Hello,

I submitted my resignation with my former employer in late October, 2003. In my resignation email, I stated my last day would be January 1, 2004. My former employer agreed to this resignation date (via email). During the month of December 2003, my former employer asked me several times to assist the company by working 2 weeks into January, 2004. I agreed to this extension and arranged my schedule to accommodate him.

On December 30, 2003 I was working my regular shift (3pm-midnight) and my employer arrived into the office around 7pm and told me he had decided to let me go tonight. I told him I wanted to work into January and he said this is the last night I will be working. He prepared a resignation letter for me to sign and cut me my final paycheck.

My former employer now will not provide the my 2003 contributions. Although I worked in excess of 1000 hours of service, he states per the terms of the plan I resigned 1 day short of the plan year.

My first question is under the "hours of service method", will my 1000 hours of service override this Jan 1, 2003 to Dec 31, 2003 plan year.

Also, do fellow members see a good case for arbitrary and capricious intent on behalf of my former employer to deceive me of my profit sharing plan benefits.

My total employment was from 5-11-2000 to 12-30-2003.

Thanks,

Slufoot2000

The sole-participant in a DB plan will require his first required minimum distribution on account of attaining age 70 1/2 just before the plan is terminated and he rolls-over his lump sum distribution.

I know there has been some debate about if the applicable 401(a)(9) regulations allow a distribution by treating the PVAB as an account in an account plan and distributing accordingly.

But if he starts to receive a monthly benefit and then rolls over his lump sum, his future required distribution will be calculated under the individual account method.

I would like to treat the PVAB for the first distribution calendar year as an individual account and proceed accordingly with his subsequent required payments calculated based on his lump sum distribution.

Any thoughts or help on this would be greatly appreciated.

Hypothetical situation of 3 doctors who own 1/3 each of a company and are separately incorporated, an obvious controlled group. There are no other employees. Now if each doctor were to have his own DB plan for his corporation, then obviously 401(a)(26) would not pass for any of them. But, what if each plan included the other doctors' corporations and benefits in each were at the 415 limit?

Now each doctor would be getting 3 times the 415 limit, so language would call for benefits to be reduced appropriately because the 415 limit benefit was provided under another plan. Doctors 2 & 3 would have benefits reduced in doctor 1's plan, doctors 1 & 3 would have benefits reduced in doctor 2's plan, and so on. (I would have to perfect the language.)

The 415 limit is disregarded when determining if someone is considered benefiting for 410(b)/401(a)(26), so each doctor would be considered benefiting in all the plans and 401(a)(26) passes while the doctors get nothing but in the plan sponsored in their own corporation.

Anyone see a problem with this?

The DOL posted today their Q&A on this topic. See http://www.dol.gov/ebsa/faqs/faq_compliance_5500.html

Assume X is a surgery center and is owned by the owners of A, B, C, D and E, all doctor groups. All corporations are PCs. Would it be possible to argue that there are in fact 5 ASGs here, not one? Under that argument, we would be treating each doctor group as an FSO and the surgery center as the A-org.

Thanks.

I have a situation where a client is asking if all or a portion of his inherited IRA (he is a non-spouse beneficiary) may be transferred to his spouse/ex-spouse under 408(d)(6).

Both the code and reg 1.408-4 describe an individuals interest. Would you include as an individuals interest in an IRA one held as an "Inherited IRA" which has specific distribution requirements attached to it. If it is allowed to be transferred under 408(d)(6) and the spouse treats it as their own, then you have a de-facto rollover to a non-spouse non beneficiary of the original IRA. Reprint below of appropriate code & regulations.

408(d)(6) TRANSFER OF ACCOUNT INCIDENT TO DIVORCE. --The transfer of an individual's interest in an individual retirement account or an individual retirement annuity to his spouse or former spouse under a divorce or separation instrument described in subparagraph (A) of section 71(b)(2) is not to be considered a taxable transfer made by such individual notwithstanding any other provision of this subtitle, and such interest at the time of the transfer is to be treated as an individual retirement account of such spouse, and not of such individual. Thereafter such account or annuity for purposes of this subtitle is to be treated as maintained for the benefit of such spouse.

71(b)(2) DIVORCE OR SEPARATION INSTRUMENT. --The term "divorce or separation instrument" means --

71(b)(2)(A) a decree of divorce or separate maintenance or a written instrument incident to such a decree,

71(b)(2)(B) a written separation agreement, or

71(b)(2)© a decree (not described in subparagraph (A)) requiring a spouse to make payments for the support or maintenance of the other spouse.

1.408-4

(g) Transfer incident to divorce

(1) General rule. --The transfer of an individual's interest, in whole or in part, in an individual retirement account, individual retirement annuity, or a retirement bond, to his former spouse under a valid divorce decree or a written instrument incident to such divorce shall not be considered to be a distribution from such an account or annuity to such individual or his former spouse; nor shall it be considered a taxable transfer by such individual to his former spouse notwithstanding any other provision of Subtitle A of the Code.

(2) Spousal account. --The interest described in this paragraph (g) which is transferred to the former spouse shall be treated as an individual retirement account of such spouse if the interest is an individual retirement account; an individual retirement annuity of such spouse if such interest is an individual retirement annuity; and a retirement bond of such spouse if such interest is a retirement bond. [Reg. §1.408-4.]

