J Simmons

Parking is $220/mo for 2008; $230/mo for 2009 Transit is $115/mo for 2008; $120/mo for 2009 Rev Proc 2008-66

Since the Service has made the VS (check the box) so much like the prototype, why does the Service continue them separately rather than merge them into one? Does anyone know what the Service's rationale for keeping them separate is?

The COBRA premiums are premiums for health coverage. COBRA simply implies that the coverage with the old ER is being continued by the EE per his COBRA rights. But the payments are yet premiums for health coverage. Since the new ER is paying them to pay for health coverage for its EE, it ought to qualify for exclusion from the EE's taxable income under IRC § 106(a). For mechanics of how to make the payments, you ought to look at Rev Rul 61-146. You might want to get an opinion as to whether the new ER reimbursing the EE for paying the COBRA premiums is an ERISA employee welfare benefit plan. If so, then there will be ERISA plan document requirements involved.

Good to be leery. There are special concerns when investing the assets of an IRA (Roth or Traditional) in real estate to avoid 'unrelated business taxable income' and/or prohibited transaction by reason of the real estate investment. The assets of a Roth IRA may be invested in real estate, but there are significant limitations and risks. There's no conversion from "Roth IRA" to "Real Estate Roth IRA" except that the Roth IRA's assets are invested in real estate.

"Dissolving" a Roth IRA? Haven't heard that one. It's not a term of art. Dissolving would likely imply more than just stopping contributions. Dissolving suggests that the Roth IRA will no longer be such. That would involve distribution. It is probably worth asking the person using that terminology specifically if they mean distribution of the Roth IRA (or perhaps just stopping contributions).

I agree, Below Ground, since the TSA program could not be said to be 'entirely funded with EE contributions' given that there were ER contributions in that TSA program's past.

Per EE, per ER. Yes.

Spencer, It sounds as though the last assets have now been rolled out of the terminated plan, but it was long after the 2003 termination effort. I take that from the fact that you've now received a Form 1099-R as to that lingering life insurance policy asset. If that is the case, it might be too late now to do updating amendments--other than through EPCRS filing. See Basch Engineering, TC Memo 1990-212, 59 TCM 482 (April 25, 1990). If there are yet any assets held in the name of the plan trust, then you might have an easier time of EPCRS with just interim amendments having been missed but there yet be trust corpus and thus a plan to update. That would yet require a VCP filing, but likely a lesser user fee. And, as you mention, the delinquent f5500 filer program would need to be pursued too. Was a "final" f5500 filed for 2003 (or 2004) showing no assets?

I'm not so sure it hasn't been earned. You, Larry, and I are not being offered these packages just for making the choice, even if we're willing to agree not to work for the ER. It is the existing EEs of the ER. If they were not employed, i.e. had no past service, they would not be given this choice. The ER is giving EEs that take the severance pay a choice between a taxable benefit, the lump sum delta between the two packages, and a non-taxable one, medical payments. You might be able to structure the lump sum delta v medical payments choice in some sort of 125 context, but I think there would be many hurdles if not roadblocks to doing that.

If the severance pay (lump sum or lesser lump sum+med payments) would not be taxable if there was only one severance package rather than two to choose from, then having the choice and picking between two non-taxable benefits should not of itself trigger constructive receipt of taxable income. If the lump sum severance pay would be taxable, then the choice between a taxable lump sum and a taxable lesser lump sum+tax-free med payments would make the choice--which boils down to the lump sum delta or med payments--constructive receipt of the lump sum delta even for those that choose the med payments instead. These are thoughts off the top of my head, not suggesting whether the severance pay would or would not be taxable absent the choice of the two packages.

I would be uneasy about the "seek out one provider" aspect of your question. FAB 2007-2 allows for the ER to take steps to assure tax compliance without blowing the ERISA-exemption. The ER can establish criteria for participation by vendors if that criteria is reasonably related to assuring tax compliance. This may include setting a top end number of vendors, "designed to afford employees a reasonable choice in light of all relevant circumstances. * * * [A]n employer may limit the number of providers to which it will forward salary reduction contributions as long as employees may transfer all or a part of their funds to any provider whose annuity contract or custodial account complies with the Code requirements and who agrees to the plan's division of tax compliance responsibilities among the employer, provider and participant." Note, however, that "[n]egotiating with annuity providers or account custodians to change the terms of their products for other purposes, such as setting conditions for hardship withdrawals, would be a form of employer involvement outside the safe harbor" from ERISA application. I think if you establish vendor criteria designed to assure tax compliance and you permit exchanges to any vendor that agrees to that tax compliance criteria, you could limit the total number of vendors to receive new contributions without blowing the exemption from ERISA. However, it would appear that among those vendor(s) to which you limit the new contributions, the 403b products offered by them would need to give employees a reasonable choice of 403b products for the ERISA exemption to apply.

Sorry, Peter. I do not know if Stark Truss Company pursued any claims against the less experienced lawyer upon which Stark Truss had relied when it missed the updating amendment.

Mr. Kite, Does the particular state's law require dependent coverage in situations that might not be encompassed by the plan's language of rely on the EE for more than 1/2?

