Belgarath

Eligible. Of course, may not get an allocation, but you'd have to include for coverage and testing. I suppose I should qualify this a bit - I guess if you had some prior service that could be disregarded under the BIS rules, then it might change the overall result. I havn't really thought that part through.

I was discussing a message board situation, and referred to it as "Benefit Slink." Dave, I assure you it wasn't a Freudian slip, just too many thumbs. Tom, I think you could choreograph a dance number to go with one of your songs. The Benefit Slink might be the next big viral internet hit!

Thanks! This was the conclusion I was coming to as well, but it just didn't "feel" right. But I was unable to find any reason why it wasn't allowable, and apparently that's what the rest of you found as well. Seems odd, but ours is not to question why...I still have this sinking feeling I'm missing something, but darned if I can find it!

Let's say that a 50+ person has $22,000 of earned income. Defers all of it to a designated Roth account in a 401(k). Can he also contribute to his Roth IRA? It seems counterintuitive that he could, but perhaps it is ok? thanks!

Hi Bird - do you know where we can look at the draft? Here it is: http://www.irs.gov/pub/irs-dft/f5500ez--dft.pdf

Ignoring whether or not a fully insured plan is appropriate or not for their situation... Off the cuff, yes, presumably you can do one. As for RMD's, you are going to calculate an annuity based upon the benefit, right? In essence no different than a traditional DB, other than how you arrive at the appropriate benefit, (I think.) As to taxable term costs, if they are unincorporated partners, they can neither deduct the TTC, nor can they recover it as basis later. Perhaps you can delay the effect a bit by using cliff vesting? Remember, you can't roll over the RMD's, so I guess you'd have to crunch some numbers to determine if all this fol-de-rol will ultimately be worth it. They might possibly be better off with a 401(k) and employer discretionary, and max themselves out, with catchups? Andy's opinion on that will be far more informed than mine in terms of potential numbers! Plus he's a Bosox fan, which makes him a fine, informed, trustworthy, intelligent person, as opposed to those who root for the Evil Empire, and are therefore pond scum. Sorry, I can't help myself - baseball is in the air, so the world will soon be right again. I see SoCal addressed some of the questions while I was typing this.

Husband and wife with separate businesses who would ordinarily satisfy the "non-involvement" clause, but are considered a CG due to community property state, now move to a non-community property state. Presumably this takes them back out of CG status - just wondered if anyone had a different opinion? Thanks. P.S. - this brings another question to my mind unrelated to CG status. When you have a corporation in one state, if you move your business to another state, do you have to do new articles of incorporation or whatever in your new state, or do all states recognize corporations incorporated in another state, etc....?

1. Yes. 2. No.

Speaking on a strictly personal level, I'd take the risk and roll over the 8 cents. Maybe you can pass it off as a rounding error?

We had 2 feet of snow yesterday, 7 foot drifts in front of the garage, and the entire length of the front of the house was sealed in drifts half way up the first floor windows. I think Hell (Grand Cayman) would look pretty good right now... But that's just a minor flurry, the real snow will probably come in April. Or May. I well remember a canoe trip with my parents on Memorial Day weekend when I was a kid, and we woke up to 4 inches of snow on the ground. People often don't believe me when I tell them this, but it is true. Last April, I was just about at the point where I had to mow the lawn for the first time. On Wednesday, we received 20 inches of snow (at our house - a difference of a few hundred feet elevation sometimes makes a HUGE difference in snowfall totals.) On Friday morning, we still had 11 inches. On Sunday, I mowed the lawn - temperature nearly 80 degrees. But that's one of the great joys of living in New England - complaining about the weather is a favorite pastime. And the variability is what makes it interesting, although once in a while, I'd prefer it was a little quieter. then I read about some of these poor folks who have to deal with floods, hurricanes, tornado, etc., and realize how lucky I am and stop my complaining! As to the SSA, which after all is the subject of this post, has anyone actually heard any information about the electronic filing system, whether from IRS friends or from the podium at a conference? Any indication on when such information might be released?

I think that (b) is a precursor to (e), since Hell must freeze over before (e) takes place.

FWIW, here's how we handle it: Payments under a QDRO are not specifically addressed in the regulations. We take the approach that the alternate payee is considered a "beneficiary" under the plan for these purposes. As such, these distributions should be considered in making the top heavy determination. Since the top heavy changes under EGTRRA retained the 5 year lookback period for distributions OTHER than severance from employment, death, disability, or termination of the plan, the 5 year lookback period would apply to distributions pursuant to a QDRO.

What Kevin said goes for me as well.

Heck no. That would have been too easy!

Most documents I've seen (or at least those where I've happened to look at this wording) provide something to the effect that the "employer" includes the sponsoring employer, any "associated employer" - e.g. member of a CG/ASG - and any participating employer. And all the eligibility, participation, required contributions, etc., automatically take into account the employees of any associated employer. So, in a situation where the employer neglects to inform you that there's a CG, until AFTER the end of the year, and there's now a required contribution on behalf of the employees of the employer who has not, as yet, signed on as participating employer, is the cost deductible? And if so, is it deductible to the sponsoring employer, or the "associated employer" who has not yet signed on as a participating employer? If not deductible, is it subject to the penalty tax, and can it then be deducted once the associated employer actually signs on? I suspect that in the real world, the associated employer kicks in the requisite amount and deducts it. I don't know if the IRS would disallow this on audit anyway, as it is arguabley "required?" Just looking for thoughts or discussion, or any actual experiences you might have had with this or similar situations. Thanks!

