When valuing an ancillary benefit (for example - vested termination liability from withdrawal) - does the lump sum value of the accrued benefit get valued at the greater of FASB assumptions or GATT??

This may be a problem on several levels. Client added a CODA to existing PSP effective 1/1/01. CODA included a safe harbor non-elective 3% contribution and notices were provided by the TPA to the client with instructions regarding timely notice.

Sole shareholder (and the only HCE) dies during the plan year. Several NHCEs deferred small amounts--but HCE did not defer any amount prior to death (intent was obviously to fully fund to $10,500). The office manager is now trying to sort out what needs to be done--we advised that they are on the hook for the 3% non-elective; HOWEVER, she advises that the notices were never provided to the ees!

1) So, are they "off the hook" for the 3% non-elective becuase proper notice wasn't given? I realize ADP must be performed, but that's obviously no problem.

2) Now aren't we looking at a plan operational failure (failure to operate plan in accordance with its terms to provide the notice and safe harbor contribution)? Wouldn't correction include providing the 3% non-elective anyway?

Obviously, they'd like to avoid providing the 3% contribution at this point. Any insight?

I am in need of good ERISA Attorneys in the Boston area. Any advice?

If you participate in a Dependent Care FSA with you employer that runs from 10/1/01 to 9/30/02, but do not incurr any expenses until after the first of the year (1/1/02) then how is the amount shown in Box 10 of your W-2 not treated as taxable income on Form 2441, Child and Dependent Care Expenses.

Thanks,

Joe

I'm looking for a little heads up info on the potential application of the 4980 Tax on Reversion of Qualified Plan Assets to Employer. A client has been presented with a proposal to have an unrelated company "purchase" a newly formed subsidiary which will have become the plan sponsor of the client's currently substantially overfunded pension plan. Third party will pay to client to purchase the subsidiary approximately 75% of overfunding.. Upon closing, third party will spinoff "back" to client assets, sans overfunding, to cover benefits as originally accrued. Third party them "markets" overfunded shell plan to underfunded plan.

I find it hard to believe that the IRS would not or has not taken the position (successfully if challenged) that the payment of the purchase price is an indirect reversion, taxable under 4980.

Anybody know of any IRS position on this? To say nothing about DOL

I wanted to verify my understanding of K-1 dividends and their relation to the definition of compensation.

As I understand it, for an S-Corp, K-1 earnings are not included in the definition of compensation. The IRS addressed this issue in PLR 8716060. Furthermore, an S corp is not an organization that can have self-employed individuals as defined in IRC 401©(1).

Is there any way that an S-corp can include K-1 income in the defn of compensation?

Is there any mandatory requirement to announce a black out or quiet period before a transition? If so, what is the time amount required? I know it is recommended, but I wasn't sure if it is mandatory.

Do the contribution percentages and limitations of Code section 457 plans apply separately to each 457 plan or to all 457 plans (assuming someone is a participant in more than one 457 plan)? Thanks!

I am wondering about the change to Code Section 403(B)(3) made by EGTRRA (and clarified by the recent Job Creation and Worker Assistance Act) which allows employers to make 403(B) contributions for up to five years after an employee's retirement. I am aware of a number of school districts that either have or would like to establish early retirement "severance" arrangements which may be problematic under TAM 199903032. It appears that the modification to 403(B)(3) would provide the employer with an alternative to the severance type of arrangement; however, I have seen little discussion of the 403(B)(3) change. What is the purpose behind the change and any thoughts as to the viablility of post-retirement 403(B) contributions instead of a severance arrangement?

In 1998 I converted a traditional IRA to a Roth IRA. I spread out the IRA distribution over 4 years for tax return purposes. The fund that i had converted to has gone down by 40%. (It was a heavy tech fund). I have not made any further Roth contributions to this fund(needless to say). Am I able to recharacterize my year 2001 IRA distribution so that I am reporting less than the $2500 that I've been reporting annually over 3 years or was the recharacterization only available to the entire conversion amount in 1998 to be recharacterized by the end of 1999? I've asked a financial advisor whose not sure and he advised that I come to this site for a clarification. Comments will be appreciated.

Can a union contract establish a 401(a) trust by providing for a lump sum retirement buyout to union employees? The objective would be to gain income averaging treatment on the lump sum distributions (these distributions were made in 1996).

I work for an insurance company the deals with annuities. We have questions from our clients asking if we use the surrender value or accumulation value when doing a Roth Conversion. We have surrerender chares and Market Value adjustments when doing a surrender. Any help on this matter would be appreciated. We have been told to always use accumulation value as of the day the client wants to covert. Example client has an IRA annuity with us. Client sends in request to covert to a Roth. We would look at the accumulation value as of the date of the letter and use that value for reporting and taxing.

