Dave Baker

Cool! Thanks for adding the link! There was a case out of Florida -- a friend of mine handled it -- in which he was able to argue that because the IRA had SEP contributions it had a different status than an IRA into which employer contributions never had been made, but I think it was reversed on appeal.

Interesting! The thinking is that an IRA that's part of a SEP arrangement would have superior protection against creditors under the applicable state law, as compared to an IRA that held only the regular sort of contributions made by the IRA owner?

As a legal matter, there's no transfer of funds required in order for the employer to begin using a different investment firm for future contributions -- the already-contributed funds can stay in the employees' current IRAs. But if the new investment firm doesn't want the employer to contribute funds to the employees' IRAs for which the former investment firm is acting as IRA trustee or IRA custodian, then the new investment firm can set up new IRAs for the employees. An individual can own more than one IRA. Then the individual employees can direct the old investment firm to move their funds into the new IRA at the new investment firm, as a direct transfer (no withholding or other income tax aspects). I think each employee would need to provide that direction to the old investment firm (the employer probably wouldn't have the authority to do so).

I'm not even sure that notice to employees is required -- but that certainly seems prudent from an employee relations standpoint. The reason for this informality is that a "simplifed employee pension" or "SEP" technically (in the terms of the Internal Revenue Code) is just an individual retirement account that receives contributions pursuant to rules set forth in a written program (called a "SEP arrangement" in the Code), such that the employer's contributions to an employee's IRA are not considered to be compensation-type income to the IRA owner (the employee) and don't count against the usual $2,000-per-year limit on IRA contributions made by the IRA owner. Some institutions call such an IRA a "SEP-IRA," to earmark it for their internal purposes as being an IRA into which more than $2,000 a year can be deposited (the employer contributions) without having the accounting computer throw a fit. But employer contributions pursuant to a "SEP arrangement" that meets the Code's definition of a SEP arrangement can be made to any old IRA the employee already has established (other than a Roth IRA), and that IRA becomes a "SEP" for purposes of the employer's contribution. So, assuming the written "SEP arrangement" met the Code's rules when the employer's contributions were made to the employees' IRAs, those contributions are safely tucked away in the employes' IRAs and there's no tax-exempt trust fund to blow up later (as with a tax-qualified retirement plan under Code section 401 that becomes disqualified because its terms fall out of compliance with changes in the tax laws). Basically the employer just walks away from any future funding under the SEP arrangement.

Got a report that (202) 622-6075 has been changed to (202) 283-9517.

Here's a link to Tom's message: http://benefitslink.com/boards/index.php?showtopic=4918

Just to clarify -- this employer's taxable year is the calendar year, the plan year is the calendar year, and the contribution was made in March of 2000? But the employer wants to consider the contribution as being made for the 2001 plan year, so it doesn't have to take a relatively useless deduction for 2000 due to other losses (or not much taxable income in 2000 for some other reason)?

