masteff

I work in oil and gas and once had an old plan dating back to 1952. In the pre-(k) era, DC plans such as this were often referred to as "savings and thrift plans". Many older companies still bear the term in their plan names, such as "ABC Company Thrift Plan" or "XYZ Corp Savings and Thrift Plan". 8 to 10 years ago, I know one of the MaBell successors still had at least one group of employees with a DC plan w/out a (k) feature (I reviewed an SPD for a coworker whose husband was in the plan). I'd bet if you look on the 5500 that the plan effective date is quite a few years back (or as someone said above, antiquated).

I had a similar reaction... double check your definition of retirement that termination is a prerequisite. Not a question so much of being in-service but of being retirement eligible. I can attest that some plans permit active employees to become retirement eligible and thus take the types of withdrawals available to retirees. And I also agree w/ simply fixing it via retroactive amendment under EPCRS if you can't find enough wiggle room in your plan doc.

If you were a corporation instead of a sole prop, you'd get to deduct the EMPLOYER portion of the FICA tax on your own pay. That (1-.0765) factor is to compensate for that. And it comes from Code Section 1402(a)(12). Actually 1402(a)(12) is just the (-.0765) part of it. The IRS, to simplify Schedule SE, did a minor shortcut to accomplish the deduction in one step rather than two steps. We could change Schedule SE to look more like the Code if we did this: Line 3: Line 1 + Line 2 Line 4a: Line 3 times .0765 (this is the 1402(a)(12) deduction) Line 4b: Line 3 minus Line 4a Line 5: SE Tax on Line 4b If we call Line 3 "X", it's the same to say either (X-.0765X) or X(1-.0765) So first we have Congress using a shortcut in 1402(a)(12) (in lieu of the actual 1/2 SE tax) and then the IRS using a shortcut to save a line (possibly because people were making a mess of the calc or carrying the wrong line to their 1040). EDIT: Going back to my first sentence in this post, the (-.0765) isn't about the SE tax, it's about arriving at an equitable calculation of the net income of the trade or business. It really is that a separate business entity (ie a corporation) would get a deduction on the ER portion of SE tax on the owner's pay. And the sole prop does get that deduction, it's just on the face of the 1040 rather than on the Schedule C. So to be equitable, in calculating the SE tax on income from a trade or business, they use the (1-.0765) to compensate for that.

Code Section 1402(a) is entitled "Net earnings from self-employment" and within that section we're told "that in computing such gross income and deductions": "(12) in lieu of the deduction provided by section 164 (f) (relating to deduction for one-half of self-employment taxes), there shall be allowed a deduction equal to the product of— (A) the taxpayer’s net earnings from self-employment for the taxable year (determined without regard to this paragraph), and (B) one-half of the sum of the rates imposed by subsections (a) and (b) of section 1401 for such year;" Looking at that, we see that we take NESE-before-this-deduction (ie Line 3 of Schedule SE) and mulitply it by 1/2 of the SE tax rates (ie, 1/2 of .153, or .0765). As mwyatt notes, this is accomplished on Line 4 of Schedule SE by multiplying Line 3 by (1-.0765) or .9235 Thus, I would conclude that in the strict sense of 1402(a), Line 4 is NESE. Just imagine the mess of applying the wage base to the reduction in Line 4. That "in lieu of" that Congress wrote into 1402(a)(12) simplifies a potentially messy calc.

Multiplying by .9235 is to adjust for the deduction for 1/2 of SE taxes in accordance with 1402(a)(12). So you have to take all your income and deductions before you take that step. So it is "taken into account in determining an individual's net earnings from self-employment". It's just before the SE tax adjustment, not after it.

Going back to 1987, following the major tax reform of TRA '86, only 25% of SE health insurance was allowed on the front of the 1040, the remainder had to go on schedule A. As for allowing it for SE tax in 2010, sometimes we can find evidence of Congress' legislative intent. In this case we can look at SBJA '10 itself... Section 2042 is entitled: "SEC. 2042. DEDUCTION FOR HEALTH INSURANCE COSTS IN COMPUTING SELF-EMPLOYMENT TAXES IN 2010." I'm sure there are other sources of legislative intent as well. Then there's these pages on the IRS website: http://www.irs.gov/businesses/small/articl...07,00.html#2042 http://www.irs.gov/newsroom/article/0,,id=233824,00.html

But do you see any reason to not accept recorded phone calls (and the transcripts of them) as corroborating evidence? It's more reliable than a person's memory of a conversation.

