masteff

Try this thread: http://benefitslink.com/boards/index.php?showtopic=41146

This probably should be referred to your ERISA atty. If you don't have one, then based on this issue, I'm going to suggest you need one. Which is to say, I may have an opinion but I'm not touching it w/ a 10 foot pole.

So how does the plan arrange to build a plan asset on his property w/out entering into some form of agreement w/ him? And do so in a proper arms length manner w/out it being a PT?

Tell the participant to call the lender and request a letter. Lenders are more than happy to send them if it means they'll get paid. But double check the statement... don't just look for "foreclosure notice" in huge letters, look for "if you fail to bring this current, proceedings will begin against you". I've posted before that my opinion it's sufficient for there to be a threat of imminent foreclosure for it to be preventable.

The preamble of the reg references "repayment terms that are commercially reasonable". I would state the banking industry standard practice as: a certain repayment period commencing reasonably promptly after the date of disbursement. For a plan loan, I wouldn't let the delay between the disbursement of the loan and the commencement of payment be more than 30-45 days, preferably within one to two pay periods. Keep in the mind that the allowable cure period is based on a calendar year quarter... exact days get rounded out when you have a calendar quarter of leeway. So, assuming you don't have an unreasonable delay, I would look at the amortization schedule. If you have monthly payments, then your amort sched should have no more than 5*12=60 payments; semi-monthly, 5*24=120 payments, etc. (And yes, this practice has been thru successful IRS and DOL plan audits.)

The CPA is probably confusing the rules for 1099-MISC.

As I said to participants more than once: "Congress and the IRS have much narrower definition of what a hardship is than you or I do".

You were told by whom? What authority or relation does the person giving this legal advice have to the plan? (ie, was it someone who has the capacity to give a legal opinion on which you might reasonably rely?) If necessary, I'd put it back to them to provide a citation or source "so you'll have it for your files".

Similar goes for any of the three IRA-only exceptions to the 10% penalty listed in the Form 5329 instructions. "07 IRA distributions made to unemployed individuals for health insurance premiums. 08 IRA distributions made for higher education expenses. 09 IRA distributions made for purchase of a first home, up to $10,000." For my, it's the old thing about the difference between providing information and advice. I have had the conversation in which I stated: If you take the money from your 401(k), you have to pay the penalty. If the money were in an IRA, it might not be subject to the penalty; you should read this IRS document (5329 instructions). Money taken from both your 401(k) and from an IRA are subject to normal income tax. You have $xxx which could be rolled over at this time to an IRA.

That is what I get for not going back to the 1065 instructions. I yield.

Sorry, didn't stop to think about the nuance. I'd go one of two ways on employee contributions... 1) Ignore them because you're reporting gross pay on the appropriate line for compensation. Putting it somewhere else would result in duplication. or 2) Because it's technically deferred compensation, even though it's a deduction, the contribution is really being made by the employer to the plan (albeit for the benefit of the employee) so it goes on line 18 (and pay net of deductions goes on the line for compensation).

He he... I know some math majors (including my aunt, the retire high school algebra teacher) that I'm going to have to dump this one on.

Form 1065, line 18.

Loan offset can occur when the participant has a distributable event. Death is generally speaking a distributable event. Practically speaking, I am not aware of any plan that distributes loans to beneficiaries. Even if you can have the loan survive the death, why would you want to? It's a burden that should not be placed upon a beneficiary. And the classic answer also applies: what does the plan say?

What is the employer's intention once the stock/gold/etc is inside the plan? Will it be held as an investment fund? Will it go into employee directed brokerage accounts? Will it be immediately liquidated and treated as cash? If it's not immediately liquidated, then you have the same fiduciary responsibilities as with any other plan investment option. And why does the employer not want to liquidate the investment into cash before putting it into the plan? Is it to avoid transaction fees? Is it an appropriate fiduciary action to shift the burden of those transaction fees from the employer to the plan participants? If the stock is illiquid, what makes it even remotely appropriate as a plan investment?

Yes, they can do a direct rollover but double check your plan. Refer to IRS Notice 2007-7.

