jpod

OK, I'll bite: What do you mean when you use the term "MERP"?

Let me modify my last post. While you may be "safe" in the sense that you may ultimately prevail even if you do not file, you should file if you wish to avoid aggravation. Don't forget, completion of a 5500 for a 403(B) should take about 3 seconds (figuratively speaking).

MBozek states the excellent argument to be made if you were forced to defend not filing. Nonetheless, the government's position is not clear, so if you want to be safe you should file.

There is no answer to your question. I won't go into the technical reasons why it's an issue, but the DOL knows it's an issue which people are talking about but refuses to provide an answer. If you want to be safe, continue to file.

yes

Assuming he is legitimately an EZ filer for all late years, he does not need any relief from DOL/PWBA, because there are no penalties subject to their jurisdiction. He needs relief from IRS for late filing penalties. There is no "program" such as DFVC for EZ filers. The client has a legal obligation to file. However, based on the facts you presented, if the EZs are prepared and filed with a statement of reasonable cause before the IRS finds him, the chances are high, in my estimation, that the IRS will not assess penalties. The statement of reasonable cause should be simple; something like: "I never filed 5500s before, and I didn't know I was supposed to file until my new advisor told me about the requirement."

Clearly, the distributions are plan earnings. You're right: normally, plan earnings would be allocated to participant accounts. But, what do the loan documents say? Do they not require all cash distributions/dividends with respect to encumbered securities to be used to pay down the loan, or to remain encumbered?

I still do not know what you mean by a "tax qualified fund" or a "tax preferred commingled fund." If, by chance, you mean a fund held in a trust that is deemed to be tax-exempt by virtue of Rev. Rul. 81-100, then the answer is that only 401(a) plans, certain governmental plans and IRAs can be investors in such a fund [and it's questionable whether an IRA could actually invest in such a fund due to securities law issues].

If it is not eligible for the 5307 is it eligible for the extended GUST reliance deadline (or was it subject to the last day of the 2001 plan year deadline)?

We are all assuming that when you use the phrase "sole proprietor" you mean an individual whose business is unincorporated. If, on the other hand, you were using the phrase to mean a one-person corporation, specifically a C corporation, the answer could be different.

Look at it this way, in an economic sense, it most certainly is "interest:" payment of the compensation is being deferred, so the employee is entitled to "interest." However, at least for certain tax purposes, it is "compensation;" specifically, "deferred compensation."

For purposes of applying the federal income tax, it most certainly is "compensation" (i.e., Section 3401 "wages"). For FICA/Medicare tax purposes, earnings/interest accrued after the deferred compensation becomes vested are not wages subject to those taxes. For what purpose are you asking?

Shouldn't be any filing if less than 100 participants at the beginning of the plan year.

If the partners are interested in deferring some of their current partnership income, it won't work through a nonqualified deferred compensation plan. If the partners are interested in providing retirement income for themselves subject to whatever criteria they feel is appropriate, they should do so, but there are no tax tricks here. I've heard that there may be some "effective" ways of pre-funding a partner retirement plan liability, but I've never seen a proposal that made economic sense.

I'm confused. Why is a "correction" necessary if the plan already has a "failsafe" coverage provision?

I don't have the cite, but my recollection is that you can now find it in the RMD regulations. The general rule is stated in the regs under Section 401(a)(9) of the Code: you must compute AND distribute RMDs on a plan-by-plan basis. The exception for multiple IRAs is set forth in the regulations under Section 408 of the Code dealing with special RMD rules for IRAs.

It may be fortuitous that the excess amount is only $2,000. If he has not also made regular IRA contributions, it can be treated as a regular IRA contribution for 2002 (or 2001 depending upon when it was deposited). Whether it is deductible, partially deductible, or non-deductible would be determined under the normal rules.

Think of it this way. If the plan made a "legitimate" investment by loaning $10,000 to a 3rd party, the interest paid on that loan become part of the plan's assets and would be pre-tax to the participant. So, instead of lending $10,000 to a 3rd party, the participant takes a loan for himself for $10,000. The interest is treated the same way because the loan is to be treated as if it was a "real" loan.

I agree that it is "out there;" but so is Osama.

Anyone who is advised to rely on that opinion is getting very bad advice.

I think the lawyer's interpretation of the applicable requlation is incorrect. Admittedly, it is a "tails I lose/heads you win" situation. If the employer had ever been able to deposit within 2 or 3 days, then the DOL will assume, absent evidence to the contrary, that it is always possible to segregate the money within 2 or 3 days. And, quite frankly, I think that's fair. To the contrary, if you've always waited until close to the 15th day following the end of the month, the DOL will want to know why you couldn't do it alot faster, perhaps at the times you deposit taxes. I think that's a fair question too. As an aside, I have a sense that a number of people, even those in the benefits profession, have the mistaken view that the time frame for depositing employee contributions must be based on the time involved in transmitting participant-by-participant data to the trustee, TPA, etc. Clearly that is not correct. The question under the regulation is how soon can the money be reasonably segregated; not how soon can the money be broken down so that it can be posted to individual participant accounts. Trustees and TPAs who refuse to accept money without the participant-by-participant breakdown are not properly servicing their clients. There needs to be a vehicle for depositing the money with the Plan's trustee fast; posting to individual participant accounts can come later.

RCK: In those cases you've seen where the court has expressly allowed a participant to repay his plan loan through payroll deduction, did that reduce the amount he had to pay to his creditors as part of the Ch. 13 plan? If so, talk about a "miscarriage of justice." A participant would be taking money from his left-hand pocket and putting it in his right-hand pocket, all to the detriment of creditors.

Thanks, Appleby. I've read the ruling. It's nutty, so I agree with Mr. Picker that this should not be done by another taxpayer unless he or she secures his or her own ruling. Mr. Picker: To close the loop, can you tell us what regulations also allow (or seem to allow) this technique? If there are regs. which allow it, why would one need to apply for a ruling?

I'm sorry, I don't understand. Are you saying that the regulations (what regulations?) allow a post-death rollover of a deceased participant's qualified plan benefits into an IRA for the benefit of the deceased participant, with the result that the IRA beneficiary can receive distributions "as a beneficiary"?

Mr. Picker: I am interpreting the poster's inquiry as involving a request to move her late husband's 401(k) account to an IRA in her own name via a rollover, which she is permitted to do. If the money stayed in the 401(k), any withdrawals by the spouse from the 401(k) would have been eligible for the exception for "after death" distributions. Are you saying that there is a PLR that holds that the exception may be available for distributions from the rollover IRA? Do you have a cite handy?