1/10/11-4/7/11; THE CLIENT ROLLED OVER FUNDS INTO AN IRA ACCOUNT WITH OUR FIRM THAT WERE PREVIOUSLY HELD IN A DEFERRED OPTIONS ACCOUNT WITH THE POLICE DEPARTMENT. ONCE THE FUNDS WERE IN THE IRA, HE WAS ADVISED TO DO A ROTH CONVERSION ON A PORTION OF THE FUNDS. THE CLIENT STATED THAT HE WAS ADVISED THAT HE COULD DEFER THE TAXES INTO 2011 AND 2012 ON A CONVERSION EXECUTED IN 2010. THE CLIENT ALSO ALLEGED THAT WHEN HE INITIALLY ROLLED THE FUNDS INTO THE IRA, HE COULD HAVE WITHDRAWN THE FUNDS FROM THE ACCOUNT AND NOT INCURRED THE 10% PENALTY. APPARENTLY IN 2006 CONGRESS ENACTED A PROVISION WHEREBY PUBLIC SAFETY EMPLOYEES COULD ACCESS THESE FUNDS WITHOUT INCURRING THE 10% PENALTY. THE CLIENT FELT THAT THE FA AND THE BRANCH OFFICE SHOULD HAVE BEEN AWARE OF THIS LEGISLATION. HE STATED THAT AS THE RESULT OF THE FUNDS ROLLING INTO OUR IRA, HE HAD TO TAKE OUT A MORTGAGE FOR SOME PROPERTY THAT HE BOUGHT. HE ALLEGED THAT HE NOW HAS TO PAY MORTGAGE INTEREST, TAXES ON THE ROTH CONVERSION AND STILL CANNOT ACCESS THESE FUNDS.

$5,000.00

THE FA SUGGESTED THAT THE CLIENT COULD TRANSFER HIS PENSION FUNDS INTO A TRADITIONAL IRA AND NOT INCUR ANY TAXES. ONCE THE FUNDS WERE IN THE IRA, A ROTH CONVERSION WAS DONE ON A PORTION OF THE FUNDS, WHICH ALLOWED THE CLIENT TO PAY THE TAXES ASSOCIATED WITH THIS CONVERSION OVER A TWO YEAR PERIOD. THE CLIENT'S ACCOUNTANT AGREED WITH THIS TAX STRATEGY. THE CLIENT COULD HAVE TAKEN ALL OF THE FUNDS OUT OF THE PENSION FUND WITHOUT INCURRING A 10% PENALTY, BUT HE WOULD HAVE HAD TO PAY THE TAXES IN FULL FOR THE ENTIRE DISTRIBUTION. THE CLIENT ELECTED TO ROLL THE FUNDS TO THE TRADITIONAL IRA AND CONVERT A PORTION TO THE ROTH. THE CLIENT'S REQUEST FOR REIMBURSEMENT WAS DENIED.