Lame Duck

Although there is some disagreement about this conclusion, and it doesn't seem to make much sense, the instructions to Form 5500-EZ state that you may file form 5500-EZ if the plan covers only you (or you and your spouse) and you own the entire business, whether incorporated or unincorporated, or the plan covers only one or more partners (and spouses) in a business partnership. A literal reading of the instructions would appear to preclude the use of 5500-EZ in any case involving a corporation with owners other than spouses.

My understanding of the attribution rules would attribute the wife's ownership to the husband so that he is, effectively, a 100% owner of both entities, making it a controlled group. You might want to review the rules under Regulation Section 1.414©-4(b)(5)

See IRC Section 414(v)(3)

FundeK, I just reread your question and see tha I missed an important point. You specified $150,000 each and I missed that point. The requirement is for a total combined income of $150,000 or less. Sorry for the mistake.

Thanks, but are you going to remind me to "fall back", too?

It's my understanding that Golden Gate University also offers an LLM in tax with specialization in employee benefits. I didn't get my LLM but know some who did. One individual in particular was working for a law firm at the time he returned to get his LLM (not in employee benefits). The firm paid for his education and continued his salary all the time he was in school. In return, he committed to working for the firm for two years for every year he was in school. He regretted the decision. His comment to me was that he could have earned a whole lot more by paying for the education himself and making himself available in the open market after graduation.

Code Section 1402(a) defines net earnings from self-employment as "the gross income derived by an individual from any trade of business carried on by such individual, less the deductions allowed by this subtitle which are attributable to such trade or business, plus his distributive share (whether or not distributed) of income or loss described in Section 702(a)(8) from any trade or business carried on by a partnership of which he is a member ...." This income is reported on a partner's K-1. What you are thinking about are distributions from a Sub-S corporation also reported on a K-1 which represent dividends rather than compensation eligible for plan benefits.

413(b) relates to multiemployer plans. 413© relates to multiple employer plans. 413(a) provides that subsection (b) applies to "a plan maintained pursuant to an agreement which the Secretary of Labor finds to be a collectively bargained agreement between employee representatives and one or more employers." I think the main question is whether the plan is maintained pursuant to collective bargaining agreements rather than whether members of a collective bargaining unit are covered by the plan.

You're right. I was answering in terms of deductibility, since I can't conceive of a reason where a person would ever make a non-deductible contribution to a traditional IRA where a Roth IRA alternative is available.

Yes. Only the requirements for earned income and the income limitations ($150,000) are factors in determining eligibility for as Roth IRA. Participation in a 401(k) plan will not preclude funding a Roth IRA. You are also correct in the fact that your participation in 401(k) plans will preclude a traditional IRA contrbiution since your AGI is above the threshhold.

Another question that may impact your decision to make a Roth IRA or traditional IRA contribution. Did you have a taxable windfall this year that moved you into a tax bracket higher than your normal one. If you will be in a lower tax bracket next year you might want to consider making the traditional IRA contribution and then converting it to a Roth IRA next year, when your taxes will be lower. however, in order to convert a traditional IRA to a Roth IRA, your adjusted gross income must not exceed $100,000 and you must file a joint tax return with your spouse. In addition, you may also be able to make an IRA contribution on behalf of your spouse, which can increase the total amount of IRA contributions to $6,000. This can be divided in any manner you see fit, so long as the amount contributed on behalf of you or your spouse does not exceed a total of $3,000 in total. For example, you could contribute $2,000 to a traditional IRA and an additional $1,000 into a Roth IRA.

Yes. The contributory as well as spousal IRA rules apply to Roth IRAs as well as traditional IRAs.

IRC Section 413©(4)(A) provides that for a plan established after December 31, 1988, "each employer shall be treated as maintaining a separate plan for purposes of Section 412 unless such plan uses a method for determining required contributions which provides that any employer contributes not less than the amount which would be required if such employer maintained a separate plan."

The decree of divorce is a matter of public record and a copy can be acquired from the Clerk of the Court in the county where the divorce took place.

