jevd

You are correct. SEPs are funded through Traditional IRAs. Onces the cotributions are made by the employer, all Traditional IRA distribution rules apply.

My understanding is yes he can as long as there are no control or affiliated service group issues. The 415 limits are on an employer basis. As long as there are no deferrals in the SEP (realizing that if this is a new SEP that's not an issue) then I believe he is ok as long as his Compensation is appropriate. I haven't worked directly in the QP/employer plan area for some time so others may have more insight.

See code section below regarding SIMPLE IRA plans: 408(p)(2)(D) ARRANGEMENT MAY BE ONLY PLAN OF EMPLOYER. -- 408(p)(2)(D)(i) IN GENERAL. --An arrangement shall not be treated as a qualified salary reduction arrangement for any year if the employer (or any predecessor employer) maintained a qualified plan with respect to which contributions were made, or benefits were accrued, for service in any year in the period beginning with the year such arrangement became effective and ending with the year for which the determination is being made. If only individuals other than employees described in subparagraph (A) of section 410(b)(3) are eligible to participate in such arrangement, then the preceding sentence shall be applied without regard to any qualified plan in which only employees so described are eligible to participate. 408(p)(2)(D)(ii) QUALIFIED PLAN. --For purposes of this subparagraph, the term "qualified plan" means a plan, contract, pension, or trust described in subparagraph (A) or (B) of section 219(g)(5). As stated above, it applies on a year by year basis. An employer with a previous plan may still establish a SIMPLE IRA but it must be the only plan accruing benefits or contributions made for that year as I understand it. Emphasis added.

Sounds good to me.

It came up in the Federal Register a couple of days ago as a proposal for a regulation with a request for comments. See the original link and the first paragraph or so.

Todays Federal Register This is a clarification???

Correct. However, he/she could take a distribution immediately after the deposit. Taxable to him/her but offset by business deduction.

My understanding is that no waivers are permitted. Period. That's why employers have the right to set up Traditional IRAs for unwilling, deceased or missing employees.

See the following excerpt from IRS Pub 575: Excerpt from Pub 575: Rollovers by nonspouse beneficiary. If you are a designated beneficiary (other than a surviving spouse) of a deceased employee, you may be able to roll over tax free all or a portion of a distribution you receive from an eligible retirement plan. The distribution must be a direct trustee-to-trustee transfer to your traditional or Roth IRA that was set up to receive the distribution. The transfer will be treated as an eligible rollover distribution and the receiving plan will be treated as an inherited IRA. For information on inherited IRAs, see Publication 590. HERE See PUB 575 Here

First, thank you for the kind words. There are many knowledgable posters here, each in their own fields. Your assumptions are correct. If he were to establish (amend) the SEP under a Prototype or Individually designed SEP document, then he could contribute to both the SEP and 401(k) subject to the appripriate limits.

An employer can contribute to both a SEP and 401k plan in the same year but the plans are subject to a single DC limit. However some IRS model SEP plans do not allow the employer to maintain another plan. You need to read the IRS model document. I agree with MBOZEK and in fact the IRS Model 5305 specifically disallows the use of any other plan if the 5305-SEP is being used for the SEP. See instructions for the form Here A prototype or Individually designed plan document is required if the employer wishes to combine a SEP with any other qualified plan other than another SEP.

Generally speaking the answer to the question is yes. Will he include both accounts in his initial calculation? If so, no problem. You didn't specify if these accounts are in IRAs. If the annuity is not within an IRA under 408(a) then 72(t) does not apply to the annuity, 72(q) does and you can't mix the two. There is a website that deals almost exclusively with these issues and you may want to check their discussion board part of the site. The site is 72t on the net and is Here

Do you have links to those commentaries? It would be helpful to understand their logic and then some of us could comment. Generally speaking however, if the only the converted amounts are reported on Form 1099-R, where would the IRS get the total value of all IRAs as those values are changing all of the time. It would be burdensome at best and there really is no basis in the code or regulations . Edited for fat fingers twice

