Dave Baker

Security Trust Company: http://www.securitytrust.com/

Excerpt: "Tax legislation to be considered by the House Ways and Means Committee this week would substantially expand pension tax preferences for high-income executives but likely lead to some reductions in pension coverage among low- and moderate-income workers and employees of small businesses. The pension provisions, which are similar to those included in the large tax bill that President Clinton vetoed last summer, would primarily benefit high-income individuals." http://www.cbpp.org/7-12-00tax.htm Do you agree?

One trouble with this situation is the failure of the sole proprietor's SEP arrangement to provide contributions (i.e., to cover) the employees of the corporation. A SEP arrangement is simple but clumsy in this regard; it has to cover all of the age-and-service-eligible employees of the "employer," applying the common control rules of Code section 414©. A corporation wholly owned by a sole proprietorship would be a "brother-sister group of trades or businesses under common control." (See Treas. Reg. section 1.414©-2©.) So the SEP's failure to provide contributions for the corporation's employees means the contributions into the IRA have not been made under a simplified employee pension arrangement after all, and would be treated like any other excess contributions to an IRA (to the extent they exceed $2,000 per year).

He's the sole shareholder of the CPA practice?

Watch your 404 deductibility limit - comes up on you fast if you have a 200% or 300% match. I had a group of doctors use such a match; a couple of the doctors didn't want to contribute but didn't want to formally waive participation in the 401(k) plan, because they thought maybe one day they'd like to contribute. The other doctors were delighted to have the non-contributors continue to be eligible to participate, because the compensation of the non-contributors counts as part of the 15%-of-aggregate-participant-compensation figure (the 404 limit), thereby giving the contributing doctors more headroom. The professional association was able to get a total of $30,000 into the accounts of the contributing docs (deferrals plus the match) without having to make any profit-sharing contribution (which pleased the non-contributing docs, because they didn't have to have a chunk of their draw put into the plan on their behalf as a profit-sharing contribution either).

What kind of employer? Sole proprietor?

Here's some related info re holding real estate inside an IRA: http://benefitslink.com/boards/index.php?showtopic=3462 Two custodians that handle unusual assets are suggested here: http://benefitslink.com/boards/index.php?showtopic=3375 Anybody want to suggest others?

An interesting Q&A in Derrin Watson's controlled group column on BenefitsLink might shed some light -- Using options to create controlled groups (click)

Authority for this is Department of Labor Advisory Opinion 84-44A, I think ... does anybody have a copy of that advisory opinion in data format they could paste into a message here?

See also http://benefitslink.com/boards/index.php?showtopic=5185 re excise tax consequences

http://www.irs.gov/forms_pubs/instruct/i5500-toc.html

This one? http://www.benefitslink.com/links/20000615...15-005844.shtml (Firm is called BenefitFinder.com)

http://www.benefitslink.com/links/19991019...19-002998.shtml

Were the sons named as the beneficiaries of the IRA? Was that designation in place on April 1 of the year immediately following the year during which the IRA owner became 70-1/2 (six months after his 70th birthday)?

I think there is no significant risk to the proposed rollover, despite the "a" language ... the idea is that any qualified plan's distribution can qualify for special tax treatment, in particular 5-year income averaging. That treatment is not available for IRA distributions. So the rule behind keeping the conduit IRA "pure" is to prevent a rollover IRA from being used as a way to move IRA non-rollover contributions (which would not qualify for 5-year income averaging if paid from the IRA) into a qualified plan from which they could be paid and qualify for 5-year income averaging. Having two different plan distributions in the conduit IRA shouldn't matter -- those moneys are from *some* qualified plan, where they were capable of being paid using 5-year income averaging, so the payment of the conduit IRA balance into a single retirement plan doesn't turn non-rollover IRA money into qualified plan money -- it's all qualified plan money to start with.

Maybe the $10k was your account's contribution for your last year of employment, which had not yet been calculated when you retired and received your account balance at retirement? It's common for a plan to need to wait until the end of the year to determine how much goes into each eligible participant's account, and to provide a contribution for people whose employment terminated during the year due to attainment of early or normal retirement age as defined in the plan. The contribution might have been for $8,000 but has grown to $10,000 over the past 5 years, as well.

Personal brokerage accounts are the subject of an article on the 401Kafe.com web site this week -- http://www.401kafe.com/commentary/feature/feature.html

Anybody know where the SPARK RFP can be found online nowadays? American Express' site seems to have pulled it off.

Do you have a booklet (the "summary plan description") that describes your distributions, and does it include a single-sum payment option?

test Can anybody help Steve? [This message has been edited by Dave Baker (edited 03-20-2000).]

I think so -- the purchase of the annuity would be a lump sum distribution "in kind" of the contract, which would not cause income taxation immediately to the participant due to the special rules for taxing annuities in Code section 72. I guess the idea is that the trust is clearing out all of its assets. (If the trust continued to operate, e.g. to make further installment payments, then it ought not to be making payments to pre-59-1/2 persons despite the trust's "termination.")

tcunagin said: The HCE have their own investment accounts, several of them. The non-HCE's have their money in a separate pooled account. The client was instructed to make a deposit, and a transfer from two of the HCE's accounts into the pooled account. The transfer occurred and the client deducted the transfer from the total deposit that should have been made, shorting the amount to be deposited!

Fred Reish's take on this issue: http://www.benefitslink.com/reish/articles...d_expenses.html

But the contributions for the HCEs were made on time? (How did that happen -- are these segregated investment accounts?)

Interesting! Would this be education regarding investments in the employer-sponsored 401(k) plan, or financial planning in general?