but are currently under age 59½, you should only consider rolling over assets that you will not need before age 59½, as a 10% penalty reattaches upon completion of rollover as it (the 10% penalty) does not apply to the distribution from the qualified plan.

  • If you have access to an in-service distribution and you wish to diversify your investments versus the options offered via your current retirement plan.

How does Rollover IRA benefit you?

A Rollover IRA offers several potential benefits, including:

  • No taxes are withheld on assets distributed into an IRA.

  • You can gain access to a potentially broader investment selection than may be available in your employer’s plan, giving you the option to continue tax-deferred1 and potentially tax-free savings by opening a Roth rollover IRA for individuals with a designated Roth account (available in some 401(k) and 403(b) plans).

  • Allowing a non-spouse beneficiary to roll over a deceased participant's account balance from a qualified plan into a decedent IRA (not commingled with their own IRA).

  • The ability to roll all proceeds from a qualified plan into an IRA. However, if the plan contains any after-tax dollars, you may choose to invest these funds separately in a taxable account and only roll over the taxable proceeds.

1 Income whose taxes can be postponed until a later date; examples include IRAs and 401(k) plan earnings.

Note: Be careful if your client has a participant loan at the time of distribution. Generally, unless the plan has provisions to the contrary, the outstanding loan balance will become taxable income, if it is not repaid before transferring the former employer's plan account as rolling over a plan loan is not permitted in an IRA.

Diversification does not guarantee a profit or protect against loss in declining markets.

An IRA rollover may involve the application of fees and charges to the investor.

This material is intended as general information only and is not intended as legal or tax advice. Some of this information may be quite complex and we strongly suggest you consult with your advisor or tax professional based on your individual situation.

Who is eligible to open an IRA rollover? 

When an individual leaves his/her employment and the employer sponsored retirement plan pays lump sums, he/she is eligible to open a Lord Abbett rollover IRA account. This IRA rollover does not have to immediately follow severance. Many participants leave their accounts with their former employers because it was too much of a hassle to move it or because they like their former employer's plan investment offerings. If you have an account balance greater than $5,000 and leave employment, distributions do not have to begin until you attain the retirement age under the terms of the plan, generally age 65. In addition, some plans also allow participants who attain a certain age, 59½, for example, to withdraw all or part of their account while they continue to work.

Depending on the source of the funds or potentially a participant's election, the IRA rollover could either be a traditional IRA rollover or a Roth IRA rollover. A Roth IRA rollover is available if you had a designated Roth account under a 401(k), 403(b) or 457(b) governmental plan with your former employer. In addition, all rollover eligible recipients, including beneficiaries inheriting retirement plan accounts, could choose to convert all or part of what would otherwise be a traditional IRA rollover to a Roth IRA. 

Most IRA rollovers are funded directly from the former employer's retirement plan to the IRA custodian and, until recently, have generally been traditional IRA rollovers. We have a write-up on the "Rollover" home page describing the procedures you could follow to obtain a smooth transition from the qualified plan to an IRA rollover.

If you take possession of your qualified plan assets, the rollover can still be completed, but it must be done within 60 days of receiving the funds. Any taxable proceeds you received before completing the rollover are subject to mandatory 20% federal income tax withholding, so in order to complete a 100% rollover within the 60 days, you would need to come up with the cash to replace the withholding. Not replacing the withholding would subject that portion of the distribution to income tax and a 10% penalty if you were under age 59½, unless an exception such as disability applied. If the distribution you received directly was from a designated Roth account, the proceeds can also be rolled over to a Roth IRA rollover. However, if you wanted to roll the entire proceeds to another designated Roth account within you new employer's retirement plan, you must have the proceeds sent directly to that plan. If you take possession of your designated Roth account, only the earnings portion of the distribution can be subsequently rolled over to another company's retirement plan. These restrictions do not apply when opening a Roth IRA rollover.

A deceased participant's spouse may roll over their late spouse's account to their own rollover, and a non-spouse beneficiary may roll over the account he/she inherits to an IRA account called a decedent IRA (not their own existing IRA), as a decedent IRA account may only contain the inherited funds and requires distributions to begin in the year following death or the decedent IRA must be distributed within five years following the former participant's death.