What type of plan does the account owner/participant have. IRA (Traditional, SIMPLE IRA or ROTH) or Qualified Plan. If a qualified plan, what type. Who is the beneficiary ? Spouse, Non-spouse, Qualifying Trust etc. How old is the beneficiary if a person? All of these factors come into play. In general, A spouse may rollover a qualified plan death benefit to his/her own account. A non-spouse may establish an inherited IRA ( in the name of the deceased for the beneficiary's benefit) for the benefit but cannot rollover the benefit to his IRA in his own name. THe distribution period will be based on the age of the beneficiary & the deceased account owner. IRAs have slightly different rules and they differ by Type Those are some general rules. Refer to IRS Publications 590 & 560 & Possibly 575 for additional informaation. Defined benefit plans have additional issues. If you are unfamiliar with plans in general contact the plan administrator if its a qualified plan or the custodian/trustee if an IRA. Look before you leap. Be sure you understand all of the options and the requirements. Pitfalls and penalities abound. If you have a more specific question or more detailed information, repost. There are many knowledgeable people on this board willing to help but always always check with your tax professional. Good Luck.

When I worked in a security vault clipping coupons (in another life) we sat with the auditors and could do nothing but watch. Have you got a clerk that could spend a day sipping coffee that might inhibit the guy.

Are the parties divorced? If the parties are still married why isnt the waiver of spousal rights valid under ERISA 205©? Also retirement benefits under ERISA are usually divided under a DRO issued after the parties are divorced, not a separation agreement. A property settlement agreement can be a valid DRO if it is approved by a judge as part of a divorce decree or order. You need to check with a divorce lawyer to see if the parties can transfer property property under a DRO prior to a divorce being issued. The separation agreement may provide that the marital property will be divided when incorporated as part of a divorce decree. If the parties are not divorced the question is whether the waiver of spousal rights is a forgery. You can: 1. ask the spouse come in and personally sign the wavier and a statement that the parties are not divorced in presence of the plan administrator and, 2. Ask for the attorney for the H to provide a letter stating that the parties are still legally married. In addition once in the IRA , under 408(d)(6), the IRA or portion may be transferred to the spouse under a Separation Agreement. 408(d)(6) TRANSFER OF ACCOUNT INCIDENT TO DIVORCE. --The transfer of an individual's interest in an individual retirement account or an individual retirement annuity to his spouse or former spouse under a divorce or separation instrument described in subparagraph (A) of section 71(b)(2) is not to be considered a taxable transfer made by such individual notwithstanding any other provision of this subtitle, and such interest at the time of the transfer is to be treated as an individual retirement account of such spouse, and not of such individual. Thereafter such account or annuity for purposes of this subtitle is to be treated as maintained for the benefit of such spouse.

Can't have your Kaye & Edith too. NO. S Corp Dividends etc Distribution from K-1 not considered earned Income. Must be on W-2 and pay FICA or use income to calculate S.E. Tax.to be considered earned income. The accountant shouold be able to determine what the individual's status is. I'm not an accountant. The IRS may raise an eyebrow if dividend income from S-Corp and w-2 earnings k-1 income etc. are not appropriate for the type of business etc. Did the individual "Work" in the business or is he/she a silent investor type?

IRS Notice 94-22 Here Here are the IRS SItes: http://www.irs.gov/retirement/article/0,,id=110139,00.html http://www.irs.gov/retirement/article/0,,id=110142,00.html http://www.irs.gov/retirement/article/0,,id=110108,00.html SSA SITE http://www.socialsecurity.gov/foia/html/ltrfwding.htm

I believe that "Most" refers to the fact that the waiver does NOT apply to DB plan participants.

