I am dealing with an IRS agent who is claiming that the failure to make payment on a participant loan is a prohibited transaction. Note that he is not claiming that the loan failed to meet the requirements of Section 72(p) or 4975(d)(1), or that there was no intent to repay the loan. He is stating that the failure to make payments called for under the promissory note caused the PT. He claims that this is "the policy of the Service".

Anyone run into this? This seems clearly contrary to the exception in 4975(d)(1).

SPD wording states coverage will begin first of the month following 45 days as an Active Employee. Employee was out on disability for 11 days during the waiting period. Would his effective date then be moved up an additional month?

Husband and Wife run separate businesses as Sole Props and file separate Sch Cs.

Husband's business has no employees but the wife's business has 3 employees.

They want to set up two separate DB plans. One plan covering the Husband only and the other covering the wife and her employees.

Are they controlled group to be considered as one Employer for 401(a)(26) and 410(b) etc?

Client has a DB Plan, has no employees, so its Top Heavy....

Hires his first employee and wants to have an immediate eligiblity 401(k) plan.

The DB plan contribution exceeds 25% of pay so how does the TH min work? the DB plan has a 2 year wait so the new employee will not be eligible until 01/01/07 so there is the 2004, 2005 & 2006 TH min to worry about.

Seems like the client has to make a non-deductible contribution and that an excise tax would apply.

Can you specify that the employee is eligible for only a TH min accrual in the DB plan for 2004, 2005 & 2006? If he quits in 2005 he has 2 years of 100% vested TH accruals in a plan he never entered?

Thanks for any ideas or information.

A profit sharing plan provides that a joint and survivor annuity is the "normal form" of benefit, and requires spousal consent to distribution in any other form. Assuming that the employer doesn't want to eliminate annuities altogether, may the plan be amended to say that annuities are not the normal form, but are one of several options, thereby eliminating the requirement for spouse's waiver of J&S? I don't think spouses are protected under 411(d)(6), but would this change present any other protected benefit problems? Would the 90-day notice that applies to eliminate of annuities apply in this situation?

My client is a one-life group that has a calendar year split-funded defined benefit plan. The Form 5500-EZ was due for 2002, and I assume he filed the one that I sent him. I advised him in early 2003 of the (Life Insurance) and the investment fund contribution for PYR 12/31/2002. That contribution would obviously have been due no later than 9/15/2003.

I certified his 2002 Schedule B showing that the 2002 total contrib had been made, on the basis of a letter that he sent me to that effect.

What do I do now? Prepare an amended 5500-EZ (with amended Schedule B) showing the accumulated funding deficiency? To make things worse, he called me today (September 15, 2004) to let me know that he could not make his pension contribution for PYE 12/31/2003. At least he has "owned up" to this one now.

What are the penalties he faces for failure to meet minimum standards for 2002? For 2003? Does his accumulated funding deficiency through 2003 (on which the penalty is figured) include the A.F.D. for 2002?

Finally, has anyone ever had this happen to them before? What does the IRS say to the enrolled actuary? Help!

Dave,

the search feature seems not to permit words less than 4 characters. Therefore a search on "SAR" or "SPD" does not work. Is it possible to modify this to 3 characters?

A hospital ("Hospital") was formed as an LLC. A number of physician-owned professional service corporations ("Dr. Groups") are owners/members of the Hospital. In addition, a number of the physicians who are employees of the Dr. Groups ("Physicians") own interests in the LLC. The ownership interests of the Doctor Groups and the Physicians vary, but none is high enough to constitute a controlled group with the Hospital. The Physicians provide services to patients at the Hospital. Currently, on average, the Physicians perform about 50% of their total cases at the Hospital. The rest are performed at other area Hospitals. That percentage is expected to increase to about 70% by year end.

A number of parties involved in this arrangement are saying that this type of arrangement is very common and that it can't possibly constitute an affiliated service group. How have others treated this type of arrangement? If you haven't treated it as an affiliated service group, on what basis have you done so?

Thanks.

What are the requirements for distributing an SAR for a 401(k) plan? Who must receive it? i.e. for PYE 12/31/03.

Sal Tripodi leading us all in

"HAPPY BIRTHDAY DEAR ERISA'

If a plan is subject to the J&S provisions and requires spousal consent, that consent must be witnessed by a notary or plan representative. Does it matter if the participant signs the form after the spouse and notary? I have always had an issue with this because I thought the participant had to make an election and the spouse then had to agree to that election and signed the form showing this agreement. But, now I am questioning this.

