Finance - HL 130 (1)

THIS IS NOT A COMMERCIAL ENDORSEMENT!  I always hesitate to publish anything from a firm with a vested interested.  Here I think the information is valuable so it is included for your benefit.  Please discuss any action with your personal advisors.  Mark

From: George Chaudoin

Date: 6/1/2012 8:51:01 AM

Subject: Smith Anglin - Implications of the FAA Modernization and Reform Act of 2012

-----Original Message-----
From: Smith Anglin Financial <emailinfo@Smithanglin.com>
To: Undisclosed recipients:;
Sent: Fri, May 25, 2012 1:10 pm
Subject: Smith Anglin - Implications of the FAA Modernization and Reform Act of 2012

Over the past few months, we have had several conversations with clients regarding the FAA Modernization and Reform Act of 2012 that was signed into law February 14^th of this year. We wanted to share some additional information with you.

The Worker, Retiree, and Employer Recovery Act of 2008 allowed eligible current and former airline employees to transfer 100% of certain bankruptcy payments they received to a Roth IRA. Because tax had already been withheld on the proceeds, settlement recipients could move those proceeds to a Roth IRA with no additional tax implications. However, if you did not roll those proceeds to a Roth IRA, there was no provision for getting any of the withholding amounts back.

This year, however, the FAA Modernization and Reform Act of 2012 addresses the issue of possibly getting some of the tax withholding back in the form of a tax refund. Section 1106 of the ACT allows eligible current and former airline employees, and their surviving spouses, to transfer up to 90% of bankruptcy related payments to a Traditional IRA. In addition, the ACT allows individuals who took advantage of the Roth IRA rollover opportunity to transfer those Roth IRA funds to a Traditional IRA subject to the 90% limit.

We have been asked by several clients in recent months if this is something that should be done. Although everyone is in favor of getting a tax refund, it is very much an individual decision that cannot be answered without looking at your situation and circumstances. Clients that may benefit are those that took advantage of the 2008 ACT and rolled the proceeds to a Roth IRA or clients that have after tax accounts/money that could be used to fund up to 90% of their settlement amounts into a Traditional IRA. By moving the money out of the Roth and into a Traditional IRA or funding the Traditional IRA with after tax dollars, you could then apply for a refund on your 2012 income tax return. However, the deadline to make either of these transfers is August 13^th, 2012.

If you have not already talked to your account manager, please obtain copies of all your Form 8935s and give us a call. You will need to know the exact amount of the settlement proceeds that are eligible for this treatment. You should have received a Form 8935 in 2009 detailing the payment amounts that were paid in 2007 and 2008. Some eligible recipients may have also received additional Form 8935s in 2009, 2010, and 2011. If you do not have your Form 8935s, Delta pilots can obtain them by calling the Employee Service Center at 800-693-3582. United pilots can send an email to esc@united.com using the subject line “IRS Form 8935”, include your name, file number, complete mailing address and telephone number.

We always appreciate the opportunity to help and look forward to answering any questions you may have.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ The above post is not necessarily the opinion or shared view of the editor. Some posts may be excluded from the current issue because of too much content or deemed inappropriate. All PCN subscribers are welcome to post. PCN Home Page is located at: http://pcn.homestead.com/home01.html