Tess was a precocious eight year old when she heard her Mom and Dad talking about her little brother, Andrew. All she knew was that he was very sick and they were completely out of money. They were moving to an apartment complex next month because Daddy didn't have the money for the doctor bills and our house. Only a very costly surgery could save him now and it was looking like there was no-one to loan them the money. She heard Daddy say to her tearful Mother with whispered desperation, "Only a miracle can save him now." Tess went to her bedroom and pulled a glass jelly jar from its hiding place in the closet. She poured all the change out on the floor and counted carefully. Three times, even. The total had to be exactly perfect. No chance here for mistakes. Carefully placing the coins back in the jar and twisting on the cap, she slipped out the back door and made her way 6 blocks to Rexall's Drug Store with the big red Indian Chief sign above the door. She waited patiently for the pharmacist to give her some attention but he was too busy at this moment. Tess twisted her feet to make a scuffing noise. Nothing. She cleared her throat with the most disgusting sound she could muster. No good. Finally she took a quarter from her jar and banged it on the glass counter. That did it! "And what do you want?" the pharmacist asked in an annoyed tone of voice. "I'm talking to my brother from Chicago whom I haven't seen in ages," he said without waiting for a reply to his question. "Well, I want to talk to you about my brother," Tess answered back in the same annoyed tone. "He's really, really sick... and I want to buy a miracle." "I beg your pardon?" said the pharmacist. "His name is Andrew and he has something bad growing inside his head and my Daddy says only a miracle can save him now. So how much does a miracle cost?" "We don't sell miracles here, little girl. I'm sorry but I can't help you," the pharmacist said, softening a little. "Listen, I have the money to pay for it. If it isn't enough, I will get the rest. Just tell me how much it costs." The pharmacist's brother was a well dressed man. He stooped down and asked the little girl, "What kind of a miracle does you brother need?" "I don't know," Tess replied with her eyes welling up. "I just know he's really sick and Mommy says he needs an operation. But my Daddy can't pay for it, so I want to use my money. "How much do you have?" asked the man from Chicago. "One dollar and eleven cents," Tess answered barely audibly. "And it's all the money I have, but I can get some more if I need to. "Well, what a coincidence," smiled the man. "A dollar and eleven cents-- the exact price of a miracle for little brothers." He took her money in one hand and with the other hand he grasped her mitten and said "Take me to where you live. I want to see your brother and meet your parents. Let's see if I have the kind of miracle you need." That well dressed man was Dr. Carlton Armstrong, a surgeon, specializing in neuro-surgery. The operation was completed without charge and it wasn't long until Andrew was home again and doing well. Mom and Dad were happily talking about the chain of events that had led them to this place. "That surgery," her Mom whispered. "was a real miracle. I wonder how much it would have cost?" Tess smiled. She knew exactly how much a miracle cost... one dollar and eleven cents... plus the faith of a little child. A miracle is not the suspension of natural law, but the operation of a higher law. (Author unknown; thanks to Cindy L. Lambert for this contribution!)

It's not so much a matter of not knowing enough to ask as it is intimidating. For a great many people, it's a big, scary deal when they're filling in "legal" forms (or when they're out in public with a lot of strangers, standing in a little booth, with a lot of people waiting in line behind them and all kinds of commotion going on). Under those circumstances, for a lot of people it's not in their nature to get assertive and demand assistance or clarification.

Carol Calhoun has a nice listing of the tax code requirements that apply to tax-qualified governmental plans at http://www.benefitsattorney.com/appfa.html -- though it doesn't identify which are affected by GUST.

This has come up a coupla times before -- http://benefitslink.com/boards/index.php?showtopic=7140 http://benefitslink.com/boards/index.php?showtopic=898 -- but I don't think we nailed it down.

See also http://www.benefitslink.com/boards/index.php?showthread=7039

Something I try to apply when drafting forms is the "grandmother test." I ask myself, "if my own grandmother were to get this form in the mail, how would I want it to read for her?"

I'm concerned with the "screw 'em if they can't read a ballot" perspective we're seeing on some of the "man on the street" interviews. Yes, there is a level of individual responsibility for being careful in preparing to mark a ballot and then in marking the ballot. But if the fact is that a large number of voters were confused, then that's the fact. Assume a plan administrator drafts a distribution election form and its accompanying explanation of annuity options-- and a small percentage of the participants' surviving spouses later come back to the plan and honestly say that didn't understand the paperwork to say that a widow would get no benefits at all after the participant's death under the "life annuity" option they chose. Somebody in the pension business is probably inclined to say "tough luck, lady, we can't allow adverse actuarial selection." The big picture here is that a plan exists to provide benefits to participants and their beneficiaries (the "exclusive benefit" rule), and if it's not putting dollars into the hands of those people in the way they expect, then it's failing them to a degree. The plan administrator is a fiduciary whose job, in effect, is to "look out for" the interests of the beneficiary of the trust. If a dumber-than-average beneficiary in fact is confused, even if it's "his own damned fault," and the fiduciary knows or has reason to know that such a beneficiary is going to be confused, then shouldn't the fiduciary look out for dumber-than-average beneficiaries, too?

