I am a newbbie to forums protocol so please forgive if this post is inappropriate. In particular, I have posted this question on another forum and have not received useful replies. Some direction is felt to be urgently needed, so I am asking for some guidance from your expertise. Thanks in advance!

I realize that the second point below is hardly apropos to this forum but any insight offered will be greatly appreciated. It is point (1), however, that is the most puzzling for me. FYI, I would probably be classed as a knowledgeable, responsible investor. I am well past retirement age, and have been managing my own investments, principally equities, annuities, and real estate, for nearly 55 years. I am now at a point that I do not need the RMD required of my Traditional IRA, and, in fact, could reduce taxes by managing my own annual withdrawal amounts. So, with that info:

Procedural Question:

Subject: LLC owned by Self-Directed ROTH IRA - Initial Formation Quandaries

Background:

In a couple of years (2010), certain investors will have the opportunity to convert existing 401K and Traditional IRAs into ROTH IRAs in a tax-advantaged environment. The requirements are straight forward and unambiguous - choose an acceptable ROTH Custodian, rollover the existing IRA funds into a newly established ROTH, pay the attendant taxes, and invest the ROTH funds in assets which are permitted by the Custodian and not disallowed by the DOL or IRS.

Interestingly though, there are additional provisions in the interpretation of ROTH rules and regulations which allow for the implementation of “checkbook control” of a self-directed ROTH IRA. However, the initial procedural steps necessary to properly structure such an entity are not well documented, and it is this area that I wish to pose the following questions.

1. The “operating” environment of a properly established LLC which is under the control of a self-directed Roth IRA (ROTH-LLC) is pretty simple. A Custodian administers the ROTH Account. The ROTH Account owns one asset - all membership units of an LLC (which were subscribed to and paid for from the capital deposited to the ROTH Account). The LLC is managed by the individual investor who owns the ROTH Account. All day-to-day business activity of the LLC (viz., investment and management of the assets represented by the influx of the original ROTH capital) is conducted by the manager, who, annually, reports the status of the LLC to the Custodian and to the responsible department of state in which it is registered.

But how one starts from scratch and arrives at the time when this environment is the norm is not clear.

Consider the following scenario. One of the most basic inhibitions of the ROTH-LLC body of regulations is that the investor/owner shall not co-mingle private and IRA funds. This is illustrated with the common example in which the LLC wishes to acquire an asset but does not have sufficient capital to purchase ownership. A tempting solution for the manager is to use his/her own capital in sufficient amount, when combined with that of the LLC, to effect the purchase. However, such deals are simply not allowed. Now, here is my quandary.

In the beginning, the LLC must be in existence before the ROTH Account can “invest” in it by purchasing all membership units. In order for the LLC to exist, the owner must supply at least enough capital to cover all state registrations and filing fees. Since no ROTH funds are accessible in this stage, the expenditures are necessarily funded by the investor/owner from non-IRA wealth. At a later date, assuming all other steps are successful, the Custodian “approves” the purchase of this new LLC for the ROTH Account. At this point, what exactly is the ROTH buying? The LLC at this point has not assets, no income, and only expenses to show for itself. Not a particularly attractive investment candidate for a due-diligence investor. Further, the LLC must have a bank account. To open an account requires the deposit of some minimal amount of cash. It seems that there is no way to rationalize away the fact that the cash in the bank, as well as the expenses carried on the books, represent owner-invested funds. So, can anyone explain the conundrum evident here?

2. A further point of my ignorance is that it is not clear what constitutes “doing business within a state”. Most states require a company, including LLCs, to register with the appropriate state department(s) if the company “does business” within that state. I have been repeatedly shuffled from agency to agency while attempting to obtain an answer from my state government what constitutes doing business within this state. Paraphrased, the bottom line answer has been, “you had better not be doing business in our state if we ask for your provenance and you can’t produce it”

My confusion is illustrated by the following example. An LLC is organized and properly registered in, say, Nevada. The only “asset” of the LLC is municipal bonds issued by, say, New York City. Now, how is the doing business concept applied in such circumstances? It seems obvious that the LLC is doing business in Nevada, but what does New York think? Is the LLC “doing business” there by purchasing municipal bonds specifically anchored to NY assets? Again, any clarification of such questions would be greatly appreciated.

Jim1Best

I really really hope someone is willing to help with a few questions!!