You should consider a Lord Abbett rollover IRA if you:

  • Would like to avoid current taxation of your pension distribution;
  • Would like to preserve the full amount of your distribution as there's no withholding on direct rollovers;
  • Would like to continue tax deferral started within the qualified plan; and/or
  • Would like to preserve the tax free potential offered via the designated Roth account started with your former employer.

This material is intended as general information only and is not intended as legal or tax advice. Some of this information may be quite complex and we strongly suggest you consult with your advisor or tax professional based on your individual situation.

What are the Rollover IRA contribution limits?

Rollover IRAs are designed to receive contributions from qualified plans so you can avoid current taxation. The dollar amount a rollover IRA may receive is equal to the individual retirement funds available from the qualified plan.

Can I combine a rollover IRA and an IRA receiving annual contributions?

You can combine rollover and contributory IRAs in the same account. However, you are required to keep traditional IRA and Roth IRA money (rollover or contributory) in separate accounts. An advantage to keeping a rollover IRA (traditional or Roth) separate from a contributory IRA occurs should you ever declare bankruptcy. Contributory traditional and Roth IRAs are exempt from bankruptcy up to the first $1 million, while rollover IRAs (traditional or Roth) have no cap. Combining the accounts, in the event of a bankruptcy, could cause you to prove what money belongs to the contributory IRAs and what money belongs to the rollover IRAs.

How do rollovers affect contribution or deduction limits?

Rollover IRA contributions do not count toward the maximum IRA contribution limit. Since rollovers simply defer taxation, they do not affect whether or not your IRA contribution is tax deductible. (See "Traditional IRA Eligibility" regarding deduction rules.)

This material is intended as general information only and is not intended as legal or tax advice. Some of this information may be quite complex and we strongly suggest you consult with your advisor or tax professional based on your individual situation.

What types of rollover IRA distributions are available? 

There are basically seven types of rollover IRA distributions an individual can take from a Rollover IRA:

  • Normal
  • Premature without an exception
  • Premature with an exception
  • Required
  • Distributions due to death of account owner
  • The 60-day withdrawal and subsequent rollover (return)

What is a normal rollover IRA distribution? 

 A normal rollover IRA distribution occurs after the actual date, not simply the calendar year, you attain age 59½. For example, William was born on February 15, 1954. He will be 59½ on August 15, 2013. A distribution before that date would be called premature (see below).

All distributions are taxable, unless aftertax contributions were made, but there is no 10% penalty tax. If aftertax contributions were made to any IRA you owned, a pro-rata formula would apply to each distribution allocating tax-free return of contributions and taxable gains and/or contributions regardless whether the distribution comes from any one or several IRAs.

What is a premature rollover IRA distribution without an exception?

A premature rollover IRA distribution, without an exception, occurs when you remove funds before age 59½ and none of the statutory exceptions apply (see next Q&A), so that a 10% penalty is assessed against any taxable amounts withdrawn in addition to any taxes due.

What is a premature rollover IRA distribution with an exception? 

A premature rollover IRA distribution with an exception occurs under any of the following circumstances:

  • Substantially equal periodic payments are taken based on your life expectancy. (This is frequently called a 72(t) distribution because of the section of the Internal Revenue Code where the penalty and exception reside.) Payments must be made for the greater of five years or you attaining age 59½, or the 10% penalty reattaches (retroactively) to all distributions made before age 59½.
  • You are disabled.
  • You are the beneficiary of a deceased IRA owner.
  • You are using distributions to pay qualified higher education expenses (tuition, fees, books, supplies, etc.) for yourself or a family member, such as a son or daughter.
  • You are paying health insurance premiums after you have received unemployment compensation for more than 12 weeks.
  • You have significant, unreimbursed medical expenses (greater than 7.5% of adjusted growth income [AGI]1 for that year). Individuals 65 and over can use the lower 7.5% threshold through 2016.
  • Your distribution is used to buy, build, or rebuild a first home. (There is a lifetime limit of $10,000 for distributions for first-time homebuyers, so if you wanted to assist two children equally to buy a home, each child could receive $5,000. If your spouse also had an IRA, he/she could also do the same for each child in this example.)
  • Your distribution is due to an IRS levy to pay overdue taxes.

