A participant has been receiving minimum required distributions (MRD) for years. The participant has two designated beneficiaries (his son & daughter). The participant dies in 2004 before taking his MRD for the year. The participants daughter wants to take her portion in 2004; his son wants to defer until 2005.

My question is: The 2004 MRD still needs to be distributed. Who gets the MRD?

His estate;

Can it be satisfied by the daughter taking her portion of the benefit; or

Does the MRD need to be prorated between the son & daughter.

Thanks.

Here is my scenario:

H/W roll IRA accounts to Profit Sharing Plan of LLC as one component of huge estate planning technique. 95% of the assets were then used (or will be used) to purchase life insurance. LLC pays members guaranteed payments and LLC contributes to plan on ongoing basis (these amounts are minimal - $3,600 each in contributions per year).

The question is: is there any guidance as to how to determine and payout required minimum distributions for both H/W on an annual basis when no liquid assets exist? I believe this to be a major problem in the attorneys grand plan.

I am relying on recent Rev Proc 2004-16 to value the policies at the premiums paid by the plan (roughly $1.8M) as the plan started 9/03, premiums paid 10/03 and 12/31 plan year end - the valuation date for the 2004 RMD. The plans would not have had a chance to build a sustantial cash value yet. For 2004, I've calculated H's RMD at around $93,000 and W's at around $1,200.

Today, there is enough cash in the account for a couple years of payments but a final insurance premium is due this October that would deplete all but this years payments.

I've looked at incidental benefit rule and some postings here regarding that and it appears rollovers are exempt from the IB rule. Would you all concur?

Any suggestions or resources you might know of to tackle this? My only idea is to borrow against the policies, if available. This ultimately wil deplete cash proceeds of policy at death but we may have no other choice.

Thank you kindly in advance.

Does anyone have any experience with the sale of a company while they have an EPCRS application pending. In our situation, transaction will likely be structured as a stock deal for various reasons and Buyer will presumably desire termination of the 401(k) Plan prior to close. Seller, however, has an EPCRS application pending for various operational errors. Although a number of the errors were self-corrected, the Plan was still required to seek IRS approval for final corrections of certain errors. Approval and correction of those errors is not expected to be a problem as the Plan has proposed using standard IRS corrections. The problem is the EPCRS application has only been submitted for a couple of months and the proposed sale is being pushed up for various reasons. I would appreciate thoughts of anybody having dealt with a similar situation.

Can EPCRS sanctions be paid from the plan?

I have a client who is 100% owner of two corps (A and B). I have been TPA for Corp A's X-tested PS plan for the past four years. While preparing the 9/30/04 contribution calculation I have been informed that there exists Corp B, which was formed in April of 2002 and said Corp B has a 401k plan. There are a few employees that work for both Corps, but i am told that the common employees do not participate in the 401k plan. There is one employee who worked for Corp A until June of 2002 and then moved to Corp B. I'm trying to figure out if i have issues for the 9/30/03 plan year. It sounds like i do. I thought there may be a two or three year grace period when a new controlled group issue arises, is that true?? Thanks.

I know if you make too much money you are not eligible to participate in a Roth IRA. But what do you do if you made a contribution to a Roth IRA only to find out your income is too high for you to be eligible to contribute to it?

I'm finding that some sellers of non-qualified plans for not-for-profits are promoting plans that actually vest in the event of involuntary termination prior to normal retirement age. Does anyone know of any authority that would allow this?

If it is allowed, would it then be considered retirement income or severance income or ??? If severance, would it then be applied against the 2 times earnings cap?

Thanks in advance for any thoughts you have on this, or even what you've observed.

Is an employee on paid leave permitted to make 401(k) contributions from that pay? Any comments and/or citation would be appreciated. Thanks.

Does anyone know what the obligations (i.e. IRS Notification, Customer and Participant Notification) of a Plan Sponsor of a prototype SIMPLE IRA is when the Plan Sponsor is no longer offering the plan to some of its customers?

