Hopefully a simple question :

Husband (74 and received distributions)passes away. IRA (aprox $40k) fbo-husband(wife beneficiary) is in joint bank account of husband and wife (67). What should the wife do to effect her ownership of this asset ? Are there any tax consequences ?

Thanx in advance for your help.

PLRs 9608042 and 9418034 show that a surviving spouse who makes a penalty-tax-free withdrawal from an IRA left in the decedent's name cannot later treat the decedent's IRA as his or her own IRA.

Do you advise your clients to segregate a spousal beneficial IRA in order to withdraw money before 59 1/2 without losing the distribution options available when the IRA is rolled over into the spouses name?

If so, do you think an IRA custodian should prevent a spousal rollover if any pre-59 1/2 money was ever withdrawn from the beneficial account? How strong is the IRS position on this issue?

I've got a client who adopted a standardized target benefit prototype from Northwestern Mutual in late 1996. Client is terminating it in 2000. Anyone know a contact at Nortwestern Mutual who can supply a current amendment for one of their prototype plans? I've left messages at Northwestern's reitrement services tel. line but gotten no response. I've also tried to contact the e/ee benefits firm that got them into the prototype, but they are not responding. That's probably because they've screwed things up so badly that they don't want to talk to me. The doc needs to be amended upon termination....doesn't that apply to prototypes as well?

Thanks for any help..

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Please help resolve a disagreement in our office. One person believes that the determination of whether a plan termination occurred due to a significant reduction in future benefit accruals (a "horizontal partial termination")only affects DB plans. Another believes this determination could also affect DC plans.

For example: If a money purchase or target benefit plan is amended to reduce the contribution formula (say from 10% to 5%), one person believes there is the possibility that the IRS would consider this a partial plan termination. The person's analysis states that this would occur if the potential for a reversion of assets to the employer (i.e. future forfeitures exceed future contributions) increases.

Each person has reviewed IRS Reg. 1.411(d)-2(B) and various court cases.

Which person do you think is correct?

Will SI plans be immune to 2000-14 ???

I know they are not as flexible as new comp. plans, but they still work well for plans with only 1 HCE.

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Andy Treece

Hello everyone,

Have any of you heard of this way for employers to save money: Relating to IRS MR106, the employee pays the full premium for a medical deduction and then the employer reimburses the employee for the portion that the employer would have paid directly in the normal cafeteria plan scenario. How does this work? Also, have any of you ever heard of an "expense reduction" consultant?

Thanks,

Christine

A client's accountant recently told us that we no longer have to reduce earned income by the contribution to the self-employed individuals. There are no common law employees in this plan so once we reduce for the self-employed taxes, we're done according to him.

Is this correct?

We have several employees that are provided a company vehicle for both business and personel use as a part of the individuals compensation package. We now have an employee who is no longer insurable. Any suggestions on how to handle this situation and any thoughts for a policy going forward.

It has always been my contention that a refund of excess contributions, due to an ADP test failure, plus earnings or losses thereon, are includible in the year of contribution if refunded before 2 1/2 months after the close of the plan year end.

I have an associate who asserts that an ADP refund is treated like a refund for an excess deferral; that is, the contribution is taxed in the year of contribution, while the earnings are taxed in the year of distribution.

Has anybody seen or done refunds like this? I was totally surprised when my associate mentioned this.

Thanks for any assistance!

I have a participant who took a pre-TEFRA loan for $300,000 amortized over 30 years to purchase a house. In 1996, he stopped making payments. The loan was deemed a distribution, included in his taxable income and a 1099R was issued.

The loan plus accrued interest was then re-amortized and he began making payments again. Now he has retired.

Does the loan just disappear when he takes a distribution since he's already been taxed on it?

Has anyone heard of a TARSEP, with a "T"?

What is this creature, or am I just looking at something with a typo?

An actively employed, non 5% owner, age 73, not receiving MRD's, died 3/99. Was the spouse required to receive a MRD 12/31/99, or is 4/1/00 ok?

Can you amend a plan in any given year to enter select NHCE's who do not meet the plan's eligibility requirements? If so, please advise where I can find something relating to this subject.

Thank you for your assistance.

Plan document allows the employer to defer distribution of any stock encumbered by a loan until the loan is repaid. If in some years, the emloyer has sufficient cash to repurchase the encumbered stock available for distribution, does this mean that he has to do so in subsequent years? Does this become a 411(d)(6) issue? Can he decide on a year by year basis? Any help is appreciated.

A 1999 arbitrator's decision requires a public employer to make a nonelective contribution to a 457 plan on behalf of "employees who maintain an account".

The union argues that since the contract term

runs from 1997-2000, the intent of the decision was to require the employer to make contributions for active employees AND former employees who left prior to the arbitrator's decision (i.e., in 1998). Aside from the labor issue regarding the meaning of the decision, our position is that Section 457 does not permit retroactive contributions for former employees, and to do so may result in a determination that the plan is ineligible.Our reasoning is that 457 plans are for active employees only, and that an agreement to defer comp or make a contribution must be in place prior to the period in which comp is earned. Sorry for the long-winded message.

Any thoughts?

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I've used this correction method before. It is taxable in the year of distribution and coded 7 on the 1099.

I haven't looked at the revised EPCRS info from earlier this year, but I don't think this kind of defect has been addressed by the IRS.

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Andy Treece

You are correct, forfeitures are not included in the deductibility limits. It's the same thing with a PS plan that uses forfs. to reduce - you can gross up the contribution, so that the net deposit is 15% and still pass 404(a).

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Andy Treece

I wrote an article on this topic. It's on the BenefitsLink web site, and also on our website at www.schultzcollins.com, under "corporate retirement plans"/"articles" (follow the NAV bar). hope this helps.

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Jon C. Chambers

Principal

Schultz Collins Lawson Chambers, Inc.

(415) 291-3004

Does a for profit employer group that provides fully insured medical benefits through an insurance company, need to issue a summary plan description in addition to the certificate of insurance issued by the insurance company?

Just recently assumed admin. for limited partnership but feel uneasy about info coming from CPA; CPA claims partners have $0 in line 15a of K-1 & receive W-2's for services rendered to the partnership; since I'm not an accountant, what info should I request so that a trained eye would be able to figure out what is going on here; things that come to mind would be the Form 1065, 1st page of each Form 1040, Schedules K & K-1, etc. - Is there more info I should ask for ?