Who would be the beneficiary in the following scenario?

Taxpayer A converts his traditional IRA ("TIRA") to a Roth IRA ("RIRA") in 1998. For the TIRA the primary beneficiary was his spouse but for the RIRA the beneficary was a qualified trust [such that the beneficaries of the trust are the designated beneficiaries for 401(a)(9) purposes].

Taxpayer A dies in 1999.

In preparing Taxpayer A's estate the executor finds out that A's 1998 MAGI needs to be adjusted such that it will exceed the 100K limit. The executor recharaterizes the RIRA back to the TIRA by the 12/31/1999 deadline.

Who is the effective beneficary for this IRA?

i)On the one hand, Taxpayer A's last intention before he died with regard to the beneficiary was expressed on his RIRA. Which would leave it to the trust.

ii)On the other hand, 1.408A-5 Q&A-3 says the effect of the recharacterization, in this case, the RIRA "is treated as having been originally contributed to the Second IRA [herein the TIRA] on the same date ... that it was made to the the First IRA [herein the RIRA]". This implies to me that the beneficiary should then be the ben. of the TIRA, the spouse.

Seems to me result (i) makes the most sense. For example, the executor should not have the power to change the beneficiary designation of the decedent. Note in this case

1.408A-5 Q&A-6© gives the power to the executor to make a post-death recharacterization. It does not say it has to be a mandatory recharacterization. If result (ii) was correct the executor could change the intentions of the decedent. What if the executor was the beneficiary of the TIRA? You see where I'm going...

In addition, 1.408A-5 Q&A-1(a) says that if both the RIRA and the TIRA were within the same trustee instead of a transfer back to the original TIRA, the RIRA can be "redesignated" as a new TIRA; which in this case a redesignation would keep the RIRA's beneficary, the trust. One would think that the effective beneficary would not rest on the way the trustee chooses to processes the recharacterization.

Does anyone have a citation that would apply, other than the previously quoted 408A-5 regs in this scenario? I think that result (i) should be right; but I have no legal basis for it.

One could go on and complicate things by asking about a fractional recharacterization and about whose lifetime would be considered for MRD purposes in the recharacterized IRA but I think I'll stop here for now...

reg_h2b

Many years ago, a 501©(3) entity sponsored a 403(B) plan with employer contributions. There was a document and the plan complied with all of the applicable regs and rules. The plan was frozen and no contributions have been made to the plan for years. Employer has since adopted a 401(k) plan which is running nicely. Employer wants to allow employees to make deferrals to a 403(B) program. Primary reason is that some employees have asked to be able to. Second reason is that some employees get refunds of their deferrals to the 401(k) plan each year because of ADP testing. 403(B) would be open to all, employees can select vendors, etc., etc.....Is the "new" 403(B) program exempt from ERISA (assuming we meet all of the requirements) or is it somehow subject to ERISA because of the old plan or some other reason. Thanks

Fund choices changed in company plan, and no notification was sent to former employee. The funds rolled into a default account which was a bond. He had been in a growth fund. The former employee had a significant loss and is very upset. Any violations?

XYZ, Inc. had an individual that was not able to enroll at the time enrollment meetings were held due to a life threatening problem. This individual was hospitalized and is now coming home. Are there any guidelines on allowing the participant to make up the deferral contributions (other than the catch-up provisions of the document)?

XYZ, Inc. has an individually designed document that allows for catch-up contributions for the Year 2000. Since the catch-up language is in the document, is there any problem with this individual making up pre-tax contributions (this participant was being paid compensation while he was out). Are there any applicable guidelines other than not exceeding the plan and IRS limits?

The document addresses the "misclassification or mistake of fact". ..."If a misclassification or mistake is made concerning the participation of an Employee in the Plan, either by including an ineligible Employee, or excluding an eligible Employee, and if such mistake is not timely discovered and corrected for the Plan Year in which it occurred, upon discovery of such error in a subsequent Plan Year an adjustment to the Employee's Account Balance shall be made." Later in the same section it reads "In the case of the exclusion of an eligible Employee, the Company shall correct such error as soon as practicable by making a Qualified Nonelective Contribution to the Plan on behalf of the Employee that is equal to the Actual Deferral Percentage for the Employee's group(either HCE or NHCE), as applicable, for each Plan Year during which the Employee was omitted from participation in the Plan."

This was a start-up plan (resulting from a terminated DB Plan). The employer did not send the enrollment package to the participant because he was on life support. Once the employer found out that the participant was doing better and was transferred to a rehab center, he mailed the enrollment package to the participant’s wife. Considering the circumstances, does the "excluding an eligible Employee" scenario apply?

About how long does a letter of determination take?

We are a TPA firm and I administer a qualified plan where a participant died at age 51, and was not taking plan distributions at the time of his death. His designated beneficiaries are his two children, ages 13 and 15. The children's tax advisor has asked the plan to rollover their benefits into "Custodial Inherited IRA's" for each child.

I do not believe that non-sopuse benefitiaries could rollover qualified plan benefits - IRC 401©(9) and

408(d)(3)©. I also looked at the 300 postings in the Distribution Q & A column and I could not find this situation specifically addressed. I did find that questions 156 and 222 address this situation for IRA's. Does the IRS look at qualified plans like IRA's in this situation?

