Carol V. Calhoun

Yes. Unlike 401(k) plans, SIMPLE IRAs are available to governmental entities. ------------------ Employee benefits legal resource site

Yep, that's what I hear, too. However, my understanding is that it is as yet an unofficial position--there has not been any official guidance on it. Is anyone aware of any? ------------------ Employee benefits legal resource site

In theory, under the regulations, the election would have to be both irrevocable and made at the first time the employee was eligible to participate in any plan of the employer. However, in recent private letter rulings under I.R.C. § 414(h)(2), the IRS has taken a much more liberal position. (Some of the ones dealing with purchased service credit seem to allow for annual "one-time irrevocable elections.") You might want to check these out. ------------------ Employee benefits legal resource site

Unfortunately, I'm not aware of any. Among other things, the amendments would be different depending on whether the plan was a governmental or church plan, a salary-reduction-only plan of a tax-exempt employer which met the Department of Labor requirements to be treated as not subject to ERISA, or a plan subject to ERISA. ------------------ Employee benefits legal resource site

Nope. Section 415 limits, unlike elective contribution limits, are on a per-employer basis.

One problem is that 403(B) plans for 501©(3) organizations do require a plan document, unless they are salary reduction only and meet other standards set forth by the Department of Labor. The 403(B) plans examination guidelines to which you refer deal only with the IRS requirements, not the Department of Labor ones. ------------------ Employee benefits legal resource site

Yes. See Rev. Rul. 90-24, 1990-1 C.B. 97, which indicates that this will not be considered an impermissible distribution. ------------------ Employee benefits legal resource site

Maybe even before that. If there is a severance arrangement in place in which his or her rights are vested at some point before termination of employment, the value of the severance would be taxable in the year of vesting, not the year of actual termination of employment. ------------------ Employee benefits legal resource site

Basically, the liability would result from one of two sources. First, taxable contributions to plans are considered wages, on which the employer is liable for withholding. Even if the employer has not in fact withheld, it is liable for paying the taxes which should have been withheld. The most common IRS action in the event of an audit is to go after the employer for those taxes, as opposed to trying to go after individual employees for income taxes. The second possibility is that if the IRS decides to go after the employees, they might sue the employer for failure to disclose the problem. Of course, the success of such an argument would depend on such things as what statements the employer made to employees, etc. ------------------ Employee benefits legal resource site

Looks like you got an answer to this one on the Church Plans message board, from my former partner Danny Miller, who definitely knows what he is talking about in this area. http://benefitslink.com/boards/index.php?showtopic=2050

Section 457(B) is the source for the FIT exemption for employer contributions. "Employee" contributions must be treated as employer contributions in order to be eligible for the exemption. This is typically done by having the employer make the contribution, but by lowering the employee's salary, pursuant to a salary reduction agreement, by the exact amount of the contribution. With regard to FICA and FUTA consequences, see I.R.C. §§ 3121(v) and 3306(u). With regard to income tax withholding, the reason the amounts are not subject to 3405 withholding is because they are treated as wages, subject to income tax withholding. (The normal exemptions for benefits under qualified and 403(B) plans do not apply to 457 plans.) The income tax withholding (unlike the FICA and FUTA withholding) occurs when benefits are paid out, not when amounts are deferred. ------------------ Employee benefits legal resource site

Absolutely! There is no requirement that a 457(B) plan have employee contributions. And a 457(B) plan for a tax-exempt organization (other than a governmental organization) must be a top hat plan, since otherwise, ERISA would require funding the plan, which would eliminate its 457(B) status. ------------------ Employee benefits legal resource site

No, 457 plans cannot make loans to participants. In recent private letter rulings, the IRS has been requiring 457 plans to assert that they do not permit such loans. See, e.g., Private Letter Ruling 199932045 (August 16, 1999). ------------------ Employee benefits legal resource site

Yes, and yes. Is that clear enough? Seriously, plans of the federal government and Indian tribes are exempt from 457. Thus, they are subject to the same deferred compensation rules as private companies, except that since they are exempt from ERISA, their plans can cover rank and file employees as well as top management and highly compensated employees.

The problem with using voluntary employee contributions to meet the requirements is that Social Security must be paid on each employee who does not accrue the necessary benefit under the employer's plan. Thus, you would still have to contribute to Social Security for those employees who elected not to participate. Moreover, it may be difficult to persuade employees to continue to contribute if they realize that failing to contribute will result in their receiving the benefit of employer contributions toward Social Security which are higher than the employer match they could get in the plan. The 7.5% figure comes from Treas. Reg. § 31.3121(B)(7)-2(e)(2)(iii)(A). You can view Treas. Reg. § 31.3121(B)(7)-2 in text format by clicking here, and in PDF format (requires the free Adobe Acrobat Reader) by clicking here. (These pages take a LONG time to load!) ------------------ Employee benefits legal resource site [This message has been edited by CVCalhoun (edited 03-08-2000).]