I've searched some prior threads, and some of them come close, but don't directly answer my question.

Suppose the IRA owner dies. Spouse is beneficiary, and their daughter is contingent beneficiary. Spouse does not want to roll the proceeds to her own IRA, as this will restrict her ability to withdraw funds without incurring a 10% penalty.

However, she wants to be able to change the contingent beneficiary listed in deceased husband's IRA. Say she gets remarried, for example - she wants funds to go to new husband - not the daughter.

Can she do this? While one part of me thinks that as long as the IRA is maintained in the husband's name, no one can alter a beneficiary designation, it also seems that as primary beneficiary, since she has the right to withdraw the funds at any time, she should be able to name anyone she wants.

Who controls - current bene or the husband's previous and recorded designations?

Thanks!

We have a client that sponsors a defined benefit plan. An employee of the client is entitled to an accrued benefit under the defined benefit plan. The employee has committed fraud against the client. The client is pursuing both criminal and civil action against the employee. Can the client deny the employee his accrued benefit from the plan?

Helping a client identify HCEs for ADP testing purposes and was under the impression that an HCE was either a 5% owner/family or made over the comp limit. Someone today mentioned that in an SCorp any owner was considered an HCE, no matter their percentage of ownership. I wasn't aware their were different definitions of HCE depending on the company structure. Does anyone know if this is accurate, thanks.

We are in the process of determining the liability and assets (4044 calc) for a DB plan spinoff in conjunction with a sale.

The potential buyer is getting cold feet because of the fact that the seller's pension plan is underfunded. The potential buyer claims that when it entered into a similar transaction with a different seller, the DOL said that there could not be any transfer of plan liabilities and spinoff of plan assets unless the plan was fully funded.

Our client (seller) thinks that the DOL issued this ruling in the case of the earlier transaction in the form of a news release or advisory opinion.

Since we are not the service provider for the potential buyer, we cannot request more information on that earlier situation.

Has anyone run accross this situation? Does anyone recall seeing a DOL release on spinoffs and situations where the DOL would not sanction a spinoff? Thanks.

Under 2004-55, an employer can design its cafeteria plan to have employees pay disability premiums pre-tax, with the option to the employee to pay after-tax (and thus receive tax-free disability payments), provided that the employee makes an IRREVOCABLE ELECTION PRIOR TO THE BEGINNING OF THE PLAN YEAR.

So, the way I interpret this, if an employer decides to offer the pre-tax default payment option, an employee is going to be stuck paying tax on his disability payments UNLESS he can predict that he will be disabled in the next plan year and makes a corresponding election change.

Am I right?

On our 2002-3 5500, we (well the tpa) marked that it is the final report, as for the next year, we are changing the plan sponsor, plan name and plan #, so it seems like it will be a different plan, so this would be the last year of this plan. But the EBSA wrote back saying it was inconsistent, since there were participants at the end of the year, and maybe we didn't mean to mark it as final report? So should it not be marked as final due to the changes for next year?

Thanks

Prior TPA company is upset with our new client, and has suggested that they will not delvier assets to us on the date that they previsouly communicated to us. When are they required to deliver assets?

Originally posted in general category, before I found the Roth IRA page...sorry for the double post...

Hello,

I did a search of these boards and found some information, but nothing that I considered definitive. My exact question is this:

If my Roth IRA (opened in 2000), is currently valued less than my contributions over the past four years, will there be a penalty if I withdraw from it or close it?

My understanding is that since all of my contributions were already taxed, they are not taxable. The thing I am not sure of is the penalty...does early withdrawal incure a penalty, even if it is only from my contributions?

There has been no rollover, conversion, dividends, etc....just my straight monthly contributions. And even if I close it, I am taking about a $1k loss compared to what I contributed.

I ask here because of conflicting information I am getting from my agent and my funds custodian.

Thanks in advance for any help,

bill

Hello,

I did a search of these boards and found some information, but nothing that I considered definitive. My exact question is this:

If my Roth IRA (opened in 2000), is currently valued less than my contributions over the past four years, will there be a penalty if I withdraw from it or close it?

My understanding is that since all of my contributions were already taxed, they are not taxable. The thing I am not sure of is the penalty...does early withdrawal incure a penalty, even if it is only from my contributions?

There has been no rollover, conversion, dividends, etc....just my straight monthly contributions. And even if I close it, I am taking about a $1k loss compared to what I contributed.

I ask here because of conflicting information I am getting from my agent and my funds custodian.

Thanks in advance for any help,

bill