First a little background. I have about $100,000 invested in my employer’s retirement plan. The present plan with the present financial company is a SARSEP that my employer has had for many years. My employer now has decided to switch both financial companies and retirement plans. The new plan under the new financial company will be a 401k plan. This switch will take place after the first of the year. I have asked my employer if the old SARSEP plan with the old financial company is being terminated or is it just not going to be funded any longer by my employer (pay role reductions). Seems I can’t get a good answer.

Now my question and forgive me I don’t know much about the financial world but want to watch over my retirement investments as best I can and not get myself trouble with the IRS.

The staff from the new financial company, at a recent meeting, stated that any money now in the SARSEP plan could stay where it is or it could be rolled over into the new 401k plan (just 2 options discussed). I asked what, if any, fees would apply if money was rolled over to the 401k plan and I really didn’t get an answer except we can discuss that when we meet on an individual basis.

Question 1: Are there other options available other than the 2 stated above?

Question 2: Is it customary for the new financial company to charge fees for the funds rolled over to the new 401k plan or is the initial movement of funds waived of fees?

Question 3: If I have a choice and leave the $100,000 it the SARSEP at the old company, and this plan is no longer available thru my employer, can the money now in the SARSEP plan be moved into a rollover IRA (regular or traditional IRA) at the old financial company, or any other fund company for that matter, to get it out of the old SARSEP plan. OR does it have to be rolled over into another qualified retirement plan and nowhere else since I’m not quitting or changing jobs? I would honestly like to move the money out of the SARSEP and into a regular or traditional IRA with a company like Vanguard instead of rolling it over into the new 401k plan, if possible, but have no idea if I can do that. I will still fund the new 401k with future pay role reductions but don’t want to put any part of the $100,000 now in the SARSEP in the new 401k if I don’t have to. **Hope this makes sense.**

I have searched the net for these answers and everything I find relates to either quitting your job or changing jobs. Nothing I have found discusses or relates to staying with the same employer and the employer changing financial companies and plans (what you can and can’t do in this situation). I cannot get good information from my employer – I just don’t think they understand this situation any better than I do.

Again any help would be VERY helpful and thank you.

Karen

The following URL provides a handy capsulation of applicable interest rates: http://www.datair.com/rates.htm

There has been an unofficial IRS moratorium on 414(e) church plan private letter rulings for a while. However, there were at least 3 rulings in 2007 concerning church plan status -- PLRs 200708090, 200747022, and 200743036. Does anyone know if the moratorium is over, or if these were exceptions?

Thanks!

I have a plan... 3 ees

Comp/deferrals

1- 168,000/15,500

2- 142,000/15,500

3- 37,000/0

SH Match...

What is the max contribution for this plan?

Please display each EEs ER contribution.

Thanks!

A company is going to spinoff from a PEO and start their own plan. Would this be considered eligible to do safe harbor for 2008 since it is a startup or is it looked at as a continuing plan and would have had to have the notice out by 12-2007?

I am in the process of terminating a DB plan, accruals have been frozen, notices have been sent out but we have not yet filed with PBGC.

One of the principals has retired, wants to take his RMD and rol over the balance to an IRA.

Can he do this prior to filing with PBGC?

Interstingly enough, I called PBGC, spoke to one of their staff attorneys, and he has not been able to give me an answer.

We've just taken over a plan where the Normal Retirement Benefit is subject to a 1% annual COLA. The only two retirees under the plan are the former owner and his wife. I don't have any history with respect to any other former employees.

The plan was frozen by amendment at 1/1/06. I'm assuming the freeze extended to the COLA as well as the accrual for active employees, but I don't know for sure. If the COLA was not frozen, what issues does that create with respect to 401a26, 410b, and 401a4?

What is the latest position of the IRS on whether an LLC can place each member of the LLC in his or her allocation group for purposes of the cross test. I've heard concerns that this is tantamont to a deemed cash or deferred arrangement. Do most people recommend broader groups for an LLC or LP?