For everyone who knows me from this board, and has my e-mail, etc., information in their Rolodexes, please note that an update is in order. (I've already updated the information on the board--this is an issue only if you're keeping a card on me somewhere else.) I just started my own law firm, Calhoun Law Group, P.C. New e-mail address is cvcalhoun@benefitsattorney.com . Other contact information can be found by clicking here. I'm very excited about being on my own (well, if you don't count the 7 attorneys in Sanders, Schnabel & Brandenburg, with which my firm has a mutual of counsel arrangement). But for those who have expressed concerns, my employee benefits site will be continuing as always. ------------------ Employee benefits legal resource site [This message has been edited by CVCalhoun (edited 03-03-2000).]

For everyone who knows me from this board, and has my e-mail, etc., information in their Rolodexes, please note that an update is in order. (I've already updated the information on the board--this is an issue only if you're keeping a card on me somewhere else.) I just started my own law firm, Calhoun Law Group, P.C. New e-mail address is cvcalhoun@benefitsattorney.com . Other contact information can be found by clicking here. I'm very excited about being on my own (well, if you don't count the 7 attorneys in Sanders, Schnabel & Brandenburg, P.C., with which my firm has a mutual of counsel arrangement). But for those who have expressed concerns, my employee benefits site will be continuing as always. ------------------ Employee benefits legal resource site [This message has been edited by CVCalhoun (edited 03-03-2000).] [This message has been edited by CVCalhoun (edited 03-03-2000).]

Gee, Kirk, after all that, will it be too much of a let-down if I actually agree with you? Seriously, I don't have a serious problem with arrangements of a limited duration, in which the employee maintains clear ties to the entity which leases the employee to another entity. My concern is more with the horror stories I've seen, in which employees go on for years in fact working for one entity, and theoretically working for a third party leasing agency. You're right that so long as the leasing arrangements are short-term and casual, not only is the risk of their recharacterization lowered, but the risks if they are recharacterized can also be small.

You'd have to look at the specific state's laws, including the terms of the state retirement system, to determine this. It's not a federal issue, but may well be an issue under applicable state law. ------------------ Employee benefits legal resource site

It was in the tax bill Congress passed and Clinton vetoed last year. It's now in both the House and Senate versions of the minimum wage bill. Maybe once the election is over, Congress and the President will be able to come up with compromises, instead of just passing bills sure to be vetoed, and/or vetoing bills if they are passed? By the way, how does everyone like this new format? I'm not sure I like it being known that this is my 356th post on this board!

The real question is whether the employees continue to be common law employees of the city, or whether they in fact become employees of the private agency. This depends not on who pays them, or what their contracts say, but on who actually has direction and control over them. And since that determination is now governed by a 300 million factor test which depends on the color of the moon over Aunt Minny's mimosas on the 23rd of August (okay, so maybe I'm exaggerating!), it's very hard to be sure that the employees remain true employees of the city when their day-to-day work is regularly, over a long period of time, being supervised by someone else. ------------------ Employee benefits legal resource site [This message has been edited by CVCalhoun (edited 03-03-2000).]

The real question here is whether the plan will automatically become subject to ERISA when the tax-exempt entity takes it over. There have been some recent favorable Department of Labor rulings regarding a situation in which a governmental entity continues to hold assets for the benefit of employees who have now been transferred to a private employer. But as far as I know, they have not dealt with the situation in which the plan itself is transferred to the private employer. ------------------ Employee benefits legal resource site

Yes, a governmental plan can obtain an IRS determination letter on its qualified status. We have obtained determination letters for many governmental plans. The reason to do this is that if a governmental plan is not qualified under I.R.C. § 401(a), participants are taxed on contributions to the plan as they become vested -- even though benefit distribution would typically not take place for many years after vesting. Moreover, vested employer contributions are also subject to income and FICA tax withholding. The employer is liable for the taxes which should have been withheld, even if the employer was unaware of the need for withholding and therefore did not actually withhold anything from the participant's pay. Of course, qualified status under 401(a) is available even without a determination letter, if the plan meets the 401(a) requirements. (You can click here for a chart of which IRC requirements do and do not apply to governmental plans.) Thus, a determination letter is just extra insurance that the plan has not made a mistake in interpreting the qualification requirements, and that the plan will not be required to make retroactive modifications if the IRS later changes its mind regarding what a particular provision means. Depending on the circumstances, this protection may or may not be worthwhile. ------------------ Employee benefits legal resource site

I've got one online, which Art Tepfer and I wrote. It's at http://www.benefitsattorney.com/ria.html. ------------------ Employee benefits legal resource site

It's not clear to what extent you might be able to stop the Form 5500 filings on the theory that the 403(B) plan had been terminated, at least if you converted the 403(B) plan to individual annuity contracts. This topic has been discussed before on this board; you can click here to see the older discussions. ------------------ Employee benefits legal resource site