Curiously IRS Pubs 571 and 721 make mention of this (and 721 clearly supports what MJB is saying), while Pubs 575, 590 and 950 are silent. (I don't read anything into the omission because there are lots of other minor issues that 575, 590 and 950 fail to cover.) From 721 (emphasis added): "Federal Gift Tax If, through the exercise or nonexercise of an election or option, you provide an annuity for your beneficiary at or after your death, you have made a gift. The gift may be taxable for gift tax purposes. The value of the gift is equal to the value of the annuity. Joint and survivor annuity. If the gift is an interest in a joint and survivor annuity where only you and your spouse can receive payments before the death of the last spouse to die, the gift generally will qualify for the unlimited marital deduction. This will eliminate any gift tax liability with regard to that gift. If you provide survivor annuity benefits for someone other than your current spouse, such as your former spouse, the unlimited marital deduction will not apply. This may result in a taxable gift. More information. For information about the gift tax, see Publication 950, Introduction to Estate and Gift Taxes, and Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, and its instructions."

The target fund will change its asset allocation slowly over time as the target year approaches. The life strategy fund will hold a constant asset allocation. But beyond that, see what EPCRSGuru said above. This site is directed more toward the professionals who administer benefits plans and not to the actual investments. My suggestion is to call Vanguard and ask to speak to an investment specialist who can help look at your personal financial situation and help you choose between the two. Many of the larger firms have people like that to help you if you know to ask.

It appears that in certain scenarios (mainly involving timing of the approval of the QDRO vs the filing of the bankruptcy), in a Chapter 13 (but not in a Chapter 7), a DRO can be discharged. At the very least, you should consult w/ an attorney to get advice on whether you should file anything w/ the bankruptcy court to protect your interests. You certainly don't want to assume you're safe only to get a nasty surprise.

The model IRS amendment specifically addresses match, so you need to look at your plan language. (See page 8, section 5.4 http://www.irs.gov/pub/irs-drop/n-09-65.pdf ) I'm guessing part of your question has to do with timing for when the return of the "default elective deferrals" are returned in a subsequent year, i.e., the money went into the plan in 2011 and is returned to the EE in 2012. I presume you're doing either a year-end match or a true-up. My thought is if the funds have been returned to the EE prior to the date the match is posted then I'd zero out the match. But be sure you know what your plan document says.

If and only if Loan A is paid off before Loan B is taken. If you get into a refinancing, then you look at 1.72(p)-1 Q&A-20 which says in some scenaios then both A & B are counted as outstanding simultaneously. (And I'd take Q&A-20 as indirectly confirming what you say; if you only combine the refi'd loans in certain scenarios then the implication is that you don't combine them outside of those scenarios.) What you describe is what I might call a serial or perhaps a chain loan rather than multiple loans. You could create the same result in a plan that only allows one outstanding loan at a time. Of course, if someone is doing this, then I'd look at how they're calculating the payoff and accruing interest as that's the one reason I could see someone abusing this (either trying to get extra interest into the plan or abusing timing of interest to get an interest-free loan). Invoke "level amortization" and make it apply in fact.

Code 72(p)(2)(B)(ii) actually includes the words "(determined at the time the loan is made)". As to more than one residental loan at a time, look to your plan document or plan loan rules. Do you permit multiple loans? Be careful to distinguish whether you permit refinancings versus separate new loans as that may or may not change the outcome.

Here's link to the document being cited, the exact quote is on the page 47: http://benefitslink.com/src/taxregs/td9319.pdf

Lots of old threads on the subject... basic jist is don't confuse plan participation with immigration, what does your plan document say, and what does your legal counsel say? http://benefitslink.com/boards/index.php?showtopic=49539 http://benefitslink.com/boards/index.php?showtopic=37665 http://benefitslink.com/boards/index.php?showtopic=20082 http://benefitslink.com/boards/index.php?showtopic=22202 http://benefitslink.com/boards/index.php?showtopic=25110 http://benefitslink.com/boards/index.php?showtopic=28822 http://benefitslink.com/boards/index.php?showtopic=39779 http://benefitslink.com/boards/index.php?showtopic=40702 http://benefitslink.com/boards/index.php?showtopic=46450