The details are as follows: A Financial Institution is selling some of its branches. Those branches offered customers a prototype SIMPLE IRA. Because of the sale, the prototype plan is no longer going to be offered to the existing customers. We know that we need to notify the customers, but are not sure if we are required to file anything with the IRS and have not been able to find any information on the subject.

Any help would be greatly appreciated. Thank you.

Has anyone seen a participant threaten litigation against plan trustees for the way the profit sharing plan was managed and the resulting losses in '00,01, and 02? This profit sharing plan is managed by the plan trustees (small business owners) but the salary deferrals under the 401(k) are participant directed under the plan's various fund accounts.

There was a law firm in K.C. advertising for plan participants to contact them if they experienced losses in their retirement accounts at work.

The only cases I have been able to find have dealt with employer stock and not challenging the prudence of the plan trustees in asset management.

Thanks for any insight.

Client maintains a 403(b) annuity. He turned 70 1/2 in March, 1998. He began taking withdrawals, but not enough to meet the minimum required distributions.

My questions are: In order to determine what should have been distributed prior to 2001, do I need to go back to the 1987 Proposed Regs for the life expectancy tables? Also....do I use the 12/31 balances (per his annual statements) to determine what the minimum amounts should have been. Do I need to "back off" the amount that should have been distributed?

I think I've just confused myself.

Should a 1099 be issued when making payment of a U.S. citizen's plan benefit to his Canadian beneficiary? Since the beneficiary is Canadian, he doesn't have a social security number? Any other issues I need to know about? Thanks in advance!

I have a 401(k) plan which is going through a partial plan termination.

Do the terminations have to be processed all at once, or can they be done as they come in?

Just want to be sure I follow all the guidelines.

Thanks!

I am a student at the University of South Carolina and I am doing research on the best practices for Beneftis and any future trends that are looking popular in the world of benefits.

I would appreciate any information on where to find this information or any advice any of you have about the things going on right now in the world of benefits that are up and coming, and any information about how the future of Benefits is going to go.

Any insight would be great!

The distribution code explanations changed for "2". In 2003, it highlighted Section 72(t), (q), and (v). In 2004, it is silent in regards to those sections.

Does this mean that if you are set-up under 72(t) - that now we are required to report your distribution code as a "1" - if you are under 59.5?

My company is thinking of providing domestic partner benefits. Since I do not have a clue where to begin, can anyone tell me of a good website or where I can gather information that will provide me all the information I need to getting this rolled out. Any information would be most helpful.

Thank you,

CCruise

This may be a stupid question but I have a client that owns land under his participant directed account in a ps plan. He insures this land and has just received a bill for premiums due. Does he pay the bill out of plan assets, his own pocket, or out of business?

thanks for any help...

Client gave me w-2s for 2003. One of the HCEs had 2 w-2s. When I added them together the 401(k) contribution was $15 over the limit. I told them to refund the $15 to the HCE.

Then I found out that they had withheld money from the employees paychecks, that was never sent to the mutual fund. The $15 over contribution was part of the money that was withheld but never contributed. I told them to go to the VFCP or self correct using the method set forth by the VFCP.

They found another TPA do do the work. He/she gave them a different answer. Don't know what that answer was. Was I wrong in my advice? If I was please let me know so I don't make the same miztake twice.

When securities are Rolled Over from a Qualified Plan to an IRA, the market value of the securities at the time of the rollover become the cost value of the security in the IRA. I am looking for documentation of this rule somehwere. Does anyone know where I will be able to find this in the Regulations?

Thank you for your help.

More on this saga . . .

So the guy's contribution was due May 15, 2003. It was not made.

It was not made by May 15, 2004 either.

In paying the excise tax on this a prohibited transaction, one which has now crossed two corporate tax return due dates, have we now moved into a "tier two" tax situation, where the company not only owes 15% of the delinquent contribution, but now 100% as well? Or can we just do the 15%?

Also, regarding the 2002 tax return, if it's amended because the employer did not make the contribution when it was due, then it also means the 5500 needs to be amended, and then they flunk coverage because the guy didn't get what he was due . . . and we spiral into a nightmare over $650.

Is there a way to do appropriate corrections without this turning into a frenzy of papers and penalties?