IRA Owner passed away at 54 and the Marital Trust is the beneficiary. The surviving spouse is 67 and due all income from the IRA through the trust. Our issues are as follows:

Spouse is not required to take distributions until decedent’s 70 1/2 year, but income is required from the IRA. If minimums are taken, the amount is based on the Spouse’s age and not the decedents, correct?

Also, if distributions are taken (before decedent’s 70 ½ year) do they have to be considered required minimums, Or can the Spouse (trust) take all of the income generated as a death distribution without worry of a minimum amount until that 70 ½ year? If distribution is taken before decedent would have turned 59 1/2, is there a penalty?

I can see an accountant in my future, but I was just wondering if anyone had come across this and had any ideas.

Is a judgment requiring that a trustee's account balance be forfeited or setoff (the trustee's account balance was forfeited to the plan's forfeiture account and redistributed to the other participants) a taxable event that is required to be reported on Form 1099-R?

I haven't been able to locate any authority indicating that it should be reported as taxable event but the DOL seems to think that it is.

I have the Schedule K-1 for both partners whose firm sponsors a 401k. There are no employer contributions for the 2006 plan year, just deferrals. Is the compensation for the partners the figure shown on Line 14A of the K-1, or do I need to subtract the 179 deduction (line 12) from that figure? Or is there another amount that should be used?

Thanks

I have to amend a plan because it was written to provide for monthly loan repayments, but the client now tells us that their payroll cycle is weekly and they (wisely) want to make all loans be paid through payroll deduction, one paycheck = one repayment.

How "material" is this change? The plan is a Datair prototype, where the Loan Procedure document is referenced to be part of the master document. Not that the employer is trying to hide anything here (that I know of), but if they can avoid confusing the participants with an additional notice, that would be nice. Is this a small enough issue that it doesn't warrant notification? Thanks.

We have an employee who died this year and was entitled to a severance payment before his death. We are paying it to his estate. I looked at the instructions to Form W-2, which indicated that we (i) submit a final W-2, listing the severance payment in the social security and medicare boxes (but NOT as income), and (ii) give the estate a Form 1099, which will list the amount of the severance payment as income.

Am I understanding it correctly that the W-2 takes care of the FICA taxes and the Form 1099 makes the estate responsible for paying income tax?

Does the company still have to withhold federal income taxes on the amount of the severance payment?

thanks in advance for anyone's insights.

A company sponsors several types of welfare benefit plans (health, LTD, life & ADD, group travel and accident and a cafeteria plan). They have typically been under the 100 participant limit for filing 5500s, but some of the plans did go over 100 participants during some years, then back down again. I can see that determining which plans went over the 100 mark, in which years, is going to be quite a hodge-podge.

I was told by another practitioner that there is much less concern at the EBSA about 5500 filings for welfare plans than qualified plans. She suggested that we not try to go back and figure out which plans should have filed for which years, but start being vigilant now, on a going forward basis.

I was wondering if some of you have had a similar experience and how you handled it.

3H is plan feature for "member of a controlled group." Do people agree that if ALL members of the controlled group and/or affilliated service are covered by the Plan, that 3H should NOT be selected? Being a "member" of a group implies that there are other members as well.

How exactly do you calculate the bonding requirements for welfare plans when the assets are quickly eaten up to pay benefits?

A school district contracts with EEs on a 12-month basis each year. Some EEs' pay is stretched out over the entire 12 months while others over just the 9 month school year. Due to a payroll error, 1/12 of the cafeteria plan-elected annual health insurance premiums were held out of an EE's pay that was paid on the 9 month basis. Payroll should have had 1/9 of the annual amount of premiums held out each month, since the EE only receives a paycheck over those 9 months. All other similarly situated Ees had 1/9 held out of each of their 9 monthly checks for the year.

The EE in question is willing to pay for the 3 months coverage, but that EE and the district's payroll are wondering if there is anyway to effect this in a tax-free situation.

Any suggestions will be appreciated.

Is a 401(k) plan legally required to allow participants to cease deferrals at any time?

Cites are appreciated - thanks.

Plan eligibility is no age, no service requirement and immediate entry.

There is an employee who worked 5 hours a week - (260 hours a year) - and will never work anymore hours than that. Can this person be "carved out" of the ADP Test forever - as long as the employee never reaches 1000 hours in a year? OR Can we only carve this person out of the test the first year and then in following years include them?

THANK YOU!

