Can you convert a traditional IRA to a Roth and begin taking basis withdrawals without being subject to the 10% early w/d penalty?

When a Plan is a Plaintiff in fiduciary litigation, who would sign the Settlement Agreement and Release on behalf of the Plan when the case settles?

Partner A and Partner B are the only participants in a plan. After a few years, the partnership dissolves and they go their separate ways. The Plan is terminated and distributions are made. It is discovered shortly after Partner A receives his payment (rolled to an IRA) that Partner A accidently got about $4,000 of Partner B's money. Partner A refuses to pay it back, because the tax consequence to him, as well as bad feelings toward former Partner B.

Since there is no employer remaining from whom to get any money from, and if Partner A refuses to pay back the $4,000, what is the correct next step in this matter.

Thanks

I converted from a traditional IRA (invested in mutual funds) into a Roth IRA in January 2001. I knew that I would need to pay taxes on the conversion. I did not pay estimated taxes on this conversion because I could always recharacterize the conversion before fileing my taxes. I reasoned that I did owe the tax liability until I made the FINAL decision to recharacterize or not.

I had sufficient funds in other mutual funds to pay this tax. I had expected the value of mutual funds to increases during the year so that I would be able to pay the taxes with some of the increase in the funds. As we all know mutual funds have lost money this year thus the conversion after paying the taxes in no longer a good deal.

However, if the stock market rebounds the first part of 2002 then I should not recharacterize. I know that I have until I file my tax return (could be as late as October with extensions) to make the decision to recharacterize. My 2001 estimated tax payments will exceed 108.6% of my 2000 actual taxes thus I am protected from paying an underpayment penalty.

My question is if I file my tax return in April (to allow the stock market to rebound) am I correct in that I will only owe the taxes due without any interest or penalty? If I obtain extension(s), will I only owe the interest on the late payment? What is the interest rate charged?

Employer has 403(B) plan to which employer contributions are made. Wants to install a DB plan for 2002 as well.

Current rule is that, in general, the 403(B) plan is not aggregated with the DB plan for 415 limits (1.415-8(d)(1)). However, one of the specific exceptions to this under 1.415-8(d)(2) is where the

403(B) participant made the so-called "C" election under

415©(4)©, to use the Section 415 limitations, rather than the exclusion allowance calculation.

With the passage of EGTRRA and the unlamented demise of the MEA, it would seem logical that this is tantamount to the "C" election being made, and that the 403(B) plan will now be aggregated with the DB for the 415 limits. Do you read Section 632 of EGTRRA to get to this result? It seems to me that it does, but I'd sure appreciate any opinions on this issue. Thanks!

Can you terminate a safe harbor 401-k plan effective end of business 12/31/01 and set up a SIMPLE 401-k effective 1/1/02? Is the SIMPLE 401-k considered a "successor plan" or can distributions be made from the safe harbor 401-k?:confused:

is anyone else having problems with getting satisfactory results when there are invoicing issues with Corbel? It seems for the last couple months I am constantly trying to get corrections and even software updates for forms I subscribe to; specifically their 1099 package which our office started using last year. It's Dec. and I've already heard from Corbel in Nov. that they would be invoicing me for the update for 2001 before they would ship the update.... my question is how long does it take them to generate a bill for something that should be an automatic issue?

In aug. when their prototype was approved they were quick to announce that they had prepared an additional admin. manual that was to be useful in using the new doc. updates... when I still hadn't received in by the end of Oct. I started calling to find out where it was (they had no problem posting the $400 to my amex accout!). Turns out the manual wasn't even ready yet, so I cancelled the order in the middle of Nov. It's still on my amex account but in the process of being credited (after calls to amex and corbel).

I am getting really frustrated with their whole method of doing business. If I billed for things before I had them ready for delivery I would be out of business!

