jpod

There are no 5500 penalties at issue here. Can't the 3d Q 941 be fixed by having the employer deposit all taxes due? The taxes attributable to the medical insurance premium for one employee for one quarter can't be a large amount.

QDRO: This is, after all, a discussion board. This discussion may someday be useful to a poor soul who fears that he or she has blown the 120-day deadline for a second filing, only to learn that there is no reason to pursue or pay for DFVCP relief.

I've heard and read (probably on this Board) that DOL will say that, but there is nothing in the regulation that would support that interpretation (assuming it really is an "interpretation," as opposed to a pipe dream).

The conditions for the waiver in the regulation could not be clearer: file once and only once. Why do what is not required?

All good advice. In addition, consult with your client about it's possible failure to file separate 5500s in the past for the welfare plan and what to do about it. (Note: there may not have been any failure to file if welfare plan did not cover more than 100 participants at the beginning of any plan year.)

JanetM: You may want to take a look at 29 CFR Section 2550.408b-2(e)(2) and Example (6) of -2(f) and see if that changes your mind. (Identical provisions are in the Treasury Regulations interpreting Section 4975©). QDRO: If there is no compensation, direct or indirect (as unlikely a scenario as that may seem), it could nonetheless be a PT (e.g., if the son can then "tout" his experience as an investment advisor to the XYZ Company Retirement Plan); or, perhaps not.

Section 406(b)(1) of ERISA and Section 4975©(1)(E) of the Internal Revenue Code fo 1986.

Are we talking huge dollars here? Can the IRA owner afford to (a) pay for an independent valuation, (b) pay FMV for the bond (or to borrow money to pay for the bond), and © hire legal counsel to apply to the DOL for a PT exemption? If so, he should consider trying to get a PT exemption to buy the bond from the IRA for cash, then distribute MRDs in cash thereafter. Alternatively, perhaps the bond can be dropped down into an LLC that is owned by the IRA, then the IRA distributes membership interests to the IRA owner each year having a value equal to that year's MRD (although I'd have to think a bit more about whether any one or more of those transactions might be a PT for which an individual exemption would be required). He would need to transfer the bond to an IRA custodian that accomodates sophisticated IRA investments. If the dollars are not huge, none of the above seems to be worthwhile. Just take the entire bond out of the IRA in kind, pay tax now (presumably on a depressed value), and forget about it.

LRDG: I thought the proposed regs. give you a free pass on the nondiscrim. rules for a POP only plan, as long as everyone is eligible on the same terms and conditions.

The LLC would be a disregarded entity for Federal tax purposes, so the income characterization at the LLC level would be attributed to the Plan, and there would be no UBTI. I can't imagine why anyone would ever go to the trouble of creating a corporation to hold the property, but if they did clearly corporate dividends/distributions are also exempt from UBTI under the 512 rules.

Aren't rent and gains from the sale of appreciated property held for investment (i.e., not inventory) excluded from UBTI by Section 512?

Sorry, I still don't believe that retirement plan assets would be treated any different than any other asset. The fact that the retirement plan assets might be moved in such a way that triggers a taxable event is merely a legal nuance, but they shouldn't be treated any differently that other assets.

If the parties have sufficient other assets, a solution may be for the AP to give up any interest in the P's retirement plan in exchange for a lesser amount which she would receive tax-free as part of a property settlement. But, putting that aside, I am having a difficult time believing that a 1099R showing a distribution of retirement plan assets in connection with a divorce will prejudice the AP in connection with her financial aid search. Is it the fact that she would have funds available that hurts her? If so, why would funds via a retirement plan distribution hurt her but cash from any other source not hurt her (or is she really afraid that she can't "hide" a 1099R but she can hide other assets not reported on a 1099)? I can understand how a 1099-MISC showing non-employee compensation, and thus perhaps a regular source of income, might be a problem, but why a 1099R? Would it make any difference via the financial aid if the 1099R shows that the retirement plan distribution was rolled over to an IRA?

I don't know of any specific instances, but even if I did I'm not sure how that information could be helpful to you. I think the more pertinent inquiry is "why wouldn't I be a mere general creditor vis a vis my 457(b) account in the event of my employer's bankruptcy?" I can't think of a good reason why you might hope to have any preference beyond that of a general creditor (and behind secured creditors).

I think you are on the right track, assuming there was full and immediate vesting. Look at section 402(b) of the Internal Revenue Code and the Treasury Regulations under section 402(b).

