Appleby

see link http://www.benefitslink.com/boards/index.php?showtopic=10608

Or any other third party- or by mail? Fact is, it is required- it she needs the money- she must find a way to obtain the spousal consent

The Massachusetts law states "If your gross income was less than $8,000, it is not necessary for you to file a return" and the income is not subjected to state tax withholding. It would follow then that distributions under $8,000 are not subjected to taxes including withholding. The issue for the custodian or trustee then becomes, "how do they know if the individual's gross income is less than $8,000? The MA State law requires the custodian to withhold state taxes, if the individual has requested federal withholding. To avoid the state tax withholding, the individual must waive out of federal tax withholding

Take a step back here. It is important that we do not forget that the MPPP is in fact a pension plan. Lets considers some issues: - A qualified retirement plan (QRP) must be permanent. While this does not means that the plan must remain in existence forever, terminating a plan within a few years after it was established may violate this rule- and could result in plan disqualification It a MPPP is terminated and roll/transferred to a Profit sharing plan (PSP), the MPPP assets must be accounted for separately- because of the annuity rules that apply to MPPP assets. This is a benefit that CANNOT be taken away. One option of course could be to freeze the plan, by amending it to a zero contribution limit. MPPP has not lost its appeal, there was not just one benefit, i.e. that of the 25 percent contribution limit- for example- It also served a means of attracting qualified employees. Tell me, If you were being hired by two firms, both offering identical packages, including benefits- the only difference was one had a PSP and the other a MPPP, which would you choose? Most likely the 'guaranteed' and not the discretionary contribution plan right? Lets not write-off the MPPP just yet…

A 90-24 transfer, which is a non-reportable transaction, must still take place between two 403(B) accounts. The movement of assets from a 403(B) to an IRA, is still considered a rollover (reportable transaction) and does not fall under 90-24

No it doesn't- Reason- you are borrowing from yourself and if you default on the loan repayments- the outstanding loan balance and interest will be reported as taxable to you. You would then owe the IRS income tax on the amount

The new withholding and reporting requirements applicable to eligible 457 plans as states in IRS Notice 2000-38 [2000-33 IRB 174] still applies. Check http://ftp.fedworld.gov/pub/irs-drop/n-00-38.pdf

By definition, an in-service withdrawal is one that is taken when there are no triggering events. Attaining retirement age as stated in the plan, is a triggering event. A distribution upon attaining retirement age is not considered an in-service withdrawal and is therefore permissible in an MPPP.

Hardship Distributions of deferral contributions are not rollover eligible (effective 1999- transition year 1999). However, hardship distributions of employer contributions are rollover eligible The entire eligible rollover amount can be rolled to an IRA - this is the amount less after tax contributions and hardship attributable to elective deferrals.

My 2-cents An employee may have met the service requirement to be a 'participant' in the plan and can therefore make deferral contributions. However, with respect to 'employer contributions' active employees, as well as those who terminate from service during the year, are not entitled to receive 'employer contributions' unless they perform the required hours of service, as stipulated in the plan document. This is permissible with standardized as well as non-standardized plans Tom Poje, you are defining active employee, which is different from active participant- as one can be an employee and not a participant and vice versa.

You said "Most Likely" fraudulent- I prefer not to make assumptions, especially when the IRS is involved. If the client can prove that the valuations are in fact fraudulent- then the FMV used to figure the RMD can be reduced by the overstated amount. If it cannot be proven, then it is always best to err on the side of caution and take the required amount, by using the FMV, without the adjustment

A MPPP is subjected to the minimum funding standards. Therefore, unless the employer obtains approval from the IRA, the funding cannot be waived or reduced in mid year. The employer may reduce the funding for the next year, providing employees are given proper notification (the 204(h) notice.). This notification must be provided to employees not less than 15 days , before its effective date.

Just want to add- unless the participant is declared dead (legally) the assets must be distributed to him, not to the spouse. She can always deposit the check in a joint account...

I would think so- providing the terms of the POA permits it. Not to mention, the balance is under $5,000- which means the participant's consent is not required anyway

Usually, if the date has been less than six-months since you received the last distribution request, you may use the same document to process the residual If it has been more than six-months you must obtain new documentation. This is to ensure compliance with the Internal Revenue Code, which requires that you provide a withholding notice to the account holder no more than 6 months preceding each distribution, if the participant is taking distributions less frequently than quarterly. I understand that the 90-day notice must be provided for eligible rollover distributions, but this is a residual- which means that the proper notification was already provided to the employee. However, it could be argued too that the IRC § 402(f) requirements are being violated. Any thought on sending the payment , along with a copy of the IRC § 402(f) notice- requesting a confirmation of receipt?