Treas Reg § 1.403(b)-3(b)(3) only requires that a 403b contract be maintained pursuant to a 403b plan document to exclude contributions from the EE's taxable income after 12/31/2008. Yet Rev Proc 2007-71, § 8.01 requires a reasonable, good faith effort be made by the ER to include 2004-2008 403b contracts in the ER's 403b plan. Alternatively, those 403b contracts satisfy the 403b plan document requirement if the vendor makes a "reasonable, good faith effort" by "taking action before making any distribution or loan to the participant or beneficiary" including contacting the person in charger of administering the ER's 403b plan and exchanging "any information that may be needed in order to satisfy §403(b)". Then Rev Proc 2007-71, § 8.02 provides that pre-2009 403b contracts of former employees "will not be treated as failing" the 403b plan document requirement if before the vendor makes a loan from the pre-2009 403b contract of a former employee makes a reasonable effort (not relying solely on the former employee's representations) to "determine: (1) whether the participant or beneficiary has in the prior 12 months had any other outstanding loans from qualified employer plans of the employer (taking into account §§72(p)(2)(D) and 72(p)(5)); and (2) if the participant or beneficiary has had any such loans, the highest outstanding balance of such loans during that period." If § 8.01 applies to the pre-2009 403b contracts of former EEs, then what if anything does § 8.02 add? § 8.02 would be rendered redundant. On the other hand, if you are the ER, do you want to risk the chance the vendor won't independently verify before making a loan--causing failure of the 403b plan document requirement because the ER did not also make the effort to include these 403b contracts in the ER's 403b plan?

IRC § 4973

It is always easier to get it right up front than to undo and fix later. I'd spend what you need to with Judy Diamond Associates/FreeERISA for it to do a look up for the Trust EIN before I would apply for (another) one.

In Pawlak, TC Memo 1995-7, 69 TCM 1603 (January 10, 1995), the court observed that the employer/petitioner had (emphasis added): In Stark Truss Company, Inc., TC Memo 1991-329, 62 TCM 169 (July 17, 1991), the employer tried to argue that the IRS should cut it some slack on missed amendments because the employer had switched to a less experienced lawyer. That argument failed.

I agree with GMK. Your SPD ought not refer to or in any way depend on language contained in the newsletter. Also, make sure that the newsletter highlight explains that it is not the SPD, but just a high-level overview and that the SPD ought to be reviewed for information about benefits before any decisions are made or actions taken. Also, your newsletter highlight needs to accurately reflect what it does mention about benefits, and not mislead as some employees will inevitably read just that newsletter. Therein lies the danger if that newsletter misstates anything or glosses over important but not intuitive details. If your newsletter (or employee handbook) merely mentions that employee benefits are explained in the SPD, then all you have to worry about updating when there is a change in benefits is the actual SPD and the governing plan document, if separate.

Is it a 403b plan?

No citation, but I seem to recollect that OFAC screening would not apply because the definition of 'account' excludes those set up by an ERISA plan and that an ERISA plan setting up an automatic rollover IRA would be so excluded.

I think it would be easier to defend if you only attempted to DCFSA the expenses of the child in the private school while of an age that he would be in kindergarten or younger, rather than 'fudge it' at older ages.

As self-employed, you do as leevena notes, get an above-the-line deduction, but no deduction against the 15.3% self-employment tax. Also, you might in fact be an employee of your 'one client'. That might allow you into a group health plan and any other benefit plans that the 'one client' has. You and your one client ought to run the facts of your situation passed the IRS (Form SS-8) to determine if you are actually an employee or independent contractor.

(e) describes the situation where a custodian indicated in response to the ER that even if the EE objected to payout the custodian would nevertheless distribute from the 403b account if the ER notified the custodian that the ER was terminating the 403b plan--the situation you have described as the only response you have heard of. There are mutual fund cos that will not take new dollars into their existing 403b accounts after 2008, but are simply shunning the invitation from ERs to have those 403b accounts maintained as part of the ER's 403b plan--opting instead to simply administer the existing contributed amounts in those 403b accounts, per the existing custodial accounts. Architectspeak of yesterday suggested that such 403b accounts might be "in" the ER's 403b plan anyway, just from the overture by the ER giving a name and contact info to the 403b custodian--that further complicates the ER's ability, logistically, to terminate its 403b plan. I think that your estimate of less than 10% is likely accurate. It might be much less than 10%. I've heard one 403b practitioner that advises 403b ERs across the nation observe that only 3 such clients with individual 403b7 custodial accounts were able to successfully terminate in light of -10(a)(1). Others face plan-lock and a freeze is the best that they can do in avoiding the new compliance chores. The new regs aim heightened compliance responsibility much more at the ER than at the custodian. Upping compliance would have been much more successful in my opinion had the regs outlined more obligations for the custodian, or risk the 403b contract becoming taxable.