Establishing a 401(k) would disqualify the SIMPLE plan for the year. Only Plan rule. See Pub 590. Contributions for the year would need to be removed as excess. Any matches as well. Prior year contributions could stay in SIMPLE IRA or rolled/transferred to Traditional IRA if at least two years since the original contribution. See PUB 560 Chapt 3. PUB 560 Appleby also has some good information Here

I think the Theory of Relativity would be simpler to explain. "You can choose your friends but not your relatives" "Insanity is hereditary. You get it from your kids." Etc. Etc. It's Friday and it's hot in Denver. Go Rockies!!

Hey Dave, Maybe its about time to start another board for SOX Nation and other fans etc.

IMHO as stated above the A in IRA stands for Arrangement as far as the IRS is concerned, I believe they will consider all Roth IRAs as one and you would be allowed to do one or the other but not both.

Here you go. I have a source but you can also find them at http://www.legalbitstream.com/scripts/isyswebext.dll Here REV-RUL, PEN-RUL 19,442, Rev. Rul. 77-200, I.R.B. 1977-22, 5. Issued as IR-1813. Rev. Rul. 77-200, I.R.B. 1977-22, 5. Reversion of employer contributions Qualified employee plans and trusts may permit employer contributions involving mistaken payments described in ERISA Sec. 403©(2) to revert to the employer. Guidelines are also provided for determining the types and amounts of reversions covered. Advice has been requested whether, and under what circumstances, a qualified pension, profit-sharing, or stock bonus plan may permit reversions of employer contributions. Section 401(a)(2) of the Internal Revenue Code of 1954 generally requires a trust instrument forming part of a pension, profit-sharing, or stock bonus plan to prohibit the diversion of corpus or income for purposes other than the exclusive benefit of the employees or their beneficiaries. Section 403©(1) of the Employee Retirement Income Security Act of 1974 (ERISA), Pub. L. 93-406, 1974-3 C.B. 1, contains a similar prohibition against diversion of the assets of a plan. Section 403©(2) of ERISA, for which there is no parallel provision of the Internal Revenue Code, provides that the general prohibition against diversion does not preclude the return of a contribution made by an employer to a plan if: (1) the contribution is made by reason of a mistake of fact (section 403©(2)(A)); (2) the contribution is conditioned on qualification of the plan under the Internal Revenue Code and the plan does not so qualify (section 403©(2)(B)); or (3) the contribution is conditioned on its deductibility under section 404 of the Code (section 403©(2)©). The return to the employer of the amount involved must be made within one year of the mistaken payment of the contribution, the date of denial of qualification, or disallowance of the deduction, as the case may be. Before ERISA, the Internal Revenue Service ruled that a plan may provide for the return of employer contributions on the failure of the plan to qualify initially. See Revenue Ruling 60-276, 1960-2 C.B. 150. Also, in those instances where an excess contribution was attributable to a mistake of fact, the Service has, in proper cases, allowed the excess amount to be returned to the employer. Language providing for a return of contributions in the circumstances specified in section 403©(2)(A) or © of ERISA may now be included in a plan intended to qualify under the Internal Revenue Code. Provisions incorporating such language may be effective as of a date no earlier than the date section 403©(2) of ERISA is effective. Plans which are amended only to include language essentially equivalent to the language of section 403©(2) of ERISA will not fail to satisfy section 401(a)(2) of the Code solely as the result of such an amendment. The determination of whether a reversion, due to a mistake of fact or the disallowance of a deduction, will adversely affect the qualification of an existing plan will continue to be made on a case by case basis. In general, such reversions will be permissible only if the surrounding facts and circumstances indicate that the contribution of the amount that subsequently reverts to the employer is attributable to a good faith mistake of fact or a good faith mistake in determining the deductibility of the contribution. A reversion under such circumstances will not be treated as a forfeiture in violation of section 411(a) of the Code, even if a resulting adjustment is made to the account of a participant that is partly or entirely nonforfeitable. The amount which may be returned to the employer is the excess of (1) the amount contributed over (2) the amount that would have been contributed had there not occurred a mistake of fact or a mistake in