A client of mine - US citizen now living in the US - has three UK pension plans. One is a "TeleWest Unfunded Unauthorized Retirement Benefit Fund" (SS AAR 005) which I believe is NOT elegible for transfer, and must be cashed in the UK.

The other two are called "Personal Pension Schemes" and I am told they may be transferred. A friend of this client purportedly did so in 1999 without consequences.

I called Standard Life in UK today and they informed me that it was their understanding that any such transfer is taxable as income in the US immediately, should it be transferred and they advised against this.

Nobody seems to know the correct answer to this. Help, please!

401(k) plan for a controlled group of several auto dealerships - EmployerA/Plan A. One of the auto dealerships was purchased by an individual (lock, stock and cars) from Employer A, creating Employer B.

After the purchase Employer B continued to take out deferrals from employees (previously participants in Plan A) for aprox. 1 month. Employer A/Plan A refused to take those deferrals and not willing to allow Employer B in their plan. Employer B has not yet established their own 401(k).

Shouldn't the deferrals (and earnings) taken from Employer B's employees be returned to them, since Employer B has no plan which even allows these employees to make deferrals? All of this has happended so far in 2005. Any alternatives?

I need some expert advice about retiree benefits being changed by a collective bargaining agreement after vesting has occurred, increasing the years of service required through a new contract after the individual has a deferred retirement date and seperated from a county government for approximately 17 years, just finding out the years of service have increased for health retiree benefits from 8 years (year of departure, Union contract gave health benifits), to 15 years which prevents qualification. Which collective bargaining contract is the correct contract for health benefits, the year the individual seperated or some new contract, denying the vesting committment of when seperated from service.

I know this topic has been discussed MANY times but here I go again...

I know the DOL says deposits have to be made as soon as the contributions can be segregated from the sponsors general assets. Under this guideline, I'm wondering if a two week time period is acceptable for a medium size (2000 employees) employer.

The company is on a bi-weekly payroll. Their stated goal is to remit deferrals and match prior to the following payroll. This seems to be a bit too long to me but I'm wondering what others think the DOL would say about this.

If you agree that this is too long, how should an employee approach the employer about speeding up the deposits?

Thanks for the input.

We have a client who is a bank who only does business in the state of Montana. Their holding company stock is not traded on the open market. The market values are determined by D.A. Davidson, a regional brokerage, based on the last sales price of the stock. They will be issuing a special stock offering and want to make it available as an investment election for participants in their 401(k) plan. In addition, other employers we work with would like to purchase the stock for their pooled account and individual directed plans. Some of these local employers (the owners) sit on the Board of Directors for the bank.

Our questions are:

1. Can the bank offer the stock as an investment selection for all money types in their plan, i.e. deferral, match, employer contribution? Are their any limits to the amount of stock the plan or any one individual can hold?

2. Are there any restrictions on the purchase of this stock by other plans, either pooled account or individually directed account plans. Is that affected by any other banking arrangements the employers sponsoring the plan might have with the bank. Or that the owner of the employer sits on the bank's board?

3. Would any of these answers change if the bank did business in more than one state?

An S Corp ESOP acquired non-voting shares in addition to the voting common stock in 2004. Would those shares be subject to the diversification requirements since they were acquired post-86, even though they are not "employer securities" under 409(l)? I did not find anything that would exempt them from diversification.

Employees are nurses that provide home health services. They don't track hours. Nurses are paid a set amount for each home health visit, regardless of the time necessary.

Some nurses will do several visits a day while some only do a few each week.

With the exception of elapsed time rules, any good ideas on how to measure or credit time for these employees?

Perhaps something like each visit = 3 hours, etc?

I'm trying to determine the additional interest charge due to late quarterly contributions for a calendar year plan for 2004, and I'm not sure when and how much of my FSA credit balance I can apply to the required quarterly payments.

Here are the facts:

FSA interest = 7%

Aggregate cost method, so no amortization bases

Schedule B total FSA charges at 12/31/2003 = 165,000 (this includes a 5,000 interest charge on late quarterlies from 2003)

FSA credit balance at 12/31/2002 = 28,972

2003 plan year contribution of $300,000 deposited 8/27/2004

FSA credit balance at 12/31/2003 = 166,000 [165,000 - 28,972 x 1.07 - 300,000]

Do I have to wait until 8/27/2004 to apply my 166,000 credit balance against the 2004 required quarterly contributions?