I quite like the new term you coined, Architectspeak. Some ERs (the more proactive ones) have 'group' 403b7 custodial agreements, somewhat similar to a group annuity contract. Under a group 403b7 custodial agreements, the ER typically has certain contractual rights that the ER may unilaterally exercise including to direct payout. If so, the ER has the legal right to effect payout incident to termination. On the other hand, many ERs have taken a more conduit-only approach to the involvement of their payrolls in merely accommodating EEs that wanted to make pre-tax contributions to 403b7 custodial accounts. In such situation, the EE has to make his own separate arrangements with a custodial institution of his choosing, to set up a 403b custodial account. Typically, the only two contracting parties to such a custodial agreement are the EE and the custodial institution. There is mention of the ER, such as limiting contributions to remittances received by the custodial institution directly from the ER, but the ER has few if any contractual rights. As plan termination was not a concept known to the 403b world prior to the new regs, many such custodial agreements did not provide for payout incident to when the ER might 'terminate' its 403b plan. The 403b statute has for years if not all along presumed that the 403b product would be purchased by the ER for the EE. So some of the individual 403b7 custodial agreements were drafted to reflect that the ER was the purchaser, and bestowed some contractual rights on the ER. Here is where we end up in the quagmire of Architectspeak. You are correct that Treas Reg § 1.403(b)-10(a)(1) does not set out a time frame for the payout to be 'administratively practicable'. That reg merely provides that "n order for a section 403(b) plan to be considered terminated, all accumulated benefits under the plan must be distributed to all participants and beneficiaries as soon as administratively practicable after termination of the plan." Architectspeak at other forums during the last 12 months includes the notion that the 12-month period that applies for payout of benefits incident to the termination of a 401a QRP applies also to the payout period for terminating 403b plans. In section 8.3 of the model 403b plan language attached to Rev Proc 2007-71, the model language provides (emphasis supplied): In Architectspeak, this means that an ER with individual agreements in its 403b program may only terminate the 403b plan if all the individual agreements permit payout by reason of plan termination by the ER. I think it is equally a plausible interpretation to be applied to the bolded phrase above in the model 403b plan language that contracts that permit payout incident to an ER terminating its 403b plan will be distributed and those contracts that do not will pay out on their own terms. Is the "subject to any restrictions contained in the Individual Agreements" a qualifier of the ER's practical ability to terminate the 403b plan (Architectspeak) or a qualifier on the operative portion of that sentence, "all accounts will be distributed" (not Architectspeak)? FWIW, I did not include the bolded phrase in the 403b documents I drafted because of that vagueness. Even in the conduit type of arrangements where the employee signs the custodial agreement with the MF (which was mostly used in 90-24 transfers) the custodian can still terminate the agreement without the consent of the employee. The custodian will not want to continue administering a custodial account under the 403b plan after the plan has been terminated because the custodian will not be willing to assume any responsibilty for compliance with the provisions of 403b such as loan and hardship or amending the contract for future revisions to 403b. If the employer indicates its intent to terminate the plan the custodian will not question whether termination is permitted under the regs but will resign as cusotdian and distribute the funds to the participant to avoid any risk or responsibility for administering the account under the 403b regs. If an ER gets written assurances from each of the custodians that it will do as you describe, then the ER might want to proceed to terminate the plan. Some of the custodians that responded to the reasonable, good faith effort my client/ERs made this past year under section 8.01 of Rev Proc 2007-71 ranged from (a) given its agreements, only if the EE consents would the custodian be willing to do a distribution incident to plan termination by the ER, (b) no response at all from the custodian, © affirmative refusals to cooperate with the ER's 403b plan efforts (even before any plan design or terms had been decided upon), (d) 'yes, we'll cooperate--here, sign our info service/service agreement and no, we won't even consider negotiating with or look at a counterproposed agreement of the ER', (e) custodian would distribute over top of any EE objection if ER terminates its 403b plan, (f) etc. Not really too manageable. Only one of my clients was able to successfully terminate its 403b program that included individual 403b7 custodial agreements from multiple vendors--and that was after the ER agreed to reimburse a few of the EEs that would face forced surrender charges.

The universal availability rules took effect in 1989. House Committee Report on TRA '86 for IRC § 403, under the heading Elective Deferrals, there is explained that (emphasis added)— Initial IRS guidance on the universal availability requirement was provided in Notice 89-23 (IRB 1989-8, February 21, 1989) (emphasis added): An EE generally does not have an opportunity if he is not aware of it. Annual notice to all eligible employees is generally deemed sufficient by the Employee Plans Correction Units (EPCUs), at least EPCU closes its review if the ER explains that such notices are so provided. One of the questions on the EPCU compliance check questionnaires sent out with IRS Letter 1562-F re 403b universal availability asks: "5) Describe how the opportunity to make deferrals is communicated to employees to ensure that they are aware of their right to participate in the section 403(b) plan. If the method differes by groups of employees or if there are different hiring packages, explain that as well." The EPCU follows up with Letter 1564-B (7-2007) when the responses from the ER suggest a possible failure of universal availability. EPCU gives the ER 240 days to correct by the ER making a 'lost opportunity cost" contribution for each EE equal to 1.5% of pay, or if less and calculated, 1/2 of the average of the deferral percentages by those that were in fact given the opportunity.