It sounds like you may have the makings of a good "reasonable cause" argument. Advise your client that it would be beneficial to get a letter from his physcian and to be up front with the IRS concerning 2005 and 2006 as part of the effort to demonstrate reasonable cause. P.S. Has your client taken annual MRDs?

Fiduciary Guidance Counsel mentions the first line of inquiry: Could the arrangement possibly be a "pension plan" under ERISA? While this is somewhat of an oversimplification, if the arrangement is that Executive X receives $Y if he remains employed through Z Date, and he is 40 years old or younger, I would say that it is not a "pension plan," in which case ERISA would not apply. The age of 40 is not in the law, but I was using it as an example which you will understand when you look up the definition of "pension plan" in ERISA.

My gun is not loaded, but I'll throw this out to you. Is there any authority under the Code that would allow the employer (or an issuing insurance company) to take the position that any "make-whole" payment to the employee, either through a lump sum cash payment or the purchase of an annuity, should have the same attributes as a lump sum payment or annuity coming out of the terminated plan?

Is there any elective element to the plan, or is it all nonelective Employer money? If the former, more likely than not there is an offering of a security under the Federal securities laws (and presumably any applicable State blue sky law). The plan sponsor needs to have a securities law attorney look at this and determine how compliance (with an exemption or otherwise) may be achieved.

Are you saying that the DOL can "interpret" the existing 4975 reg. in such a fashion as to add a list of additional exemption requirements which cannot be found in the existing reg? If you are saying that, I disagree. Presumably, the DOL can amend the 4975 reg. by virtue of the reorganization plan, but it is not proposing to do so, so my question still stands.

Please tell me if I am missing something that should be obvious. The DOL's proposed regulations would amend the regulations under the service-provider exemption under Section 408(b)(2) of ERISA to add new fee disclosure conditions to the availability of the exemption. There is an identical exemption from the Section 4975 excise tax in Section 4975(d)(2), and the existing regulations under 4975(d)(2) are identical to the existing regulations under Section 408(b)(2) of ERISA. However, the Treasury has not proposed any amendment to the regulations under Section 4975(d)(2). Question: Assuming the fee disclosure regs are finalized, why would an employer and/or service-provider be subject to excise taxes under Section 4975 if it complies with the existing regulations under Section 4975 but not with the regulations under 408(b)(2)?

No, but - 1. I would think that any State law claim that might otherwise exist would be preempted by ERISA; and 2. I am not sure that there is any Federal law that prohibits or has been interpreted by courts to prohibit discrimination by private employers based on marital status.

Consider the following points. 1. A SERP plan is subject to ERISA unless it is a church plan, a gov'tal plan or an excess benefit plan as defined in Section 3(36) of ERISA (i.e., it's sole purpose is to provide benefits which can't be provided under a tax-qualified plan due to the Section 415 limitations). 2. Assuming the SERP plan is subject to ERISA, it must, out of necessity (or practicality, take your pick) be designed to qualify as a top-hat plan. A top-hat plan is subject to ERISA, generally, but it is not subject to most of the substantive ERISA requirements, including the J&S/spousal beneficiary requirements or Title I of ERISA. 3. Notwithstanding 2, some/many of us believe that it is a good idea to draft a SERP as if it was subject to the J&S/spousal beneficiary requirements, and to comply operationally with those requirements as if they applied. The reason for this is that if the top-hat status of the SERP is successfully challenged, there will be no issue of past non-compliance with the J&S/spousal beneficiary requirements of Title I of ERISA (e.g., lawsuit by a surviving spouse alleging that a defined benefit-type SERP was not a top hat plan and that the SERP benefits should not have been paid to the participant in a lump sum).

A question that has plagued me (slight exaggeration) for years: Assume the 403(b) plan is subject to Title I of ERISA. Unless it is a "profit sharing" plan, it is subject to the J&S requirements. Is it a profit sharing plan? Anybody ever seen any DOL guidance on this (it's not really an issue under the jurisdiction of the IRS).

Before you write the letter, review the pertinent authorities to determine what is timely filing when you use a private delivery service. We know that timely filing when using US Mail is the date of delivery to the Postal Service, as evidenced by the postmark. What is timely delivery when using a private service? I don't have a clue, because I've never done it; I know I'm safe when I send it certified mail/return receipt requested and have proof of delivery to the Postal Service