Precious Metals IRAs

Selecting the Metals

Precious metals are not valued for their form, age, rarity, or artistry, but by their metal content and intrinsic value. CNB will only custody metals that are permitted to be held in IRAs under Internal Revenue Code Section 408(m)(3). If held within a retirement account, the precious metals must meet the following minimum fineness requirement or they will not qualify as an allowable investment in an IRA.

• Gold - 99.50% purity
• Silver - 99.90% purity
• Platinum - 99.95% purity
• Palladium - 99.95% purity

Additionally, if held within your IRA, the precious metals must also be in the physical possession of “a trustee,” i.e., a bank, credit union, trust company, or IRS-approved nonbank custodian.

Some precious metals are determined to be collectibles and cannot be held in a retirement account.The Tax Reform Act of 1986 set out rules and regulations as defined in IRC 408(m)(3), which indicates which specific metals would be considered collectibles and which metals would qualify for an exemption from the rule. Any metals purchased in an IRA that do not meet the requirements would be treated as a collectible and, per regulation, the IRA owner will be deemed to receive a distribution in the year the collectible is acquired. The distribution is generally taxed as ordinary income and could carry an early withdrawal penalty if the participant is under age 59½. A current list of permissible precious metals can be found on the CNB Precious Metals Disclosures & Instructions Form.

Choosing a dealer

There is risk involved in any investment. The best way to protect your retirement savings is by reviewing the investment, the investment sponsors, and the metal dealers. An important step in the purchasing process will be your selection of the precious metals dealer. You will be responsible for completing the necessary due diligence when making that choice. CNB is not affiliated with nor do we recommend any specific precious metals dealers. Financial Industry Regulatory Authority (www.finra.org) has investor resources available and investor educational series with tips to help avoid problems when choosing a dealer and investing in precious metals. Other industry sources for reference would be the Professional Numismatics Guild (www.pngdealers.org), the American Numismatic Association (www.money.org), or the Better Business Bureau (www.bbb.org). The Commodities Future Trading Commission (CFTC) also has important information to review when selecting your dealer.

Funding the purchase

Your precious metals funding will need to be available in the IRA prior to any transactions. There are several ways to get funding into your IRA including an IRA to IRA transfer, a rollover, a contribution, or a conversion of funds from a Traditional IRA to a Roth IRA.

Transaction Process

Once you have chosen the allowable precious metals, have selected your precious metals dealer, and have funding available, you will negotiate the price and terms of the transaction directly with the dealer. After the terms of the transaction have been set, you will need to complete our Precious Metals Investment Authorization Form and submit it to CNB Custody along with the dealer’s itemized invoice referencing the metals to be purchased and trade details. The net settlement amount will be wired from your IRA into an escrow account at Delaware Depository where it awaits delivery of the metals, unless you chose the optional funding method on the Investment Authorization Form where the trade proceeds go directly to the dealer.

Delivery Process

The next step is for your dealer to deliver the metals to the depository for storage. CNB has chosen to utilize the services of Delaware Depository Services Co. (DDS) and International Depository Services Group (IDS) for the storage of all precious metals. For detailed information on these storage facilities, please visit www.delawaredepository.com and www.internationaldepositoryservices.com.

Metal Storage

There are two types of metal storage available at the depository, segregated and non-segregated. Your selection on the Precious Metals Investment Authorization Form will determine which type will apply to your metals. If no selection was made, non-segregated will be assumed.

• Segregated – This is stored with your account information. When you sell, exchange, or take an in-kind distribution of the precious metals, you will receive the exact same metals you originally deposited. No silver will be segregated at DDS. All metals are segregated at IDS.
• Non-segregated – Precious metals are stored commingled with other customers’ precious metals (bulk storage). When you sell, exchange, or take an in-kind distribution of the precious metals, you receive “like” metals, not the ones you initially purchased. Non-segregated storage is not available at IDS.

Fair Market Value

As with most commodities, precious metal prices are in a constant flux. CNB will base the value of your precious metals on a spot price. The spot price does not include any markups, markdowns, or commissions and should not be construed as a firm bid price to buy or sell metals. Many sites such as www.bullionvalues.org exist to obtain current precious metal spot prices.

Fees

As your IRA custodian, CNB charges a fee to perform recordkeeping that tracks the activity within the account, produces statements for the account owner showing the activity and status of the account, and provides tax reporting of contributions, distributions, and fair market value to the account owner and to the IRS as required. Annual fees will be due to the depository and to CNB.

In addition to the annual base and storage fees, you may have additional fees for shipping or wiring proceeds directly to a dealer that must be paid prior to your initial transaction. Your fees may be paid by check, by calling CNB to pay by credit card, or by paying online under the fees tab of our website at www.cnbcustody.com.

See our Fee Schedule and our Precious Metals Disclosures and Instructions for more information.