Steelerfan

Does anyone have any knowledge of what's going on with the NJ Division of Taxation on this issue and what employers are doing? It appears that NJ is attempting to tax salary deferrals at the time of deferral, unlike the timing for federal taxes (at distribution). This is contrary to their prior stance that they would tax deferrals at distribution if the plan is unfunded, etc. Their theory seems now to be that employees are in constructive receive of the amounts when they are earned since they can control their deferral percentages. The law and regs in NJ may support this view, but they have flip flopped on their approach, creating an inconsistency in published guidance, and now won't clarify when they should be taxed. This poses a problem for employers who don't have certainty as to when the requirement to withhold income taxes arises. Anyone know how companies are handling this problem, or if they are ignoring it, etc?

SUB plans if set up properly are not subject to FICA/FUTA. And even if they were, I'd be pretty pist if you used my SUB benefits for the employer portion.

The fourth para said the value fluctuates daily, not that it's valued daily.

I think the reporting depends upon whether the payments are treated as wages for FITW. If not (which I suspect), then trust should report payment of 600 or more in the aggregate on 1099-MISC. If they are treated as wages with FIT withholding, then Reg §1.6041-2 requires withholding on a W-2. for FITW, what counts is the entity that controls the payment, not who services were performed for (you're confusing FITW with FICA)

I don't recall anything that required amending previous returns. My understanding is that late penalties and interest would apply, but it's been a while since i looked at that guidance--hopefully more guidance on calulation of income and penalties is coming.

I agree with previous posters, but the fear is it's always hard to tell where TPA duty ends and fiduciary begins (not to suggest you'd have fid liab). Rather than get all the raw data, maybe you could compose a list of fill in the blank questions and let them fill in the numbers. Otherwise I'd suggest using this incident to renegotiate the contract and make it clear that they must provide you with the info you need either responsible for testing or must give you the i. They probably have illegal aliens on the payroll, and i don't mean the kind from MIB.

serously though, you have to admit it wasn't that good an argument!

I think the rules require retroactive income taxation and withholding plus 20% on non-grandfathered amounts from the time the amounts were deferred and first not subject to a substantial risk of forfeiture.

there's one other thing that can't be overlooked, and that is that the person can't already be the common law employee of the service recipient; the term “leased employee” means "any person who is not an employee of the recipient . . .", which has been interpreted to mean "common law employee". Since that test is a facts and circumstances test it is a potential trap for the unwary. If that were case, the service can't be excluded and the person isn't eligible for the leased employers benefit plans. I think everyone overlooks this assuming that temps would be leased employees afer a year, but there are cases where temps could be considered common law employees of the receipient. The easiest example of this is when a company rehires retirees and then pays a third party to cut checks. The reality is that the temp agency is a payroll processor and that is only one factor in whether or not a person is a common law employee. Reality is nothing changed and the retiree is likely to be considered employed by common law standards. and BTW, there has to be an agreement betwen the recipient and the agency and id be surprised if there was no writing.

This issue can occur even where there is no pre-deceasing taker. This acually happened to me. I had an Aunt on my father's side who left 1/2 of her estate to my cousins (my father's sister's kids) of which there are 4 and the other 1/2 to me and my 2 sisters (three of us). The will did not say per stirpes and so me and my sisters got more than each of my cousins. They asked us to have the will re-drawn for equality and we all said no. I think they still hate me to this day. I don't know what the answer is, but to me the Point is that you better draft it the way you want it or else accept the result of the default rule.

They made the informal argument that the statute, sec 401(k), requires income inclusion. It seems it might be an uphill battle to argue that rules of constructive receipt/409A which merely allow for deferral would trump a statute that aguably requires inclusion, but i agree its not very clear.

The IRS begs to differ, they think the 401(k) regs mean the amounts have to be incuded in income.

Even if you could make a proper 409A election, the IRS several times before enactment of 409A had taken a public stance against being able to do this. They believe that since the 401(k) regs state the amounts must be distributed, that means they can't be deferred. No one has appeared willing to push the issue.

Sorry me again: From CCH: "The performance goal requirement is met if: (1) the grant or award is made by the compensation committee; (2) the plan includes a per-employee limitation on the number of shares for which options or stock appreciation rights may be granted during a specified period; and (3) the amount of the compensation to be received is based solely on the increase in value of the stock after the date of the grant or award "(Reg. §1.162-27(e)(2)(vi)). The legislative history also supports this interpretation. Good luck!

This is reported on a Form W-2 and is subject to FICA/FUTA. Retiring doesn't make distributions non wage payments.

Don't forget the "plan" is separate from the "trust". Not sure why you couldn't transfer the assets to a rabbi trust created by the employer without liquidating and recognizing gain (or loss). But as a practical matter if there were gain or loss, the employer would have to recignize it on their tax form as income, etc. from a grantor trust.

In my experience most plans list the maximum # shares available for awards and an individual limit per annual award for each eligible officer, even if the officer is not in the top 4. I would think failure to have a per person limit would be fatal, but haven't seen the issue myself.

I don't think the employer can't legally hold the money either. As part of a settlement agreement, the participant can agree to have the 401k money be paid to the employer. How this works out in reality is unclear to me since the employer is apparently required to pay the money, but can't prevent the participant from spending or "hiding" it before a settement can be reached (or is there a way?).

