Can an employee who has a NQDC account assign the right to receive payment upon his termination to the trustee of his revocable trust and avoid having to pay income taxes at the time of termination? I thought that giving the right to assign NQDC benefits gives rise to constructive receipt/economic benefit issues but I haven't found clear authority in that regard. Does anyone have a cite to a Revenue Ruling or other authority?

Greetings,

I live in California. In 2007 I converted my traditional IRA to a Roth IRA. Unfortunately, I don't have the cash to pay the taxes I owe. So, I think I'm going to recharacterize the conversion back to a traditional IRA. When I converted, some federal taxes were withheld -- about 5%. I'm not sure how this amount was calculated, but I am glad it wasn't a higher percentage. The withheld taxes were reported on a 1099 R form and I am being penalized for the distribution. From what I understand, this 5% can not be put back in the traditional IRA when I recharacterize since I am past the 60 days from the conversion. Is that so? Are there any other issues or tax ramifications I should consider before recharacterizing?

Thanks in advance.

I have a participant for deferred 11,400 in 2002 (deferral limit was $11,000). During a plan audit, it was discovered that the plan never distributed the $400 excess. When earnings/losses were determined there was a loss greater than the 402(g) excess deferral:

$ 400 excess deferral

$(430) loss

$ (30) total

EPCRS says to tax report the 402(g) excess deferral in the year of the deferral and the excess deferral plus gain/loss in the year distributed. 2002 is a closed tax year.

Since 2002 is a closed tax year, should the plan still report the $400 on a 2002 Form 1099-R?

The plan will process the excess deferral in 2008 with the loss. Is there anything that needs to be tax reported on a 2008 Form 1099-R? The 1099-R instructions indicate that only distributions of $10 or more are reported.

Thanks!

EE has wife and a 4 year old child. EE waives medical coverage for himself and deps at time of OE on Jan 1st. EE and spouse have a child 3 months later. Can the EE now enroll himself, wife, 4 year old child and newborn?

Insurance Carrier is telling us that only the EE, spouse and newborn are eliglble but the 4 year old cannot come on the plan.

I always thought the qualifying event made the EE and all deps eligible for coverage.

Seeking the truth.

We have a client who has come unglued at the prospect of providing us with the information we need in order to do their complaince testing. This is the plan's first year & he refuses to give us any census data, as that's none of our business. (we are the TPA by the way.) We have explained compliance testing, etc. & what we have to do with the data, but he wants something in writing stating that they are legally required to give us the census data. I can't find anything that specifically says that, but I also dont' know how we would do the testing, etc. without the information. Any advice?

Plan has "pooled" investments which are valued and allocated twice a year. Participant has option of electing to self direct and open up a brokerage account, if they want. We issue statements showing assets by money type twice a year -- earnings are allocated to the different money types at this time.

Reviewing a Domestic Relations Order for a terminated participant. DRO says to give one-half of the value of vested interest in plan as of the last valuation. While normally that would send me into a giggling fit because it's doable, I find myself in a quandry.

The account has lost value since the last valuation (which was almost 6 months ago) due to market decline and is just a little over half the value that it was 6 months ago.

Do I reject and ask for clarification, since the account can be valued due to a distributable event since it is in a brokerage account and that value fluctuates daily? If he were in the pooled account, it wouldn't amtter, because value assigned to him would not have fluctuated.

Should i even address this?

Does this make sense to anybody else but me?

Can a 457(f) plan allow unforeseen emergency withdrawals? Treasury regulation 1.457-6 does not provide an exception so I assume it applies to both 457(b) and 457(f) plans, but want to confirm it. Thanks!

Has anyone compiled a list of IRS/PBGC/DOL guidance (regs, notices, rulings etc) to date on PPA, especially for the DB plans? Or is such a list available somewhre - IRS/ASPPA/COPA/Academy's websites?

I would appreciate if you could share. I am way behind on this and need to catch up quick.

A client has a one-man DB plan. He decided a few years ago to contribute his home to the plan. Now he wants to sell it. Can his adult child purchase the house from the plan, or would that be a prohibited transaction?

I have written custom functions in Excel to calculate Single Life (with or without period certain) and Joint & Survivor annuity factors using the 3-tiered interest rates required by PPA. I have limited access to other sources to test my functions and hope that some of you will be willing to test some factors and report back. If you're willing to do that, please go to http://www.woodley.ws/APRs.htm then fill out the form and I'll send a copy. I may offer this as shareware after it has been more rigorously tested.

Trying to figure out how to handle a situation where a temp employee is hired full time by the recipient. You are required to recognized service while working for a "leasing organization" if you become hired by the recipient if the SOLE reason you are not a leased employee is because you have not been working on a substantially full-time basis for at least a year.

However, one of the requirements for being considered a leased employee is that:

(A) such services are provided pursuant to an agreement between the recipient and any other person (in this subsection referred to as the “leasing organization”),

Most temp services do not require a written agreement. They simply send out temps, and bill their clients. So are these services provided pursuant to an agreement? I would argue no, because if there was no requirement for a formal written agreement than there would be no need for this (A). There is an "agreement" whenever any two unrelated parties exchange goods or services for money, even when I go to the drug-store to buy a pack of gum. You agree to give me a pack of gum, if I agree to give you a dollar. In the absence of a written agreement, the relationship of a temp agency to its clients is analagous to the drug-store's relationship to me, the patron.