Or, can I start applying the 12/31/2002 credit balance (rolled forward to 4/15/04 with interest) to the 4/15/04 required quarterly contribution?

My knowledge regarding insurance policies in plans is somewhat limited and I need some guidance regarding the following question:

Can a participant buy out the policy from the plan....for example, write a check payable to the plan for the cash value of the policy today and take the policy out of the plan in his own name. Then allow for a rollover of the account baloane into an IRA at a later date? Isn't this a prohibitive transaction?

Employer treats actually date of the paycheck as when compensation occurs not the end of the pay period (i.e. pay period ending 6/26 is paid 7/1). This normally is not a problem except at year end when someone might terminate employment say on 12/27 and then does not receive the final paycheck until say 1/4. The employer has been treating the 1/4 paycheck as comp for the year that it is paid in. So say the 1/4 paycheck was paid in 2004 they are treating that as 2004 compensation and giving the employee contributions on the amount in the paycheck and keeping them in the plan for the 2004 year. The final paycheck consists of normal comp and not severance pay or special bonus or vacation buyout. Is there any problem with this? Technically they did not complete an hour of service in 2004. There is no service req't on receiving any matching contributions or even non elective contributions.

Section 2518.--Disclaimers

26 CFR 25.2518: Qualified disclaimers of property. (Also §401; 1.401(a)(9)-5.)

Individual Retirement Account (IRA); decedent; beneficiary's disclaimer. This ruling discusses whether a beneficiary's disclaimer of a beneficial interest in a decedent's IRA is a qualified disclaimer under section 2518 of the Code even though prior to making the disclaimer, the beneficiary receives from the IRA the required minimum distribution for the year of the decedent's death.

Rev. Rul. 2005-36

ISSUE

Is a beneficiary's disclaimer of a beneficial interest in a decedent's individual retirement account (IRA) a qualified disclaimer under §2518 of the Internal Revenue Code even though, prior to making the disclaimer, the beneficiary receives the required minimum distribution for the year of the decedent's death from the IRA?

FACTS

Decedent dies in 2004. At the time of death, Decedent is the owner of an IRA described in §408(a) with assets having a fair market value of $2,000x. Decedent's "required beginning date," as described in §401(a)(9)(A), occurred prior to 2004, and accordingly Decedent was receiving annual distributions from the IRA prior to the time of death. However, at the time of death, Decedent had not received the required minimum distribution for the 2004 calendar year.

Situation 1: Under the terms of the IRA beneficiary designation pursuant to the IRA governing instrument, Decedent's spouse, Spouse, is designated as the sole beneficiary of the IRA after Decedent's death. A, the child of Decedent and Spouse, is designated as the beneficiary in the event Spouse predeceases Decedent. Three months after Decedent's death, in accordance with §1.401(a)(9)-5, A-4, of the Income Tax Regulations, the IRA custodian pays Spouse $100x, the required minimum distribution for 2004. No other amounts have been paid from the IRA since Decedent's date of death.

Seven months after Decedent's death, Spouse executes a written instrument pursuant to which Spouse disclaims the pecuniary amount of $600x of the IRA account balance plus the income attributable to the $600x amount earned after the date of death. The income earned by the IRA between the date of Decedent's death and the date of Spouse's disclaimer is $40x. The disclaimer is valid and effective under applicable state law. Under applicable state law, as a result of the disclaimer, Spouse is treated as predeceasing Decedent with respect to the disclaimed property. As soon as the disclaimer is made, in accordance with the IRA beneficiary designation, A, as successor beneficiary is paid the $600x amount disclaimed, plus that portion of IRA income earned between the date of death and the date of the disclaimer attributable to the $600x amount ($12x).

Situation 2: The facts are the same as in Situation 1, except that, instead of disclaiming a pecuniary amount, Spouse validly disclaims, in the written instrument, 30 percent of Spouse's entire interest in the principal and income of the balance of the IRA account remaining after the $100x required minimum distribution for 2004 and after reduction for the pre-disclaimer income attributable to the $100x required minimum distribution ($2x). As soon as the disclaimer is made, in accordance with the beneficiary designation, A is paid 30 percent of the excess of the remaining account balance over $2x.

