masteff

In additional to jpod's comment, please note the bolded phrase. This refers to income that becomes due to the company after the provider ceases to have control over the practice. An example of this would be an insurance agent who sells a practice and gets paid based on future years' premium payments. In the orginal scenario, the AR that the doctor is getting payment from is for services performed and payment due while the doctor was still an owner-member of the practice. Therefore we have to go back up to an earlier sentence in the excerpt which says "Accordingly, the final regulations generally provide that a schedule based upon the timing of payments to the service recipient is not a fixed schedule of payments."

The only time I would use an average account balance to allocate earnings on a QDRO is when date-by-date transactional data isn't available or is so excessive as to be infeasible. An excellent example is when older records consist only of quarterly statements. (Anyone else still have a microfiche machine just for looking at old qtrly stmts?) Since you've already done the more detailed date-by-date calculation, thus proving it is not infeasible, why would you not use that method?

Under Section 125 in general, if say health premiums had a big change mid-year, then could allow a mid-year change of election for medical coverage. But I don't know to what extent that applies to health FSA, especially in this case where it's not the premiums that change but the potential for out-of-pocket. EDIT: Answer my own question, final regs on change of cost/coverage, http://www.irs.gov/pub/irs-irbs/irb01-07.pdf , Mary was on right track. Health FSA's are excluded from change in cost/coverage by reg 1.125-4(f)(1). So EE could drop spouse from other coverage (such as medical/dental/etc) but can't change FSA.

Is there any basis to call it a significant change in cost since all of the spouse's health care costs (including out of pocket / copay cost associated) are now being paid by the government? Or is that a stretch?

A statement product that I like is called Fringe Facts from http://www.bsiweb.com ; I hesitate because it's geared more for comprehensive benefits statements, but no reason you couldn't narrow it from total comp picture to just 401(k)/PS. Two nice features are that you can load the data from excel spreadsheets and that you can have conditional text (such as if Loan=Yes, then add a paragraph about loans). If you just want something simple, a mail merge in Word might be an attractive alternative.

It's not a true MRD until 2015, so none of the money would be precluded from rollover due specifically to that. Perhaps someone more familiar w/ this type of error and correction could address whether the correction would cause any amount to not be rollover eligible.

A sole-proprietor would excute as himself, but you're correct the LLC is the appropriate entity in this case (my thinking was if it had been done in his name, it'd be easier to skip amending the 1065). Does the proposed conclusion have sufficient merit to be defended in a tax court? I think so. The reasoning being the tax deduction in this case belongs solely to the individual so his extended due date can control for SEP timing. Fortunately 1065 just has a check box for amending and doesn't require an explanation. I do suggest discussing w/ your client that it's a slightly aggressive but merited position and let him make final decision. Oh, and have the tax preparer make a note to request the SEP amount in future years. If anyone else reading this has an opinion or sees something we're overlooking, please speak up. PS - after re-reading the linked thread above, the difference in scenarios is DB plan versus SEP-IRA, where the SEP-IRA gets special treatment on the partner's personal tax return.

One caveat to J4's linked thread is that LLC can be taxed as a partnership which has slightly different set of ramifications that an S-corp has. Which leads to a question: if filing a 1065, then there are other members in the LLC? if so, do they have eligible income and are they making identical % contributions to their own SEPs? (A common pitfall is one member wanting to contribute more or less than others, but that can break rules.) Overall, I'd prefer the 1065/K-1 to have reported it. I doubt if the return can be amended at this point. The item that gives me pause is on page 7 of IRS Pub 560 under "where to deduct": it states that partner's contribution will be listed on the 1065/K-1 (before being reported on 1040 line 28). But if he's the only member of the LLC w/ eligible/SE income then I might argue he's making the contribution from his own funds as a self-employed person rather than it being made on his behalf by the LLC, so the deduction would only go on his 1040 and not the 1065/K-1. Except, how was the 5305-SEP executed, as himself or as the LLC?