As we know, if a plan passes the 1/3 rule, forfeitures are not included in the 415 test. However, it is not all forfeitures that can be ignored, according to 415©(6) it is only forfeitures of employer securities acquired with a 404(a)(9) loan that can be. 54.4975-11(d)(4) says no stock allocated from a suspense account (eg acquired with a loan) is forfeited before all other assets available for forfeiture are. Therefore, in order to accurately perform the 415 test and forfeit amounts from a participant's account, it is necessary to track the source of the shares, forfeit cash, other assets and non-loan shares first which are then included in the 415 test regardless of the 1/3 rule, then forfeit loan shares as needed. Only the loan share forfeitures are excluded from the 415 test and only if the 1/3 test is passed. Have I stated that correctly? If so, what a pain. As always, thanks for any comments.

I've been trying to locate a resource to help me understand how each state treats 457(b) public and private plan distributions.

Please let me know if you know of a guide that you have found helpful. Maybe this has already been discussed in another thread on this site? If so, please let me know.. thank you.

Thank you.

Does anyone know whether an employer can allow employees to participate in the employer's cafeteria plan if the employer does not have reporting/withholding obligations on the incomes of such employees? Any thoughts or ideas are much appreictaed. Thanks.

Discovered that a loan was over paid, and now the plan's investment account has excess loan payments in it. We figure that we need to refund those excess loan payments. Should we also calculate earnings attributable to those excess loan payments?

Also, it seems that taxes should not be taken from the excess payments since they shouldn't have gone in the plan in the first place (the loan was paid off, but money was sent in in error). The earnings should be taxed...right?

Does anyone have any thoughts on this? I can't find anything anywhere that tells us what we should do.

Thank you.

Trying to help a client out, but I do not have any experience with the Form 5330. What is the correct way to report the interest amounts on multiple late deferral deposits over several years? The client settled with the DOL and was informed to file Form 5330 for the excise tax on the interest on the late deferrals. The interest amounts are very small, a total of $1,250. However, there are 34 separate occurances from 2002-2007. Is it acceptable to list the total on line 25(b) under column (d) on the Form and calculate the 15% excise tax on that amount, or must each occurance be listed separately? Or, a better way?

Please help, I'm clueless about this! Thanks.

If an employer settles a claim that arises out of an employee not being paid for the classification of duties being performed and the settlement does not characterize the payment as backpay, IRS guidance says the settlement payment is wages for employment tax purposes. Is the settlement payment going to be treated as wages for which the employer has to pay additional pension contributions?

The proposed 125 regulations specifically allow a spend-down for a DCAP. The regulations appear to be silent on whether a spend-down is permitted for a health FSA. (correct me if I am wrong) I am aware of plans that have spend-downs for both DCAP and Health FSAs. Are they permitted for Health FSAs? If so, are they limited to the amount contributed as of the date participantion ceases or does the normal universal coverage rule apply.

BTW - by spend down, I am referring to claims incurred after terminatin of participation but during the period of coverage.

Pardon my ignorance; I think I know a little bit about retirement plans but am under no such delusions about health benefits. I've tried to beg off from involvement, but here I am.

When an employER is funding the account, is a plan document required? Intuitively, I think so; I don't see how an employer can just arbitrarily start throwing tax-free money into an account without some sort of documentation. The HSA administrator is not able to provide a direct answer, which is frustrating.

When an employER is funding the account, is 5500 reporting required? I have at least one source saying "yes." Again, the HSA administrator is clueless.

If a 412(i) plan is set up, and then at some point the sponsor fails to make the premium payments, and continues notto make them for several years, what are the ramifications?

Is the answer dependent on anything else, such as whether any of the policies have lapsed?

If a participant terminates and is then rehired, do they have to take a minimum distribution? They turned 70 1/2 in 2007.

Please excuse me if this has been answered before. I have a feeling it might have, but I just don't feel like slogging thru all the posts right now.

A calendar year plan specifies that AEQ assumptions are interest based on 30-year Tresury securities, and the mortality table specified in Rev. Rul. 2001-62. No mention of minimum lump sums, no separate AEQ for lump sums and other forms, no incorporating the interest rates or mortality table by reference, and these are the AEQ assumptions for all forms of payment. Stability period is one year, and the November rate is used.

Assuming the plan is not amended by 1/1/08:

1. As of 1/1/08, do we need to calculate the lump sum based on the old mortality table (2001-62) and the Nov. 2007 rate? Or is the 12/31/07 lump sum amount protected? (Clearly we need to provide the minimum LS based on the new rates.)

2. As of 1/1/08, I believe monthly options are based on the Nov. 2007 Treasury rate. Do we continue to use the 2001-62 mortality?