Randy Watson

Is there any way that the personal payment of legal fees accrued in connection with preserving the favorable tax status of an IRA would be a prohibited transaction? Must those amounts be paid from the IRA?

What exactly is meant by an "association of churches"? Can you have the employees of a number of different parishes participate in the same qualified plan without creating some sort of multiple employer plan? As you can probably tell, I don't deal with church plans...at all. Please help!

There is no formal process. If you meet the definition in PTE 84-14 you will be treated as a QPAM.

Is there some sort of registration or licensing processes to become a "QPAM" or do you simply qualify as such if you meet the criteria?

What factor(s) would make it a PT rather than a constructive distribution of that asset alone?

Property held in the IRA was transferred to the name of the individual's business. It was held in the name of the business for about a year, and when it was "discovered" that this was not permissible it was transferred back to the name of the IRA. I really don't want to give more detail than that.

Yes, it's an IRA.

By the way, does this mean that these assets are fully taxable to the invididual?

Good point. The only correction is that the assets need to be placed back in the name of the trustee. Long story. Thanks again.

No statutory or class exemption available. The transaction already took place. It's a fairly minor transaction, so it would be much easier and more cost efficient to make the necessary corrections and pay whatever tax is necessary. Thanks.

Is there any justification for participating in a prohibited transaction when it is necessary to protect a plan asset? I know this is an overly broad question, but I'd rather not get into the details if I don't have to. Thanks.

Why is it that the industry categories in Rev. Proc. 91-64 are so limited? Is there any "wiggle room" if a business doesn't fit squarely within one of those categories? What if it doesn't fit within a category at all....is this safe harbor out the window?

Did the IRS address this? It seems like they should have at least acnknowledged that the rules would apply to these assets in light of the many MPP to PS mergers that took place after EGTRRA.

I've read about a "product" that would allow an individual to use 401(k) assets to establish and operate a business. I won't give any free advertising to the company. Bascially, an individual sets up a corporation and the corporation adopts a 401(k) plan. The sole participant then rolls his account from a prior employer into the plan and would direct that the assets be invested in a new entity (solely owned by the 401(k)). Anyone heard of this? I can't imagine that it's legit.

I'm not sure what to believe now. Under the "Nonqualified plans" heading on the first page of 1099-R it states that you should "report distributions to beneficiaries of deceased plan participants on Form 1099-R." Form 1099-MISC states that "death benefits from qualified and nonqualified deferred compensation plans paid to the estate or beneficiary of a deceased employee are not reportable on Form 1099-MISC but are reportable on Form 1099-R."

If a money purchase plan was merged into a profit sharing plan, do the money purchase assets have to comply with the "new normal retirement age" rules?

I've read that a distribution from a nonqualified plan that is paid to a beneficiary in the year following the participant's death is not subject to income tax withholding. FICA and FUTA were already incurred. Can anyone confirm this? The participant has not been an employee for several years, so 1099-R will be used. Please help.

Would the insolvency of a related entity (assume controlled group) be treated as the insolvency of the plan sponsor? The truly insolvent entity does not contribute or have employees in the NQDC plan.

I can't believe I missed that. Thanks. Since this section of the regs permits a cancellation (as opposed to a suspension), the service provider would be without deferrals under the NQDC for the remainder of that year, and possibly part of the following year. In the event the 6 month period spans two years, I don't see anything wrong with the service provider making an election prior to the next year to start deferrals at the end of the 6 month period. Do you? For example, assume the service provider takes a hardship under the 401(k) on September 30, 2009. The 6 month suspension would end April 1, 2010. Is there anything preventing the service provider from electing deferrals under the NQDC to commence on April 1, 2010 as long as that eleciton is made in 2009?

The safe harbor standards require that the recipient of a hardship distribution be prohibited from making deferrals to the plan and all other plans for 6 months. "All other plans" includes the employer's nonqualified deferred compensation plans. It is my understanding that 409A prohibits the suspension of deferrals once an election is made. Does this mean that employers with NQDC plans subject to 409A can't use the hardship safe harbors for their 401(k)?

Are you required to withhold taxes prior to escheating amounts to a state's unclaimed property fund? If so, what if you don't have a valid SSN?

It's over the plan's cash out limit. So it looks like we have to hold the benefit indefinitely. But even on termination, how do we deal with not having a valid SSN? Does the PBGC missing participant program require SSNs? If not, any idea whether the PBGC's missing participant program for defined contribution plans will require it? Are the relevant agencies even addressing benefits of illegals?

We have a missing participant and an invalid social security number. The participant was apparently in the country illegally. Although "illegal", he was entitled to participate and accrue a benefit. I don't see any alternative other than to treat the participant as a missing participant. That doesn't do much good when you don't have a valid SSN. So do we just maintain the account indefinitely? How would we ever be able to make a distribution without a SSN? I believe all of the distribution options available to a DC plan on termination would require a SSN (e.g., rollover IRA, state unclaimed property etc...). What do we do?

As we know, compensation in excess of $1.0M for certain individuals is generally not deductible by a public corporation. One exception to this rule is performance based compensation. In order to maintain the exception, the company has to have preset performance goals that are objectively determinable. However, it is very common for plans to allow a compensation committee to adjust the preset performance goals when the corporation experiences an extraordinary event (e.g., the unexpected sale of a division when the productivity of that division was part of the compensation formula). I don't see anything in the Regulations that would specifically permit adjustments to performance goals after they've been set. Does anyone know if there is any specific authority that allows this kind of adjustment? Thanks.

B2, This is from the preamble of the final regs: "For periods following July 26, 2007, and before the applicable date, taxpayers can rely on these regulations, except that (1) such reliance must be on a consistent and reasonable basis and (2) the special rule at §1.403(b)-10(a) of these regulations permitting accumulated benefits to be distributed on plan termination can be relied upon only if all of the contracts issued under the plan at that time satisfy all of the applicable requirements of these regulations (other than the requirement at §1.403(b)-3(b)(3)(i) of these regulations that there be a written plan)."