jpod

I do not have the citations in front of me, but the bankruptcy courts have reached the "correct" result when it comes to outstanding plan loans (although they have arrived there by different routes). Namely, the courts will not allow someone to pour money back into his or her plan account through "loan" repayments at the expense of creditors, whether it is an involuntary proceeding or a voluntary proceeding. And, to the extent that anyone would try to defend the economic integrity of a plan loan and argue that the plan is a "secured" creditor, the courts' response, figuratively, is to have a good laugh.

I believe it is a separate pt. 408(e) merely exempts any pt that would arise as a consequence of the purchase or sale of qualifying employer securities; the note represents a prohibited loan.

If there's no withholding required there is no W-2 reporting. Section 6051 reporting is linked to 3401 withholding.

I don't think the previous response is correct. Dependent care reimbursements are not subject to tax withholding and are not to be reported as taxable wages on the W-2 if "at the time of" the reimbursement it "reasonable to believe" that the employee will be able to exclude such payment or benefit from income under Section 129 of the Code. Section 3401(a)(18). That is, if it was "reasonable" for the employer to believe that the reimbursement would be excludable, regardless of what the employee knew or didn't know at the time.

I'm not so sure about the previous response. I don't believe this situation is covered in the 5500 instructions. Section 6039D is the source of the 5500 filing requirement for a Section 125 plan under the Internal Revenue Code, and it says (I'm paraphrasing )that a filing must be made for any year in which the Section 125 income exclusion applies. This could mean that if there are tax-free reimbursements during 2002, a 5500 is required. It could also mean that if the mere potential for tax-free reimbursements existed during 2002, a filing is required. Whether a filing would also (or in any event) be required under Title I of ERISA is an open question.

Maybe this is too simplistic, but the prospect still has until midnight tomorrow to certify (if it's deadline is Feb. 28 and not later). If you point this out to the client before the deadline runs out, won't you have a better chance of turning this prospect into an actual client?

If "new" money/contributions went directly into impermissible investments, this would be fundamentally inconsistent with the 403(B) requirements. Therefore, I would apply the rules in EPCRS applicable to "ineligible employer" situations, by analogy. If, on the other hand, this was a case of "old and cold" money that had been in permissible investments for a while being transferred into impermissible investments for a period of time, it seems to me that a less drastic correction method would be acceptable.

MGB is correct. If there is no trust, there is no other entity potentially subject to tax for which you would want to start the limitations period running (which is the only purpose of the Schedule P).

We are in agreement, although what usually happens is I tell the client that I'll stop trying to convince the agent to back off if I think that will be more expensive than stopping right there and drafting the stupid amendment. Also, I think you can find out in about the first 15 seconds of your telephone conversation with the agent whether or not he/she will listen to reason.

My experiences have often been the same as mbozek's, but not always. Lately, I've found that if you give the agent a specific and truthful reason why a certain change is not necessary, which he/she can write down and show to the reviewer if necessary, they happily accept that explanation and back off. Clients that pay us to draft individually-designed plans do so either because a prototype is not available or because they don't want all the junk that must be in prototype plans. In the latter case, I feel it is a disservice to the client to just give up without trying to convince the agent to back off. On the practical side, if the client ends up with a bunch of junk in its plan, the client will wonder why it had to pay me $x to draft an individually-designed plan, no matter how much I try to blame it on the IRS.

I suggest that you contact John Swieca in the IRS' National Office (I believe he is still in charge of the m&p program to a significant degree.) Better yet, you should have outside counsel (presumably, different counsel) who knows his/her way around prototype plans and issues confronting prototype providers contact Swieca on your behalf, so that counsel does not have to identify your company or your plans right off the bat. There may be a way for you to correct your new documentation on a streamlined basis without risking the validity of your new opinion letter(s).

I'm guessing, but it may be that there was an exemption from registration under the Investment Company Act of 1940 that was available to the master/group trust while the two employers were affiliated, but may no longer be available. On the other hand, I know that there is at least one exemption from the 40 Act that is available to many/most 81-100 trusts whose participating plans are plans of several unrelated employers. There may also be a 33 Act registration/exemption issue given that the plans are self-directed (i.e., an exemption that was available while the employers are affiliated, but is no longer available). Chances are all of the above has already occurred to you, but if not, maybe this is helpful.

I assume that by the term "hedge fund" you mean an unregistered interest in an investment vehicle that is typically a partnership or something else that is treated as a partnership for tax purposes, or even an off-shore corporation based in some tax haven. There is nothing about such investments that make them impermissible for IRAs. However: (1) it is not always possible, easy or inexpensive to find an eligible IRA trustee or custodian to hold these investments (remember: only a bank or trust company or an IRS-approved non-bank custodian can be an IRA trustee or custodian); and (2) quite often they throw off UBTI, which is not necessarily a bad thing, but it's an added complication.

Does anyone know where I can get a complete copy of SOP 93-6 on line?

