masteff

Carol V Calhoun is a regular contributor on Benefitslink. Here's a fairly thorough page on her website. http://benefitsattorney.com/charts/state-taxes-and-married-same-sex-couples/ I'll send her a PM and let her know that I'm linking to her in case she wants to add anything to this discussion.

I think this statement by Effen bears repeating...

http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-SEPs-Contributions "Do I have to contribute for a participant who is no longer employed on the last day of the year? Yes, you do, if they are otherwise eligible for a contribution. A SEP cannot have a last-day-of-the-year employment requirement. If the employee is otherwise eligible, they must share in any SEP contribution. This includes eligible employees who die or quit working before the contribution is made. If you haven’t made a contribution for an eligible employee in your SEP plan, find out how you can correct this mistake."

I agree w/ Lou. This prior discussion specifically addresses the "as defined in Section 416" bit of what Lou cited: http://benefitslink.com/boards/index.php?/topic/47056-rmd-change-in-ownership/ Multiple other prior discussions: https://www.google.com/search?as_q=5%25+owner&as_epq=&as_oq=mrd+OR+rmd&as_qdr=all&as_sitesearch=benefitslink.com%2Fboards&as_occt=any&safe=images (had to use a google search since the board's search doesn't like short terms like "5%")

In addition to what QDROphile said above, I'd like to ask what specifically the plan says. Does it say "loan for hardship reasons" or does it says "loan for this specific list of hardship reasons"? Be careful to not assume that a list of hardship reasons in one part of the plan should automatically apply to another part if the plan. If you still feel the plan specifically limits the list of reasons, you could add a "facts and circumstances to be reviewed by the plan sponsor" reason for the purpose of loans. This opens it slightly to other employees but is far from a floodgate.

The rules on spousal IRAs changed a bit in recent years so take what you've previously heard w/ a grain of salt, as it might be dated. See IRS Publication 590, especially but not limited to page 11. http://www.irs.gov/pub/irs-pdf/p590.pdf Page 8 of that publication explains what is and isn't compensation for this purpose. Neither of the items you list qualify.

Yes, however the deductibility of the traditional IRA contribution may be limited due to participation in the SEP. http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-SEPs-Contributions

If she is using a model 5305-SEP plan, that form clearly states that the employer cannot maintain both an SEP and another qualified plan (it could be done under a prototype plan but that's moot because of the control group rule). The control group rule also applies to 401(k) plans. Should talk to the people who administer the 401(k) (do they have an outside TPA?) to determine what options she might have there.

The Service has informally said that prime plus 2% is reasonable. http://www.irs.gov/pub/irs-tege/loans_phoneforum_transcript.pdf I'd say that prime plus 1% is probably reasonable. It's commonly used and I'm not aware of wide reports of the Service dinging plans on it. In light of the conversation in the document I linked, you might do a brief write-up and put in the plan file of how you arrived at +1% (workforce composition, local lending policies, default risk, etc).

No. If you mean an in-plan Roth rollover, yes (http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-on-Designated-Roth-Accounts#irr6 ).

Supposing for a moment that it was a valid plan design, this particular element is a deal breaker to me. It's glossed over in other articles on that website ("simply limit plan participation to people w/ proof of insurance which means preventive care will be covered by that plan instead"), but here's your all too realistic scenario: EE takes cheapest insurance, Insurance has a limited network and restricts (legally) preventive care to network providers only, EE prefers his own provider so EE gets out of network preventive care, Plan and Company are now on the hook for entire cost of preventive care which could quickly outweigh the Company's savings on payroll taxes.

http://www.shrm.org/LegalIssues/FederalResources/Pages/ERISA-Claim-Waived-General-Release.aspx "The appellate court distinguished between entitlement claims, which cannot be waived, and contested claims, which can be waived. An entitlement claim is one for a “vested benefit” to which the employee is “entitled under the terms of the pension plan itself”; whereas a contested claim is a claim for “additional benefits to which [a plaintiff] is not entitled to under the terms of the Plan itself.”" Per this, an entitlement claim cannot be waived. I would think your scenario would be an entitlement claim. EDIT: the top link may not work... for some reason that website lets you get to the article via google but not via the direct url. Here's a google search result, the SHRM.org article should be the top result: https://www.google.com/search?q=anti+allienation&sourceid=ie7&rls=com.microsoft:en-US:IE-Address&ie=&oe=#q=distinguished+between+entitlement+claims%2C+which+cannot+be+waived%2C+and+contested+claims%2C+which+can+be+waived.+An+entitlement+claim+is+one+for+a+“vested+benefit”+to+which+the+employee+&rls=com.microsoft:en-US:IE-Address In case the link gets messed up in the future, the court case in the article is: Hakim v. Accenture United States Pension Plan, 7th Cir., No. 11-3438 (May 23, 2013)

The word you want is "recharacterize". See Pub 590 starting on page 30. Also see the instructions for Form 8606, being sure to read item 3 in the middle column of page 4.

