Belgarath

My undying gratitude! That and a dollar will get you a cup of coffee. Of course, this doesn't explain why it appeared after a couple of law firms. Unless they are ambulance chasers...

Thanks - we are in the process of asking. I was inclined to think "service corporation" myself, but that's only a guess. I did all kinds of web searches trying to find out if this was some specific type of corporate entity, but found nothing. I did, however, see this "SC" after many medical practices and a couple of law firms. (and a lot of South Carolina hits as well!)

What does the "SC" stand for?

This is very interesting. I never understood the distinction between an action at law and equity. So does this apply only to ERISA plans? In other words, if an IRA withdrawal is overpaid to me, to the tune of 50,000, then if I blow it in Las Vegas, the IRA custodian can collect from my other assets because it isn't an ERISA plan? Just making sure I know how to be completely unethical in case I'm ever overpaid...

Yes, with regard to benefits already accrued. But it can be amended prospectively for future benefit accruals.

Mbozek - while I agree that it is usually not practical, sometimes it is. We had a DB plan where a participant was overpaid on a lump sum distribution by 55 thousand dollars. Entire distribution was rolled to an IRA. When participant refused to return it, Plan Administrator hired an attorney, sued, and the funds were returned. Now, I'm no lawyer, so whether the former participant could have avoided paying this money if he'd had a different attorney, I can't say. But what little I've seen on this subject in the past seems to indicate that there is a fiduciary obligation to attempt to recover overpayments. And I'm inclined to think there may be a fiduciary breach issue if a lawsuit could reasonably be expected to recover all or part of the funds, obviously depending upon circumstances and the amount of money involved. Watcha think?

1.401(a)(9)-5, Q&A-4. Minimum distribution is required for the year of death.

Andy - here are 3 that may help. The first one contains several links to tables and data that may be very helpful. The second one is really for public universities, but I threw it in anyway. http://www.aaup.org/publications/Academe/2...ja/ja01ehre.htm http://www.tiaa-crefinstitute.org/Publicat...ags/issue50.pdf http://chronicle.com/stats/990/

Well, I wouldn't necessarily say ALL overpayments. For example, if the plan has individual accounts, and when the fund liquidates the account they send the participant an extra amount to which he is not entitled, then I wouldn't necessarily say it is the responsibility of the Plan Administrator to attempt to recover this - it is a fund error, and if the fund wants their money back, they can go after it themselves. But once notified of the error, then I'd agree that a corrected 1099 must be done by the Plan Administrator. However, in most situations, I do believe the Plan Administrator must attempt to recover the funds, with notification that the excess is not an eligible rollover distribution, corrected 1099, etc. Rev. Proc. 2003-44, appendix B, .05 (which refers you back to .04(1) and (2))deals with the correction, and only specifies "reasonable steps" to have the overpayment returned. I think there's some exercise in judgement - if the overpayment is 3 dollars, no Plan Administrator is going to go to court to attempt to compel return of the overpayment if the participant refuses. But a letter, and corrected 1099, seem to be the very least that can be done. It's also worth noting that the Appendix B correction, while an approved correction, is not the ONLY possible method of correction. It's just that other corrections may or may not receive IRS blessing.

This was changed by EGTRRA, and was effective for plan years beginning in 2002.

Agree with J2D2 - For a nonperiodic payment that is not an eligible rollover distribution (such as this) the withholding rate of 10% is mandatory UNLESS the participant elects out of it. So it is voluntary in a sense, but the withholding is the mandatory default. See IRC 3405(b).

Ashlea - just for the record, especially if you are going to be a regular poster and we will be "conversing" in the future - I was not in any way questioning your integrity, and if my post implied that somehow, I apologize.

Ashlea - you may scrape a few raw nerves with this one. "I am unsure why some think it is a complicated thing to do. Setting up and maintaining a one person plan is not complicated at all." Then why are you asking questions if it is so easy? There's a lot more to setting up and maintaining a plan then just signing a document. For one thing, being able to answer all the questions such as these, and many others, that will arise. Even the "easiest" plans usually end up with some screwball situations. Getting beyond that, rollover funds are generally not subject to J&S requirements. See 1.411(d)-4, Q&A-3.