IMHO, you need to consider the extent of the amendments, rather than the number of amendments, especially if you're using an individually designed plan. The document can become unwieldy if there are a number of amendments attached to the plan, making it more difficult to adminster. If you're using a protoype document, it's probably easier to restate the plan than it is to amend it. The fewer things you have to look at, the less chance of an operational error.

Code Section 401(a)(9)(B)(iii)(III) provides an exception to the 5-year rule for distributions that begin "not later than 1 year after the date of the employee's death or such later date as the Secretary may by regulations prescribe." (December 31st of the year following the year of death.) Code Section 401(a)(9)(B)((iv)(I) provides an exception to the one year rule for a surviving spouse - "the date on which the distributions are required to begin under clause (iii)(III) shall not be earlier than the date on which the employee would have attained age 70 1/2" Therefore it is not considered as violating the 5-year rule since it is governed under the exception to the 5-year rule.

dubya, From the information you provided, it appears to me to be a brother/sister arrangement, rather than parent/subsidiary, in that individuals own both A and B rather than A owning B. That notwithstanding, your analysis still appears to be correct, since father and son do no own at least 80% of B, provided that the ownership of some or all of the additional 12 owners does not need to be attributed to either father or son. I understand your "woe". I probably do at least a hundred controlled group analyses a year and I still find it to be one of the most confusing and complex aspects of retirement plan law.

IRC Section 408A(d)(3) specifically provides that Section 72(t) does not apply to any rollover from an IRA other than a Roth IRA. 408A(d)(3)© provides "The conversion of an individual retirement plan (other than a Roth IRA) shall be treated for purposes of this paragraph as a distributio to which this paragraph applies."

We use a Corbel non-standardized prototype adoption agreement and it has a specific provision permitting that the normal age and service requirements shall be waived for eligible employees as of a specific date and that they will enter on that date.

I think I would go back to the financial advisor working with the plan or the life insurance professional who sold the policies in the first place. Transfers of life insurance policies should be old hat for them and it's better than having the plan trustee make an error.

Copy A of the 5498 is forwarded to the Internal Revenue Service Center with Form 1096.

It's been quite a while since I worked with union plans, so my information may be outdated. Maybe someone else has more current knowledge. Have you looked at your collective bargaining agreement? Under the NLRB (I believe), benefits are a mandatory topic of discussion in collective bargaining agreements. It's possible that the CBA specifies both the compensation to be used in the plan and the percentage that can be deferred. In that case, the plan could not be amended unilaterally by your employer, even to improve benefits, as it would be a violation of the CBA. If that is the case, permission of the union would be required before the plan can be amended. It is also possible that your CBA says something to the effect that benefits will be the same as specified in the CBA of the main bargaining unit and you will need to check that agreement for benefit provisions, as well.

Most usury laws provide certain exceptions to enforcement, such as credit cards charging 18+% interest or some automobile loans. However, if a loan is not specifically exempted, it would be subject to the laws. State laws are generally beyond the scope of these message boards. My suggestion is to consult with your attorney before making a loan in excess of the state 10% limit. I am assuming that there is adequate security for the loan, as any disinterested party would require and that the loan does not constitute a prohibited transaction.

"I'd like to say a word fer the farmer." From "Territory Folks Should Stick Together" - Oklahoma. In many instances, the only option available to a small plan sponsor with a start-up plan who desires a bundled product with a multi fund family investment menu is through an insurance company variable annuity platform. Most insurance companies add on a wrap fee of from 100 to 150 basis points to the underlying fees of the mutual funds. You may want to ask your employer why they went with an annuity contract rather than a single fund family. Also, the assets may be large enough now to investigate moving the plan from an annuity contract arrangement to a more traditional approach. The PSCA has a very good fee survey questionnaire to give to your provider. It is designed to ferret out all the hidden fees so you can see exactly what you're paying. The form can be downloaded from their website. Before you can make a decision that the use of a variable annuity is a good or a bad thing, you need to know the reasons behind its selection and are they still valid.