I'm being lazy because I could not find this quickly.

If the AVA exceeds the MVA, can the AVA be used to determine if the 110% funding threshold is satisfied, or must the MVA be used?

I think you can use the AVA but am not sure. Anybody recall the answer off hand?

Thanks.

I recently opened a Roth IRA with tdwaterhouse and my inital contribution was only $100 I know thats very little to put into a roth ira but I plan on putting atleast 100 in per month is this a good plan or should I have put more money in at the beggining or does it even really matter. Also i have read that you can just leave the money alone or invest it into different things. What kinda of interest do you make on it if it just sits there and is not invested into stocks or funds? Sorry for the questions I know they seem dumb but I think they are things I need to know. Thanks in advance

I just opened a Roth Ira account with tdwaterhouse and was wondering if anybody else has an account with them. Thanks

Hi,

I have some questions regarding the suitability of options trading within IRA accounts. What/Where would I be able to find some guidelines regarding this? There seems to be a general consensus of being very cautious and conservative in offering options but is there an underlying reason why? I don't believe that its a prohibited transaction yet its not completely clear (at least to me) what is or isn't allowed (most B/D's seem to allow covered call writing and some also allow trading puts & options but there doesn't seem to be any uniform policy). Any help at all is greatly appreciated.

Thanks

We have a DB Plan covering 2 HCE participants and a DC that covers 3 additional (2 HCEs) for a PSP allocation. The 25% compensation combined limit does not apply since there are mutually exclusive employees covered by each plan. If the 2 HCE covered under the DB Plan also have 401(k) deferrals in the DC Plan, does this change the result such that the 25% limitation would apply for both plans?

Any thoughts.

In this day and age, it is difficult for me to understand this, but just the other day a person contacted me with the following issue:

On Feb. 1, 2003, a 35 year old 401(k) plan participant (with a $400,000 vested account balance) received a participant loan from the plan in the amount of $100,000. No additonal propery was used to secure the loan. The participant started to make payments on the $100,000 loan. In 2004, the plan sponsor learned about the $50,000 limit and started to ask questions about what to do.

I have looked at 72(p) and its regs, I have looked at 4975 and its regs and have come up with the following conclusions:

1. The participant received $50,000 too much.

2. $50,000 can remain classified as a loan - since payments have continued to be made, I am not concerned about the status of the loan. I may suggest that the outstanding principal be calculated and the payments then recalculated over the remaining life of the loan.

3. The other $50,000 is a deemed distribution subject to 1099-R reporting and subject to a 10% under 59 1/2 penalty tax. Since this amount comes from a orifut sharing plan with a 401(k) feature, it is not treated as an actual distribution.

4. A prohibited transaction has occured and the plan sponsor is subject to a 15% excise tax for 2003 and 2004 (Assuming that the participant is reported on Form 1099-R in 2004).

5. The 2003 Form 5500 must accurately reflect this prohibited transaction. There would be no loan in default.

I would welcome any input or comments as to whether or not I am looking at this correctly or not. Thanks as usual.

An independent trustee candidate for a directed account holding employer stock wants to be indemnified for negligent acts other than breaches of fiduciary duty. The trustee does not seek indemnification for willful acts or gross negligence. What specific risk is the trustee trying to address?

We are being presented with a change to our plan. Under the medical reimbursement section there is now a requirement that if an employee terminates, they must pay the balance of their election. For example, if an employee signs up for $50/mo. and leaves the company mid year after contributing $300, the company will take the remaining $300 out of the last paycheck. Can they do this?

do the regs contemplate different types of medical expeses being acceptable and others not being acceptable? specifically, can the participant have elective surgery or cosmetic surgery? i think they can. our plan uses the 213(d) definition of medical expenses.

Does paying premiums for life insurance or disability insurance on a pre-tax basis through a cafe plan make the benefits taxable to the employee where they would otherwise not be taxable?

I am filing from abroad and get an automatic extention until June 15th. Does this mean that my deadline for making a contribution to a Roth IRA for the 2003 tax year is also extended to June 15th?

We have been waiting patiently for the final release of our 5500 software to go through. As it turns out, the very piece we have been waiting for will not be updated for 2003 on the software we use(!)

It is my understanding that the Summary Annual Report for small plans now needs to include the name of each institution holding plan assets, and the amount of the assets reported at each financial institution at the end of the plan year if the small plan is going to meet the requirements for an audit waiver.

Can anyone share a sample of the language in this statement as it appears on their 2003 SAR? I am going to have to input it manually on each of our clients' SARs. What fun.

Thanks.

An attorney called today with this problem looking for ideas.

Participant is in prison and both father and wife have gone to employer with a power of attorney to withdraw full account balance. The father than came back with a letter from the Participant stating that he had cancelled his wife's power-of-Attorney. No divorce is in progress that we know of.

Does anyone have any suggestions for him?

Patient has had a gastric bypass, and has submitted a letter from Cleveland Clinic requiring certain vitamins and minerals. Would anyone have any problem approving them?