masteff

No. And it would take new law from Congress before it could happen and I'm not aware of it being on any major agenda. And here's the grid that pmacduff is referring to: http://www.irs.gov/pub/irs-tege/rollover_chart.pdf

Thanks for confirming for me, Sieve. I've since found that the source of our initial idea came from someone involved w/ small companies (under 20 ee's), which as you note get to play the game slightly differently.

See discussion from 2002 here: http://benefitslink.com/boards/index.php?showtopic=15210 Does anyone know if anything has changed on this? Is it still disallowed for an employer to subsidize the cost of a Medicare supplement and Part D coverage? Is there any mechanism by which it would be allowed? We've had one employee jump ship from our group plan and two more are planning to... it would be win/win if we could subsidize their supplement and Part D cost. Thanks

The problem is that too many people abused cash gifts in the past so Congress and the IRS closed basically every door on non-taxable cash to employees. What you've described is essentially like a tip pool at a restaurant. The fact that the employer is a non-profit doesn't change the equation. If it puts spendable cash or equivalents into the employee's hands, then it's taxable.

Cost would be split between employee and employer.

That was code for "I know I should understand this myself already so please don't think I'm too stupid for asking you but I need to make sure what the answer is so I don't give someone a completely wrong answer." You weren't right or wrong to ask them, it's something valid for you to figure out. You just have them 2nd guessing their own understanding of how it works.

Is it legal (particularly, is it legal in Oklahoma) to mandate participation in employer-provided health insurance? The exception would be evidence of other coverage (spouse's plan, Medicare, Tribal insurance, Veterans insurance, etc). If it makes any difference to the answer, we do have a Sec 125 premium-only plan. Basically we'd be saying, if you want to work here, then you have to be in our health insurance. I.e., participation would be a "condition of employment". The reason is to reduce adverse selection. We're leaving a multi-employer association due a 37.6% increase this year and want to minimize the risk of major increases in coming years by maximizing our number of insureds.

On the topic of codes and box 2a... also see the recent discussion in this thread: http://benefitslink.com/boards/index.php?s...c=43334&hl=

Going back to Notice 09-68... At the bottom of page 3 it explains that "PPA '06 amended the definition of qualified rollover contribution in Sec 408A of the Code to include rollover contributions from any eligible retirement plan as defined in Sec 402©((8)(B)". The money had to first be a rollover contribution per the QP-relevant sections. If it in fact qualifies as a direct rollover, then it's still such, even if it's going to a Roth IRA. Congress and the IRS do not appear to have included "from QP to Roth IRA" in the requirements for 20% mandatory withholding (and further note that the new model notice in 09-68 does not specify any special difference for withholding on "QP to Roth IRA" direct rollovers).

So supposing he gets the $4000-5000 in January and pays all the past due pmts and pays the remainder on the loan w/ the smallest balance... what balance and payments does that leave him with? Would it eliminate the smallest loan? The "pro" of using the commission to pay on the loans is it reduces the balances and therefore the amount of taxable income he'd have if he eventually defaults. The "con" of using the commission to pay on the loans is it might not eliminate either or both loans, which could still leave him in a cash flow crunch. Another thought... if you conclude it's okay for him to request (preferrably in writing) to stop his loan payments, would you also conclude that he could choose to only stop one of the loan payments and continue paying on the other?

K2's 2.25% comes from (3% * 9/12) + (0% * 3/12). Mid-year terms would blow this out because they wouldn't have any months at 0%. Your biggest deciding issue: have any employees terminated mid-year and done a full withdrawal from the plan? If so, you have no plan assets from which to do an adjustment. In which case, you simply have to wait until 1/1/10 and change your match then. If you can't change your match for this year, then you may want to minimize eligible comp for the remainder of the year... like postponing raises and bonuses until after year-end.

And it's a double post: http://benefitslink.com/boards/index.php?s...c=43396&hl=

Link: http://www.irs.gov/pub/irs-drop/n-09-68.pdf

So the plan may well find itself having to use EPCRS. When it was just you and a mere month after the fact, using EPCRS would have been like using a 5-ton bomb when a shovel would work. But for a longer, deeper problem such as may exist, IRS code and regs will likely mandate they use the EPCRS process.

That's how Fidelity does it.

So.... if he'd gotten a doctor's prescription, traveled to Nevada, and kept complete records including invoices from providers, then it would be tax deductible?

They're both right. See "Excess Contributions Withdrawn by Due Date of Return" on page 50 of IRS Pub 590. http://www.irs.gov/pub/irs-pdf/p590.pdf You have to give the dividend back to the 401(k). But the earnings on the dividend can't stay in the IRA because they should have been there in the first place. It's basically a windfall for you. You get to keep the earnings on the money they shouldn't have given you, BUT you have to pay a small amount of tax and penalty on that windfall. If you do the math, you'll find that you have more cash afterwards than before... you come out ahead.

Question for the board at large: would a private letter ruling be an option in this case? (of course the asset in question would need to be large enough to justify the cost of submitting one)

No, the plan has no say. You can use any number you want (keeping in mind that your ex has to agree to it). They will only care whether they can make a proper calculation using the numbers and dates in the QDRO. Or as GMK, david rigby and others have said... you can come up with the final amount and use my 2nd example.

It's a minor nuiance but vested and accrued are two separate things. At the very least you have a problem on anyone w/ over 25 years of service, but whether you have issues w/ removing a benefit from people who have not yet accrued it is something I'll leave to people more expert on that.

Just because the plan doesn't report the taxable amount in 1099-R box 2a, the individual is not off the hook. Don't forget the beast that is the IRS data processing centers. It's amazing the connections they find that people assume won't be caught. With someone's 1099-R, 1040 and 5498 in hand, they can see the trail left behind. They have a good idea from the 1099-R what the taxable amount is, so if it goes into a Roth, they'll be looking to see what was put on the 1040. In fact, the instructions for form 1040 say to subtract box 5 from box 1, they don't even reference box 2a.

Smell test, ie, only if you have reason to genuinely question the document. I saw the photocopy w/ an odd shadow around key information (ie white out) a few times myself.

Don't focus on how they should fix it. Focus on the outcome. The outcome is that: 1) you are allowed to make all the deferrals you missed because of their mistake, and 2) you receive any matching contributions you should have on those deferrals. And frankly, if you can just raise your deferral rate for the rest of the year and come out the same, the matching is the real issue. Of course they first have to realize their mistake.

Ah... I'm w/ you now. Instructions for 1099-R, page 4, says: "For a direct rollover of an eligible rollover distribution to a Roth IRA (other than from a designated Roth account), report the total amount rolled over in box 1, the taxable amount in box 2a, and any basis recovery amount in box 5. (See the instructions for box 5 on page 9.) Use Code G in box 7. If the direct rollover is made on behalf of a nonspouse designated beneficiary, also enter Code 4 in box 7." I think GMK's hit the nail on the head for the solution.

You're way off base talking about QNECs. You'll make the situation worse if you go in asking for the wrong solution rather than simply seeing what they propose. You do want to insist that it be fixed, but don't try to insist on "how". You really need to give enough time for your plan administrator to understand the error they apparently have made and to figure out how to fix it. If they come to you w/ a solution that doesn't put you in the same place as you should have been (ie you're allowed to make the missed deferrals and they correct any missed matching), then come back and post to us what they've said.