determining the deduction. Earnings attributable to the excess contribution may not be returned to the employer, but losses attributable thereto must reduce the amount to be so returned. Furthermore, if the withdrawal of the amount attributable to the mistaken contribution would cause the balance of the individual account of any participant to be reduced to less than the balance which would have been in the account had the mistaken amount not been contributed, then the amount to be returned to the employer would have to be limited so as to avoid such reduction. In the case of new plans, a provision permitting the reversion of the entire assets of the plan on the failure of the plan to qualify initially under the Internal Revenue Code will continue to be allowed as provided in Revenue Ruling 60-276. REV-RUL, PEN-RUL 19,740, Rev. Rul. 91-4, 1991-1 CB 57. Rev. Rul. 91-4, 1991-1 CB 57. Reversions: Employer contributions: Good faith mistakes Employer contributions to a qualified plan may be returned to the employer in the circumstances set out in ERISA Sec. 403©(2)(A), (B) and ©, as amended by the Omnibus Budget Reconciliation Act of 1987. Plans that are amended to include such language (which allow reversions if there is a mistake of fact, if the contribution is conditioned on qualification and the plan fails to qualify, and if the contribution is conditioned on its deductibility) will not fail to satisfy the prohibition against diversions of the plan's corpus solely as the result of such an amendment. PURPOSE The purpose of this revenue ruling is to obsolete Rev. Rul. 60-276, 1960-1 C.B. 150, and to supersede Rev. Rul. 77-200, 1977-1 C.B. 98, for reversions occurring on or after December 22, 1987, the date of enactment of section 9343 of the Omnibus Budget Reconciliation Act of 1987 ("OBRA 87"), Pub. L. 100-203. ISSUE Under what circumstances may a qualified pension, profit-sharing or stock bonus plan permit reversion of employer contributions? FACTS A plan permits reversion of employer contributions under the conditions described in section 403©(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"), Pub. L. 93-406, as amended by section 9343© of OBRA 87. LAW AND ANALYSIS Section 401(a)(2) of the Internal Revenue Code of 1986 generally requires a trust instrument forming part of a pension, profit-sharing or stock bonus plan to prohibit the diversion of corpus or income for purposes other than the exclusive benefit of the employees or their beneficiaries. Section 403©(1) of ERISA contains a similar prohibition against diversion of the assets of a plan. Section 403©(2) of ERISA, for which there is no parallel provision in the Internal Revenue Code, generally provided, prior to its amendment by OBRA 87, that the general prohibition against diversion does not preclude the return of a contribution made by an employer to a plan if: (1) the contribution is made by reason of a mistake of fact (section 403©(2)(A)); (2) the contribution is conditioned on qualification of the plan under the Internal Revenue Code and the plan does not so qualify (section 403©(2)(B)); or (3) the contribution is conditioned on its deductibility under section 404 of the Code (section 403©(2)©). The return to the employer of the amount involved must generally be made within one year of the mistaken payment of the contribution, the date of denial of qualification, or disallowance of the deduction. In Rev. Rul. 60-276, the Service held that a provision permitting the reversion of the entire assets of a plan on the failure of the plan to qualify initially under the Code would be allowed. In Rev. Rul. 77-200, the Service held that plan language providing for the return of employer contributions under the circumstances specified in section 403©(2)(A) and © of ERISA could also be included in a plan intended to qualify under the Internal Revenue Code. The Tax Court, in Calfee, Halter, & Griswold v. Commissioner, 88 T.C. 641 (1987), held that a plan may qualify under section 401(a) of the Code if it permits reversions under pre-OBRA 87 section 403©(2)(B) of ERISA, even if such reversions are not limited to initial qualification of a plan. In reaching this conclusion, the Tax Court assumed that the standards and guidelines in Title I of ERISA were applicable in interpreting the Code. In enacting section 9343 of OBRA 87, Congress legislatively overturned the holding in Calfee, Halter, & Griswold. It amended section 403©(2)(B) of ERISA to provide for the return of employer contributions under that section only if: (1) the return of the contribution is conditioned on initial qualification of the plan; (2) the plan received an adverse determination with respect to its initial qualification; and (3) the application for determination