Kirk's comment prompted me to poke around a little bit. Evidently, my memory is fading as fast as my hair, not only because I was wrong about what the PLR said, but also when it was issued. Actually, there are two PLRs, and each is a post-check-the-box ruling. Each holds that a non-corporate subsidiary entity that is taxed as a corporation under the check-the-box regs can qualify as a "subsidiary corporation" under Section 424. PLR 9736031 involved a partnership that was taxed as a corp., and PLR 200017048 involved an association taxed as a corp. Each ruling involved options issued by the corporate parent (i.e., a "real" corporation, not merely a "tax" corporation). Neither ruling involved options issued by the non-corporate entity, so the issue of whether the non-corporate entity's equity interests could qualify as "stock" was not addressed. I do not know what position the IRS is contemplating in view of the proliferation of LLCs. However, if you look at the regulation under Section 421 that defines the term "stock," it's not clear whether that definition is broad enough to encompass equity interests in a non-corporate entity that is taxed as a corporation. On the other hand, can anyone think of a reason why an entity that is a corporation for all purposes under the Code should not be able to issue ISOs, or have a 423 plan? I cannot, but then again I already admitted that I'm starting to "lose it."

There is an old PLR (pre-check-the-box, I believe) that allowed an association taxable as a corporation to grant statutory stock options, so the same result should hold for an LLC that has elected to be taxed as a corporation.

Chlomer - There is a very clear answer to your question: "Don't even think about it." The only solution is to get the money back from the surviving spouse. Be careful with threats and intimidation, however, so that the employer does not violate any employment laws.

I agree that we agree.

Would you have been entitled to vested matching contributions if the deductions had been taken out of your pay? If so, then this may be a matter worth pursuing, and you can show the Company that you mean business by threatening to contact the IRS's employee plans division and the Department of Labor's Pension and Welfare Benefits Administration unless they do something to make you "whole." If there would not have been any vested matching contributions, then my advice would be to forget about it and get on with your life.

Merlin, I don't think CORBEL intended for its summary to be interpreted in the way you are interpreting it. I think what CORBEL was trying to say is that you have to account for the old MPP money separately if you do not wish to be forced to make the entire plan subject to rules that would satisfy the rules for a MPP. Alternatively, you may have to maintain separate accounts if there is a feature of the PSP which you cannot take away (such as an in-service distribution option), but which is inconsistent with the MPP rules. However, if neither issue is a problem, there is no need to maintain separate accounts post-merger. Does anyone out there in Benefitsland hold a different view?

No reason to maintain separate accounts in my case. The only difference between the two plans is that the J&S is not mandatory the PSP. However, the principals of the employer in question really don't give a hoot about the J&S requirement, so we'll end up making the entire plan subject to the J&S rules. This will happen automatically if we don't maintain separate accounts (and we don't intend to) under the "transferree plan" rules. As far as I can tell, the J&S "transferee plan" rules would trump any 411(d)(6) problem which you could conceivably have by suddenly subjecting PSP money to spousal consent rules. In other words, prior to the merger, the participant would not need spousal consent to select a form of benefit distribution; now, after the merger, he/she would need spousal consent to elect something other than a J&S. While this may sound like a 411(d)(6) problem, that does not appear to be the case.

Maybe others feel differently, but I think it's too late to amend for GUST. I assume that these plans did not file 5310s in connection with the termination, in which case they should consider EPCRS. If your firm was involved in the decision to terminate and you did not advise the plans to amend for GUST, you should consider retaining legal counsel and/or contacting your E&O carrier. On the other hand, there may be relief from adverse tax consequences depending upon the applicable statute of limitations, except for people who rolled over to IRAs or other plans.

In my case, the contributions for the two plans, in the aggregate, will exceed 15% of covered compensation in 2001. The employer does not wish to avoid the MPP contribution. The sole reason for merging the MPP into the PSP is to simplify administration (i.e., reduce the cost of administration). The sole reason for merging before 1/1/02 is to avoid an extra 5500 and an extra ERISA audit.

Steve R: Your comment about the MPP receivable is interesting, but it seems to me that there is no MPP receivable at year-end because the MPP no longer exists - the receivable becomes an asset of the PSP as of year-end as a result of the transfer of assets and liabilities to the PSP. Therefore, as of 12/31/01 the MPP's 5500 shows assets of $0, in which case there is no 5500 due for 02. Do you or anyone else feel differently about this?

Andy H: I was not at the ASPA meeting. Let's say the MPP and PSP are 12/31 plans; the MPP is merged into the PSP as of 12/31/01, and the assets are in fact consolidated as of 12/31. There is no intention to avoid the MPP contribution for 01. If the contributions for 01 are made in 02, is the MPP contribution for 01 deductible above and beyond the 15% PSP limit, or is the MPP contribution counted towards the 15% limit because as of 12/31/01 there was only one PSP? From your previous post it sounds like you still get the separate MPP and PSP deduction treatment, but I wasn't sure what the IRS speaker(s) may have said. (Note: this is important to the employer because by merging 12/31/01 it has to file only one 5500 and pay for only one CPA audit for 02, whereas it would still have two plans in 02 if it merged as of 1/1/02.)