saabraa

Smells like a distribution to me, negating the SEPP.

Tell me if I'm off base; the only transitional rule I see is from TEFRA section 242(b) and requires the employee to have made a written election by the end of 1983 if he wanted to use the old MRD rules.

The calculator is a great tool. Thanks Appleby. That sure beats reading the regs, etc. Come to find out that one IRA will suffice to achieve at least a $20K annual payout.

I'm not ready to agree that the employer MUST allow a 90-24 transfer; I've been under the impression it's one of those MAY allow deals. Based on several phone conversations over the years from around the country, many employers are not allowing the transfers. As I recall, it seems that assets held by TIAA-Cref were particularly likely to be subject to a preclusion regarding 90-24 transfers.

Did partial research and concluded you're closer than I originally thought. There are still 3 permissible methods, and the annuitization or amortization method will give you the highest result. The section 1274(d) midterm rate times 1.2 is around 5%. One option for life expectancy for a 57 year old is 39.7. That's the uniform life figure from rev rul 2002-62 and may be a joint life expectancy, so maybe there's a lower number for a single life. You might want to look at Notice 2004-15 and eventually the 1.401(a)(9) regs.

I would characterize the rule change as being "set in stone." IRS issued proposed regulations on 11/16/04, in regard to section 403(b) plans. You might try looking for Federal Register, Vol 69, #220. For most employers (looks like that includes government employers), the rules are effective as of 2006 "tax year." Although there is language in the new regulations that talks about not being able to rely on these new proposed regs until they become final, when all is said and done the employer will use the proposed regs as a guide and not much can be done about it. Well; there's probably an address mentioned in the regs, and you can send comments in hopes of seeing the restoration of the old rule in the future final version of the regs. (Sometimes, it can be a while before final regs come out). I didn't see 94-25 transfers mentioned in so many words, but the preamble to the proposed regs as well as proposed reg. section 1.403(b)-10 speak in terms of which transfers will continue to be allowed. Basically, the recipient investment must be an investment option of another 403(b) maintained by an employer for whom you work. As regard to logic, I usually don't even try to find it. Often, such an endeavor can cause headaches. Back in the day when I had the time and the will for a few such searches, I was usually surprised that there was solid logic at the end of a long and twisting trail. Maybe you nailed the crux of it. The rules are being changed to make retirement plans more homogenous (sp?). It's getting easier and easier to put money into the plans, but it's still limited as to the occasions for getting the money out.

I suspect you can't quite get there. A couple of years ago, IRS simplified the rules for setting up a series of substantially equal periodic payments. Can't remember the cite and don't have a lock on the methodology. I suspect a 57 year old will have too long a life expectancy to make the money last at 20K a year. It must last for life or life expectancy. A five year payout plan is not allowed. Moving some of the money to another IRA won't work to avoid the 10% tax completely, although it seems a good strategy overall to use the 2 IRA plan. I think you'll be left short of $20K as a permissible distribution. I think he needs to bite the bullet and incur the additional 10% tax for the first 2 or 3 years on some unknown ideal amount of distribution from IRA #2. When he reaches 59 1/2, he can take funds from the 2nd IRA but must continue with the first IRA's payment methodology until 5 years are up. Can't accelerate payments from the first IRA.

Could this be the distinction? Forfeitures are not the distinction, unless they replace otherwise required contributions. If I'm thinking right, required contributions will rarely (I hesitate to say never) be made with forfeiture money in a PSP. Notice 98-4, Q and A B-3. Also see IRC 408(P)(2)(D)(i) for more authoritative but a bit less definitive verbiage.

It's probably the same provision that applies to for-profit businesses. If the entity year and the plan year have the same year end, and if the entity has an extension for filing its tax return (or 990), then the due date for the 5500 runs with the extended due date of the tax (or 990) return. All I could find was a reference in the 1.6058 IRS regulations referring you to Form 5500 instructions for time and manner of filing. The 5500 instructions speak of the extension related to extended TAX returns, but I didn't see a similar reference in the 5500 or 5558 instructions for tax exempt filers of the 990. I'm assuming the same rule applies. Finally, going back to my school days, no fewer than 12 instructors had a warning about assuming, which I choose not to remember. Taking a much more conservative position, you're on safer ground if you're filing an extended 990-t for a plan sponsor who also has the same fiscal year end as the plan. Since the 990-t is a tax return, it definitely meets the specs in the f 5500 instructions.

Can't say much about ERISA, but will throw out another idea from IRS. How about the generic "not following the terms of the plan?" This may be the most popular assertion for potential disqualification for an operational issue (distinguished from plan document failure), but I never did figure out where it comes from. I mean, other than reg. 1.401-1a2, which talks about a plan being a definite written program.

Looks like Notice 2005-84 supersedes 2005-60 and extends funding deadline to 2/28/06.

I like stumpers here and there, but let's go with the 5 second shot for this one. How about the IRS's anticutback rule at IRC 411d6? On the other side of the coin, I wouldn't expect many agents taking issue with this situation.

Any of your scenarios are feasible. The SIMPLE-Ira can't coexist with an ACTIVE plan. In either of your situations, the 401k will not be receiving contribution allocations in regard to its 2006 plan year, even though the plan continues to exist. Regarding notice, in general, the employees get 60 days to make their contribution election when a SIMPLE-Ira is starting.

After hitting the books for a bit, I must agree nothing convincing jumped out. Pursuing it from the 401(m) end, I got into the thicket of code and regs under 401a4, 401m, 402g, 414(l), et al. Like you say, some hurdles are cleared; the definition of elective deferral is solidly met----or is it? There's language regarding such contributions as those being made to a plan, or to a defined contribution plan & ultimately there could be a hangup (requiring the elective deferral to be part of a 401a plan). At this point it's unclear to me, but if it's theoretical, like you suggested, I'm gonna let it go. Parting comment; I wouldn't go there (to such a plan configuration).

But ultimately the substance of the arrangement IS part of the SEP. I picture the qualified plan document allocation provision referencing the SEP. There's no way around that.

I'm sticking with my original statement; the filing or deemed filing starts the statute. If any line items are pertinent and are NOT accurately answered, the statute is 6 years. The 5330's filing begins the SOL for other issues, such as minimum funding.

As far as I know, the IRS cannot abate the tier I tax but the DOL has final say regarding prohibited transactions, so try chatting with them or looking at their web site. It's possible there's a partial break regarding the years ending 12/31/2000 and 12/31/2001. IF the 5500's were filed timely and were sufficient in reporting any line items related to the P.T., the statute of limitations is three years and is expired for those two years. You're still left with the pyramiding of the tax until the pt's corrected, in regard to post 2001 plan years.

For starters, matches aren't permitted in a SEP. Though you might assert the match need only worry about the 401(m) nondiscrimination test, you'd still be subject to a SEP's uniform allocation rule at 408(k)(3) of the IRC.