Situation 3: The facts are the same as in Situation 1, except that A is designated as the sole beneficiary of the IRA after Decedent's death, Spouse is designated as the beneficiary in the event A predeceases Decedent, and the $100x required minimum distribution for 2004 is paid to A 3 months after Decedent's death. Seven months after Decedent's death, A disclaims the entire remaining balance of the IRA account except for $2x, the income attributable to the $100x required minimum distribution paid to A. As soon as the disclaimer is made, in accordance with the IRA beneficiary designation, the balance of the IRA account, less $2x, is distributed to Spouse as successor beneficiary. A receives a total of $102x.

LAW AND ANALYSIS

Section 408(a) provides that the term "individual retirement account" means a trust created or organized in the United States for the exclusive benefit of an individual or his or her beneficiaries, but only if the written governing instrument creating the trust meets certain specified requirements.

Section 408(a)(6) provides that, under regulations prescribed by the Secretary, rules similar to the rules of §401(a)(9) and the incidental death benefit requirements of §401(a) shall apply to the distribution of the entire interest of an individual for whose benefit an IRA trust is maintained.

Under §401(a)(9)(A), a trust will not constitute a qualified trust unless the plan provides that the entire interest of each employee (i) will be distributed to such employee not later than the required beginning date, or (ii) will be distributed, beginning not later than the required beginning date, in accordance with regulations, over the life of such employee or over the lives of such employee and a designated beneficiary (or over a period not extending beyond the life expectancy of such employee or the life expectancy of such employee and a designated beneficiary).

Under §1.408-8, A-1, an IRA is subject to the required minimum distribution rules of §401(a)(9) and must satisfy the requirements of §§ 1.401(a)(9)-1 through 1.401(a)(9)-9 in the same manner as a plan, except as otherwise specified in §1.408-8. Under §1.408-8, A-1, for purposes of applying the rules of §§ 1.401(a)(9)-1 through 1.401(a)(9)-9, the IRA owner is substituted for the employee. Under §1.408-8, A-3, the term "required beginning date" means April 1 of the calendar year following the calendar year in which the IRA owner attains age 701/2.

Under §1.401(a)(9)-4, A-1, a designated beneficiary is an individual who is designated as a beneficiary either by the terms of the plan or by an affirmative election by the employee (or the employee's surviving spouse) specifying the beneficiary. A beneficiary designated as such under the plan is an individual who is entitled to a portion of an employee's benefit, contingent on the employee's death or another specified event.

Section 1.401(a)(9)-4, A-4, provides that the employee's designated beneficiary generally will be determined based on the beneficiaries designated as of the employee's date of death who remain beneficiaries as of September 30th of the calendar year following the calendar year of the employee's death. Generally, any person who was a beneficiary as of the employee's date of death, but is not a beneficiary as of that September 30th (e.g., because the person receives the entire benefit to which the person is entitled before that September 30th), is not taken into account in determining the employee's designated beneficiary for purposes of determining the distribution period for required minimum distributions after the employee's death. Accordingly, if a person disclaims entitlement to the employee's benefit by a disclaimer that satisfies §2518 by that September 30th, thereby allowing other beneficiaries to receive the disclaimed benefit instead, the disclaimant is not taken into account in determining the employee's designated beneficiary.

Under §2518(a), if a person makes a qualified disclaimer with respect to any interest in property, then for estate, gift, and generation-skipping transfer tax purposes, the disclaimed interest will be treated as if the interest had never been transferred to the disclaimant. Instead, the interest will be considered as having passed directly from the decedent to the person entitled to receive the property as a result of the disclaimer.

Under §2518(b), the term "qualified disclaimer" means an irrevocable and unqualified refusal by a person to accept an interest in property, but only if: (1) the refusal is in writing; (2) the writing is received by the transferor of the interest, his or her legal representative, or the holder of the legal title to the property to which the interest relates, not later than the date that is 9 months after the later of -- (A) the date on which the transfer creating the interest in the person is made, or (B) the day on which the person attains the age of 21; (3) the person has not accepted the interest or any of its benefits; and (4) as a result of the refusal, the interest passes without any direction on the part of the person making the disclaimer and passes either--(A) to the spouse of the decedent, or (B) to a person other than the person making the disclaimer.

