jpod

Is this design subject to regular 410b testing or is it subject to "benefits, rights or features" testing under the 401a4 regulation?

My firm has earned some nice fees working with 409A over the past 4+ years. Nevertheless, I predict a substantial contraction of 409A, if not an outright repeal, because the prospect of the IRS assessing draconian taxes for document violations attributable to ignorance is just too ridiculous. This is to be distinguished from qualified plans, where the employer is getting an accelerated tax deduction and has an incentive to comply.

Tauriffic: Good information. When they said "late March" did they mean that they were blowing off the directive to get model notices out within 30 days of enactment, or did they mean that they were going right down to the wire but would publish by March 19?

JSimmons: Your point is well taken. On the other hand, isn't the prospect of having an increase in future premiums better than being the de facto insurer of that same individual's medical expenses should a court and up disagreeing with your "gross misconduct" conclusion? For that reason, I lean more towards SLuskin's rule of thumb, although I wouldn't necessarily insist on police action if there were witnesses who would back up the employer's position.

QDRO: Answer = "nothing" (would prevent it).

Trying to take a pulse. Is anyone self-designing the new/revised COBRA forms required by ARRA or are you all waiting (at least a couple of more weeks) for the DOL to publish its model notices? I realize that there is a certain amount of retroactivity built in to the ARRA rules, but that's not very helfpul when your clients are laying people off and negotiating severance arrangements. Also, has anybody from DOL said anything in public yet about when we might see those model notices and/or other interpretative guidance?

This is all covered in great detail in the W-2 and/or 1099-Misc instructions. This is my recollection and may not be 100% correct, but if payment is made in the same year as the year of death, and if there is a FICA tax liability (and there may not be due to 3121(v) rules), I believe that the FICA wages and FICA tax withheld are reported on the deceased employee's W-2 for that year. Regardless of the FICA situation, the amount paid is reported on the surviving spouse's 1099-Misc.

Getting back to my question, where/when was it stated that 25% or more is some kind of safe harbor? Or, are you just imagining that 25% is sufficient (in which case you are probably correct).

I don't see where a distinction is drawn between a SEP IRA and an IRA. Obviously, IRS wants to know if any contributions were made to the IRA under a SEP, but that's about it. If I am missing something in the instructions, so sorry, but can you please tell us exactly where it is?

I have no idea. Incidentally, is the "25%" some kind of rule of thumb that will create a SRF in the eyes of the IRS? If so, I had not heard that. Who at IRS/Treasury suggested that?

jevd: Please expand on your comment: To whom/what would a trustee/custodian be required to identify an IRA as an IRA that is part of a SEP rather than a plain older IRA? I think you identify SEP contributions separately on a 5498, but where and when would a distinction be drawn between a SEP-IRA and a regular IRA?

The answer to "Why September 1?" can be divined by remembering what September was like.

Does anyone know if the IRS has prescribed (or hinted at) a definition of "nonrecourse" for purposes of the loan regime rules? (Or, for that matter, a definition of "recourse.") Example: collateral assignment split dollar, where the loan is always recourse, except it is nonrecourse if the executive is fired without cause. (Note: assume this is not a sham; executive has no effective control over his own firing.)

408(p)?? (i.e., a SIMPLE IRA plan) Why do you care that they don't file 5500s?

Also: 3. the administrative difficulty of forcing corrective distributions out of individual annuities and custodial accounts in a 403(b) if an ADP-type test is failed.

The reason may be stated in the legislative history to the Tax Reform Act of 1986, but I don't remember. Probably 2 reasons: 1. 403bs with salary reduction go back to the 1950s, if not earlier, long before 401(k)s; and 2. There are no owners in 403(b) plans.

Assume an SAR otherwise meets the criteria for the exclusion from 409A in the -1(b)(5) regulation. Can you still meet the exclusion if the right to time the exercise belongs to the service recipient (rather than the service provider)? I realize that this is not a traditional "SAR," but I cannot find anything in the reg that says it must be the service provider who has the right to time the exercise. What we are trying to do is to give the employer the right to time the payment of phantom equity appreciation, and not necessarily limited to 409A-permitted payment events.

Must a Form 4 be filed in connection with the award of non-vested restricted stock units (i.e., no actual issuance of shares unless and until vesting criteria are satisfied)?

With the exception of the FICA tax savings on money contributed directly to an HSA, is there any reason for the employer to get involved in that? Why not give the employee more cash severance and let the employee contribute or not contribute? Is there some reason I'm missing besides saving 7.65% on roughly $6,000 (or 1.45% if the employee is already above the SS wage base with other severance)?

It seems to me that any additional vested benefits beyond increases due to interest or mortality factors would be taxable as they accrue under 457(f) and 3121(v). By the way, you refer to required "withholdings," but where in the Code or the regs. do you find a requirement to withhold income taxes on unpaid amounts which are included in income due to 457(f)?

Sorry, I don't understand. Is the employer throwing its hands up in the air and getting out of the 403b business just because Vendor X is refusing to accept the $$? Why can't the employer make arrangements with a new Vendor to take new contributions? I don't see any legal reason why the $$ in question cannot be re-directed to another vendor, thereby preserving the pre-tax treatment which everyone thought they'd be receiving.

QDRO: Slight overstatement on your part, I think. (a) Could be a public school district plan, so there would be no ERISA-avoidance issues. (b) The employer certainly can be in charge of its own decision as to when it will stop allowing elective payroll deductions and transmission of same to vendors, without tripping the ERISA wire.

It seems odd that a 1/1/09 freeze meant that no money could be deposited on or after 1/1/09. The logical inference is that it means no contributions out of pay received on or after 1/1/09. And, how is it that the custodian is in control of this type of decision-making?

This is all so uplifting, isn't it?

Unless something has changed in the latest EPCRS rev. proc., there are only a few operational defects which can be corrected via a plan amendment without making a VCP submission, and I don't believe your situation is one of them. You should be able to confirm this quickly by doing a word search through the latest rev. proc. Assuming I am correct, I think it's highly likely that IRS will approve a correction via a retroactive amendment to conform the plan to its actual operation (assuming all participants have been treated the same). Unfortunately, a written submission will be required, which will take some work, and there will be a compliance fee paid to IRS.