is made within the time prescribed by law for filing the employer's return for the taxable year in which such plan was adopted, or such later date as the Secretary of the Treasury may prescribe. Section 9343 also provided that, except to the extent provided by the Code or the Secretary of the Treasury, Titles I and IV of ERISA are not applicable to interpreting the Code. Both amendments were effective on the date of enactment of OBRA 87, December 22, 1987. Section 1.401(b)-1 of the Income Tax Regulations provides a remedial amendment period for disqualifying provisions. Any such section 401(b) remedial amendment period is a later date as the Secretary may prescribe for filing the application for determination. HOLDING Pursuant to this revenue ruling, language providing for a return of contributions in the circumstances specified in section 403©(2)(A), (B) and © of ERISA, as amended by OBRA 87, may be included in a plan intended to qualify under the Internal Revenue Code. Thus, plans that are amended to include such language will not fail to satisfy section 401(a)(2) of the Code solely as the result of such an amendment. For example, a plan provision permitting the reversion of the entire assets of the plan on the failure of the plan to qualify initially under the Internal Revenue Code will be allowed only under the circumstances described in section 403©(2)(B) of ERISA. The determination of whether a reversion due to a mistake of fact or the disallowance of a deduction with respect to a contribution that was conditioned on its deductibility is made under circumstances specified in section 403©(2)(A) and © of ERISA, and therefore will not adversely affect the qualification of an existing plan, will continue to be made on a case by case basis. In general, such reversions will be permissible only if the surrounding facts and circumstances indicate that the contribution of the amount that subsequently reverts to the employer is attributable to a good faith mistake of fact, or in the case of the disallowance of the deduction, a good faith mistake in determining the deductibility of the contribution. A reversion under such circumstances will not be treated as a forfeiture in violation of section 411(a) of the Code, even if the resulting adjustment is made to the account of a participant that is partly or entirely nonforfeitable. The maximum amount that may be returned to the employer in the case of a mistake of fact or the disallowance of a deduction is the excess of (1) the amount contributed, over, as relevant, (2)(A) the amount that would have been contributed had no mistake of fact occurred, or (B) the amount that would have been contributed had the contribution been limited to the amount that is deductible after any disallowance by the Service. Earnings attributable to the excess contribution may not be returned to the employer, but losses attributable thereto must reduce the amount to be so returned. Furthermore, if the withdrawal of the amount attributable to the mistaken or nondeductible contribution would cause the balance of the individual account of any participant to be reduced to less than the balance which would have been in the account had the mistaken or nondeductible amount not been contributed, then the amount to be returned to the employer must be limited so as to avoid such reduction. In the case of a reversion due to initial disqualification of a plan, the entire assets of the plan attributable to employer contributions may be returned to the employer. EFFECTIVE DATE Plans have until the end of the section 401(b) remedial amendment period to be amended retroactively to conform with OBRA 87. Operation of a plan in a manner inconsistent with section 403©(2)(B) of ERISA, as amended by section 9343 of OBRA 87, on or after December 22, 1987, the effective date of section 9343, will cause the plan to fail to satisfy section 401(a) of the Code. EFFECT ON OTHER REVENUE RULINGS Rev. Rul. 60-276 is obsoleted. Rev. Rul. 77-200 is superseded for reversions of employer contributions occurring on or after the date of enactment of section 9343 of OBRA 87. DRAFTING INFORMATION The principal author of this revenue ruling is Jane Kesten of the Employee Plans Technical and Actuarial Division. For further information concerning this revenue ruling, please contact the Employee Plans Technical and Actuarial Division's taxpayer assistance telephone service between the hours of 1:30 p.m. and 4:00 p.m., Eastern Time, Monday through Thursday on (202) 566-6783/6784 (not a toll-free number). Ms. Kesten's telephone number is (202) 343-0729 (also not a toll-free number).

I was admiring the beauty of Kaye when Edith came into view And I found to my dismay That you can't have your Kaye and Edith too.