I'm w/ John that FDRXX is a bad choice in general for you. The only condition I'd make on that opinion is that we don't know what your other investments are. So if you have lots of aggressive investments in your 401(k), then a little bit of money in a cash option is not as bad as otherwise. Since you have a Fidelity 401(k), you should look on NetBenefits under Tools and Learning. Explore what they have to offer as far as education and tools. There's also good stuff on fidelity.com. At 26, you have 40-60 years before you'll need this money to live on (some earlier, some later; you don't just suddenly spend it all at once, but over the whole of your retirement). And as both posters have said, w/ more time, you can be more aggressive overall because in general you can expect short term downturns will be erased by long term performance. At the very least, I'd point you towards an S&P500 index fund long before I'd suggest a cash fund like FDRXX. But I'd rather see you research some other funds that are more aggressive. At first glance, John's mentioned Fidelity Four in One bears looking at (I personally like it's higher international exposure). Hmm... as a Fidelity 401(k) account holder, you can also call them and get extra help in selecting a fund. Call your plan's 800 number for Fidelity, after logging in, push zero for a phone rep, tell the phone rep that you'd like to speak to an investment specialist. They will transfer you to a specialist who can do 2 things, 1) review your choices in your 401(k) and 2) help you select a fund for your IRAs (both roth and regular) that will work in balance w/ your 401(k) investments. (If your IRAs aren't w/ Fidelity, I suggest you look at it because you can generally get waived annual fees by being a 401(k) account holder w/ them; ask Fidelity for more info if needed.)

Subject to taxation, yes, but here we're speaking to withholding. There's no mandatory w/holding requirement on death benefits.

On that note, if you calculate the dollars lost due to excise taxes on various methods of reversion, that would give you a price range for selling the plan. If the doc could only realize, for example, 70 cents on the dollar, then he'd be willing to sell it to someone else for 80-90 cents on the dollar. Thus, both parties realize a gain (and potentially offset all of a buyer's cost of acquiring the plan).

Sorry, should have been more specific w/ my first question. There are a number of reasons a distribution might be not allowed. So I'm not asking what the trust co did that wasn't allowed but why specifically the funds aren't allowed to be w/drwn under the plan. Was it safe harbor company match? Was it QNEC funds? Etc. Understanding what type of funds were allowed to be incorrectly withdrawn may help someone figure out where to direct you on corrections.

What made it be more than allowed? I'll let someone else address it from the EPCRS side... From the admin side... My line of thinking is maybe we can justify the extra $400 and thereby make the potential mistake disappear. Some dollar amounts might be helpful. The first and obvious thing is what's the dollar amount of the supporting documentation for the withdrawal... and what is the tax gross up being allowed on that amount? If you add the $400 to the tax gross up, is it still a reasonable amount for taxes? Note: the tax gross up isn't restricted to the amount withheld, the participant can withdraw enough to cover all taxes and hold the non-withheld portion until they file their tax return. The second thing would be, does the participant have additional supporting documentation available which (with additional gross up) would cover the extra $400?

To clarify, they are included in the "office plan" by being HCE despite of union membership, correct? So if they're included the "office plan", then I would expect language in the union plan's eligibility rules that excludes them, either by explicitly naming the office plan, by excluding HCE's or by a catch-all like "and not eligible in another plan of the employer". Despite their desire to be in the union plan, I'd make sure whether or not they are eligible for it at this point.

Here's an article at Relius... http://www.relius.net/news/technicalupdate...?ID=158&T=P

Might have to review the plans' loan rules but we always allow employees to substantiate other income sources to prove they meet the income criteria (e.g., 2nd job income, spouse's income, rent house income). It would take tightly worded loan rules to restrict to only plan eligible earnings. But WSP has a point about reviewing how the payments must be made (coupon book versus payroll deductions). W/out any payroll, can't meet a payroll deduct requirement regardless of other income. Of course loan rules can be easy enough to amend. Also, do loan rules have anything about being in active employment? Ours always have. Keeps people on leave, terms and retirees from being able to take new loans. Which takes us back to the contract income angle.

Contact the company where you set up the Roth IRAs. They will have forms and procedures for you to follow. Sooner is generally better but you have until the due date of your 2007 tax return. Refer to IRS publication 590 here: http://www.irs.gov/pub/irs-pdf/p590.pdf See page 62. One option listed there is to apply the excess contribution to a later year (which again would require contacting the IRA company).

He has two plans because that's what it used to take for a self-employed person to get the full amount set aside each year due to limits that applied by plan. CPA firm where I started out had a dozen or two of doctors set up just the same. I'm w/ Janet... unless the plans have more stringent break in service rules, I see no reason to rush a change before roughly 5 years of zero compensation have elapsed. Is there some other reason to rush that we're missing for trying to convince this guy to term his plans? I'm not seeing anything other than IRA transaction fees for the financial advisor. Here's a thought... has he looked into working for the hospital as a contractor? I once did 5500's on some ER doctors that did that. He'd have to weigh benefits and other perks from the hospital has versus being self-employed again, but then he'd have income that could be used under the plans. Or just to avoid a break in service, another option is if the hospital would let him free-lance, then he could pick up a few contractor hours in a clinic or as an on-site physician for a local business, etc. I'm sure that w/ some thought and effort, he could pick up some self-employment income fairly quickly.

