If an employee's domestic partner participates in the employer's health plan and then the two (employee and domestic partner) marry during the plan year, does the employer consider the employee married for the entire plan year ( and recoup overpaid taxes for benefits paid while a DP) or should the marriage only be honored on a prospective basis for tax purposes (i.e.,tax breaks apply only for the portion of the year during which they were married)? Any citations would be appreciated.

Looking at the 2013 Schedule SE and want to make sure I'm understanding correctly.

We are back to a .5 multiplier on both the SS and Medicare to determine the deduction?

The .596 multiplier on the SS was just 2011 and 2012, correct?

Good Morning,

I have a client who is a more than 5% owner. Back on 12/21/1983 he signed the waiver of RMD until the later of normal retirement age or the year in which he actually retires. This has allowed him to forego RMDs for 2011, 2012 and 2013.

The participant is still employed, but wants to take an in service distribution of his entire account and roll it to an IRA. He will continue to make 401(k) contributions and receive employer contributions.

Question - Does the RMD waiver prevent him from rolling his funds to an IRA? The notice talks about when the payment is made in annual installments over the lifetime of the participant with the balance at his death to his participant. OR since he is still active, and eligible for an in service, can he take his account and roll to the IRA.

In essence he will be rolling over funds that are not adjusted for prior RMDs due to the waiver - Is this ok??

We have the signed waiver, and it was properly and timely executed. Just never saw one before!

I have a dentist with a SARSEP plan. He has a son who is age 21 and works part time on his website and has worked for him for over three years now. Questions:

Must the son come into the plan ?

If he does not make any elective deferrals does it help his father in any way for the ADP test ?

How is this test done with the son and the father ?

For ADP testing purposes is he considered a HCE ?

Is the son counted for the rule that says that 50% of all eligible employees must defer ?

If so and he needs to defer will this hurt his fathers elective contribution percentage.

Many thanks

WE have an old grandfathered SARSEP in which we generously contribute 10% to all eligible employees. We just had an employee become eligible and she asked if she could opt out of our plan including employer contributions. She indicated that having a SEP Plan will have negative consequences on their current retirement savings strategy.

Is it possible for an employee to opt out of SEP in which Employer has contributions to all eligible employees?

I know an employee can opt of 401k but did not know about SARSEP. Employer would like to allow this this as it would save him over $3,000 in contributions.

Thanks.

It doesn't appear that Notice 2013-74 addresses how to code the 1099-R for the new ATRA IRR. I couldn't find it in the 1099-R instructions either. Is there other guidance that I've missed?

We have a participant that is taking an in-service distribution from her 401k designated roth account. She has attained age 59 1/2 and her roth monies have been in the account for 5 years. Is it code Q?

Client's CPA told them their 401k contributions could be passed through a Cafeteria Plan, excluding them from being subject to FICA. This is news to me. CPA provided the attached PDF, which focuses the 401k component on Page 9.

...a cafeteria plan ... can include a profit-sharing or stock bonus plan that has a qualified cash or deferral arrangement under IRC §401(k). Amounts contributed under the employee's election are treated as non-taxable benefits for cafeteria plan purposes. IRC §125(d)(2)(B). After-tax employee contributions under a defined contribution plan subject to the non-discrimination rules of IRC §401(m), are also allowed. Furthermore, employer matching contributions may be made with respect to before-tax or after-tax employee contributions. Prop. Reg. §1.125-2, Q. and A.-4©.

Any additional insight? If passed through a Cafeteria Plan, does that mean the funds are added back to FICA wages? Or does this exemption really exist?

Chapter-14-Cafeteria-Plans-Employee-Fringe-Benefits-and-COBRA.pdf

Corporation Z is owned 50% each by two brothers, A and B. The brothers have decided to end their professional relationship; each brother will take a piece of business (and some employees), and each will have their own company (which might be a corp, or maybe a sole prop). They want to terminate the 401(k) plan, and both expect to start new 401(k) in their respective new entities.

Does this run afoul of the successor employer/plan rules? It seems to be OK, but I could certainly see how this could look like a tax dodge (i.e., a way to get a distributable event). Any thoughts? Thanks.

Plan has a participant who defaulted on their loan (because the plan sponsor forgot to start the repayments, not that that particularly matters). 1099-R has been issued, and we're still accumulating income because there is no distributable event yet. Now the participant wants to take a new loan - the plan sponsor is very inclined to give one to her because they feel this whole situation was their fault.

The plan's loan program only allows one outstanding loan per participant. Does this defaulted loan count as the one loan the participant can have?

Securities laws and required disclosures aside - client is interested in offering election to transfer/invest participant 401(k) funds under the client's ESOP. Does anyone have any knowledge or experience whether the transfer of Roth funds is permitted?

Thanks in advance...

One person DB plan terminates in 2013. Owner takes RMD prior to the rollover to an IRA. Is RMD also required for IRA in year of rollover? This seems like a double-hit.

Were government plans required to adopt good faith interim amendments for either PPA or IRC 436?

The instructions for the 1099r say that the taxable amount should be entered in box 2a, but to enter code "G" in box 7. Is that correct to do so rather than using code "1" or "7"?

I have a pension plan where term insurance is purchased as an incidental benefit to the employees. Is the insurance premium considered a part of expenses in determining the asset rate of return for Schedule SB purposes?

I'm seeing a lot of plans that preclude in-service withdrawals or loans from Roth accounts, but allow them from pre-tax deferrals. I'm wondering what y'all think about this. All opinions appreciated!