This Schedule D stuff makes me cross-eyed. Probable takeover case where a Schedule H is required, and one question led to another, ad infinitum - you know the routine. Plan investments are all through the "John Doe" Trust company, which allows participants to direct their accounts by purchasing only mutual funds. They are limited to (x) funds - I believe around 50 of them. I find the form 5500 instrructions and DOL regs referenced to be somewhat less than a model of clarity on Schedule D and DFE issues. The Trust company does NOT file a 5500 as a DFE, and they say that a Schedule D is not required as this is not a PSA, or a CCT, etc. This is the conclusion I also rather belatedly arrived at, although I originally expected the opposite. But since this is the first time I've wrestled with this particular question, I'd appreciate any comments from others who may have gone through this same exercise. Do you agree or disagree that a Schedule D is not required? And assuming not, then the value of the funds should be listed on 1©(13) on the Schedule H? Thanks in advance!

On this side, rock. On the other side, hard place. Between them, you. This is so dependent upon the preferences of the person reading the resume that's it's nearly impossible to decide the "best" course of action. You could perhaps try something like "previous employment history available on request." There are some folks who want to see every job back to your lemonade stand when you were 6. Others just want recent employment history, as you mentioned. Once you get the interview, this experience can easily be turned into a plus, "I've had first hand experience in the importance of accurate and proper business practices, and the consequences of noncompliance. This makes me far more attentive to detail than an average employee." Etc., etc. - it's very true that all experiences contain their own lesson for someone willing to learn. I'm with Pax - I may be old fashioned, but if I were reviewing the resumes, I'd want to see employment history prior to current employment. If you are absolutely convinced that employment with the TPA you mentioned is a red flag that will otherwise remove you from consideration, then I see little choice but to address it squarely (but VERY diplomatically) in your cover letter. If the person doing the hiring is going to toss you out automatically if you've been employed by the TPA, it would likely come up in the interview at some point anyway. However, I would think that since you've been at another reputable firm for 7 years, this would count for more than the fact that you worked for this TPA prior to that. So I'd personally be very hesitant to assume it will be held against you. If 'twere me, I'd list the TPA employment on the resume, and hope for the best. The negativity of trashing a former employer in a cover letter, even if done diplomatically, will turn off most employers.

I'd just like to mention that asking me to explain it will be a grevious disappointment to you, since I only passed on an answer I didn't understand in the first place! But I'll try to get some additional clarification from my source - which won't be until next week, as apparently the champagne has started to flow in some households already. I hope you all have a SAFE weekend, and a great 2005!

Blinky - the calculation of cost on a DB plan is a deep, dark mystery to my non-mathematical mind, (Oh, I understand the basic theory, but reality is another matter) so I posed your question to one who actually does DB valuations, and here's the response I received: "There is more to it than that. First, what is your normal retirement age. The theoretical individual level premium calculation for life insurance is a separate calculation so you can't just say 2/3rds of the benefit is purchasing life insurance." I pass that on for what it is worth, if anything, as I am an untutored rube in this arena. But maybe it will mean something to you!

Of course, if you REALLY want to get rich, become a plumber!

Of course, if you are dealing with prototypes or VS, then the amendment route isn't terribly attractive either!

We've been struggling with Q&A-15 as well. For example: Small employer with only a half dozen employees. 2 terminate employment. When distribution kits sent to them, apparently either the 402(f) notice OR another separate letter must identify the issuer of the IRA. Now, as a small employer, how do I know who the issuer will be? It seems a little ridiculous for me to have to take the time to line up a vendor that may never be used, is it will only be used if the terminated participants fail to make an election! And it isn't uncommon for a small employer to never have this problem. Would it be reasonable to have a notification in the distribution kit that says something to the effect of: If your distribution is a “cash out” benefit which is otherwise eligible for rollover, and is less than $5,000.00 (excluding existing rollover accounts within the plan) but more than $999.00, and you DO NOT MAKE AN ELECTION as to how to receive your benefit, the plan is required to act as though you had elected a direct rollover to an IRA in your name. If you have not made an election within (x) days, we will send you another letter advising you of the name, address, etc... of the IRA issuer. Please contact your Plan Administrator, John Doe, at ........... if you have any questions. Would that work, or some similar approach? Or are employers stuck with identifying an IRA issuer prior to ever sending the distribution kit containing the 402(f) notice?

