masteff

Hmmm... that question takes me back 10 years to the 13th or 14th of September and my wanting to issue a statement to not panic trade while the market was closed (I got overridden because someone didn't want to risk being seen as giving "advice"). Short answer: my opinion is no, assuming you're complying w/ 404©. Of course you could do something more from an investor education point of view than a fiduciary responsibility view.... My thoughts: 1) I wouldn't just warn on money markets because a huge number of mutual funds actually have a small percentage held in treasuries or money market funds of treasuries. And frankly the "mob mentality" of the financial markets will make all investments a lot more volatile in the short term. 2) Of the few articles I can find that really discuss the issue (w/ regard to money market mutual funds), the consensus seems to be that warnings like Moody's are "alarmist". I'd say the ratings agencies have a duty to be semi-alarmist because people need to fully appreciate the ramifications of a worst case scenario (and especially after their failure to alarm during the last financial crisis). The worst case scenario touched on in several articles is a repeat (but worse) of 2008 where interbank lending halted and took nearly all liquidity out of the financial markets. 3) If my current employer had a retirement plan and if I were to issue something, I'd probably go with a message about uncertainty and panic trading. I'd not focus on but would mention that we don't know how the Treasury Dept will handle payments on bills and bonds and it's impossible to predict the impact that will have on the broader financial markets. Any trading made now or over the coming days and weeks should be made from a deliberate investment decision and not out of panic. 4) And I'd either issue it right here, right now, or I'd wait until the debt ceiling is really hit (not the swag date of Aug 2nd). If I issued anything at all.

Here's an interesting table: http://www.treasurydirect.gov/instit/annce...s_cashpydwn.htm It shows how some of the debt just keeps getting rolled forward from auction to auction. Of course the devil w/ a debt cap is you can't borrow enough new money to cover the interest accrued on the maturing debt. (You could play w/ the interest rate to make new debt sell at a premium but that only works for a round or two before it compounds into a death spiral.)

http://www.nytimes.com/2011/07/27/us/politics/27fiscal.html And to think I used to reassure employee's that the plan's Govt money market was the safest investment in the plan and if the MM ever lost it's value, there'd be a lot bigger problems to worry about (because the whole world would surely be in chaos, crisis and war before it happened).

Speaking only to this piece... The law was changed by Section 646 of EGTRRA from "separation from service" to "severance from employment". And it applies if the plan was amended to correspond w/ this change.

Had to check my CCH Master Pension Guide for the correct cite... Per 411(a)(7), for a DC the accrued benefit is the balance of the employee's account. 411(a) generally discusses accrued benefit and vesting. From the usage, the nonvested portion of the account is part of the accrued benefit. (And my CCH guide says the same.)

I'm sure we all know the analogy of the three legged stool... the three legs of retirement income are employer plans, social security and personal savings. The Social Security leg is already wobbling; in 2036 the trust runs out and SS revenues are projected to only cover 77% of benefits. If they implement too severe limits on contributions to employer plans, then we'll have two weak legs out of three. Frankly, I'm saving every spare buck I can because when the stool collapses, I'll need that third leg as a crutch.

My favorite piece of cannon fodder in Bush Jr's budgets was his univeral retirement savings account. It would have replaced IRAs and qualified DC plans w/ a single account that greatly reduced paperwork/administration. A single bucket for all tax-deferred savings. If they're going to put a serious cap on contributions, then something like this would finally work. And I'm torn on what % of comp is a reasonable limit. If you don't bail out Social Security, then a higher % is fairer to people really trying to set aside for themselves. But let's be honest: the only people who can afford to defer 100% of comp are people who have either income or assets to spare. 20% is too low, 100% is too high, so what do you do?

It's not limited to the Gang of Six plan. I'd suspect the annual additions limit is a major target: "much of the academic literature shows that higher income people are moving investments they would have made anyway [in taxable accounts] to a tax-preferred account". The links in this article are as useful as the article itself: http://blogs.reuters.com/reuters-money/201...401k-tax-break/ (Lots of articles out there but I chose the Reuters one as the least likely to be seen as biased.)

I see it as teaching him a valuable lesson regardless the size of initial contribution. He for sure can't rely on Social Security. Of the top of my head, see if the investment firm you use for your own IRA will waive annual fees for his IRA (I assume most of them still charge a fee if the balance is less than several grand). For example, Fidelity will combine accounts of family members in the same household if you complete the proper form. Worse comes to worse, go to your bank and put the Roth in a CD just to get it started.