When DOL Reg. 2590.606-1(d) & (f) permit a single notice to covered employee, spouse and dependents, how are people addressing these letters?

Advisement sought on matters disclosed below:

1. Requriement, if any, to provide alternate payee under a pending QDRO, an opportunity to review or otherwise a copy of the 404C/401k 'official plan text'. (Largest US telecommunication provider.)

2. If no requirement exists, what legal action could be taken to force such disclosure/opportunity to review.

Purpose by alternate payee appears meaningful - to prove harm associated from loans initiated by plan participant (payee) who clearly took out 2 loans within 4 months and 2 weeks of each other ($25,000 Aug 2003) and ($10,000 Nov 2003).

Plan participant appears to have also not disclosed to alternate payee, the second loan taken in violation of Court Order.

Alternate Payee seeks opportunity to review and otherwise copy 'official plan text' pertaining to IRC Loan 72p. Alternate payee also seeks valuation of portfolio since date of filing as basis of its half of the accretion during the marital period, as well as its half of market appreciations, dividends, losses and the like. Case law seems absent on the matter - no one apparnetly has tried such a claim. Alternate payee seeks specific language as to the funding of the loans. SEC 11-k uses 'collateralized' when there is a true FIFO sale according to an SPD depicted schedule of fund families and contribution types.

Advisement Sought on requirement to disclose and how disclosure could be forced.

Thanks,

-TrustButVerify June 21, 2007

My client's mother died in 2006. She had been withdrawing her RMDs. However, she was very ill during the end of 2006, and failed to take the RMD for that year. She died in January 2007.

The IRA was divided among her two children in Conduit IRA accounts. Now they have been notified that she failed to take the RMD in 2006.

I suggest that each of the children immediately take a distribution equal to 1/2 of the RMD for 2006 from each of their accounts, report it on their 1040s for 2007, and file a Form 5329 seeking a waiver of the excise tax for 2006. I don't believe that the kids are required to pay the distributions back to the estate.

Does anyone find any problem with this analysis?

401(k) PS plan with 1.7M in total plan assets made a loan to the owner of the brokerage firm that works with the plan and his wife for approximately $1.4M of the Profit Sharing plan assets. The loan is a mortgage on the brokerage firm offices.

1. Would he be considered a disqualified person and as such make this loan a prohibited transaction?

2. Does it matter if the firm has not received any commisions for working with the plan?

3. Assuming it is a prohibited transaction is there any alternative to having the loan repaid immediately?

4. Does the fact that there are sufficient non-loan assets to pay out all non-owners and required distributions make any difference.

Thanks!

Wasn't sure where to put this question, so I put it here, since it relates to a Shedule I entry.

In part IV of 5330 where I report the late deferrals, which "transaction date" should I use?

1. The date the deferrals were due to the plan?
   
2. The date the deferrals were actually remitted?
   
3. The date the deferrals were actually invested?
   

Page 6 of the instrux aren't particularly revealing. Your thoughts are appreciated.

Is there a minimum amount of assets needed before there is a requirement to have a fidelity bond in place for a 401(k) plan? I know the bond should be for at least 10 percent of assets and needs to be no larger than $500,000, but is there a minimum?

May an employer pay all the premiums in a cafeteria plan? My understanding is that the employee must contribute in order to the contribution to be pre-tax.

Hello,

I hope this is the right place to post this question. Sorry if I'm in the wrong area.

I am a partner in a tiny clothing company. How tiny? Well, me and my wife's 1 bedroom apartment is full of our samples, her sewing machine, and boxes of orders since we can't even afford an office.

Anyway, our overseas supplier has shipped us our sales samples for next season, but they've been stuck in customs for over a month now with no explanations or any estimate as to when they will clear! I don't know what they are waiting for, they could've inspected each individual thread with an electron microscope by now!

We've called, complained, pursued every avenue, and gotten stonewalled at every corner. This is a serious situation as our margins are so thin that having these samples not reach the showroom is costing us about half of our marginal income each week that goes by.

Can anyone offer any suggestions as to what we should try next? How do we get these G-man desk jockeys to take us seriously? They're causing demonstrable harm to our business for no good reason, and we're going to be forced to close if this keeps up. Does anyone have any suggestions as to how to get our shipments moving again so we can keep our business afloat?

Thanks!

Plan year end is 6/30. Child enters kindergarten in September and daycare is no longer needed...would that be a change in status that would allow the deduction to be stopped or would that be argued as a forseen event and the participant should never have started and thus forfeits the contributions?