First, the in-service withdrawal is an "optional form of benefit and the loan is a "right or feature." Purely from the standpoint of nondiscrimination testing, do you believe:

A. That nondiscrimination testing is required, because of the Roth restriction, or,

B. That nondiscrimination testing (in the absence of other restrictions) will pass since the decision to defer on a pre-tax or Roth basis rests solely with the participant, and if loans/withdrawals are important to them, they have an unfettered right to do pre-tax deferrals, and this would therefore satisfy both current and effective availability? (And I recognize that effective availability is subjective at best.)

C. Or, some other opinion?

Second, with regard to Prohibited Transaction issues with the DOL regulations under 2550.408b, since loans must be available on a "reasonably equivalent" basis, I think the same general thought process applies. Do you believe:

A. The lack of availability from Roth accounts makes the plan fail the "reasonably equivalent" test, and thus Prohibited Transactions become an issue, or

B. As in B above, due to the fact that participants CHOOSE pre-tax or Roth, that this satisfies the "reasonably equivalent" requirement?

C. Or, some other opinion?

A pension equity plan (PEP) provides annual percentage accruals according to the following schedule: Age < 30 (4%); Age 30-34 (5%); 35-39 (7%); 40-44 (10%); 45-49 (13%); 50-54 (16%); >=55 (18%).

Accrued Benefit is the sum of these percentages over all all years of service, times highest 3 year average compensation, converted to an annuity at Age 65.

Question: How does such a plan meet one of the 3 tests of minimal benefit accrual rate required of all DB plans? It seems to me that it fails the 3% rule on its face because the Age 65 benefit can be based on >33-1/3 years of service (and percentage accruals). It seems to fail the 133-1/3% test because accruals vary from 4% to 18%, so for example, 18% > 133% of 4%. It seems to fail the fractional rule test because it backloads the accrual so that initially the accrued benefit is less than the fractional method.

What am I failing to understand? (layperson speaking here) How does such a plan meet one of the tests?

I'd very much appreciate your suggestions!

Reg. Section 1.409A-3(b) says generally that a plan provides for payment upon a permissible event (e.g., retirement, death, disability, separation from service, etc.) "if the plan provides the date of the event is the payment date, or specifies another payment date that is objectively determinable and nondiscretionary at the time the event occurs." [emphasis added]

The regulation also provides that "a plan may also provide that a payment . . . is to be made during a designated period objectively determinable and nondiscretionary at the time the payment event occurs, but only if the designated period both begins and ends within one taxable year of the service provider or the designated period in not more than 90 days and the service provider does not have a right to designate the taxable year of payment . . . ." [emphasis added]

Must this be read so literally as to require that the plan cannot say, for example, that "the service recipient may, in its discretion and without input from the service provider, make payment either: (i) within the taxable year following the year of the event, or (ii) within 90 days of the event."? In other words, if the service recipient wishes to take advantage of the flexibility afforded by permitted delay in payment, must the plan specifiy either (i) or (ii) - but not both (because permitting both would insert some discretion into the mix)?

Thanks.

I have a potential client that own two companies - a New York law firm and an NJ accounting firm. He is insisting that by STATE law they cannot sponsor the same plan. He quotes the below. My thoughts are that both sections seem to exclude Profit Sharing or retirement plans and wouldn't ERISA pre-empt anyway? But hey -- he's a lawyer -- maybe he know stuff I don't. Any thoughts?

The underlining below is from me -- not the original source.

Thank you

"

EC 3-8

Since a lawyer should not aid or encourage a non-lawyer to practice law, the lawyer should not practice law in association with a non-lawyer or otherwise share legal fees with a non-lawyer. This does not mean, however, that the pecuniary value of the interest of a deceased lawyer in a firm or practice may not be paid to the lawyer's estate or specified persons such as the lawyer's spouse or heirs. In like manner, profit-sharing compensation or retirement plans of a lawyer or law firmwhich include non-lawyer office employees are not improper. These limited exceptions to the rule against sharing legal fees with non-lawyers are permissible since they do not aid or encourage non-lawyers to practice law.

DR 3-102 [1200.17] DIVIDING LEGAL FEES WITH A NON-LAWYER.

A. A lawyer or law firm shall not share legal fees with a non-lawyer, except that:

1. An agreement by a lawyer with his or her firm, partner, or associate may provide for the payment of money, over a reasonable period of time after the lawyer's death, to the lawyer's estate or to one or more specified persons.

2. A lawyer who undertakes to complete unfinished legal business of a deceased lawyer may pay to the estate of the deceased lawyer that proportion of the total compensation which fairly represents the services rendered by the deceased lawyer.

3. A lawyer or law firm may compensate a non-lawyer employee, or include a non-lawyer employee in a retirement plan, based in whole or in part on a profit-sharing arrangement.

DR 3-103 [1200.18] FORMING A PARTNERSHIP WITH A NON-LAWYER.

A. A lawyer shall not form a partnership with a non-lawyer if any of the activities of the partnership consist of the practice of law.

DR 3-103 [1200.18] FORMING A PARTNERSHIP WITH A NON-LAWYER.

A. A lawyer shall not form a partnership with a non-lawyer if any of the activities of the partnership consist of the practice of law"

Participant deferred $7000 over the 402g limit last year 2013. She terminated and rolled her account over to an IRA. Not sure why recordkeeper did not monitor this excess but in any event, what is the procedure for recordkeeper and plan at this point? Issue participant a letter notifying her of excess and that she should contact IRA to take it out. Is there an April 1 deadline? Do the double taxation rules apply if not distributed from the IRA by 4/15?

Thanks for any help!