The effective date can be anywhere in between 1/1/05 and 1/1/08. I recall some guidance that said the amendment doesn't have to be retroactive to 1/1/05 as long as the plan was in operational compliance on and after 1/1/05.

I thought the fiduciary duty rules didn't apply to welfare benefit plans as long as assets are not held in trust.

J Simmons quote: "This is why I think the LaRue decision will nudge more plans towards brokerage windows and open architecture rather than back to non-directed status. " How does brokerage window and open archtecture work?

Of course I don't know what the result on remand will be, but I think P will have to prove a breach occured, that much is clear. All the facts will have to be sorted out to determine whether the P followed the plans proper procedures, etc. I already said before that footnote 3 presents obsacles, but the employer's position is clear and I would bet that exchaustion would be futile at this point and thus not a bar to a court proceeding. I meant litigable back up to the Supreme Court, as you keep talking about LaRue II. There is no issue left that should go back up to the SC. The entire issue surrounding whether a breach occurred can be litigated, but 502(a)(1)(B) is not an obstacle; it is irrelevant in this context. How would you propose to win on the argument that the plaintiffs remedy under 502(a)(1)(B) is adequate and relief under 502(a)(2) is inappropriate? There is no authority (other than Robert's misprint--which is not even legal authority) to say that 502(a)(1)(B) can be a defense to this claim. The Court made it clear that if a fiduciary breach occurred causing a loss, liability under 502(a)(2) is the remedy--period, end of sentence, no ifs ands or buts. The P will have an opportumity to prove that a breach ocurred, and 502(a)(1)(B) cannot bar recovery if a breach is proved. That is clear from the language of the majority opinion, regardless of Roberts rantings in his concurrance.

People do it all the time. You may or may not be sure you'll collect, and maybe you sue, maybe you don't. Take the OJ Simpson civil case as an example. I still don't think the goldman's have recovered much if anything. When evel knievel died there was a 30+ year old personal injury judgement against him that remained uncollected. You're putting the cart before the horse because you don't like the rule. But why go into this tangent just because some judgments may be uncollectable? If it's uncollectible, you either sue for principle or you walk away. Why is this relevant? Of course some courts had ruled against these claims, Im not saying it was unanimous, just saying that most lawyers are not fighting this and were not surprised by the ruling. It was merely confirmation of what they already knew and they aren't changing their operations. No one ever said recovery would be automatic, if you read my prior posts it makes clear that there is a long road ahead of this participant in order to win. Not sure what issue you think is still litigable after this decision. It's as if you disregad the majority opinion in favor of a concurring opinion that has no force of law and has no rationale that makes sense in the context of the facts. Roberts's opinion offers no rationale or explanation of why or how 502(a)(1)(B) could or should preclude recovery where it is shown that the plan has sustained a loss that cannot be restored to the plan without further action. The majority opinion is the law and Roberts's opinion runs counter to it. His opinion could be persuasive in cases where the participant could receive his full benefit without the need for a 502(a)(2) remedy. But sec 502(a)(2) in this case is not providing icing on the cake like 502(a)(3) might in another case; rather it constitutes the meat of the remedy in this case, without it, Larue must live with what he got. In addition, you have offered no explanation or rationale for your position despite several posts (not all by me) describing the inadequacy of 502(a)(1)(B) as a remedy on the facts of LaRue or similar facts, and several posts that fairly substantially skewer Robert's opinion--in fact im begining to think that the majority didn't address his opinion because it make so little sense in the context of the case at bar that it wasn't worth the time and effort to respond to it. I'm not sure there's anything more I can say about this that hasn't been said, we may just have to agree to disagree.

well, I actually just spoke with an ERISA litigator who has been operating all along under the assumption (i.e." advising clients") that these types of claims are (have always been) permissible based on the fact that many lower courts have held that such claims are permissible and a belief that the defenses against these claims have been generally regarded as weak. His advice is that, based on the above assumption having been in place and generally regarded as true, there shouldn't be a flood of litigation, unless all the media attention focusing on this case causes participants to file suit. But even if that isn't true, and there is a flood of litigation, since when does the tail wag the dog. How to collect or the feasibility of collection is ancillary to substantive rights and many people get out of judgements by filing bankruptcy or just being uncollectible (this happens all the time in tort and contrat law) Ability to collect shouldn't dictate law. Why should a person who has lost substantial retirement income not be able to recover just because a mistake might be as you say innocuous? It's about making the party who can better bear the cost be responsible. Why should the participant bear the cost? A participant generally will not be able recover finanacially froms such a blow. There is no evidence to support the contention that allowing these claims will destroy the foundation of the current retirement scheme or the fabric of the universe.

There is arguably less authority for Congress to regulate in the family law area since that has historically been the province of the states and is thought of in regards to the states' police police powers. On the other hand pension law is not exacly a matter of police powers, it begs for uniformity and has more of an effect on interstate commerce. I'd think just those facts and a slew that i'm sure i can't even think of would weaken the use of an analogy to family law. But putting all that aside, what should be do? I suggested we need a Supreme Court with backbone.