To summarize, what distribution options do non-spouse beneficiaries (in this case minor children) have when inheriting a Qualified Retirement Plan benefit following the death of their parent, who was not in "pay status" at the time of his death?

Thank you.

John Sample, QKA

I have a self-employed plan that we are funding for the maximum 415, high 3 year compensation. He has begun taking minimum distributions. Does his high 3 year comp have to be adjusted for the present value of these payouts for funding purposes? Please give me some references.

A client has a nonqualified defined benefit top hat plan informally funded with a rabbi trust.

The client has decided that it would like to further address the benefit security issue by actually purchasing immediate annuity contracts at the time an employee retires. The present value of the benefit would be fully taxed at that time (and grossed up for taxes).

Until the annuity is purchased the employee would be an unsecured creditor of the company. The plan would be written so that once an annuity is purchased the employee would no longer be a participant in the plan and all benefit obligations would be satisfied solely by the annuity contracts.

Does this design raise any ERISA funding issues? I'd like to take the position that it does not, that the plan remains an unfunded top hat plan and that employees have a tax impact only when the annuities are purchased.

Could annuities be purchased with rabbi trust assets? Or would it be preferable for the employer to purchase the annuities (reimbursed through lower rabbi trust contributons).

Any thoughts would be appreciated.

r.

I have experienced large capital losses this year in my stock trading accounts. I'm trying to find something positive that can come out of this! Can I convert the long term gains in my traditional SEP IRAs to a Roth IRA and offset the gains that I would have, against these non IRA, mostly short term, capital losses? My goal would be to convert with no tax due. I am 54 with goal of not tapping the conversion until at least age 62.

Also, will I have a problem establishing this conversion if my AGI for 2000 is below 0 due to these losses? I understand that I would not be able to contribute new money to a Roth, but will this keep me from converting traditional, deductible IRA money? Thank you for any help and encouragement!

Re minimum distributions from an eligible 457 plan, would the requirement that distributions be "substantially nonincreasing" (Code section 457(d)(2)©) be satisfied by using the standard account-balance-divided-by-life-expectancy approach that is used with IRAs and defined contribution plans? That method is characterized as "substantially equal," which seems like it ought to work. However, the term "substantially nonincreasing" doesn't seem to have been defined. PLR 9631034 is the only place I've found any discussion of the term.

Must you combine employee contributions deferred under a 457 plan with employee contributions made to a 401(a) defined benefit or money purchase plan under a 414(h) pick-up arrangement in determining the maximum contribution to either one? If so, how? And, for the percentage of pay limit, are all of the contributions deducted from gross wages?

I am presently in a frozen defined benefit plan where I will receive an annual benefit of $2258.00, starting at 65 11/1/2014. Can any tell me what the present value of that benefit is or how I go about figuring it out?

Thanks

Are Cobra premium payments made by a current employee considered valid expenses under an FSA?

I hope someone can help me with this question.

Example: Plan participant has $500 in her Flexible Spending Account and terminates employment.

I have always been under advisement that the employee can only file claims for eligible expenses incurred prior to her termination date. Any monies not claimed are lost.

Question: I have recently heard (from a number of sources) that an employee can choose to continue contributions (on a post-tax basis) to the employer in order to extend his/her termination date from the plan.

The terminated employee has no tax advantage in making this additional contribution, but is effectively allowed additional time as an active participant to incur the necessary claims to take out the remaining account balance.

Can anyone tell me if this this legitimate?

THE 2001 LIMIT FOR SIMPLE PLANS IS $6,500. Thus, with sufficient income, a $13,000 contribution is possible in a SIMPLE IRA ($9,900 in the case of a 2% nonelective contribution because of the $170K compensation cap). In a SIMPLE 401(k), the $170,000 compensation cap always applies (as does the 25% limit); thus, $11,600 is the maximum (with 3% match) and $9,900 in the case of a (2%) nonelective.

Is there any requirement to provide a 204(h) or 204(h) type notice to fired employees affected by a partial termination of a DB plan?

Is the required minimum distribution for a 72 year old that has died this year paid to the decedent as income in respect of this decedent and reported on that decedent's taxpayer ID number on the 1099R or on the bene's taxpayer ID number?

I recharacterized my Roth IRA back to a traditional IRA in 12/99 and then converted the same IRA to a Roth IRA in 1/00. I did this for the tax benefit. Can I now do the same thing again and recharacterized my Roth IRA to a traditional IRA and then again back to a Roth in January of 2001? I did read that you cannot do both in one year and that there must be thirty days between the transactions.

I have 2 PEO (Professional Employer Organizations) that have 401k plans and unhappy with their current adminstrators. Does anyone know of a good TPA for PEO's?

Any suggestions would be great!

Are there any situations in which a 403(B) plan is not subject to ERISA if the employer makes contributions? We have a plan in which the employer makes contributions regardless of whether the employees make any voluntary withholdings.

We are also looking at Freezing the current plan and making the new plan a matching plan of employee contributions to encourage participation. Based on what we have researched, this would be subject to ERISA and 5500 reporting.