Section 25.2518-2(d)(1) of the Gift Tax Regulations provides that a qualified disclaimer cannot be made with respect to an interest in property if the disclaimant has accepted the interest or any of its benefits, expressly or impliedly, prior to making the disclaimer. Acceptance is manifested by an affirmative act that is consistent with ownership of the interest in the property. Acts indicative of acceptance include: using the property or the interest in the property; accepting dividends, interest, or rents from the property; and directing others to act with respect to the property or interest in the property. However, a disclaimant is not considered to have accepted the property merely because, under applicable local law, title to the property vests immediately on the decedent's death in the disclaimant.

Section 25.2518-3 provides rules regarding the circumstances under which an individual may make a qualified disclaimer of less than the individual's entire interest in property and may accept the balance of the property. Section 25.2518-3(b) provides that a disclaimer of an undivided portion of a separate interest in property that meets the other requirements of a qualified disclaimer under §2518(b) and the corresponding regulations is a qualified disclaimer. Under the regulations, each interest in property that is separately created by the transferor is treated as a separate interest in property. An undivided portion of a disclaimant's separate interest in property must consist of a fraction or percentage of each and every substantial interest or right owned by the disclaimant in the property and must extend over the entire term of the disclaimant's interest in the property and in other property into which the property is converted.

Section 25.2518-3© provides that the disclaimer of a specific pecuniary amount out of a pecuniary or nonpecuniary bequest or gift can be a qualified disclaimer provided that no income or other benefit of the disclaimed amount inures to the benefit of the disclaimant either prior to or subsequent to the disclaimer. Following the disclaimer, the amount disclaimed and any income attributable to that amount must be segregated based on the fair market value of the assets on the date of the disclaimer or on a basis that is fairly representative of the value changes that may have occurred between the date of transfer and the date of the disclaimer. The regulation further provides that a pecuniary amount that is distributed to the disclaimant from the bequest prior to the disclaimer is treated as a distribution of corpus from the bequest that does not preclude a disclaimer with respect to the balance of the bequest. However, the acceptance of a distribution from the bequest is considered an acceptance of a proportionate amount of the income earned by the bequest. That income must be similarly segregated from the disclaimed amount and cannot be disclaimed. The regulation provides a formula to determine the proportionate share of the income considered to be accepted by the disclaimant, and thus, not eligible to be disclaimed, as follows:

----------------------------------------------------------------------

Total amount of

Total amount of distributions received by the income earned by

disclaimant out of gift or bequest the bequest

----------------------------------------------- X between the date

Total value of the gift or bequest on the date of transfer and

of the transfer the date of

disclaimer

----------------------------------------------------------------------

See §25.2518-3(d), Example 17 (illustrating a beneficiary's qualified disclaimer of an interest in a brokerage account passing to the beneficiary when, prior to the disclaimer, the beneficiary withdrew a pecuniary amount from the account); see also §25.2518-3(d), Example 19 (regarding a pecuniary disclaimer funded on a basis that is fairly representative of value changes that occurred between the date of transfer and the date of the disclaimer).

In Situations 1, 2, and 3, the beneficiary's receipt of the $100x distribution from the IRA constitutes an acceptance of $100x of corpus, plus the income attributable to that amount. Based on the formula contained in §25.2518-3©, the amount of income attributable to the $100x distribution that the beneficiary is deemed to have accepted, and therefore cannot disclaim, is $2x computed as follows:

-----------------------------------------------------------

$100x (distribution)

----------------------- $40x (IRA income from date of

$2000x (date of death X death to date of disclaimer)

value of IRA)

-----------------------------------------------------------

However, the beneficiary's acceptance of these amounts does not preclude the beneficiary from making a qualified disclaimer with respect to all or a portion of the balance of the IRA.

