jpod

John P., no offense but it seems to me that this is something that is readily answerable by working through the definitions of di and pii. While I think after doing that you will conclude that neither the IRA nor the Plan is a di or pii just because the sole beneficiary of each is the same individual, I can't be 100% sure without doing that legwork (which I am not going to do).

There is only a problem if the transferor is a disqualified person or party in interest, and I could be mistaken but I don't think an IRA is either a dp or a pii.

The estate planning is a bit weird, maybe terrible, but aside from that, is there really something in the IRC that prevents a 401(a) plan from accepting a gift/bequest such that it would adversely affect the plan's tax-qualified status? Assuming the answer is "no," why wouldn't it be "other income" rather than some sort of disquised or constructive contribution?

The plan is either an ERISA plan or it is not an ERISA plan. There is no 5-year rule, and there is no ability for a governmental plan to elect ERISA status like a church plan can. I am always amazed at the stuff that vendors/providers will make up.

This particular employer's bonus structure may be so heavily weighted in favor of HCEs that has reaspn to be super-confident that it will pass 414(s) every year, but short of that it seems like a poor plan design to me if you are to have a safe harbor 401K plan.

Bird, that's where I come out. There is a definition of "safe harbor compensation" which must be used for both the 3% nonelective formula and the match formula, and it must be a 414(s) definition.

Ok, the plan doesn't do that. But, do we still have to test for 414(s), and if so what if we fail? This seems like a bad plan design to me unless you have complete confidence that you won't fail 414(s). Am I missing something?

A plan is designed with the intention of satisfying the SH Match through the basic 100%/3% + 50%/2% formula. Plan defines compensation for purposes of elective deferrals AND THE MATCH to exclude bonuses. Treas. Reg. Section 1.401(k)-3©(6)(iv) clearly says that the SH rules do not prevent you from making bonuses ineligible for elective deferrals, but then it goes on to say that each NHCE must be permitted to make elective contributions in an amount that is at least sufficient to receive the maximum amount of matching contributions. What does that mean? In the plan I've described, do you still have to test for non-discrimination under 414(s)? What if you fail?

Not all custodians have the same level of sophistication or risk appetite. They also have to be convinced that 414(p)(11) is merely an alternative to 1041 insofar as tax treatment (and associated 1099-R reporting) is concerned.

MBozek, I don't disagree with you, but I suspect many 403(b) annuity issuers/custodians would. I wouldn't want to tell a client that handling as part of the property settlement pursuant to the Section 1041 construct would be "simpler" unless I knew in advance that the issuer/custodian was going to play ball.

I confess I don't fully understand the problem you are describing, but it sure doesn't sound like a qualification deficiency, in which case EPCRS is irrelevant.

I admit to the liberal use of hyperbole when I said you can burn the late notice, but in my experience with these kooky situations you will eventually receive a "whoops, sorry" letter from IRS acknowledging that you were timely, in which case preparing a response to the late letter is a waste of time (and money if the client is paying someone to prepare it).

If a late letter is dated before the 15th (actually, it would have to be dated before the 16th at the earliest), then it has nothing to do with the IRS' link-up to EFAST; obviously, it is the fault of the IRS computer thinking that no 5558 was filed. The long and the short of it is if you have your certified mail green card for the 5558 you can burn the late letter along with the rest of the junk mail.

So, Belgarath, how do you think the conversation between the DOL examiner and his or her boss is going to play out. Perhaps: "Boss, I got this husband-wife-two children plan of 4 participants and they are flagrantly violating 404 by not distributing notices to each other. Let's use the DOL's very limited enforcement resources and nail them. Will you call the Solicitor's office or shall I?

1. It is not a qualification issue, only a Title I compliance issue, so you must be referring to a DOL audit. 2. Extremel unlikely that DOL would ever pull such a small plan for audit, but if it did, I would expect that the examiner would employ some common sense and realize that the failure/refusal to go to the trouble of preparing a 404 disclosure package for a mother, father and their two children is a foot fault that can be ignored.

The technically correct answer, as implied by toolkit, is that if the plan is subject to Title I of ERISA, and that certainly seems likely given the two children participating, is that the Section 404 disclosure rules apply to this plan. Is that the practical answer? Will anyone of these 4 people sue one or more of the other 3 or the incorporated employer (if applicable) or drop a dime on them with the DOL? As an aside, doesn't the plan's vendor crank these disclosures out automatically?

An annuity owned by a "non-natural person" (such as a corporation) is taxed on the income generated by the annuity due to Section 72(t). This is contrary to life insurance, which is why so many non-q deferred comp plans are funded through life insurance.

If the deferred comp is employer money only, I guess the plan can be written in whatever manner the employer chooses, although charging employees' accounts for the employer's tax liability doesn't make much sense, as your final sentence implies. If there are employee deferrals involved, the disclosure better be perfectly clear, but if I were eligible there is no way I would contribute under those circumstances. Curious about the prior annuity structure: How did employer avoid tax on the income under Code Section 72(u)?

That's correct, but erisa doesn't have spousal beneficiary rules for life insurance.

But, even if the life insurance policy said that the spouse is the default beneficiary absent consent to another beneficiary, the same sex issue would not be impacted at all by DOMA or by the Windsor case. Yes, you'd have an issue as to what "spouse" means, but since there is no Federal law involved DOMA and its repeal would be irrelevant.

Agree with Carol, and will also note that I have seen installments along the pattern she has described justs because it is easier to swallow by any constituencies who might care (e.g., other employees, donors, the media, etc.).

The only thing DOL said was that it wouldn't assess penalties, but it went on to say that employers "should" distribute the notice. I think that's because the law requires the notice to be distributed, and there is a private cause of action available to employees under FLSA which could extend to the failure to distribute the notice.

Payment of the IRA's tax liability should be treated as a contribution to the IRA, which may or may not be deductible, and which may or may not exceed the annual limit on IRA contributions (triggering the 6% excise tax). The more interesting question is how do you get the tax paid from IRA assets? If you distribute money to the IRA holder I suspect the custodian will automatically report it as a distribution on 1099-R, in which case you have a mess on your hands. Not sure if there is any IRS guidance explaining how this can get done without a double-whammy to the IRA holder.

I never ran across anyone who would go to the trouble and expense (even if minimal) of setting up a plan with no current intention of making contributions or even allowing employee contributions. Why do they need a rollover vehicle? Aren't IRAs good enough? Years ago there was a bankruptcy protection advantage, but hasn't that disappeared since the 2005 bankruptcy law overhaul?

Assuming it's an ERISA (Title I) plan, unless a participant succeeds in proving that the actuary was acting as a plan fiduciary, I don't see how the participant would have standing to sue. Did the court explain this?