I suspect it made the list because of IRC Section 104,"Compensation for Injuries or Sickness". Refer to page 7 here: http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf for a list of code sections that the IRS apparently considers being related to "fringe benefits". My opinion is if the sick pay was earned/accrued in a manner that relates to service performed for the employer (x days off per year, y hours per month, etc), then treat it like normal wages. This is consistent w/ holiday and vacation which are aguably earned/accrued in a manner that relates to service performed. I'd think that if the sick pay were paid from an insurance policy such as PPro mentioned, then it would be a fringe. (And arguably, that could be the point, that what we sometimes call a short-term disability policy would be a fringe and not earned wages.)

There has been some action to get DOMA overturned. I think one or two district courts so far have done so. However even if you were in those districts, I would not even remotely begin to bypass DOMA. Especially on something complicated like the family attribution rules. http://www.csmonitor.com/USA/Justice/2012/...n-Supreme-Court

I agree that I agree with Austin!

Historical W-2 reporting will be entirely unhelpful; part of what we consider standard reporting didn't arise until the tax reforms of the early 80's. If you have contributions dating back to 1973... here's the 1973 W-2: http://www.irs.gov/pub/irs-prior/fw2--1973.pdf Nothing on there would help you. You have zero legal standing to make an estimate of the basis. You will place yourself in a world of hurt if you go down that road. If the employer cannot provide the numbers from their own records then the burden is on the individual taxpayer.

Actually, the OP's first sentence says the part hit the max on 6/30 at which point in time the part had $25K comp for which the 3*1+2*1/2 match in theory would be $1K. But the same statements made above about a full year could be applied to the half year. Basically, unless the plan has a true up then you never 2nd guess the pay period match unless an individual pay period is in fact wrong. You can't assume on 6/30 that the $16,500 was deferred evenly. You have to recreate each pay period before you can say the participant didn't get the right match. The participant may have changed their deferral on any number of occassions. One single pay period with less than 5% deferral will result in less than maximum match.

No. The reg says "( 2 ) Costs directly related to the purchase of a principal residence for the employee (excluding mortgage payments)" That "(excluding mortgage payments)" is what explicity disallows this for me; you cannot take a hardship to pay down an existing mortgage. And frankly, why can't the participant make the purchase of the new house contingent on the sale of the old house? This is how many people do it.

Both items (disregarding rollovers for determination of cashout and automatic rollovers) resulted from EGTRRA. http://www.irs.gov/pub/irs-utl/egtrra_law.pdf Section 648 of EGTRRA adds paragraph D to Code Section 411(a)(11). Paragraph D says in part "the present value of the nonforfeitable accrued benefit is determined without regard to that portion of such benefit which is attributable to rollover contributions (and earnings allocable thereto)". Section 657 of EGTRRA inserts a new paragraph B into Code Section 401(a)(31) to address automatic rollovers. This paragraph does crossreference Section 411(a)(11) but only in reference to how the plan determines present value w/ respect to the $5,000 cashout limit. The way that I read the Code changes as well as Q&A-14 of Notice 2005-05, my conclusion is you exclude the rollover for determining the top end (ie the $5,000), but nothing suggests that you use it for the bottom end (ie the $1,000). This is because the top end comes from a different Code section than the bottom end. That, and it's kinda hard to argue w/ the newsletter that Belgarath linked.

It may have been a typo but "plan year", not "plan". First bullet point on page one here: http://www.irs.gov/pub/irs-drop/n-12-40.pdf

Don't crisscross "prevent eviction or foreclosure" with the other hardship reasons. I take the position that, to "prevent" eviction or foreclosure, the debt must still be owed. The other hardship reasons do not have such wording to suggest the same immediacy of the debt. (And a debt often doesn't even exist yet on education since we're looking forward 12 months.) As K2retire says, in discussions about medical expense hardships, this board has reached consensuses about paying medical bills that were paid prior to the application (emergency dental work being a common scenario for payment required prior to service). The consensus has never been "it's been paid so it's no longer a medical hardship". PensionPro has suggested the debt is too old to pay, but we're talking about a 6 week old statement which we have evidence was paid a mere week ago; we're not talking about bills that are "5 or 10 years old". The "how old is too old" question has already been hashed out in the medical hardship threads. The participant experienced a financial burden when they accepted the debt to the funeral home. That burden is the exact same and continues to exist despite the funeral home having been paid. The participant still has a decrease in net worth which has caused a hardship burden for which they have applied to the plan for relief.