Technically, the deduction is the ER portion of the SE tax. That's why it's still effectively the same %. In fact the 2011 Form SE basically says as much: Line 6 - Deduction for employer-equivalent portion of self-employment tax. Multiplying the SE tax by .5751 is mathematically the same as multiplying SE income by 7.65% 7.65% / 13.3% = .5751 IMO, Line 6 is a very backwards method to calc the SE deduction. Line 6 should have simply been a repeat of line 5 but using the ER-only percentages. Edit: after looking at 164(f) I realize I should say "Philosophically" instead of "Technically".

I worked for 7 years in 401(k) administration at a major oil refiner that is owned by the national oil company of a foreign country. Our parent company would send employees on assignments to the US (several were just flat out spies to make sure we weren't cheating the parent but most were legitimate learning experiences). So, basically identical scenario as yours... My experience is yes, the foreign employee on the USA payroll participates in the USA plan. Of course, we didn't have the goal of excluding them so certainly never looked for ways to do so. Keep in mind that because of control group, the employee doesn't terminate until leaving both the USA and the foreign company. We actually had a status code just for such employees so they couldn't take distributions accidentally.

My current employer has a SH plan thru our payroll provider. It has an explicit election in the adoption agreement for true-up. So look there as well as in the plan document.

Under $200 can be denied both withholding and direct rollover, correct? Personally, I'd use QDRO's suggestion and apply 80-26 to this, thus making it the plan who issues 1099-R's to the participants.

Perhaps this is the cynical answer but the atty gets considerably more fees from the "new plan and merger" scenario.

Most individuals are cash basis taxpayers, meaning they generally don't have constructive receipt until the amount is paid in the following year.

I read this as a concern about timing... they should have been a little more clear and simply said "we'd rather issue the invoice after the charges, not before them". My answer to that is "hey, if you want to wait to get your money, I'm happy to hold on to it a bit longer" Of course, they seem to be mixing costs... they first say "outstanding charges" and the switch to "discontinuance charges". Unless they misquoted the client's request then they're abusing the English language... "outstanding" means "unpaid"... it does not include charges that are not yet incurred.

1) I asked about DOBs simply to make sure you were correctly apply the regs regarding required beginning date... a distribution is only a 401(a)(9) MRD if it occurs after the RBD, which generally speaking is April 1st of the year after attaining age 70 1/2 or retiring (eg, a distribution at age 68 that otherwise resembles an MRD is not a 401(a)(9) MRD). The regs at 1.401(a)(9)-2 discuss required beginning date. 2) Based on how I read the code at 401(a)(9) and Q&A-5 at 1.401(a)(9)-5, when death is after the required beginning date, then the 5-year option is not allowed. So, I believe you'll need to look at EPCRS and possibly file w/ the service. In addition to Tom and Kevin's citations from EPCRS, I'll point out that if you do determine you need to file... at least it won't be grossly expensive: "(2) If (a) a VCP submission involves the failure to satisfy the minimum distribution requirements of § 401(a)(9) for 50 or fewer participants, (b) such failure is the only failure of the submission, and © the failure would result in the imposition of the excise tax under § 4974, the compliance fee is $500."

Basic rule of thumb: the more complex the topic, the less successful the offshoring. What types of licensing and professional certifications do these providers hold? Able and competent are two different things. Do they provide plan document services? If not, then how do you keep your plan document current and what will that cost? Are they really retirement plan experts or merely paper shufflers? What types of questions does your current TPA answer that you'd instead have to pay an ERISA atty to answer? And if you're merely chasing price, then you have a duty to compare prices from other US providers as well. Be sure you're comparing apples to apples in terms of what services each will provide. Between posters on this board and this website's vendor directory, you can find plenty of firms that would be willing to talk to you: http://benefitslink.com/vendors/Administrators/

Wow, there's a old memory... 11 years ago, the Benefits Department manager and my mentor, who was sole trustee on 401(k) of a small joint venture, died suddenly. The JV had designated a Benefits Committee who appointed the interim department manager as trustee. Seems like it took a signed action of the Committee and then signing some papers w/ the investment firm. But it was all dictated by the plan docs, as mentioned above.