Bill Berke

I think that if you filed the 5558 before the announcement, then the announcement controls and you have the extended date. If the form was filed after the announcement was published, then you could take the position that it was an internal clerical error to be ignored. I wouldn't include the 5558 with the filing. If the gov't did a complete job (ha) the computer should be programmed to accept any 5500 forms timely filed (by Oct 16th) without regard to any existing 5558. [This message has been edited by Bill Berke (edited 06-01-2000).]

I would take your clients to their lawyer for a discussion of the community property laws versus the separability requirements in the 1563 Regs. If your clent has maintained separabilty in accordance with the Treas Regs, then your client can make a reasoned decision regarding whether the 414/1563 rules apply and how. I am not aware of any cases on this point.

Are you sure this was an IRS ruling/notice? It sounds like the DOL (and they issue Advisory Opinions). Please post the cite. The DOL says charges to plans are acceptable if they are for the adminstration of the plan or a bell and whistle for the employee (TPA fees, loan fees, trustee fees, even some legal fees). One CANNOT charge a fee for something that is for the benefit of the employer (e.g. plan termination fee) or for work that is statutorily required such as QDRO work.

Why couldn't the wife adopt the husband's SEP? This is permitted and it seems to me a way around the thorny issue of attribution. Why a SIMPLE? A SEP will do the same job where there are no employees. Unless the issue is the percentage of contribution 15% vs no %-max $6000. And deeming a partnership may prove a wise route to max the contribution if there is an earnings difference. Check with taxpayer's CPA. Here in Calif the argument is whether the Treas Regs 1563 control or does community property "attribution" control? I have not heard a definitive answer. This is a non-issue in separate property states, which leads me to believe that the Treas Regs will control. But, who knows? [This message has been edited by Bill Berke (edited 05-22-2000).] [This message has been edited by Bill Berke (edited 05-22-2000).]

I don't understand the twist. Perhaps giving an example would clarify your question.

I agree with DaveF. I think it will be important (if auditted) to show the compelling reason(s) for the freezing/no distribution and the unpredictable change in circumstances causing the unfreezing. [This message has been edited by Bill Berke (edited 05-08-2000).]

In general your plan will work. The internal subsidizing has no effect on the plan because all the plan is dealing with is compensation paid or accrued on the books for the relevant period. I can't speak about the Medicare rules. What I see in your question are a lot of payroll recognition and income tax timing issues which should/must be reviewed in detail by a CPA or tax lawyer.

Yes - see IRC 414(B)

I agree with PAX - something is strange to have a 10/12 year. Usually, as PAX said, this has something to do with eligility in the first year. If not obvious, you must investigate. And we use 6 months eligibility first day following entry for most of our small plans. There are lots of reasons to use reduced requirements all relating to eligibility or appropriate planning. For example we have a client with lots of parttimers who employer wishes to cover. So we had to reduce 1000 hours and eligibity to conform to employer's goals. [This message has been edited by Bill Berke (edited 05-08-2000).]

Yes, from what you've written the plan seems okay. If you chart out the actual dates for your employee, you will see that the employee particpates within the eighteen month requirement of 410. Your employee would participante the following June 30 - upon completing 12 months of service. Exactly 18 months from hiredate - and in compliance with 410 [This message has been edited by Bill Berke (edited 05-08-2000).] [This message has been edited by Bill Berke (edited 05-08-2000).] [This message has been edited by Bill Berke (edited 05-08-2000).]

I agree with Fred Reilly - IRC Section 408(p)(2)(D) says SIMPLE is kosher if no other contributions or benefit accruals credited in same year to qualfied plan. Thus can't have plan to aggregate. Also, how do you get only HCEs in the paln. Are they the only people who have earned at least $5,000 in prior two years? I don't know of any way to divide the SIMPLE eligibilty rules. IRC Section 410 doesn't apply to SIMPLEs, thus you have no eligibility designing avaliable to you.

As my guess - they are IRAs and I think that a disqualified SIMPLE is the same thing as an impermissible IRA and you would correct according to those rules - reversal allowed until 4/15 of the following year. But, you're suggestion to W-2 the deductions would effectively do the same thing as long as the accounts are timely closed and the earnings are currently reported.

I tell our clients to get a letter from the insurance company -NOT the agent, that the policy complies with all the requirements of the the IRC. The letter is quite detailed in its info request. I think a written affirming response is one of the fiduciary requirement selection requirements. And all the insurance companies who sell annuities to qualified plans have this language if you ask for it to be included.

No, all plan paricipants are counted and measured as to whether or not a partial termination has occured. Good luck on dealing with this gray area. I use the rough rule of thumb that - if the thought occurrs (partial termination), then I'm probably facing a partial term. BNA portfolios have an excellent desciption of this frustratng area.

Yes. You are going to carry two accounts - before and after the amendment. Is your client ready for the employee relations fallout and additional expenses and liability?

As you can see from the replies, this area is unsettled. I hope I am wrong in the belief that inside directorships are an extension of their management duties. Certainly that argument can be made if the inside director is not a manager, supervisor or officer. But how many inside directors are officers? (Probably all) So, unless I have a written opinion to the contrary, I assume that inside directors have an m(5) problem.

I have always believed that inside employee directors were continuing in their management capacity, thus 414(m) would preclude a separate plan. Outside directors are in a different position. They are not providing management services, they are providing directorship services which is a guiding position not a management position. Offbeat analogy; Congess versus the Executive branch.

Code Section 414(B) says yes. Contolled group rules apply to 408(k) and (p) Thus, all the transition rules apply [This message has been edited by Bill Berke (edited 04-20-2000).]

Plan language is secondary. State laws would control and define and paying directly to minors absent legal intructions and process is unwise.

Reish and Luftman, law firm has written a number of articles. You can contact them, I think through a link or ASPA directory

You can/should believe a written statement from the attorney regarding his/her representation. Only a fool or an outlaw would lie because of the legal ramificatons of misrepresenting who is the lawyer's client. However, if the participant has a bene designaton on file and you (plan admin) knows of death, then it is the bene who is now entitled to info not the estate. Things change at the moment of death - ask your local estate planner And there are lots of cases in benefits law regarding beneficiary designations and challenges.

IRC eligibilty requirements state the person must be employee with at least compensation of at least $300 (without COLA) to be considered for the plan. Your 1099 person had no income ergo, I think, not eligible See IRC 408(k)(2)

I strongly believe that the comp limit ($170,000 - 2000) applies. Read Code sections 408(k)(3)©, 408(K)(7)(B)and 401(a)(17). The rather convoluted way I got to this opinion.

Code Section 408(p)(2)(D) says employer may not adopt SIMPLE during any period in which employer contributed to another plan or that other plan accrued benefits(except union plan)

Assisting your client in this way may make you a fiduciary. Are you prepared for this? In a 1994(?) consent case the Arizona Carpenter's Union lost, the DOL published a blueprint for selecting and monitoring investment managers. The principles should apply in all fiduciary actions. A law firm I know in Sacremento, CA is excellent and experienced in RFPs. It is Chang, Ruthenburg and Long - you can look them up in either the ASPA or NIPA directory.