Hello,

My name is Mike and I am new to the board. I have been referred to you by 403bwise.com.

My school district is having a buyout this year and we are trying to determine how we can shelter the money for our soon to be retired colleagues. 403 or 457 and we have many questions. To be specific, these are the things we are trying to solve:

1. Our retirees will be getting 4 payments over the next two years.

Is a 457 plan the best way to shelter this money?

2. How does the 457 plan work?

3. How long does it take to set this up?

4. Does the district save FICA if the money is directly deposited? If so, why?

5. Does it work like an annuity, i.e. do you have to "buy"from a specific company?

6. What is a defined group in terms of this type of plan?

7. Give reasons why a person would want the money put directly into a 457.

8. Give reasons why a person would NOT want their money put into a 457.

9. How does a person get the money out of his/her 457? What are the penalties?

Any sort of advice or help would be great. Thanks in advance.

My email is makouri@novi.k12.mi.us

Thanks again,

Mike

A top hat plan uses a rabbi trust to accumulate assets for later distribution. The rabbi trust satisfies the IRS model rabbi trust rules. The plan includes a graded vesting schedule. When a participant's status changes from unvested to partially vested, is the portion of his/her now vested account balance ("bookkeeping account balance") no longer subject to a substantial risk of forfeiture for (1) FICA and FUTA purposes and (2) income tax purposes?

No one seems to know if "becoming vested" is sufficient to eliminate an otherwise applicable substantial risk of forfeiture under Section 83.

If a status change from unvested to partially vested eliminates the substantial risk of forfeiture, how should the plan sponsor handle the future changes from say 20% vested to 40% vested to 60% vested and so on?

Lastly, how is it possible that deferred compensation may be subject to FICA and FUTA tax treatment before such amounts are subject to income tax treatment. If such amounts are only subject to FICA and FUTA tax treatment upon the later of (1) payment or (2) cessation of a substantial risk of forfeiture, then it seems to me that FICA, FUTA and income tax treatment would occur at the same time. Can the plan sponsor, just because it wants to, pay FICA and FUTA earlier than the later of (1) payment or (2) cessation of a substantial risk of forfeiture?

Thanks.

I am planning on purchasing a home this coming month and would like to use my Roth IRA to assist with the downpayment. I have 10% to put down, the roth would be an additional 10% (10,000) to equal 20%.

I opened my Roth in Jan of 99, but made contributions for tax year 98, 99, 00, 01 and partially for 02. My estimate is that my 5 years is up at the end of 2002, correct me if I'm wrong please!

Question #1:

If my above estimate is right, I'd like to take a primary mortgage for 80% the value of the home, a secondary mortgage for 10% (which will be paid in Jan. 2003 when I can take money from my roth ) and put 10K down. Will I be able to withdraw from my roth 8 months after the purchase is complete and use that money to pay off my second mortgage?

Question #2

If I cannot use my Roth in 8 months to pay the second mortgage (which is really the additional 10% down) can I access my roth now if I complete my 2002 contributions?

Any other advice to make this work would help.

Thank You

P.S. After posting this I think I answered my own question. Correct me if I'm wrong. As long as I take distributions from my contributions there is no five year holding rule, and it can be done at any time. If I take from earnings, then the five year rule would apply.

Would anyone have a good sample QMSCO Procedure that they would like to

share

Thanks

If I work for two unrelated companies, each of which has a SIMPLE IRA, am I still limited to $7,000 in total payroll deferrals? I know that the 402(g) limit applies if I participate in a SIMPLE IRA and a traditional 401(k) and that I'd be limited to $11,000, but I can't seem to find anything that specidically addresses the two SIMPLE IRA limit.

I've already filed my 2001 return and received my refund.

I now realize that I should open a Roth IRA account for 2001 because I don't believe I will be eligible to in 2002 because of my expected income this year.

Do I have to file an amendment to my tax return? When I ran the numbers in TurboTax using a planned $1000 contribution to a Roth, I did not see any change to my 1040 return.

Hope someone can help me with this

In reading the definition of Qualifying Plan Assets for purpose of the exemption from the small plan audit requirement, I don't see that contribution receivable is listed as a qualifying asset. Is this correct? Logic would seem to dictate otherwise, but we all know some of these rules aren't driven by logic :confused:

We are in process of rewriting our Health Plan SPD for the new SPD rules among other things

1 of the numerous requirements is to include state laws on hospital lengths of stay for childbirth in addition to the federal NMHPA disclosure.

We have employees in 50 states.

Does anyone have a good state-by-state summary of this or can point me in direction of where I can obtain?

Thanks