There's a rebuttable presumption that all employee terminations are involuntary. Given that one was "asked to resign" it would appear that this was employer initiated. I'd tell the employer that it appears to be a PPT, but that they must make the decision and tell you how to proceed.

Got it! Thanks for clarifying this - for some reason the concept was confusing me.

Masteff, thanks for your reply - I assume the "cease fire" is tongue in cheek, as there's certainly no rancor here - just professional discourse. The reason I'm trying to be so precise is this: I've found that Mbozek is usually right and I value his comments, so if he's disagreeing with me, I take that very seriously, and want to "drill down" to the core of the discussion to make sure that, as you say, we are on the same page. And the following makes me think that we aren't, so if I'm wrong, I just want to understand why. "1. where the the IRA owner paid the ex spouse an amount in cash directly from the IRA, i.e. she received a distribution paid in her name from H's IRA account. According to the IRS the tax is paid the by IRA owner because it does not come within the exception cited in Pub 590. PLR 9422060 and 8820086." So MB, if my wife and I get divorced, and the decree says I must pay her $10,000 from my IRA, and the divorce decree doesn't specify that this will be accomplished via a trustee to trustee transfer to an IRA in her name and she just wants the cash - if paid directly to her as specified in the divorce decree, am I going to get taxed, or is she? And if you believe that I'm the one who will be taxed in this situation, do you still think those PLR citations are the appropriate citations, or are there others that you are aware of? (and FWIW, I agree with everything else you have said - it's just that this specific question has me bamboozled.) Many thanks!!

Mbozek - I'm still confused. Maybe I'm missing something, but I don't see how your cited PLR's apply to my question. I specified that the funds were paid directly to the ex-spouse, under the terms of a divorce decree. I totally agree that if they are just paid to the ex and NOT under the terms of a divorce decree, then the distribution is taxable to the IRA owner. But the PLR's were ruling on a situation where funds were transferred to a spouses IRA and were NOT under a divorce decree. Do you have other citations? Otherwise it still seems that if the divorce decree specifies that the IRA owner is to pay the ex a certain sum from the IRA, and the ex elects to receive it directly and not as a rollover/transfer, then it should be taxable to the recipient, and not to the IRA owner. Thanks!

Tom, can I inquire further with a little different twist? Suppose you are using a pre-approved volume submitter plan, that has specific allocation language that says, in effect, that if you fail testing, you will allocate via an integrated formula. Can you then use that -11(g) amendment to override that language? I guess I'm gun-shy on this, as it seems so unlike the IRS to allow this kind of flexibility in a situation where an integrated allocation provides MORE to the NHC than the general test, and that it is still ok to override the plan default language to then give back more of a given allocation to the HC?

Mbozek - I'm a little confused - I think we are agreeing. What I took Qdrophile's response to mean, and with which I agree, is that if (a) you have a settlement that is to be paid directly to the ex-spouse, and not to an IRA on her behalf (the original post stated it was to be paid directly to her) and (b) that settlement is a result of a divorce, presumably a divorce decree, then I think the income tax and applicable penalty tax is payable by the recipient. I don't disagree with your assertion that it can be split into another IRA, but I took the "paid directly to her" to mean that she would receive a cash distribution. Do you agree, or do you think this is incorrect? Thanks.

As Qdrophile points out, this is a common error, and frankly, very easy to make. I've frequently had people argue that QDRO payments from a IRA to an alternate payee are not subject to the penalty tax, and they cite 72(t)(2)©. Which is pretty black and white that it does not apply, if that's as far as you go. But then as Qdrophile pointed out, if you then go on to the (3)(A) - oops! A trap for the unwary.

Based upon the information you are providing, this would appear to be severance pay and NOT included in 415 compensation. In other words, this is not accumulated pay for vacation or accumulated leave or something they would otherwise have received compensation for absent a termination of employment. They are eligible for it only if they terminate employment, and can't collect it any other way. You might want to take a look at 1.415©-2(e)(3) for more detail.

While you'll have to check your document, please see the following excerpt from DOL regulation 2530.200b02: (ii) An hour for which an employee is directly or indirectly paid, or entitled to payment, on account of a period during which no duties are performed is not required to be credited to the employee if such payment is made or due under a plan maintained solely for the purpose of complying with applicable [[Page 440]] workmen's compensation, or unemployment compensation or disability insurance laws;

First, as y'all (mostly) know by now, I'm not an actuary. But if I'm reading Mr. Holland's summary correctly, it seems to me to leave out a piece of the argument, or maybe it is just my interpretation of what trumps what. (And I didn't read the actuarial discussion on the Yahoo group, so perhaps this has been brought up already) What about 1.430(d)-1(d)(2)(iii), which specifically appears to contradict the theory that you are bound by the rules in 436©? It seems like the prior interpretation is still valid - that is, such amendment to increase benefits, if made within the 2-1/2 months and satisfying all the other requirements, can still be taken into account for the prior year for funding/deduction purposes?