Lori Friedman

A sole proprietor is the only participant in a qualified plan. The individual dies, so there's no longer a plan sponsor or administrator. Who can sign the Form 5500-EZ? NOTE: This isn't an orphan plan; there's a successor trustee. But, the trustee doesn't sign and file Form 5500/Form 5500-EZ.

Andy, Are you asking about shortstops during your own lifetime, or in the team's entire history? If the latter, how could you possibly forget about Johnny Pesky? Your citizenship in Red Sox Nation is hereby suspended until further notice. You'll probably remember Spike Owen from the 1986 team? As for whether Edgar Rentaria is the worst of all time, all I can say is: 29 errors through Monday night's game.

Andy, No, I found this information inside the scoreboard, where Manny hangs out during pitching changes. Actually, I received a phone call from a DOL employee who happens to be a former colleague.

In prison for LIFE?!?!? That must be quite a story.

When you say "association", are you referring to an I.R.C. Sec. 501©(6) exempt organization?

I'm confused by the wording of your question. Are you asking about long-term care premiums paid entirely from an employer's assets, and whether the premium costs are tax-deductible for the employer?

For a really scary lesson about the qualified plan consequences of employee misclassification, read Donald J. Kenney v. Commissioner, TC Memo 1995-431. The IRS reclassified independent contractors as employees, so the qualified plan failed to meet the coverage and participation requirements. The plan was retroactively disqualified. The owner's entire vested benefit of $696,000 had to be included in his current year's taxable income.

Moderator: This message concerns a proprietary business product. Would you please move it to the Commercial Employee Benefits Messages forum? Thank you.

You've posted your question to the 401(k) Plans forum, so I'll assume that you're asking about a qualified plan when you say "business retirement plan". Independent contractors aren't eligible for qualified plan participation. Under the exclusive benefit rule of I.R.C. Sec. 401(a)(2), a qualified plan must benefit employees and their beneficiaries exclusively. So, the issue isn't whether this employer must cover the Form 1099 workers; the issue is that these individuals can't be covered. But, you can provide a great service to your client by considering QDROphile's comments. The employee-independent contractor classification isn't arbitrary, and it's among the most sensitive topics before the IRS and DOL. If your client is misclassifying some or all of the workers (and this is very likely, given that 100% of the staff gets Form 1099), your client could be sitting on top of a huge mountain of pain. All you have to do is read some of the court cases to see the consequences of worker misclassification.

Ditto on TValue. The program is extremely user-friendly.

Some states provide for decrees of separate maintenance (legal separations). Under Reg. Sec. 1.125-4©(2)(i), a legal separation is a qualifying change-in-status event for an election change. You might want to ask your client: (1) if the applicable state law allows for a legal separation, and (2) if yes, if the individual will have a decree of separate maintenace before his/her divorce becomes final.

Did anybody watch last night's Cal Ripken celebration? Ten years ago, I had the pleasure of being at game 2,131 -- what an experience. Want to talk about a player's value? There was a guy who earned a relatively modest salary, yet he excelled for 21 years, was universally admired and respected, and continues to give back to his community. Oh, yeah...he also had this amazing work ethic...

Yikes...$2,000+ is very expensive. Wasn't there an ownership change at Panel Publishers? Is this the reason for the big price hike?

Oh pax, why don't you go watch a Braves game or something? (Actually, you probably will be watching tonight's game -- P.Martinez v. J.Smoltz -- sweet!)

LMalone, I can't think of any reason why this trust can't sponsor a profit sharing plan. A trust is a form of legal entity and can certainly be an employer. For example, it's not unusual for a public charity or private foundation to exist as a trust, have employees, and sponsor a qualified plan for the benefit of its staff. As another example, qualified plan trusts are exempt organizations within the meaning of I.R.C. Sec. 501(a), and the larger trusts -- those with employees -- usually sponsor retirement plans for their own staff members. You say that your client is a trust that employs people. I say "yes" on the profit sharing plan. Kirk M., do you want to add anything to this discussion?