After reviewing Form 8606 and Publication 590, the best I can come up with is better safe than sorry. ETK - the SE tax threshhold is 400 bucks of net earnings http://www.irs.gov/pub/irs-pdf/i1040sse.pdf

In more technical terms, the participant had constructive receipt and realization of income when the original check was issued. So the benefit has legally left the plan. Reissuance is merely an administrative courtesy.

Excellent find, Tom! From Appendix 1: "The key point of this exercise is that the present value of taxes and consumption are identical in the “loan” case and the “no-loan” case."

Looks like you could have a preliminary answer w/in 30 days: http://www.dol.gov/ebsa/regs/ind_exemptionsmain.html Of course I'd start w/ a phone call to see if they agree an exemption is needed.

The flaw in this is the difference between contributions/annual additions and loan payments. Do you include loan payments in calculating the annual additions limit? No. A loan is a receivable on the books of the plan, technically an investment of the plan, and a liability on the books of the borrower.

Does the PSP has individually directed accounts or pooled investments? Does the note otherwise meet the PSP's investment policy? And approaching the IRS for approval is always an option. Though that generally involves a fee and some delay.

Agreed!!! The money was not taxable to you when it was loaned out of the plan. When you repay the money, it keeps the character it had when it was loaned (ie if it went out from pretax then it goes back to pretax). You have a personal liability to return $X dollars of pretax money plus interest to the plan. The fact that the particular dollar used to repay the loan came out of your paycheck aftertax does not change the nature of the liability being repaid. (This goes back to the fact that money is fungible, so it is technically irrelevant that a particular dollar originated aftertax from your paycheck.) The nature of the liability is what matters.

Perhaps the client misunderstood some generic statement that you have until the S-corp's 2011 tax return is filed in 2012 to establish an SEP, which is just the deadline for every year's contributions.

As QDRO said, it's a plan doc issue of how the receiving plan accepts rollovers. Usually no restriction in the plan that limits roll-ins to the window of employment... they're still a participant if they have a balance and generally any participant can do a roll-in. I saw this several times a year at my former job... one of our DB plans had lump sums so EEs would roll to the k plan in order to use that plan's flexible w/drl options. Also on deminimis cashouts... we even designed our DB cashout form to make a rollover to the k plan that much easier.

See my comment in your other thread here: http://benefitslink.com/boards/index.php?s...c=49272&hl= Andy, one key element is "issued in the name of the deceased employees legal representative".

1) The W-2 and 1099 reporting is completely consistent with Circular E (IRS Pub 15) and the instructions for Form W-2. 2) It's not W-2 comp for plan purposes. The W-2 safe harbor def of comp comes from Reg Sec 1.415-2(d)(11). This brings us back to W-2 Box 1 and/or Code Section 3401. We then look at Rev Rul 86-109 which is the basis for the W-2 and 1099 treatment and tells us that the comp in question is neither Box 1 nor 3401. We also find that the wages are reported on W-2 for FICA as a result of Code Section 3121(a), which is not reference by the safe harbor def. It might be helpful to see the discussion of safe harbor comp beginning on page 3-10 here: http://www.irs.gov/pub/irs-tege/epchd304.pdf

I'd guess that permitting forfeitures to offset employer obligations is a special accomodation made to employers which recognizes that forfs originated in the plan as unvested employer contributions. Allowing forfs to offset an employer obligation is simply recycling employer contribs back into other employer contribs. It's not really a windfall to the employer because these were conditional contributions on which the participant failed to meet the condition (ie vesting). In a high-turnover industry, this provision make might the difference between a company adopting a plan or not.

To expand slightly on Chaz' answer... you wouldn't be paying them a higher salary, rather they'd be receiving a cash option under the cafeteria plan.

Agreed, but then it can't be distributed from the AP's IRA and be exempt from 10% (unless AP meets one of the other exceptions). There is no QDRO 10% exception from an IRA even if it was a rollover from a QP.

You and he will want to review IRS Pub 590 http://www.irs.gov/pub/irs-pdf/p590.pdf but yes and yes.

I think ETK's point was that a distribution from the 401(k) qualifies for 10% exception... but if the AP rolled it over to an IRA then the 10% exception would no longer apply. Thus the incentive to keep it in the k plan.