Ability to direct investments has no impact on the analysis. In your original post you indicate the husband terminated employment in 2007. Is that correct? Did he work for the company? If so, it raises the question in my mind of whether he had an account of his own in the plan. I think the question you need the company to answer is: did the husband have an account in the plan prior to the spouse's death and was the spouse's benefit rolled into that same account or is this an entirely separate account of just the death benefit? My opinion is that if they comingled the money (his and hers) in an account he already had, then he truly did what you stated... he rolled his spouse's account into his own, in which case the MRD should be calculated on his age. But, if this really is a separate account, I'd accept their indication that this is a beneficiary account, in which case your #3 is correct (IRS Reg 1.401(a)(9)-3 Q&A-3(b)). I should add that the latter half of my answer about switching to using his own age at some future point would require that the beneficiary account be rolled over into a non-beneficiary account (presumably to an IRA if he doesn't have an account of his own in the plan).

Was it an already existing and in use account? Did the account at the time of rollover have any other money in it? How was the account designated at the time of rollover? Does anything indicate that it's a beneficiary account? The first sentence I quoted makes me think he was electing to treat the account as his own, but it might just be an inaccurate choice of words on your part. Assuming it's a beneficiary account, the answer is: #3 but you want to recalculate each year and depending on the result switch from being a beneficiary to electing to treat it as his own. A real example: My father died in the year he would have been 72 and my step-mother was 80. We established account as a beneficiary account for my step-mother. The smallest MRD currently is using the factor based on my father. In the year my step-mother will turn 91, the factor using her age will result in the smaller MRD so we will elect to treat the account as hers at that time.

They fix it by filing Form 2441, Part III with their personal tax return.

Lou - I'm firmly in the plan sponsor camp of hiring experts such as yourself when it comes to testing. I don't doubt your statement re: testing. I was pointing more toward the question of whether excluding the other employees would cause an anti-cutback problem: http://benefitslink.com/boards/index.php?/topic/17851-change-to-allocation-method-after-year-end/ I don't know the definitive answer off-hand so I was pointing to the question rather than stating it.

What does the plan say? Does it have a last day rule? http://benefitslink.com/boards/index.php?/topic/54054-profit-sharing-wants-to-add-end-of-year-employment-rule/

Code Section 72(p). 72(p)(1)(A) says any loan shall be treated as a distribution, however 72(p)(2) says it doesn't apply to any loan that meets the listed requirements. So a qualifying loan is not treated as a distribution. 1099-R is for reporting distributions.

What did Wells Fargo say when you asked them? Wells Fargo would have to tell you if they would act solely from the pre-nup. My first thought is they might want the 2nd wife to sign a beneficiary disclaimer form. You'd have to ask Wells Fargo who the beneficiary would be if the wife disclaims.

Not all IRA custodians will handle / permit self-directed investments. If the custodian in question does deal with self-directed investments, then they are likely the best source of information as to correcting it. Especially if it can be shown they botched the transaction paperwork. But if the custodian does not deal with self-directed investments, then the individual had no valid reason to expect the transaction to be done in the way described and is likely out of luck. As for a PLR... From what I found searching the internet for " ira plr cost ", it could cost high 4 figures to file a PLR. Have to weigh that against any potential early distribution penalty.

Here's a good article: https://flexneo.com/latest-guidance-hras-fsas-health-care-reform/ They reach the same conclusion and make an interesting suggestion or two.

Maybe this from Notice 2013-71 will help: "Nor is the plan, for any plan year, permitted to allow an individual to salary reduce for qualified health FSA benefits more than the indexed $2,500 salary reduction limit or permitted to reimburse claims incurred during the plan year that exceed the applicable indexed $2,500 salary reduction limit (and any nonelective employer flex credits) plus the carryover amount of up to $500." The implication here is unlimited employer flex credits. The whole "excepted benefit" business in Notice 2013-54 is a separate mess, coming from Reg 54-9831-1. To be excepted, the FSA has to meet the "greater of" rule above. I do not believe the $500 carryover is the same as in the "greater of" rule. If not excepted (and since an FSA generally is not integrated w/ a health plan) then it's subject to market reform such as preventative services, which it fails (see 2nd paragraph in 2013-54 Q&A-7). The implication here is health care market reform limits employer contributions based on the "greater of" rule, so somewhere between $500 and $2500. I'm not versed enough to know if there is a scenario in which a plan would not be subject to the "greater of" rule.

I think the answer is in Q&A-7 of that notice... Greater of: a) two times the salary reduction, or b) $500 plus the salary reduction

Perhaps they're making a semantic between "re-amortize" and "refinance"? Similar to in the 3rd paragraph on the 4th page of this: http://www.irs.gov/pub/irs-tege/loans_phoneforum_transcript.pdf