Where emphasis is added, it is my emphasis. The issue is whether deductions are allowable under section 404(a) of the Internal Revenue Code for contributions made to an employees' trust that is valid in all respects under local law except for the existence of a corpus at the close of the taxable year. Conclusion by the IRS? Accordingly, deductions are allowable under section 404(a) of the Code for contributions paid after the close of the taxable year, but within the time prescribed for filing the employer's income tax return for the preceding year, even though the employees' trust did not have a corpus at the close of the preceding taxable year. So, assuming your trust is valid under local law EXCEPT FOR the existence of corpus as of the end of the year, I don't see the problem. This has been a subject of intermittent discussion over many years. I've had approximately 40 (give or take a half dozen) attorneys agree with this, and no dissenters until what I've seen on this message board. So I'll respectfully agree to disagree, and continue to refer clients to their legal counsel for an opinion, as always. If their legal counsel says it must be funded, no problem by me!

81-114 is pretty short, so I've attached it here. I think it is very clear that there does NOT have to be any corpus as of the end of the year for the plan to be valid. REV-RUL, PEN-RUL 19,576, Rev. Rul. 81-114, I.R.B. 1981-15, 7. The purpose of this revenue ruling is to restate the position in Rev. Rul. 57-419, 1957-2 C.B. 264, in view of the enactment of the Employee Retirement Income Security Act of 1974, Pub. L. 93-406, 1974-3 C.B. 1. The issue is whether deductions are allowable under section 404(a) of the Internal Revenue Code for contributions made to an employees' trust that is valid in all respects under local law except for the existence of a corpus at the close of the taxable year. Such contributions were made after the close of the taxable year, but during the time prescribed for filing the employer's income tax return. In order to be an allowable deduction under section 404(a) of the Code, a contribution to an employees' trust must be made pursuant to a plan in effect and to a valid trust which is recognized under local law. Section 404(a)(6) of the Code provides that a contribution to an employees' trust is deemed made on the last day of the preceding taxable year if the payment is made on account of such taxable year and is paid not later than the time prescribed by law for filing the return for such taxable year (including extensions). This rule applies to cash basis as well as accrual basis taxpayers. Rev. Rul. 76-28, 1976-1 C.B. 106, provides rules with respect to the application of section 404(a)(6) of the Code. These rules do not, however, change the requirement that a plan must be in existence as of the last day of the employer's taxable year with respect to which a contribution is made. In Dejay Stores, Inc. v. Ryan, 229 F.2d 867 (2d Cir. 1956), and Tallman Tool & Machine Corp. v. Commissioner, 27 T.C. 372 (1956), acquiescence 1957-2 C.B. 7, it was held that where trust corpus was lacking at the close of a taxable year because of the employer-taxpayer's failure to make the initial contribution to an otherwise valid trust, such corpus was considered furnished and the trust was deemed to have been in existence for that year if the contribution was made within the time prescribed for filing the incme tax return for that year. Accordingly, deductions are allowable under section 404(a) of the Code for contributions paid after the close of the taxable year, but within the time prescribed for filing the employer's income tax return for the preceding year, even though the employees' trust did not have a corpus at the close of the preceding taxable year. Rev. Rul. 57-419 is superseded because the position stated therein is restated under current law in this revenue ruling.

You can try this - I can't vouch for the accuracy. http://64.233.167.104/search?q=cache:DWK2h...rotection&hl=en

Maybe someone with actual audit experience can answer this: I wonder, from a purely practical viewpoint, how likely it is that the IRS would pick up anything like this on audit? By that I mean - do they actually look at the IRA document to determine if it is inherited or not, or do you just show them a bunch of statements with the account balances, clculate a minimum distribution for each, then prove via the 1099's that you took the required amount? I truly have no idea - just wondered if the risk is perhaps insignificant? On the other hand, how difficult is it to play it safe and just take a distribution from each if there's any question? I always believe in playing it safe on any questionable item like this, but others are often less conservative.

No, the employee populations are such that Corp B's plan would fail coverage testing. Probably should have mentioned that in the original post! So do you agree that there is no way for B to establish a plan without considering A's employees? Thanks.