Belgarath

If I were informed that a participant may be going through a divorce, I would notify the Plan Administrator. But determining whether or not to allow a distribution is a fiduciary decision, and we are MOST careful to avoid this. If the Plan Administrator subsequently instructed us to process a withdrawal/distribution, we would do it.

They should be, subject to normal rules under IRC 404. See Revenue Procedure 2003-44, Section 6, .02(4)(b).

Maybe you can get your employer to send you to England to deliver the payment in cash. Then everyone will win! Except possibly your employer... Seriously - could you take advantage of DOL field assistance bulletin 2004-02?

You could also try to find a Revenue Ruling, Announcement, Procedure, etc., that is even faintly related to your question. Call the principal author of that release directly at the number listed, and ask them who you should talk to - I've had this work a couple of times.

As long as the reduction (or elimination) of the cure period is prospective only, then I see no problem. But I don't think you can do it for existing loans.

While it does apear that the regs permit one plan to have, for example, 5 year cliff and another group to have 7 year graded (assuming NTH), I must admit that I'd be squeamish about having 2 (or more) separate 3 year vesting schedules, with one being more favorable to HC than the other which covers NHC. I feel the same way as Tom - the ©(2) that you refer to does offer an "exception" but I wouldn't dare to attempt to use it for something that falls outside of that specific exception. And the situation you outline, to me, appears to fall outside of it. At the very least, I'd request a determination letter on this one if I were going to attempt to use it. But I probably wouldn't attempt to use it. I don't think ©(2) is saying that it (your situation) is ok just because the 3 year is better than TH minimum vesting. It is just saying that for a NTH plan, the 5 and 7 year schedules are equivalent, and for TH, the 3 and 6 are equivalent. But within that framework, a combination of several plans can't discriminate against the NHC under the general principles of ©(1) as Tom mentioned. But I'm not supremely confident that I'm correct...

Question: Does anyone know if the IRS is planning to do a model amendment that can be tacked on to a prototype? 'Cause otherwise, I think the timing is such that this could be a real problem - the submission period proposed in 2004-71 doesn't start until after the amendment would be required...

I want to see if I've got this right - without going blind figuring out original case, vacated decisions, remands, etc... maybe some of you legal types are more conversant with it. With the latest decision, are we now, for the moment at least, at the stage where vested participants are counted? Have I got that right?

I'm not aware of any guidance which suggests that the missed earnings must be considered. Therefore I would not consider them for excise tax purposes.

I'm not so sure - depends upon what you mean by the "required contribution." Are you talking about a termination liability? If so, then I'd agree, and please ignore the rest of my blathering. If you are talking about a "regular" contribution, it gets murkier. 404(g)(2) is discussing payments under (g)(1), which refers to termination liability amounts under ERISA 4041(b), 4062, 4063, and 4064. You still may be able to do as you suggest, but I wouldn't rely on (g)(2) to support that stance. I've seen arguments for both sides on this - some that the other participating employer(s) can deduct the contribution as they wish, and some that say you can't. And I'm not convinced either way, although I have a tendency to think that the cost should be allocated proportionately to the businesses that incur the expenses, and not arbitrarily to another business, even if owned by the same individual. I haven't found any consensus among CPA's on this either, (and I queried 4 in the last week on this very question, since it came up on a potential takeover situation.) Three of them said you couldn't arbitrarily allocate to one entity or the other of the sole owner, and one said you could. But even the three who said you couldn't also siad they didn't see it as a "high risk" - whatever that means. FWIW.

The employer had better seek legal counsel. There are all kinds of potential problems here if it really is an impermissible loan - prohibited transactions, taxation, penalties, etc... - and I don't see an easy "fix" with no costs involved! As far as TPA "culpability," that's a facts and circumstances issue for the attorneys as well. It would seem that if the TPA didn't know, and had no reason to know, that the TPA can't/shouldn't be held responsible. Impossible to say from this end.

No, they wouldn't be precluded from using this provider. It could just affect the deduction pattern. In IRS publication 560, there's an example of just such a situation you are referring to - I think you'll find it helpful. It is under the SEP section, "When to deduct contributions." Yes, there are SEP providers who have custom documents. I do not specifically know who they are or how to locate them, but I'd probably start with a web search. And probably other folks here know of some specific providers. I expect some of the big mutual fund houses may have custom docs.

Bob, I'd remember the old adage, "free advice is worth what you pay for it." That includes the free advice I'm about to post! I agree with what the other folks have posted, but the comment likely to be the most helpful to you is Blinky's. Hire someone who knows what they are doing! $55,000 is a lot of money. At least to me. I doubt you would consider closing a real estate deal, for example, for 55K without engaging the services of an attorney. Maybe you would, and more power to you. But it shouldn't really cost you that much to find a local CPA, TPA, attorney, etc., to guide you through this. It is indeed likely to be, for someone versed in these matters, a pretty easy process. But it also is impossible for any of us here, without knowing your plan or documents, to be certain of that. I will say that I've seen many, many, many disasters on these "easy" one-person plans that are administered or terminated improperly. I'm not suggesting that you aren't capable of handling it yourself, but I am suggesting that the possibility of a problem is much greater. Is it worth the risk? Good luck to you with whatever approach you choose!