Accordingly, in Situation 1, assuming the other requirements of §2518(b) are satisfied, Spouse's disclaimer constitutes a qualified disclaimer under §2518(b) of the $600x pecuniary amount, plus $12x (the IRA income attributable to the disclaimed amount ($600x/$2000x X $40x)).

In Situation 2, Spouse disclaims, in accordance with §25.2518-3(b), an undivided portion (30 percent) of Spouse's principal and income interest in the remaining IRA account balance, rather than a pecuniary amount as in Situation 1. However, as in Situation 1, Spouse's receipt of the $100x distribution also constitutes acceptance of $2x of income deemed attributable to the amount distributed. Spouse may not disclaim any portion of the $2x. Therefore, in Situation 2, assuming the other requirements of §2518(b) are satisfied, Spouse's disclaimer of 30 percent of Spouse's entire interest in the principal and income of the balance of the IRA account remaining after the $100x required minimum distribution for 2004 and after reduction for the pre-disclaimer income attributable to that amount ($2x), constitutes a qualified disclaimer to the extent of 30 percent of the remaining IRA account balance after reduction for the $2x of income Spouse is deemed to have accepted (that is, .30 X [value of remaining account balance on date of disclaimer - $2x]).

The results in Situations 1 and 2 would be the same if the amount disclaimed, plus that portion of the post-death IRA income attributable to the disclaimed amount, is not distributed outright to A, but instead is segregated and maintained in a separate IRA account of which A is the beneficiary as described in §1.401(a)(9)-8, A-3. See also, §1.401(a)(9)-8, A-2(a)(2). Separate accounts for A and Spouse may be made effective as of the date of Decedent's death in 2004, and the 2004 required minimum distribution does not have to be allocated among the beneficiaries of the separate accounts for purposes of the separate account rules under §1.401(a)(9)-8, A-3.

In Situation 3, A disclaims A's entire principal and income interest in the remaining IRA account balance after the payment of the required minimum distribution for 2004, except for $2x. As in Situations 1 and 2, A's receipt of the $100x required minimum distribution also constitutes an acceptance of the $2x of income that is deemed attributable to the required minimum distribution that is distributed. A may not disclaim any portion of the $2x. Therefore, in Situation 3, assuming the other requirements of §2518(b) are satisfied, A's disclaimer of the entire principal and income balance of the IRA remaining after the payment of the required minimum distribution for 2004, except for $2x (that is, 100% of value of the remaining account balance on the date of the disclaimer, less $2x) constitutes a qualified disclaimer.

In addition, under §1.401(a)(9)-4, A-4, any person who was a beneficiary of the employee's benefit as of the date of the employee's death, but is not a beneficiary as of September 30th of the calendar year following the calendar year of the employee's death, is not considered a designated beneficiary for purposes of §401(a)(9). In Situation 3, A both received the required minimum distribution amount and timely disclaimed entitlement to the entire balance of the IRA account on or before September 30, 2005. Accordingly, if A is paid the $2x of income attributable to the required minimum distribution amount on or before September 30, 2005, A will be treated as not entitled to any further benefit as of September 30, 2005, and therefore, A will not be considered a designated beneficiary of the IRA for purposes of §401(a)(9).

HOLDINGS

A beneficiary's disclaimer of a beneficial interest in a decedent's IRA is a qualified disclaimer under §2518 (if all of the requirements of that section are met), even though, prior to making the disclaimer, the beneficiary receives the required minimum distribution for the year of the decedent's death from the IRA. The beneficiary may make a qualified disclaimer under §2518 with respect to all or a portion of the balance of the account, other than the income attributable to the required minimum distribution that the beneficiary received, provided that at the time the disclaimer is made, the disclaimed amount and the income attributable to the disclaimed amount are paid to the beneficiary entitled to receive the disclaimed amount, or are segregated in a separate account.

Further, a person disclaiming his or her entire remaining interest in an IRA will not be considered a designated beneficiary of the IRA for purposes of §401(a)(9), if the qualified disclaimer is made on or before September 30th of the calendar year following the calendar year of the employee's death, and if, on or before that September 30th, the disclaimant is paid the income attributable to the required minimum distribution amount, so that the disclaimant is not entitled to any further benefit in the IRA after September 30th of the calendar year following the calendar year of the employee's death.