So, once you've read the posts above, I'd add the following.... First, I'd re-emphasize what allan said about the asset allocation shifting over time (that's a key difference between this target fund and "regular" mutual funds). Second, I'd re-emphasize John's point that your ultimate target date isn't age 65, but rather a stretch of dates from 65 on. Third, I'd re-emphasize what Janet said about this fund will still have it's ups and downs (but since it's actually a blend of funds, it should be less volitile than any of the individuals funds by themselves). Now, is this a bad choice? Absolutely not. Before I left my last job, we added targeted funds to our 401(k) plans. However, a few key points need to be understood about how targeted funds work. As discussed, they have a risk/allocation profile that moves from more aggressive to more conservative as you approach retirement. Don't pick a target fund just because it's performing well versus the other choices you have available right now. Don't treat this like "just another mutual fund"; you're not going to be trading in and out of this fund (so if you want to trade, look at "regular" funds). Every year or three, you'll want to compare this fund with other target funds with similar target dates (and as long as this fund is doing okay, you can stay w/ it, but don't be afraid to move to another if this one is underperforming). Lastly, don't let nervousness or lack of investing experience keep you from making a positive move towards building your retirement nest egg. Get that money started growing and then go learn some more. Visit various mutual fund websites and look for their free investor education resources. Also go to financial sites like Motley Fool, which has a variety of articles for all levels of investors. As you become more knowledgable, you can always make a change in your investment choice in the future.

Francis, for what it's worth , your scenario is typical from my experience w/ mergers/acquisitions (freeze in A and start from acquisition date in B). And yes, they can elect to recognize service for other things but not for benefit accrual in the retirement plan. I'll selectively quote what Effen said above as it summarizes my own thoughts: Question: Do both plans use final average pay in their benefit calculation? If so, then to give you a different line of thought about how the hospital could fix this... they could amend the plan to use final average pay from Plan B in calculating Plan A benefits. This would give you full credit for your years (Plan A years plus Plan B years). The real problem in the overall equation is that your Plan A pay was frozen on 1/1/94 rather than continuing to grow (actually, you should confirm if that's correct w/ your benefits/HR dept, because if they're using your Plan B pay for Plan A, then you're as well off as you're likely to be). But just to be frank, I don't see them making this change willingly 13 years after the fact.

We had a part who was past normal retirement date and kept saying he was sending election forms and never did, finally we sent him backpayments in normal form and applied his election going forward only. That matched closest to plan language at the time.

No, because in your original post you stated the participant was already in MRD's at time of death, so the payments must continue under Life Expectancy.

My experience in the 5,000 EE range is the risk that when counsel splits time between ERISA and other areas, they can get drawn more and more into those other areas. Admitted we were more complicated than most (4 DC and 4 DB) but after our GUST DL submissions were sent days after the deadline, our GC finally conceded the benefit of outside firm taking over majority of ERISA w/ in-house reviewing and coordinating. (But going back to original post, we never had dedicated in-house counsel, they always handled either employment or tax law as well.) One aspect is having enough ERISA work to keep someone in-house busy enough to not lose them to other projects. Even if a dedicated inhouse ERISA counsel can be cost justified versus outside fees, what GC is willing to let someone sit around w/ spare time? Another aspect is that it can be more clear cut which outside expenses can be charged directly to the plan versus being paid by the company (or at least the perception it's more clear cut versus trying to split out parts of an inhouse counsel's salary).

Further, the final regs, published here: http://www.irs.gov/pub/irs-irbs/irb03-37.pdf, on page 13 explicitly address that catch-up is excluded from a variety of limits and non-discrimination tests, including ADP and top heavy.

See this IRS webpage: http://www.irs.gov/retirement/article/0,,id=152956,00.html Which has an FAQ which says: Can my plan offer only designated Roth contributions? No, in order to provide for designated Roth contributions, a 401(k) or 403(b) plan must also offer pre-tax elective contributions. So unless they want to add regular pre-tax to the 401(k), then you're correct that they should amend the 403(b).