2 tax-exempt charities, previously un-related, want to determine if its possible to share benefits between the two entities. Originally each group had 10 or less employees. Charity A is taking over some of the functions that Charity B previously handled. As part of this transition, 4 employees of Charity B will now become employees of Charity A. Charity B will only have a 4 or 5 employees remaining.

Is there some way for the 2 groups to combine for purposes of employee benefits?

Would a separate company or an "employee leasing" company be a solution in order to lease the employees to each charity?

Thanks!

In 2002, a self employed individual who sponsors a 401(k) PS plan can make an employee deferral equal to the lesser of 100% of net earned income or $11,000. In calculating the 25% deductible PS contribution is this based on net earned income that includes or does not include elective deferrals?

Employee terminated during Plan Year, paid 20% vested amount = $105 , and forfeited the balance. Re-hired in same plan year, completes more than 1000 hours, and re-joins the Plan. it is time to allocate his forfeitures. Since he is back, can I allocate these forfeitures to all participants, including him? Or should I offer him the chance to repay his distribution, as provided by the plan, and hold his "forfeitures" in suspense? Thanks for all input...

I am helping a client prepare a filing for waiver of minimum funding standard. I find in Rev. Proc. 2001-8 a user fee of $2,050. Any aware of any subsequent changes to the user fee schedule?

I'm looking into the treatment of USVI

plans in general, and, specifically, how to test coverage when a USVI subsidiary is part of a controlled group of a US parent.

I have read IRC S. 932, which exempts USVI residents from US income taxation, similar to PR residents.

However, I have not been able to locate an exemption for USVI trusts from US income taxation similar to the exemption for PR trusts

found at Sec. 1022(i)(l), PL 93-406, 9/2/74 (at note to Code Sec. 501).

My conclusion is that if the plan

is organized under a US trust, then US rules

concerning annual limits, coverage, etc. apply.

I do want to point out that it would appear to be ideal that the plan be organized under a PR trust, thus the trust would be exempt from US taxation, and its participants (presumably, all of whom are USVI residents) would also be exempt from US income taxation, and thus any USVI subsidiary could be excluded in its entirety from the controlled group's coverage testing, although it would have to satisfy the coverage requirements independently.

Any comments?

Since most of us have already received our 2002 rates and gone through our enrollment periods or will be soon, I was just wondering if anyone has either had rate hikes that they felt were not justified or had some bad experiences relating to these topics in general.

I work on finding solutions to employer and employee problems, especially when it comes to benefits. Usually I'm able to save groups 20% on the cost of ancillary (non-medical) benefits and can work with groups on choosing the right carriers when it comes to medical and dental. These days, with costs rising significantly, it's important to make sure your benefits program is on the right path and doing what you want it to do.

There are more and more alternatives out there today and would be more than happy to discuss them with anyone who is interested.

My benefits division's focus is also not strictly on price, but also service. We strive to combine the two and truly deliver customer service above and beyond expectations.

I look forward to hearing from any one who is interested! Feel free to email me at matt.roberts@bbinsurance.com.

If ERISA only applies to pension and welfare plans and a Cafeteria Plan is a Fringe Benefit Plan, why is there an ERISA Technical Release 92-01 on the matter of wether contributions for cafeteria plans must be held in trust??

Repeated requests were made to a plan administrator for as to the rules for a roll-over in kind with an unvested portion would be handled beginning in February 2001. The responses were incomplete and conflicting. The participant informed the adminstrator of her understanding and plan to provide for the unvested portion (to create cash). The participant executed the plan and provided the plan administrator the paper work to execute the rollover. Again different information was provided by the plan administrator. At the end of November, the plan administrator provided what appears to be the definitive information according the plan document. which is again different.

I have found case citations that speak to requirement to provide accurate and timely information related to changes in plan design and in the case of early retirement enhancements

I am looking for law or case citations that would inform the plan administrator that their incomplete, inaccurate and conflicting information as well as lack of timeliness requires them to provide remedy, even if it "violates the plan document".

