Everett Moreland

See Revenue Procedure 2007-44, section 5.05

Belgarath: Maybe what you are looking for is in item 1 on the webpage at the following address: http://www.irs.gov/retirement/article/0,,id=184417,00.html

http://www.icmarc.org/ImageCache/pubs/401/...ersionformu.pdf

See Carol Calhoun,. Cynthia Moore & Keith Brainard, Governmental Plans Answer Book Q7:121-Q7:141 (2d ed. 2007)

The rule allowing a nonspouse beneficiary to elect a direct rollover does not validate a direct rollover as a result of this participant's election. i.e. IRC § 402©(11) does not apply to a direct rollover as a result of this participant's election.

See IRS PLR 200204038, here: ftp://ftp.irs.gov/pub/irs-wd/0204038.pdf. That ruling does not answer the plan interpretation question of whether the rollover should be completed even if not tax-free. My guess is that most plans would be interpreted to give the benefit to the beneficiary, not to the IRA.

In many (most?) states this would violate the state's wage withholding law. These laws generally prohibit a payroll deduction not authorized by the employee in writing. The safer way to do this is, as QDROphile states, cut wages and increase the employer contribution for medical benefits.

These exclusions are not subject to any nondiscrimination testing under the Internal Revenue Code.

From 72 Federal Register 16889 (April 5, 2007): "As noted above, the final regulations provide that a plan cannot take into account compensation in excess of the section 401(a)(17) limit. In addition, the final regulations provide that elective deferrals can only be made from compensation as defined in section 415©(3). However, in applying these two rules, a plan is not required to determine a participant’s compensation on the basis of the earliest payments of compensation during a year."

Following is a link to a brochure about the NY City Employee IRA: http://www.nyc.gov/html/olr/downloads/pdf/...RA_Brochure.pdf

A 401(a), 403(b), or governmental 457(b) plan can be amended to include a deemed traditional IRA or a deemed Roth IRA. See Internal Revenue Code Section 408(q). Usually the power to amend a plan is with the employer, not the plan administrator. It is improbable that an employer would be willing to amend a plan to include a deemed IRA, because that would increase the employer's compliance costs and risks and fiduciary duties and risks and because there is no shortage of IRA providers.

K2retire: Probably the way to think about this is in terms of delegation of the trustee's powers in accordance with the terms of the plan. If the plan allows the trustee to amend and to delegate the power to amend, then the next question is whether the power of attorney delegates the power to amend in accordance with the terms of the plan. My starting assumption would be that the power of attorney would need to name the plan and state that the power to amend is delegated. If the power of attorney is merely a general power of attorney, and does not name the plan and state that the power to amend is delegated, I doubt a court would treat the power of attorney as adequate to allow the agent to amend.

The following from page 5 of the Spring 2010 IRS employee plan news, available here: ftp://ftp.irs.gov/pub/irs-tege/spr10.pdf , seems to be an admission that the quoted statement from Notice 2009-68 in the first post is inaccurate: "Ordering Rule for Partial Rollovers "If you receive an IRA or plan distribution that consists of after-tax and pre-tax amounts, you would first use the formulas above to determine the pre-tax amount of the distribution. If you roll over only part of that distribution to a Roth IRA, the first dollars rolled over come from the pre-tax amount of the distribution. After all the pre-tax portion of the distribution has been rolled over, any remaining amount is after-tax, which may also be rolled over to a Roth IRA."

Maybe the following 1.409A-3(i)(5)(iv)(B) will help: (B) Certain nonvested compensation. Notwithstanding the provisions of § 1.409A-1(d) (definition of a substantial risk of forfeiture) that disregard the extension or modification of a condition for purposes of determining whether a condition on payment constitutes a substantial risk of forfeiture, a condition that is a substantial risk of forfeiture that otherwise would lapse as a result of a change in control event described in paragraph (i)(5)(v) or (i)(5)(vii) of this section may be extended or modified before and in connection with such event to provide for a condition on payment that will not lapse as a result of such change in control event, and such extended or modified condition will be treated as continuing to subject the amount to a substantial risk of forfeiture, provided that the transaction constituting the change in control event is a bona fide arm's length transaction between the service recipient or its shareholders and one or more parties who are unrelated to the service recipient and service provider (applying the rules of § 1.409A-1(f)(2)(ii)) and the modified or extended condition to which the payment is subject would otherwise be treated as a substantial risk of forfeiture under § 1.409A-1(d) (without regard to the provisions disregarding additions or extensions of forfeiture conditions). In such a case, the continued application of a fixed schedule of payments based upon the lapse of the substantial risk of forfeiture, so that payments commence upon the lapse of the modified or extended condition on payment, will not be treated as a change in the fixed schedule of payments for purposes of § 1.409A-2(b) (subsequent deferral elections) or paragraph (j) of this section (prohibition on the acceleration of payments).

The 3.8% tax is not proposed to be imposed on pension income. See the following from section 1402(a)(1) of Amendment in the Nature of a Substitute To H.R. 4872, as Reported, available here: http://www.rules.house.gov/bills_details.aspx?NewsID=4606 "The term ‘net investment income’ shall not include any distribution from a plan or arrangement described in section 401(a), 403(a), 403(b), 408, 408A, or 457(b)."

