jpod

For a Schedule C filer, yes.

If he is "counsel" is he getting the K-1 to report partner deferred compensation, or is "counsel" just a name and he still is a partner for tax purposes? It seems to me if he is doing what you say and he is getting a K-1 to report income for current services or getting a W-2 to report current wages he is NOT retired from the firm for RMD purposes. If he is getting a 1099 than he is retired for RMD purposes.

Yes, he is using his retirement account as a savings account, but based on what you say there does not appear to be any plan qualification risk or fiduciary-breach risk. What alternative course of action should the PA have considered in your view? Deny a perfectly compliant loan? Deny a perfectly compliant hardship withdrawal? Hardship withdrawals s_ck. We used to think that allowing for hardships was necessary to entice employees to save (with the side effect of increasing the likelihood of passing ADP). What does the modern literature say about that?

Just out of curiosity, but (1) why would the accountant think that you could possibly take instructions from him, even if they were appropriate, and (2) if they want to do something wrong how would you be in a position to stop them anyway? Don't make the client's problem your problem.

He must have been relatively young, so that's very sad. Aside from that all I can say is "Yikes!"

I am not saying that it would not apply. I just raised a doubt but I am not sure either way. I merely suggested that you look at the regulation and share with us why you think it could apply.

I realize that, but it doesn't mean that 410(b)(6) relief will be available.

Is the subsidiary going to go out and buy a business from a third party? If not, doesn't sound like 410(b)(6) was intended to apply to this situation. What aspect of the pertinent regulation suggests to you that it might apply here?

The document may be more employee-friendly, but under the law I believe that all you need to do is to give the participant the option of a direct rollover within the time frame specified by the regulations, but absent such an election you can send the participant a check minus 20% FIT withholding. I am going on memory so hopefully someone will correct me if I am wrong.

If the facts are as you state them (i.e., no interest or earnings on the unpaid principal), I don't know why there should be any W-2 or 1040 reporting for any years following the vesting year. P.s., if no amounts are actually paid contemporaneous with vesting, or by the end of the calendar year following vesting, FICA/Medicare must nonetheless be paid on the $500k, both the employee and employer components.

Say that again? Ok, you opened a Simple IRA, and it sounds like you are a self-employed Schedule C filer. No problem. Wait a minute: You said that YOU opened a Simple IRA. What does your spouse have to do with it? And, if it is your spouse's Simple IRA how could YOU "take a benefit from that" (whatever that means)? Huh?

The account definitely said "Schedule C," not "K-1." Is this in writing? Maybe in the heat of battle (we are approaching April 15!) he said Schedule C when he meant K-1.

Bring this to the attention of the executor or administrator of the decedent's estate. It's his/her problem to fix, not yours.

In that case they are handling their taxes incorrectly. There should be NO schedule c. And, are you sure they don't have a capital interest in the partnership? Absent a capital interest or a profits interest it is unlikely they should/can be treated as partners for tax purposes.

I disagree, at least based on how I am interpreting your post. If they are partners in a partnership they do not file Schedule Cs. If their comp from the partnership is not sufficient to make them HCEs automatically they may or may not be HCEs depending upon their interests in the capital of the partnership. Presumably as "non-equity" partners they have no interest in the profits of the partnership.

Possibly. Those who are very conservative from an ERISA compliance perspective would not hire an existing client or even a prospective client to be a plan service-provider where there is a record that they have been trying to land that prospective client. Most aren't that conservative, even those who understand the ERISA rules of fiduciary responsibility and the PT rules. On the other hand, the risk is somewhat mitigated if not eliminated as a practical matter if the fees of the service-provider (in this case, the Custodian) are paid by the employer and not by the plan.

About 30 years ago when I was a youngish attorney I was invited into one of our conference rooms to discuss some issues concerning the implementation of benefits for a company - our client - that had recently bought the assets of an ongoing business and inherited its employees. A couple of the owners were there along with the lead partner from my firm on the deal. This exact issue scenario came up. I wasn't asked for my opinion but I volunteered something like "this would raise ERISA prohibited transaction issues." They kicked me out of the conference room.

This goes on all the time but smart people don't put anything in writing. I am not saying it is not a pt and/or fiduciary breach risk, I'm just stating a fact.

Not sure I agree. While the plan may be liable, the PA in its fiduciary capacity shouldn't be liable. The PA may have a fiduciary responsibility to try to get back the excess from the other beneficiary(ies), but if it acted prudently in the first place I don't see a risk of personal liability to the PA.

Is this a "clawback" or are they taking the position that he wasn't supposed to be paid at all and it was just one big goof up?

But someone told her she would get 1/6th, and that to me is a mystery. Now that he is in pay status and everything is locked in I agree that the participant should be able to get from the plan a statement showing what is the split during his life and what happens after his death and that should be Step 1. If that statement doesn't make sense and husband and wife can't get a satisfactory explanation, Step 2 may be to seek legal counsel.

I'll wait for the answer but that there would ordinarily be a W-2 implies that it's a corporation, and the tax construct is that an elective deferral is nonetheless an employer contribution, and I don't see a "mistake of fact" that would justify the return of the $18,000 to anybody. On the other hand, if the corporation can legitimately take the position that this individual received no wages (although I would question that), the $18,000 should be forfeited and used by the corporation to offset future non-elective contributions, so indirectly the corporation will get its $18,000 back.

It must (on a 1099-Misc as non-employee compensation).

I have not, but it sounds impossible to me.

Well, that is always an issue having nothing to do with this thread (but it could apply here as well)! I think the PA needs to act reasonably and prudently based on the information readily available. If so I believe the PA is protected from a claim by a purported child that is made after account is distributed.