"Profit sharing" has nothing to do with a sponsor's business profits. A taxable employer can have a net loss for the year yet still make a contribution to a profit sharing plan. Also, nonprofit organizations frequently sponsor profit sharing plans. Under I.R.C. Sec. 401(a)(27), profit sharing plans exist without regard to the employer's current or accumulated profits or whether the employer is tax-exempt. I believe that the term "profit sharing" predates both Sec. 401(a) and ERISA, and that its technical meaning has evolved into something significantly different from its original use.

WDIK, to complete your completion... That's true for deductible contributions. An individual can make contributions to a Traditional IRA -- deductible, nondeductible, or a combination -- up to the lesser of the maximum ($4,000 + $500 catchup in 2005) or 100% of earned income, regardless of his/her annual income. No Roth IRA contributions can be made, whatsoever, if the taxpayer exceeds an annual income ceiling.

For what it's worth... I have a very bad opinion of CCH products. I've never had satisfactory results from any CCH tax research materials -- neither the paper nor electronic versions. My firm doesn't have CCH subscriptions. Instead, we use RIA Checkpoint (for basic information, with excellent hotlinks to every cite and authority) and BNA Portfolios (for detailed discussions, when more advanced information and analysis are needed).

It seems as if the employer is being very considerate of its employees. Most plan sponsosrs want to hang onto their assets for as long as possible, making contributions on or near the deadline. This employer, however, prefers to transfer money to the trust much earlier than required, probably so that the plan participants can earn more on their account balances. I wish more employers would have similar appreciation of their personnel.

Some other considerations for choosing between Traditional v. Roth IRA: Income limitations - Roth eligibility is subject to annual income limits ($160,000 for married filing jointly; $110,000 for single or head of household). If your income exceeds the annual limit, you can't make any Roth IRA contributions. There's no similar rule for Traditional IRAs. Deductibility - Contributions to a Roth IRA are never tax-deductible. Depending on your filing status, income, and whether you participate in an employer-sponsored retirement plan, a Traditional IRA contribution may or may not be tax-deductible. If you're entitled to an immediate income tax break from a deductible IRA contribution, is it advantageous for you to take the deduction? The answer depends on your own circumstances and planning needs. Age limitations - You can't make a Traditional IRA contribution after age 70-1/2. For a Roth IRA, there's no age ceiling. Required minimum distributions - You must begin to take RMDs from a Traditional IRA after age 70-1/2. Even if you don't need the money, you're required to add taxable amounts to your income and gradually reduce your account balance. Roth IRAs aren't subject to the RMD rules. Tax treatment of distributions - Roth IRA earnings accumulate on a tax-free basis. In general, your investment earnings are distributed without taxation. Traditional IRA earnings are tax-deferred and subject to taxation upon distribution.

Kirk, Until now, I'd had no idea that you're the author of Portfolio 362. Very impressive! You provide a very concise and scholarly discussion of some extremely esoteric law.

The rule of thumb for qualified plans (i.e. plans governed by I.R.C. Sec. 401(a): pre-tax elective deferral contributions must be made through a 401(k) provision. A profit sharing plan or ESOP with a 401(k) provision, or a SIMPLE 401(k) plan, can receive pre-tax employee money. Other qualified plans can certainly receive employee contributions, but only on an after-tax basis.

If the 403(b) plan is a valid non-ERISA plan, you don't coordinate its Sec. 415 limit with that of the qualified plan. In effect, each employee gets to double up on his/her annual additions limit.

An I.R.C. Sec. 501©(3) organization can certainly offer both 403(b) and 401(k) plans simultaneously. This arrangement offers minimal advantages, however, in return for numerous administrative headaches and troubles. The Sec. 402(g) salary reductions and elective deferrals must be coordinated. An employee can't reduce his salary by more than 1X the annual 402(g) limit, regardless of the number plans in force. It's very common (and often extremely advisable) for an employer to pair a 403(b) arrangement with some sort of qualified plan. But, go for something simpler, such as a money purchase pension plan. Why take on the extra compliance burdens of a 401(k) plan without reaping additional advantages?

A charity can be named as the beneficiary of a qualified plan, but it can't be a designated beneficiary. If only part of the benefits are to be paid to a charity, a separate account or separate share should be established at the beneficiary determination date. The life expectancy of the designated beneficiary can be used to determine the RMD. Without a separate account or separate share of the charity's portion of the benefit, however, only the participant's life expectancy can be used.