Leaderboard

I'm with you and the CB providers. No allocation needed for gateway.

If it's a court order authorizing payment of child support for the minor child but I believe in that case the minor child is the alternate payee even if the gauradian is the one that receiving the payments and using them for child support and the taxes are the responsiblity of the partcipant. But maybe a QDRO expert (which I am not) can shed more light.

That which is not specifically prohibited is generally allowed. That is why it may be difficult to find explicit guidance. This is entirely subject to the plan document and plan rules. Even some plans that do not allow employee after-tax contributions will accept and separately account for rollovers of employee after-tax contributions and associated pretax earnings. A bigger question is why would the participant wish to take such an unwise action. The earnings on employee after-tax contributions and current pre-tax earnings would continue to be pre-tax. It would make far more sense to do a direct split rollover of the employee-after-tax contributions to a Roth IRA (stopping any further pre-tax earnings) and the pre-tax earnings to a traditional (pre-tax) 401k account or traditional IRA (may not be advisable). If the pre-tax earnings on the employee after-tax contributions are minimal, alternatively the participant could do a single direct rollover to a Roth IRA with the earnings taxable. The IRS did provide direct guidance on the above in IRS Notice 2014-54. Clearly it is permissible.

Agreed, the amount subject to FICA is the benefit accrued (balance) up to the point FICA is applied, but then any incremental interest thereafter is not subject to FICA.

There it is again. It's not tax-free, because the distributions are still subject to federal income tax. Some states have no income tax at all. If the individual retired in one of those states, would you go around claiming that they got a tax-free retirement plan? Of course not, because they would be paying the taxes they are supposed to, which happen to be zero at the state level. Same in this case. This is deliberately misleading. The author is using a term established for federal tax law purposes and saying that it should apply to the state. What's your stake in all this, if I may ask?

Could you please give a citation for the source of your examples? Assuming it isn't official guidance from the governing tax authority with jurisdiction over NY state income taxation, (and it sure doesn't sound like it is!) I don't see how it is applicable to anything. Could be a completely worthless opinion - just like mine! And FWIW, (nothing) I agree with QDRO and CB's comments. For anyone who is interested, I have copied in below the language from the publication cited in the OP. Sorry, but I couldn't get the formatting to transfer properly. Pensions of New York State, local governments, and the federal government Qualified pension benefits or distributions received by officers and employees of the United States, New York State, and local governments within New York State, are exempt from New York State, New York City, and Yonkers income taxes. This subtraction modification is allowed regardless of the age of the taxpayer or of the form the payment(s) take. 11 Publication 36 (3/15) This subtraction modification is allowed for a pension or distribution amount (to the extent the pension or other distribution was included in your federal adjusted gross income), including a distribution from a pension plan which represents a return of contribution in a year prior to retirement, as an officer, employee, or beneficiary of an officer or an employee of: • The United States, its territories, possessions (or political subdivisions thereof), or any agency, instrumentality of the United States (including the military), or the District of Columbia. • New York State including, the State and City Universities of New York and the New York State Education Department, who belongs to the Optional Retirement Program. (Note: Optional Retirement Program members may only subtract that portion attributable to employment with the State or City University of New York or the New York State Education Department.) • Certain public authorities, including: the Metropolitan Transportation Authority (MTA) Police 20-Year Retirement Program; the Manhattan and Bronx Surface Transit Operating Authority (MABSTOA); and the Long Island Railroad Company (LIRR). • Local governments within the state, including, but not limited to: • New York State (NYS) Teachers’ Retirement System; • New York City (NYC) Teachers’ Retirement System; • NYC Teachers’ Retirement IRC 403(b) plan; • International Union of Operating Engineers Local 891 Annuity Fund (Department of Education of the NYC School District); • NYC Superior Officers’ Council Annuity Trust Fund; • NYC Correction Captains’ Association Annuity Fund; • NYC Detectives’ Endowment Association Annuity Fund; • City University of New York (CUNY) Civil Service Forum Annuity Fund; • Sergeants Benevolent Association of the City of New York Annuity Fund; and • NYC variable supplemental funds (VSF), including: • Transit Police Officers’ VSF, • Transit Police Superior Officers’ VSF, • Housing Police Officers’ VSF, • Housing Police Superior Officers’ VSF, • Police Officers’ VSF, • Police Superior Officers’ VSF, • Firefighters’ VSF, • Fire Officers’ VSF, • Corrections Officers’ VSF, • Corrections Captain and Above VSF.

I say the teachers better not move to another state with an income tax after they retire.

I'll take the opposite position. Whether by amendment or administrative action, the participants were paid what they were entitled to after giving consideration to either the document or the policy. There is nothing to repay there is nothing to correct. And, in fact, if you are successful in getting money back from a payee, the plan has violated 411d6.

I think you need to include the interest accrued throughout the year. See Example 2 in Treasury Reg. 31.3121(v)(2)-1(c)(4), which seems to be close to your fact pattern.

No. They are aggregated for 415 limit purposes however.

If someone does not get an employer contribution (other than match), then there is no gateway needed. And I think you mean "highest HCE %." Also, you only include contributions that appear in the general test for the highest HCE %. So no match. Only Safe Harbor nonelective and profit sharing.

I answered the immediate question, but there are other questions about this. To establish any plan there must be an eligible plan sponsor. No wages and no earned income imply there may not be. A real estate investor is not always (or even typically) an employer. But this also raises a question about the original goal - a back door Roth IRA. Presumably this is referring to making a traditional IRA contribution and then immediately converting it to a Roth. But if there is no earned income or wages, is such a person even eligible to make an IRA contribution?

@dmwe Yes, I agree. My position is the excess contributions (i.e., amounts contributed in excess of the reduced cap caused by the NDT) are no longer dependent care FSA balance amounts. Therefore, any amounts not already distributed prior to the reduction need to be directly returned or made available without the need to submit qualifying dependent care expenses. Here's a summary: https://www.theabdteam.com/blog/failing-dependent-care-55-average-benefit-test-2/ Excess Contributions Not Distributed: Refunded as Taxable Income or Recharacterized as Taxable Income The amount of HCE contributions in excess of the reduced limit that have not yet been reimbursed to the HCEs must also be made taxable income before the end of the year. There are two possible approaches: Refund/Return: Have the TPA refund the excess contributions to the company (skip if amounts are not held by the TPA), and then the company will distribute the excess back to the HCEs through payroll as standard taxable wages included in gross income and subject to withholding and payroll taxes by the end of the year. Recharacterize: Recharacterize the excess contributions as taxable income in the same manner as the excess distributions. Then inform HCEs that they may take a distribution of the excess contributions (which no longer have pre-tax status) from the FSA without the need to submit qualifying dependent care expenses.