Therefore, no agreement, no recognition of service as a temp once hired on a full-time basis because now the lack of full-time employment for at least a year is not the SOLE reason.

Thoughts?

Hello!

What are the consequences of failing to bring a 409A arrangement into compliance by the end of this year? Specifically, is the vested deferred comp taxable for the 2009 tax year or is it somehow included in income retroactively? Any help would be appreciated! Thanks!!

A self-employed individual maintains a qualified retirement plan and receives director's fees from XYZ Inc. In addition, this individual also exercises stock options received from XYZ Inc. Lets assume the director's fees total $150,000 for the year while the exercising of the stock options amounts to $100,000 for the year. Lets also assume this individual did not have any business expenses for the year. The individual's accountant prepares a Schedule C for the year reflecting net profits of $250,000. The income shown on Schedule SE is also $250,000 which is the amount subject to self-employment taxes.

The accountant's inclusion of the $100,000 on the Schedule C and Schedule SE would indicate that the stock option exercise is Earned Income since it's subject to self-employment taxes. My understanding is that a self-employed individual's Earned Income for pension plan purposes is the income on which self-employment tax is paid (i.e. the amount shown on Schedule SE of Form 1040).

Are the amounts received as a result of the stock option exercise considered Earned Income for pension purposes? Should the Earned Income amount equal $150,000 or $250,000?

A 401(k) plan is first effective in 2007 (calendar year plan) and uses the prior year testing method.

This is a sole proprietor so the proprietor has not yet made his salary deferrals for 2007.

There is one HCE and one NHCE eligible in 2007. The HCE makes maximum salary deferrals and the NHCE makes no salary deferrals.

We are allowed to use 5% as the maximum HCE deferral rate for 2007 under the prior year testing method for the first year.

It appears QNECs can be made using the prior year method as long as they are contributed within one year of the applicable year. The applicable year would be 2006 even though the plan did not exist in 2006.

The employer did make an employer contribution more than 2% prior to 12/31/2007.

Question: can a 2% QNEC be allocated to the NHCE for 2007 therby allowing the HCE to defer 7%?

Thanks much

Can someone please advise whether there is any way other than a cafeteria plan to withhold the money pretax from the employees check? My company, which I'm fairly new at, has had an HSA plan since 2005. Apparently the insurance man sold them the deal by telling them that it would be pre-tax dollars. Now along I come (bookkeeper) and I'm told by the accountant that the whole thing is incorrect and not being reported correctly. We do NOT have a cafeteria plan so the money has to be withheld post tax and then the employees take the deduction at the end of the year. I was told that I needed to bring this year current and correct so I had to tax them on the amounts that have been withheld in January, February and March. Let me tell you there are some very unhappy employees and I feel like the proverbial "messenger". Can anyone clarify this for me and tell me how this should be handled? I would be eternally greatful.

I want to make sure I understand correctly.

Say that there is a plan that is less than 5 years old, so the only possible restriction is on benefit payments. For some reason, the 2007 AFTAP (or the 2008 AFTAP) has not been done by 4/1/08.

First, let's say that the 2007 AFTAP is done on 5/15/08, and the AFTAP is over 90%. Then I believe the lump sum (i.e accelerated payment) restriction is lifted as of 5/15. Notice of the restriction should have been given to participants by May 1, 2008.

Now, let's assume the same scenario except the 2007 AFTAP is done on 4/15/08. If I am correct about the first instance, then the restriction is lifted on 4/15/08. Only in that case, I don't think that notice would be required. Notice wouldn't be due by 4/15, and after that point you would be giving notice that there *was* a restriction on lump sums, but that there isn't one any more. Pretty pointless.

Is that right?

Does anyone know of a list or article with all of the required amendments for a governmental 457(b) plan over the last few years? I have been handed a governmental 457(b) plan that hasn't been touched since 2002. I need to update the plan for all legislative changes since 2002.

Thanks.

Plan "1" split and half of the participants were merged into a mirror Plan "2" effective 9/1/07. Plan 2 has an inst'l parent company that has a differnt plan with a differnt vendor. What does Plan 2 need to do regarding testing from 09/01/07-12/31/07? Do they test as a sep identity for that time period? test with Plan 1, with the parent co.....?

When a QDRO is prepared, (in California) which date is used to determine actual dollar amount to be divided?

Date of separation or Date of actual divorce?

I have a plan that says all employees enter on 1/1 or 7/1 next following date of hire. There is no one year of service requirement. "Employee" is defined as anyone rendering services to employer other than leased employees.

Come to find out, the employer has been categorically excluding all part-time employees as well as several other categories of employees. When questioned about this, the employer says this is their "policy" and indeed this policy is found in several written materials which are periodically distributed to employees. Therefore, part-time employees and the other "excluded" employees are told from day one that they are not eligible to enter the plan. This has been going on for at least 10 years and probably longer

Of course the policy conflicts with the plan document.

Has anyone ever had any luck wtih an argument that a written policy as I have described somehow overrides the plan document or even acts as some sort of plan amendment?