HCE threshold

[Pension Nerd]

WDIK - you still dont get it.

The story of my life in more ways than one.

Are you stating that IR 2005-120 incorrectly reports the cumulative LB year cola increases for tax years from 2000 to 2006?

No. What I am stating is that Publication 560 for 2000 defined a highly compensated employee as

"an individual who...For the preceding year, received compensation from you of more than $80,000...",

not the $85,000 which is the limit in effect for 2000.

[Pension Nerd]

I think this may be where we go back to....you can't rely on Publications....right?

What to do?

This amuses me, but also scares me! If we can't even get something this basic right, how am I ever going to know if my new comp allocations are correct!

[Guest mjb]

In 2000 everyone in the IRS believed in the info letter fairytale. (see ABA Joint Committee on Employee benefits Q & A May 12, 2000, Q 11 citing the info letter for the 80k LB amount used in the 2000 edition of pub 560.) However that was then and this is now and IR 2005-120 reports the LB amount in 2000 as 85k, not 80k. Why not ask the IRS why they changed their LB $ for 2000 to 85k?

Pension nerd- Why not rely on the IRS cumulative notice as your authority?

[Guest Pensions in Paradise]

mjb - would you defend your clients for free if they took your position and the IRS fought them on it?

[Guest mjb]

PP how can IRS disregard their own official guidance on cola increases in IR 2005-120 (since the Info letter is not precedent)? Do you really think the look back amount for 2006 is only 95k? Seriously I would represent the clients because I would collect my fee from the IRS for the failure to have a meritorius reason for making a tax assessment. Q What is your defense for using an incorrect $ dollar amount to determine who is an HCE?

[WDIK]

In 2000 everyone in the IRS believed in the info letter fairytale...Why not ask the IRS why they changed their LB $ for 2000 to 85k?

So you agree with me that the IRS has been inconsistent in communicating its position on this topic.

[Guest non-tax pro]

In 2000 everyone in the IRS believed in the info letter fairytale...Why not ask the IRS why they changed their LB $ for 2000 to 85k?

So you agree with me that the IRS has been inconsistent in communicating its position on this topic.

Please do not send off General Inquiries to the IRS. Their responses have been inconsistent and they do the Monkey-See-Monkey-Do routine like most of you (i.e. just look at misapplied Handbooks, Q&A's, etc.). I have been on vacation, but in the meantime John Heil has volunteered to address this issue with the appropriate IRS personnel. It is very clear that the Pension Handbooks are incorrect as Mike learned when you apply the COLA amounts to the HCE thresholds (i.e. you don't know inflation until it happens, so the tabular values listed are the determination year values to replace the original $80K -- do your own homework instead of spewing and you will learn that MJB and a few others are correct. I know math is hard for some, but please give it a try and let me know if you still disagree. The numbers are enlightening, rather than the subjective opinions listed herein). I'm sorry I got this started -it seemed like such a simple clarification to what I've learned is a widespread misapplication of law.

[Guest mjb]

At one time the IRS was incorrect in reporting the cola increases but they are consistently correct now. (Until 2001 the IRS was under the control of Clinton appointees who thought that retirement benefits were a tax shelter for the wealthy.) I am just the messinger, don't blame me for the message which is that the correct compilation of the cola increases for 414q1B is found in IR 2005-120.

[AndyH]

And to us math-challenged Monkeys without obnoxious attitudes, who is John Heil?

[GBurns]

mjb

Are you saying or implying that the IRS never made mistakes, had inconsistencies and never " thought that retirement benefits were a tax shelter for the wealthy" except when "under the control of Clinton appointees "?

Are you saying that the IRS is currently perfect???

Even if we regard the IRS as being started (in its present form) in 1952, that would mean that you are saying that in over 50 years, the IRS was exemplary except for 1993 to 2001 (the 7 Clinton years).

In any case what does this have to do with the issue?

[Guest non-tax pro]

And to us math-challenged Monkeys without obnoxious attitudes, who is John Heil?

John Heil is the person responsible for the IRS indexing (e.g. HCE threshold). He works in Employee Plans Actuarial Group.

To get a real interp, one would probably have to go to the Congressional delegates who worked on this law. I think it was Warner, but it's the employees of the subcommittee that would have the historical understanding. I have not attempted to do this. I think the IRS will provide adequate clarification once they review the indexing tables and HRA 3448's wording independently of the Q&A's.

[Guest mjb]

GB: Has it occurred to you that maybe the 1999 IR was put through the white house spin cycle before it was issued (because a contrary opinion would have been a revenue loser in the last year of the Clinton administration.)? Clinton vetoed two tax reform acts passed by Congress that contained the same changes to retirement benefits that were enacted in EGTRRA. The reason the IRS chose to answer the question in an info letter instead of an authorative ruling is because the IRS was not responsible for any incorrect statement in the info since it is not an interpretation of the tax law (see below) and second it was not subject to the stringent standards and procedures for issuing official IRS pronouncements (e.g., Rev Ruling) that would have required a rigorious review of the legislative history of the amendment of 414q1B which would have discovered the LB year effective date/base period provision of 1431(d) of SBJPA.

From the last para of the 1999 info letter to Kyle Brown: "We hope this information is of assistance to you. Please note that this letter is not a ruling and cannot be relied upon as such." Q How can any IRS official state the position of the Service in an IRS document that is not a legally enforceable position of the IRS.

[KJohnson]

This came up at the ABA JCEB meeting in May of this year. In Q&A 41 the JCEB gave a proposed answer using the current year comp threshold for determinng an HCE in the lookback year. The IRS/Treasury disagreed with the propsed answer. They did, however, indicate that they would take the proposed answer as a comment to their 414(q) guidance project. The Q&A's are here. (and I realize that the IRS/Treasury's response is non-bidning).

http://www.abanet.org/jceb/2006/JCEBQAwithIRSfor2006.pdf

[AndyH]

Lunch break at the zoo.....

Anybody else wondering how "John Heil's" coming along on this? John Warner? Sam Nunn? Hillary Clinton? Karl Rove? Lani Guinier? Marion Barry? Other names we can drop? Any of them making any progress on this issue?

[Mike Preston]

Did anybody notice that our good friends at EP:EO seem so have won the day. Pub 560 for 2006 has language that is startlingly clear and completely consistent with the Kyle Brown letter, but totally inconsistent with prior years' Pub. 560's (and, of course, the law). Here is the language from 2006 (for preparing 2006 tax returns):

"For the preceding year, received compensation from you of more than $95,000 (if the preceding year is 2005, $100,000 if the preceding year is 2006 or 2007) and, if you so choose, was in the top 20% of employees when ranked by compensation."

To remind everybody, this is what the 2005 version stated (for preparing 2005 tax returns):

"For the preceding year, received compensation from you of more than $95,000 and, if you so choose, was in the top 20% of employees when ranked by compensation. This $95,000 amount increases to $100,000 in 2006."

Now isn't that just peachy?

[Mike Preston]

mjb, you out there? Do you still think that the "new" pub 560 is wrong?