The goal is to convince the plan administrator to provide remedy without litigation or government complaint.

I know Barry among others has written about a Roth Conversion in the year in which one turns 70.5 and the first MRD due for that year:

"There has been some discussion about individuals who turn age 70½ in 1998, and wish to convert their traditional IRAs to Roths. It has been suggested for such taxpayers to postpone their initial required minimum distribution until the beginning of 1999 (prior to April 1st) in order to stay under the $100K income limitation for conversion in 1998.

PLEASE BE ADVISED that the IRS' position on this issue is that you CANNOT postpone the required minimum distribution and convert your traditional IRA to a Roth. This is made very clear in Prop Reg 1.408A-4, Q&A-6. You MUST take your required minimum distribution prior to conversion.

In Prop Reg 1.408A-4, Q&A-1, A-1©, the regulation states that even if the conversion from a traditional IRA is accomplished by means of a trustee to trustee transfer, it is a qualified rollover for purposes of both Sec 408 and Sec 408A. By being a rollover, and not a trustee to trustee transfer, the rule of Sec 408(d)(3)(E) which prohibits the rollover of a required distribution is applicable.

I personally disagree with the IRS on their position, mainly because a minimum distribution is not required until April 1st of the year following the attainment of age 70½. However I have yet to find a taxpayer willing to be the test case to litigate this issue."- Barry Picker per "Roth IRA Web Site"

Questions:

1. Can TIRA owner do a partial conversion to a RIRA and still satisfy the IRS's position and avoid the MRD distribution in 2001?

Example, for 2001 (year owner turns 70.5) owner converts X% of TIRA into a RIRA in 2001 such that Y% of TIRA remains as a TIRA. The Y share of the TIRA equals the MRD for the whole original TIRA. Then by 4/1/2002 (owner's RBD) all of the TIRA is distributed. Will that fly with the IRS?

This seems a fairly obvious way to get around the MRD effecting the $100K limit so I'm suspicious that this strategy will work.

THOUGHTS???

Reg Jones

A 57 year old retired client took a 200k distribution from his IRA earlier this year, then "replaced" it within 60 days. A few months later, he took another 200k distribution, and again tried to re-deposit the $$ within 60 days, but the broker refused to accept the funds. The client was told that only 1 of these transactions is allowed per year. Does anyone have a cite that addresses this situation?

Thanks. Maverick.

p.s. He took the distributions to invest in the market.

The employer has a cafeteria plan that provides for health insurance. The employer pays a portion of the premiums and the balance of the premiums are paid by employees with before tax dollars as part of the cafeteria plan. Because the plan failed discrimination in years past, the employer has taken to paying the entire premium for the owners (4 doctors). The employer claims that since nothing flows through the cafeteria plan for these HCE's there is no discrimination and this benefit does not need to be included when testing for discrimination. This just doesn't smell right. Can they do this? Does this present some other problem?

Anyone heard of a provision that disallows eligibility in a DC plan AFTER a certain age? Does anyone have any cites or specifics, or is this ERISA Mythology?

Looking at whether QSLOB status can be met. I have some question as to whether client can pass the administrative scrutiny test. Under the Treasury regulations, a separate line of business satisfies the safe harbor if it is in a different industry from every other separate line of business of the employer. In Revenue Procedure 91-64, the IRS sets forth the industry categories referenced by the Treasury regulations.

One company in controlled group is in Group 51 while the other company falls into Group 30. Under the Revenue Procedure, Groups 13, 28, 29, 30, 46 and 55 are grouped together into one industry category. However, Group 51 is not listed in the Revenue Procedure at all. It is unclear how this Group would be categorized.

It appears that if Rev. Proc 91-64 does not require industry code 30 and 51 to be combined, then they should be treated as different industries. I think it would be hard for the IRS to argue some implied rule that those separate industry codes are combined without a formal ruling to that effect.

Anyone else dealt with this issue of industry codes not being named in this Rev Proc?