Introduction Compensation and retirement plans are referred to as employee benefits. They are values that are made available to the employee, for the services they offer to the organisation. These benefits or values are outside their regular payments. Compensation and retirement plans are referred to as tangible benefits. An example of a retirement plan is the IRA. Funds that are deposited into the IRA account are deducted by the employer from the employee’s payment and thus are not subjected to income taxation immediately. Except in cases where there are premature withdrawers from such accounts. For example, if the employee’s gross pay is 50,000 and 5000 of the gross salary is directed into an IRS retirement account. This monies can be used to invest in the retirement fund. Tax Law: Understanding the IRA Retirement Plan and Account IRA (Individual Retirement Account) is established and operated by the employee or worker. Annual contributions into the account are excluded from his income. The account is often operated with the assistance of the employers. The current contribution scheme is, 3000 for 2002-2004, 4000 for 2005-2007, 5000 for2008 (Hule 126). Depending on the distribution, IRA is subject to tax rates. For instance, premature withdrawals from qualified funds are penalised. Case Study Early this year, Scott Lowe, age 54, became dissatisfied with the service he was receiving from the broker who managed his IRA. He requested a distribution of the $48,200 balance in the account and received a check for this amount from the broker on May 23. Scott planned to roll the distribution over into a new IRA with a different broker. Before he could do so, he received news that his son-in-law had died in a hunting accident. Scott immediately travelled to his daughter’s home to console her and his grandchildren. During this period of trauma and confusion, Scott wrote a check for $48,200 to his new broker but failed to instruct the broker to put the money into an IRA. Instead, the broker invested it in a taxable money market account. Scott and his broker did not discover the mistake until late December. Must Scott include the $48,200 withdrawal in his gross income and pay a $4,820 premature withdrawal penalty? Scott will have to pay the 10% premature distribution penalty. This he would have avoided by, within 30 days of lump-sum distribution, he would have rolled the distribution into a new account, taking distribution after 59 ½ years of age, and the distribution would have been taken at the disability of a planned participant, making a distribution that is subject to a qualified domestic relations order. These exceptions are permitted. Minimum Required Distribution (MRD) Rules These rules exist to force access to the accounts, not considering whether the beneficiary needs the money. Retirement accounts are meant for retirement and not to pass wealth, this is where this policy stems from. The age differs from policy to policy, but the rule is the same, withdrawals from retirement accounts must begin at age 70 ½ (Internal Revenue Code, 401(a) (9)). Related Case Blaylock v. Harris, 531 Fed. Supp. 24 (1981), considering SSI regulations regarding monies deposited on behalf of the beneficiary during his employment years. These monies were in a civil service retirement plan, and due to his employment termination,