Thanks. That's what I had decided, but it sure is nice to have someone else agree!

I received a question today, for which I'm uncertain of the answer. Wondered if any of y'all have run into this. Small plan has life insurance on a participant. Participant dies. Insurance proceeds are paid to the plan, deposited into participant's account, and subsequently distributed to participant's beneficiary. How do you account for this on the Schedule I? Is it considered a "noncash contribution" on the Line 2b? I wouldn't think so, but it doesn't seem to "fit" any category. I believe it would all be reported as a distribution on Line 2e, but I'm having trouble figuring out where the death proceeds paid to the plan should be reported. On line 2c? Thanks.

Remember the three statisticians who went duck hunting? The first one shot a foot high, the second shot a foot low, and the third one said, "We got it!"

This is an interesting thread. Just to toss out another thought, speaking as a neophyte in these matters. What about a Roth IRA? Don't know if original poster is eligible, or how much he can contribute each year, but assuming he is eligible and his desired amount to put away each year doesn't exceed the Roth limits, how would this be? Provides a lot of flexibility and tax free growth. Total control in case kids decide not to go to college, or receive a full scholarship, etc.. Is this a reasonable possible approach, or are there reasons why it is either bad or something else like the 529 is much better?

I've refrained from commenting because discussion on these boards involving insurance tends to get a little heated. However... First, I don't sell anything!!! And I have a long standing belief that insurance is not generally suitable as an "investment." Insurance should only be sold to someone who needs insurance. That having been said, I'm certainly open minded enough to consider that there may be situations where an insurance or annuity policy might be a reasonable choice. Assuming for the moment that the parent does in fact need life insurance, and also wants to save for a child's college education commencing in 11 years, you'd then have to crunch the numbers. Term insurance for 11 years would cost you (x). The rest of the money invested in various investments alternatives would net you out several different numbers. If the same number of dollars paid into the insurance policy, when surrendered in 11 years, net you out a number of dollars that falls within the normal range of the competing investment alternatives, then I'm not sure where the harm is? Now, will this happen? Is such a policy or policies available? I can't possibly say. I'll also say this. Yes, some policy commissions are grotesque. Some surrender charges are absurd. But some mutual funds or stocks stink, and some policies provide a "reasonable" return. There are some people who simply do not want to invest in stocks, mutual funds, whatever. It's their money, and they have the right to invest as they feel comfortable. Lots of them put it into bank CD's. I don't hear much bad talk about them, but they generally pay a relatively low rate and are currently taxable. And they have a surrender charge. Want to talk about "commissions?" The same bank that pays you 3% on your CD charges loan rates a whole lot higher. Isn't this comparable to a commission? My point is not to bash banks and CD's, because they serve a useful purpose, and are the right choice for many investors. My parents purchased a deferred annuity a few years ago. It had a 7 year decreasing surrender charge, and a 4.5% guaranteed interest rate. They are people with low risk tolerance, and they can sleep nights with this investment. And they are mighty happy to still be receiving 4.5%. It was a good investment for THEM. My in-laws prefer CD's. Both of them receive a positive rate of return, with low risk. This is what they WANT. So there you have it - beauty, and good investments, are sometimes in the eye of the beholder. Would I ever advise anyone on an investment? Absolutely not, because I'm no expert. But I do believe it is in my best interests as a TPA to remain open minded - I, for example, don't like variable annuities, particularly in qualified plans. But I'm certainly willing to consider other reasonable viewpoints.

Thank you! For some reason I just wasn't making this connection.

In general, I think it does eliminate the four year lookback. But I don't read it to in all situations. For example, a terminated plan where the employees don't terminate employment, or it isn't death or disability. If you look at 416(g)(3)(B), to me this indicates that you'd go to a 5 year lookback if it were just a plan termination. However, this is just my opinion - I haven't seen anything specific from the IRS one way or the other.

Ending in 2005. You have the correct reference. EGTRRA 611 specified that the statutory increase under EGTRRA (to 40,000) wasn't effective until limitation years BEGINNING on or after 1/1/02, but the COLAs are effective for limitation years ending in the calendar year, as you mention.

It really depends on a lot of factors. If the person asking the question is referred by a CPA or attorney who does business with us, then I'd generally answer, up to a certain point. But I also generally keep them on a mighty short leash, and cut them off earlier rather than later.

Don't know if this will help, but it is from the instructions for the Schedule SE. If you were married and both you and your spouse were partners in a partnership, each of you must pay SE tax on your own share of the partnership income. Each of you must file a Schedule SE and report the partnership income or loss on Schedule E (Form 1040), Part II, for income tax pur- poses.

I didn't focus on the words "consisting solely of the doctor." I was thinking more in general terms, as you can see by my example. So I agree with Effen!

Try Proposed Reg. 1.411(b)-2(b)(4)(iv), example (3).