American Pension Consulta, You are right. It appears that it was an oversight. The respective regulatory bodies are currently reviewing this. We anticipate that subsequent treasury regulations etc may correct this 'oversight'

According to Notice 98-4, no other assets can be transferred, rolled, or transferred to a SIMPLE, except SIMPLE IRA assets, such as SIMPLE IRA contributions, or transfers or rollovers from another SIMPLE IRA. Therefore, the qualified plan assets cannot be rolled to the SIMPLE IRA. The participant must establish a traditional IRA to receive the contribution

I see your point Fishchick However, Lines 30 and 31 applies to plans that are subjected to the minimum funding requirement, i.e. money purchase pension, defined benefit pension and target benefit etc. Ergo, it does not apply to a SEP IRA, as SEPS generally, do not have a minimun funding requirement. I think we are in agreement on the correction procedures.

First, let me say that I am enjoying this discussion. Lately, not many interesting questions are being submitted. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ With regard to an a SEP Form 5330, Return of Excise Taxes Related to Employee Benefit Plans, is used to report the 10 percent excise tax on the following: • Nondeductible employer contributions to SEPs, [iRC 4972(d)(1)(A)(ii)] • Prohibited transactions [iRC 4975(a), 4975(e)(1)] • Excess contributions to plans with cash or deferred arrangements [iRC 4979(a), 4979(e)(4)] etc etc refer http://www.irs.ustreas.gov/cgi/websys_fmanage - the form and http://ftp.fedworld.gov/pub/irs-pdf/i5330.pdf - the instructions It seems to me than that none of these apply to this situation, therefore, the form is not necessary. The problem is the employer did not follow the written contribution formula according to the plan he/she adopted, therefore, what we have here is a SEP allocation excess (Prop. Treas. Reg. Sec. 1.408-7(f)) If the allocation formula, according to the SEP document is not followed, the SEP could be disqualified, especially if it is determined that contributions were made in favor of highly compensated employees. One way of correcting such excess is to make contributions for those employees who received insufficient contributions, however, as I stated before ,this correction must be made before the employers tax return due date plus extensions. The other option is to revise the compensation of the employee/s who received the excess contribution Prop. Treas. Reg. 1.408-7(f). See This reg provided a formula for making this correction. Since the lowest common denominator is "0%;" all contributions are excesses under the regulations. (Moderator)

Tom RedSox, The contribution no, the conversion yes. However, the conversion would be reported as non-taxable, if you recharacterize. If you file before you recharacterize, then it will be included in your AGI as taxable Mary Ann is right, IRS Form 8606 if filed for recharacterizarions. If you file today, or file for an extension today, you get an automatic 6 month extesnion -throught to October 16

I agree with R. Butler, I am a bit confused as to when the employees started working for the employer. We also need to know when the employer started the business, becuase the SEP eligibility reqirements looks at the last five preceeding years , i.e. preceeding the year for which the contribution is being made. Notwithstanding the above, the option to make additional contributions for those employees has passed for 1999, as this would had to have been done by the employers tax filing deadline for 1999. At this point, contributions made to the employer are excess contributions and should be removed from the IRA Note also that form 5330 is for qualified plans, not SEP IRAs

mattwoi, If you recharacterized your 1998 conversion, then you should not be paying taxes on this 1998 conversion. A recharacterization of a conversion makes the conversion null and void. There would be nothing to spread over the 4-years because you 'reversed' the transaction

If you recharacterize before you file your taxes, then you should include the information on your form 8606. If you already file your taxes and this did not include the recharacterization informaiton, thne you may file and amended 1040 ( 1040x). You have a few years to file this amended return The conversion amount will also be include on your 1040( for distributions from IRAs) but the taxable amount will be zero Your IRA custosian must provide you with a 1099-R and 5498 for each transaction, i.e. the conversion and the recharacterization

I though that what's you meant- I should have positioned my response differently. I've seen many of your responses to similar issues and it is evident that you are very knowledgeable about retirement plans. It's always best to ensure that matters such as these are very clear, to prevent someone who is not as knowledgeable from misinterpreting our responses. Keep us the good work John G

John, I disagree with your stance on the recharacterization deadline issue. The IRS is very clear on this. The deadline to recharacterize is Tax filing deadline, plus extensions. Individuals who either file their tax return or filed for an extension by their tax filing deadline, (usually April 15), receives an automatic 6-months extension, which is until October 15. There was an exception made for 1998 conversions, in which individuals received until December 31 of 1999 to recharacterize their 1998 conversions. There have been instances where individuals realized they were not eligible for their 1998 conversions, long after the December 31,1999 deadline. The IRS made an exception for some of these individuals and allowed them to recharacterize. If someone chooses to recharacterize, after the IRS stated deadline, without the IRSs permission, they run the risk of the recharacterization being disallowed by the IRS. To be sure, such an individual must contact the IRS, in writing, for permission.