1 Adjusted gross income includes wages, interest, capital gains, income from retirement accounts, and alimony paid to the taxpayer adjusted downward by specific deductions (including contributions to deductible retirement accounts and alimony paid by the taxpayer); but not including standard and itemized deductions. 

What is a required distribution from a Rollover IRA?

You must begin receiving required minimum distributions (RMDs) by April 1 of the calendar year following the calendar year you attain age 70½ and continue to receive the RMD before each subsequent December 31. Two distributions will be required in the first year if you wait until the calendar year following 70½ to commence RMDs. To avoid taking two RMDs in the same year, you would take the first RMD by December 31 of the year you turn 70½.

RMDs, which represent pretax dollars and all earnings, are taxed as ordinary income. The portion of RMDs based on non-deductible contributions, if any, is tax-free. All distributions must include both taxable and nontaxable funds (if any) based on a pro-rata formula provided by the IRS. You are subject to this rule if any of your IRAs were funded with aftertax dollars. All RMD calculations treat you as owning one big IRA from which a pro-rata share of aftertax dollars, if any, must be withdrawn. If you are affected by this issue, please use IRS Form 8606 to report the split. Earnings are always taxable.

If the full RMD is not taken in a given year, a 50% excess tax is assessed on the amount not taken. For example, if you were required to take $10,000, but only took $6,000, a 50% excise tax could be assessed against the $4,000 shortfall in addition to income taxes due.

What are death benefits from a Rollover IRA?

When an IRA account owner dies, generally an inherited IRA (that is, a decedent or beneficial IRA) is created. However, the treatment of the inherited IRA account varies depending on who is the beneficiary. IRAs that are inherited from a spouse may be treated differently than IRAs that are inherited from someone other than a spouse.

Inherited from spouse:

  • Treat IRA as your own by designating oneself as the account owner.
  • Treat IRA as your own by transferring it to your rollover or traditional IRA.
  • Transfer IRA, minus the cost basis in the account, to a qualified plan in which you (the beneficiary) participates. (Cost basis is the total amount of aftertax dollars contributed by your spouse.)
  • Withdraw funds as needed without penalty, but taxed as ordinary income. No required minimum distributions are triggered until the deceased spouse would have attained age 70½. This option is advantageous if you are under age 59½ when inheriting the account and may be in need of income, as the 10% excise tax penalty reattaches to the account if the inheriting spouse is under age 59½ and utilizes options 1 through 3 above. 

If the IRA is inherited from someone other than a spouse, the options are more limited. If this is the case, you may leave the account where it is or make a trustee-to-trustee transfer (to change investment vehicle from one IRA trustee directly to another), as long as the IRA (called a "decedent IRA" or "inherited IRA") is established in the name of the deceased owner for the benefit of the beneficiary (you). For example, the account might be titled as follows: "Joe Doe, deceased, F/B/O Jane Doe, beneficiary."

A non-spouse beneficiary has the option to:

  • Take a one-time distribution; or
  • Take payments equaling the full distribution by the end of the fifth calendar year that includes the anniversary of death; or
  • S-T-R-E-T-C-H the payments over your life expectancy, which is determined by tables, found in IRS regulations. After you die, the IRA can be passed on to another beneficiary.

What is a Stretch IRA? 

A Stretch IRA is for investors who will not need their IRA money during their own retirement. While the law does not restrict which taxpayers can select the stretch IRA option, the stretch strategy is appropriate only for those individuals who simply need and plan to receive the required minimum withdrawals, taken at the latest time the law allows, without penalty, age 70½.

A Stretch IRA can be described as a distribution strategy for an individual IRA's beneficiary. The objective upon your death is to S-T-R-E-T-C-H the beneficiary's payments over a lengthy period of time in order to obtain favorable economic and/or tax results. Payment projections over 30 years or more are not uncommon. The beneficiary is usually your child or a grandchild, but may be anyone you choose. There can be no guarantee, however, that the second- and third-generation beneficiaries will continue the stretch strategy and could elect to liquidate the account at any time.