Does the IRA owner have anything to do with the corporation whose stock will be held by the IRA?

Here's something on point, I think: http://www.benefitslink.com/benefits-bin/q...atabase=qa_401k

A sobering example of the importance of clear plan administration forms to be completed by participants (beneficiary designations, annuity waivers, etc.) -- there is strong evidence that several thousand people who voted for one candidate have had their votes counted for another candidate due to the way they marked a ballot form. From the Associated Press 11/8/2000: "Buchanan got 3,407 votes for president in the heavily Democratic county Tuesday, more than he received in any other Florida county, according to unofficial returns. Statewide, Gore was behind George W. Bush by fewer than 1,800 votes, and Florida held the key to the national race. "It was so hard to tell who and what you were voting for. I couldn't figure it out, and I have a doctorate," voter Eileen Klasfeld said. "Two larger counties south of Palm Beach both had much lower Buchanan results-- 789 in Broward County and 561 in Miami-Dade County. In Duval County, a much more conservative county in northeast Florida, only 650 Buchanan votes were cast. "The confusion apparently arose from the way Palm Beach County's punch-card style ballot was laid out for the presidential race. Candidates are listed in two columns, with holes down the middle between the columns, to the right or the left of each candidate's name." Copy of the ballot: http://www.sun-sentinel.com/images/PalmVot...otConfusion.gif A better photo of the asymetrical form, showing candidates' name blocks like staggered dominos lined up to face each other down the center of a page, where each of the tiny holes in the center lines up with a border between two of the dominos: http://wire.ap.org/APnews/center_story.htm...IMAGEID=1594562

Yup, both are talking about the definition of expenses paid for "medical care" as defined in Internal Revenue Code section 213(d). It's possible that the cafeteria plan document is written more narrowly, though -- that is, by its terms certain items that are "medical care" expenses within the meaning of the Internal Revenue Code might be expressly excluded from reimbursement under the particular cafeteria plan.

Sure can. Check to be sure there isn't any language in the particular IRA agreement that requires beneficiaries to take a distribution, though. But it wouldn't be very smart for a financial institution to require assets to leave the door any faster than the law requires. The law does require the beneficiaries to make withdrawals (causing ordinary income tax to the recipient beneficiary) at a certain minimum rate, though. This should be described in the IRA agreement. Basically you're looking at two sets of rules: one applies if the IRA owner had reached April 1 of the year that followed the year in which he or she attained age 70-1/2 (six months after the 70th birthday); the other applies if death occurred before that April 1 (the "required beginning date"). When did the IRA owner die -- before or after the required beginning date?

Another source: http://www.benefitslink.com/links/19990524...24-001908.shtml

By TPA, I assume you mean an administration consultant, rather than the entity named as the "plan administrator" in the plan document ... I would think the administration consultant has no obligation once its contract for services has run out. Ideally this sort of thing would be addressed in the contract, though I don't think I've ever seen one so specific. I doubt there is any legal obligation on the part of the TPA to continue to provide assistance once the TPA is no longer getting paid for those services.

Maybe something here: http://benefitslink.com/boards/index.php?showtopic=2143

I think there are companies that do that sort of thing for a fee -- see http://www.benefitslink.com/yellowpages/sbaudit.shtml for example

I pulled this from an earlier thread ( http://benefitslink.com/boards/index.php?showtopic=1141 ): "However, (keep your eye on the ball here now) if the retiree's spouse becomes covered under the alternative coverage and a subsequent divorce from or death of the retiree would cause the spouse to lose that coverage under the terms of the alternative plan, then the spouse will have experienced a new qualifying event that gives her the COBRA right to elect an additional 36 months of the alternative coverage! Treas. Reg. § 54.4980B-6, Q&A 7 and -3, Q&A-1(h), examples 4 and 5."

Remember that the vesting schedule applicable to the matching contributions is another important factor -- see http://www.401kafe.com/commentary/feature/...ure_100200.html