See also the following item 15 in the Staff of the Joint Committee on Taxation's 3/18/10 Estimated Revenue Effects of the Amendment in the Nature of a Substitute to H.R. 4872, the "Reconciliation Act of 2010," in Combination with the Revenue Effects of H.R. 3590, the "Patient Protection and Affordable Care Act ('Ppaca')," as Passed by the Senate, available here: http://www.jct.gov/ "15. Broaden Medicare Hospital Insurance Tax Base for High-Income Taxpayers - additional surtax of 0.9% on earned income in excess of $200,000/$250,000 (unindexed) [1], and 3.8% surtax on investment income for taxpayers with AGI in excess of $200,000/$250,000 (unindexed)"

John: See the following from page 205 of the 3/11/10 Staff of the Joint Committee on Taxation's Technical Explanation of the Revenue Provisions Contained in the "American Workers, State and Business Relief Act of 2010," as Passed by the Senate on March 10, 2010, available here: http://www.jct.gov "However, if an employer decides to expand its distribution options beyond those currently allowed under its plan, such as by adding in-service distributions or distributions prior to normal retirement age, in order to allow employees to make the rollover contributions permitted under this provision, the plan may condition eligibility for such a new distribution option on an employee’s election to have the distribution directly rolled over to the designated Roth program within that plan." What is interesting about the above statement is there is no direct support for it in the text of the legislation, which is available here starting on page 276: http://frwebgate.access.gpo.gov/cgi-bin/ge...4213eas.txt.pdf

You are right; governmental 457(b) plan assets cannot be held in a a rabbi trust. See the following from 1.457-8(a)(2)(i): "The terms of the trust must make it impossible, prior to the satisfaction of all liabilities with respect to participants and their beneficiaries, for any part of the assets and income of the trust to be used for, or diverted to, purposes other than for the exclusive benefit of participants and their beneficiaries."

In 2004 there was no plan document requirement under the IRC for a 403(b) plan, and so a 2004 variation from the document is not an IRC problem.

See ERISA sections 107 and 209 and the final and proposed regulations under those sections. Keep records at least until the statute of limitations for the employer's payroll tax liability expires.

See also the IRS discussion here: http://www.irs.gov/pub/irs-tege/win09.pdf#page=3

As to getting a determination letter for the plan after merger, see the IRS quality assurance bulletin here: http://www.irs.gov/pub/irs-tege/qab_022603.pdf As to VCP for the plan after merger, searching Revenue Procedure 2008-50 for "transferred assets" might help you.

1) It seems to me that a restriction to a direct rollover to a Roth IRA would violate the direct rollover rules, which require the plan to allow a partial rollover. My guess is the IRS view will be that the direct rollover rules prohibit any restriction on a participant's election of whether to elect a direct rollover and on a participant's specification of the eligible plan to receive the direct rollover, unless the restriction is authorized by the direct rollover rules. 2) The amendment would not violate 411(d)(6). See the following 1.411(d)-4 A-1©(1): "Generally, benefits described in section 411(d)(6)(A), early retirement benefits, retirement-type subsidies, and optional forms of benefit are section 411(d)(6) protected benefits only if they are provided under the terms of a plan. However, if an employer establishes a pattern of repeated plan amendments providing for similar benefits in similar situations for substantially consecutive, limited periods of time, such benefits will be treated as provided under the terms of the plan, without regard to the limited periods of time, to the extent necessary to carry out the purposes of section 411(d)(6) and, where applicable, the definitely determinable requirement of section 401(a), including section 401(a)(25). A pattern of repeated plan amendments providing that a particular optional form of benefit is available to certain named employees for a limited period of time is within the scope of this rule and may result in such optional form of benefit being treated as provided under the terms of the plan to all employees covered under the plan without regard to the limited period of time and the limited group of named employees." 4) Consider whether 411(a)(11) allows the window. See the following from the 2009 ABA JCEB IRS Q&As: "35. § 411 - Subsidized Lump Sum Conditioned on Prompt Election "Participants in a defined benefit plan are eligible for a subsidized immediate lump sum if they terminate employment after age 55 with 15 years of service, provided the participant submits completed election forms by the last day of the month in which the termination occurs. (An immediate joint and survivor annuity with the same value also is available under the same conditions.) Participants who are otherwise eligible (based on age and service) but who do not make a timely election may elect to commence an annuity at any time with a full actuarial reduction, but no lump sum or subsidy is available. The plan has always included the 'prompt election' requirement and the requirement is clearly communicated to participants in the summary plan description. Is this structure permitted? "Proposed Response: Yes. Under Treasury Regulation Section 1.411(d)-4, Q&A-6, a plan is permitted to condition the availability of a benefit form or early retirement subsidy on the satisfaction of objective conditions that are specifically set forth in the plan. "IRS Response: The proposed response addresses Section 411(d)(6). The Service representative indicated that there is a separate question under Section 411(a)(11), which is whether the plan is avoiding the requirement to obtain consent by having a significant detriment apply to participants who do not choose to commence benefits right now. Whether there is a significant detriment is based on all of the facts and circumstances. The Service representative's personal view is that this provision is a significant detriment because it forces participants to take their benefits now."

The following language in the short-term deferral rule provides that one of the requirements to be a short-term deferral is that the payment must be includible in income within the 2 1/2 month period: "(4) Short-term deferrals--(i) In general. A deferral of compensation does not occur under a plan with respect to any payment (as defined in § 1.409A-2(b)(2)) that is not a deferred payment, provided that the service provider actually or constructively receives such payment on or before the last day of the applicable 2 1/2 month period. The following rules apply for purposes of this paragraph (b)(4)(i): "(A) * * * * "(B) A payment is treated as actually or constructively received if the payment is INCLUDIBLE IN INCOME, including if the payment is includible in income under section 83, the economic benefit doctrine, section 402(b), or section 457(f)." So the annuity cannot be a short-term deferral unless the value of the annuity is includible in income within the 2 1/2 month period.

SoCalActuary: The language defines the accrued benefit after the offset. It does not expressly define the current year accruals for testing purposes.