Bird

I agree with the IRS' logic in Bill's post. The other thing is that yes, you could take a distribution from rollover money (or seasoned money) and I think that might allow for a purchase not otherwise subject to the incidental benefit rules, but shouldn't it be taxed as s distribution in that event?

I (still) disagree. Especially since we have a few examples of plans that do specifically address this, and say the bene's estate becomes the bene in the event of the bene's death after the participant's death but before payout. The beneficiary became the de facto "owner" of the account at the participant's death, not a contingent owner but the owner, with rights to transfer it (by beneficiary designation), and if those rights aren't exercised, then it passes to the estate like any other asset. At least that's my logic.

I'm looking at documents from two different providers; both say the beneficiary's estate is the beneficiary if the beneficiary dies after the participant but before the payout starts (one expressly permits the Beneficiary to designate a beneficiary). I'd look more closely at the document - this may be under "Death Benefits" and not "Beneficiary." If there's nothing definitive, I'd probably go with the beneficiary's estate. _____________ Just saw your reply as I was typing this... I disagree. It's not that there was no beneficiary, it's that the bene died before payout.

It doesn't look to me like line 21 is an appropriate place; that's not close to any of the examples given. I don't know why he wouldn't just add it to the Schedule C, but if he insisted on putting it on line 21, I think I would include it, with a caveat that it's not perfectly clean. If the winery business itself is incorporated now, then you should make sure that both the corporation and the sole proprietor are adopting employers if you're going to count this comp.

I'd generally think that income subject to self-employment tax is fair game for plan purposes, but is it related to the business sponsoring the plan, or is it something else entirely? Where is the income reported, if not on Schedule C? I'm thinking, or wondering, if at the very least some other entity has to adopt the plan. I would be disinclined to count it unless I knew more about it.

I read something yesterday, I think in the WSJ, about certain illiquid funds (e.g. real estate funds) that weren't allowing redemptions and it was being made to seem like a 401(k) problem when really it was a fund liquidity problem. Yawn.

If no formal action was taken to terminate as of 12/31/08 before that date, I would just terminate it "now" (any time before you submit to IRS). I don't think there's any downside to it - well, maybe there's an amendment required for '09 that wouldn't be for '08; off the top of my head I can't think of one but that shouldn't be a big issue anyway - and I don't think you can take written action to terminate retroactively.

Obsessing a bit... This is the thread I was thinking about; it's not conclusive but at least I am consistent. The participant took the loan. He didn't pay it all back before he died. It just doesn't make sense that anyone other than the participant or his estate should get the taxable event.

W-2 only. Whether the "independent contractor" arrangement was accurate or not is another question. Also, if the plan has an eligibility waiting period, then that should start on the date of hire.

I think the problem all of us are having with this thread is this concept. What makes this loan different from every other participant loan, that it doesn't simply become a taxable event at death? The fact that the estate is not the plan beneficiary is not relevant, IMO.

I agree (with Belgerath). I don't think a participant loan can be transferred to another party - estate, beneficiary, whatever. It should be extinguished at death. The loan documents will generally make this clear, but if not, that's still how I'd handle it. I remember a discussion about that here "not too long ago" but that could be anywhere from 3 months so 3 years ago. Sorry if that's not all that helpful.

Is this a general question or was there a retirement plan/IRA angle to it? (Retirement plan and IRA assets will transfer by a beneficiary designation, and can't be held jointly, so I don't think it relates to retirement plans.) Property held under a joint tenancy with right of survivorship will pass to the surviving spouse by virtue of that titling. Unless you have some other specific goal, and understand why holding assets in a trust is better in your particular situation, I wouldn't bother.

Doesn't the loan simply become a taxable distribution to the estate at death?

As far as I know, yes; we've done it a few times, but before EFast. Unless the plan is going to stay around for a while, you have to wonder if the time spent even thinking about it is worth the couple of minutes saved by filing an EZ (and the potential extra time if you have to explain it later).

I've heard of this (key man life insurance)...as a matter of fact, my GUST documents expressly permit it: "The Trustee, with the consent of the Administrator, may purchase insurance Policies on the life of any Participant whose employment is deemed to be key to the Employer's financial success. Such key man Policies will be deemed to be an investment of the Trust Fund and will be payable to the Trust Fund as the beneficiary thereof." The insurable interest to the plan is that, without the key participant's existence, the plan's ability to continue and provide additional contributions and/or benefits is compromised. PS-58 costs would not apply, IMO. I'm not really sure about this in the context of a government plan.

From a plan design standpoint, it's going to be difficult to create a definitely determinable formula to do what you want with an integrated formula. As mming notes, you might as well go with a group-type formula and have each participant in his or her own group and general test.

I tried and gave up; don't think the form is there. (But congratulations!)

Well, the problem isn't that the loan goes beyond 5 years; that isn't even a problem in my book - if the payment are within the cure period. But the problem is that the loan should have defaulted when the payments were missed and not made within the cure period, probably as of 9/30/04. I don't see a direct fix for this in EPCRS. Maybe I'm just missing something.

Interesting. I'd think it would take a lot of words to 'splain that allocation in a definitely determinable way. Does it have an approval letter? Anyway, I'm inclined to agree with you; one 410(b) test for the match, and BRF on the extra.

I'd be curious to see the document language that has different allocation requirements for the payroll match and the true up. I'd worry about whether that's being done right first.

As rcline46 notes, there's nothing wrong with an -11g amendment. And the plan sponsor is under no obligation to make the plan pass testing under the "original" contribution amounts, otherwise, at least in a plan with groups, there would never be a need for such an amendment. The drawbacks are document limitations, and current year deductibility vs prior year.

1.402(f) doesn't contain the timing rules for the notice, so I guess that reference is superfluous, but I don't think it's really a problem. FWIW

That might be true...I honestly don't know. But getting a step further off point, banks definitely won't accept a check from another institution for a tax deposit, because the funds have to clear that day. So you have to deposit the check from the investment company to the sponsor's account, wait a couple of days, then make the tax deposit. Yes, it's ok to run withholding through the sponsor's account.

It's a faulty plan design. I think what you want is to amend to a 2 step integration: Allocation 1 - 3% safe harbor Allocation 2 - integrated PS Step 1 - integrated by using comp + excess comp Step 2 - pro rata

No, there's no penalty because there's no electronic deposit requirement for the plan. The p/r company would have to set up a separate customer (the plan) with a separate ID number, etc. etc.