DRAFTING INFORMATION

The principal author of this revenue ruling is Susan H. Levy of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further information regarding this revenue ruling, contact Susan H. Levy at (202) 622-3090 (not a toll-free call).

OK, heres my situation. I'm a recent college grad with a decent job and I want to start saving for retirement. I make around $40,000 a year with salary and bonuses and my employer's 401k plan will match up to 6% of my contribution. I have heard that ideally, I should be depositing around 10% of my income for retirement, so here is my question: Would it be smarter to put all 10% in the 401k and only get a match on some of it or would it be better if I put the extra 4% into an IRA account? If an IRA is better, could anyone suggest which one would make the most sense in my situation? Thanks in advance for all the help.

I am trying to determine whether or not I have a consistency issue with a VEBA Trust Agreement and a Master Plan Document. The Trust Agreement allows the trustees to pay for life, ad&d, medical, dental, vision, LTD coverage and benefits as they deem appropriate. The associated Master Plan Document is only for medical and dental coverage. The Plan's 5500 is including life, ad&d, medical, dental, and LTD coverage and benefits paid - some by the Trust and some by the employer.

I have a feeling that things aren't operating quite as they should be.

In my head, the Trust Agreement spells out what benefits COULD be offered. The Plan Document spells out what benefits ARE being offered. If the Plan Document doesn't include life, AD&D, LTD, then this activity should not be included on the Plan's Form 5500 or on the Trust's Form 990. In addition, the insurance related to these benefits should not be paid for out of the Plan's checking account.

My question is primarily this - can a VEBA Trust fund more than one benefit plan (as defined by a separate plan document) or does there have to be a one on one relationship between a VEBA Trust and a Plan? I know there are multiple employer arrangements that include multiple employer's plans, but can one VEBA Trust be used to fund multiple plans of ONE employer? IE fund the life plan AND fund the health plan?

I hope that makes sense.....

Julie

Edited

Can a health plan require a person whose injury or sickness is the basis of a claim to be examined by a physician designated by the Plan as often as may reasobably be required during the pendency of a claim?

Is there some rule prohibiting this?

Is there any problem with defining an eligible dependent as "you spouse, who is living in the same dwelling as you, unless legally separated."

There are several instances where the employee and spouse are living apart but are still married. Should the "spouse" still be entitled to coverage? Is there any rule or precedent for this?

Fully insured plan. If a qualifying event COBRA notice is not sent by the deadline, should an employer/administrator send one out asap or just hide? This is the only fix we can think of to avoid potentionally unlimited exposure on claims, but it really raises a red flag.

Any tips on explaining this to the insurance company or ideas about whether we will get it covered?

Is there some point that this doesn't make sense (what if one year late, for example). We assume that the qualified beneficiaries can be required to pay for any elapsed premiums (the deadline for these arrearages is unanswered apparently), but at some point, the past premiums get pretty high.

Any general thoughts would be appreciated!

Employer wants to set up HDHP/HRA combo-no reimbursement would be made from the HRA until the employee reaches ERA (55/10 YOS).

Is this permissible?

Recently received some unsolicited information on a "Custom Benefit Plan" that would allow a small business owner to contribute a "minimum of $70,000 to the owner's personal account, without similar increases for the rank and file employees."

Does anyone have any thoughts as to what this might be?

I have a general knowledge of retirement plans, but am not sure if this might be a fit here. Four member LLC with no other employees. Members ages range from 52-61 and K-1's will show income of 150,000+ each.

Thanks.

Had a question come up to which I think I know the answer, but not certain. Participant in a PS plan died, and had life insurance. Plan is owner and beneficiary of the policy. Beneficiary of participant's death benefit asked the PA if a form 712 needed to be completed. PA naturally passed along the question. I'd never heard of a 712, so looked it up on IRS website.

The Form 712 is used for estate tax purposes. Since the plan owns the insurance policy, the policy itself is not included in the estate's tax return. Presumably, the estate should include the participant's (decedent's) rights under the pension plan. But these rights are distinct from the funding mechanism (the life insurance policy).

So, I do not see a requirement to complete a form 712 in this instance. Anyone have any knowledge or experience with this? Thanks.