Someone may want to S-T-R-E-T-C-H their distributions because money in an IRA grows tax-deferred.1 The beneficiary effectively inherits a tax-deferred1 savings account. By spreading the payments over a significant number of years, tax-deferred1 compounding continues, and taxes on the payments may be minimized or at least disbursed over many years.

The regulations prohibit death distributions to extend beyond the period of the initial non-spouse beneficiary's life expectancy, not recalculated as they age.

Example: Martha dies and her daughter Angela is the beneficiary of her IRA. Angela is 50 years old and her life expectancy is 34 years. In other words, Angela would need to withdraw 1/34, 1/33, 1/32, etc., of the account beginning on or before December 31 of the year following Martha's death.

If Angela dies five years later at age 55 and Angela's beneficiary is her son Bob, Bob can continue taking distributions based on Angela’s reduced life expectancy (34-5= 29). If Bob were to pass away before the 29 years were over, he could pass on the IRA to his beneficiary until the original life expectancy of Angela goes down to one, when the remaining balance would be fully distributed.

Unless restricted by the terms of the beneficiary designation, Angela and, subsequently, Bob, in this example, could accelerate their payments (take more than the minimum), which could lower the ultimate amount and length of the distributions.

If Martha did not name a beneficiary, the IRA assets may have passed on to her estate, with accelerated distributions being required. Some custodial account agreements may establish a beneficiary ordering rule, such as spouse, children, parents, etc., which could determine the actual beneficiary in the event the account owner did not have a named beneficiary upon death. A Lord Abbett IRA has the estate as a default beneficiary if a beneficiary is not named.

It is also important to note that IRAs cannot be transferred via an account owner's will, unless the will had been named, prior to death, as the beneficiary or contingent beneficiary of the account and accepted by the custodian.

1 Income whose taxes can be postponed until a later date; examples include IRAs and 401(k) plan earnings. 

Risks Involving the Stretch IRA Strategy:
Withdrawals by the account holder or beneficiaries in excess of the required minimum distribution (RMD) will exhaust the account at a faster pace, reducing or eliminating the effectiveness of the stretch strategy. Distributions greater than the RMD could subject the payment to higher federal and, possibly, state income taxes. When investing assets, which will be used to stretch IRA payments, the investor must be cognizant of any front-end or back-end sales charges that can reduce the assets available. During an extended period of declining investment returns, investors will experience income fluctuations that may cause additional withdrawals to be made that will exhaust the account at a more rapid rate. There can be no guarantee that a Stretch IRA strategy will be advantageous to your specific situation, and many of its benefits are based on current tax laws, which are subject to change. If these laws change, an investor's ability to maintain estimated distributions may be affected. Lengthy distribution periods, much like those involved in a Stretch IRA, expose an investor to significant market risk.  

What is the 60-day withdrawal and rollover rule? 

Once in a 12-month period, measured from the date you first access your IRA funds, you may withdraw an amount from each of your IRAs and use it for whatever reason and return it within 60 days, as though the withdrawal never occurred.

Example: Barbara withdraws $30,000 from her IRA on March 1, 2013. If she returns the $30,000, or a lesser amount, by April 30, 2013, she has had use of the money and avoided any taxes or penalties on the amount returned. She cannot make another withdrawal, with the ability to return it, until March 2, 2014.

If Barbara had another IRA (or several including SEPs3 and SIMPLE IRAs4), she could make this 60-day withdrawal from each of them, at different times, use the funds as she wishes, and return them within the 60-day period.

Withdrawing funds from one IRA and repaying it to another IRA connects the second IRA to the first IRA for purposes of the 60-day rule. If Barbara had two IRAs and withdrew from one, but repaid the other on a timely basis, she would lose the ability to make a separate 60-day withdrawal/return from the second IRA until March 2, 2014, in this example.

Important Tip 

You must recognize there can be significant taxes and penalties if the funds are not repaid, and larger withdrawals may be more difficult to repay. 

A rollover cannot be repaid to a SIMPLE IRA unless the funds were withdrawn from a SIMPLE IRA, but SIMPLE IRA assets, if the SIMPLE IRA were at least two years old, could be returned to any IRA.