Belgarath

Ok, here's what the DOL said. And by the way, this was from their Washington office - the local district office bumped my question up to them. Very pleasant lady, who sounded like she knew what she was talking about. For illustration, assume 4 years where an EZ should have been filed, and 2 years for a "regular" 5500. The DOL said you could not file all 6 under DFVC - only the 2 years of "regular." No surprise to that. However, I further inquired as to what would happen if he filed all 6 years using a "regular" 5500 form, instead of filing an EZ, even though he is eligible to file an EZ. She said that the DOL WOULD accept a DFVC filing for all 6 years in this situation. Now, that makes no sense to me, but that's what she said. She also said that this might only work if the employer had NEVER filed an EZ, because it would cause "confusion" with the EFAST system. So there's what I was told - take it for what it is worth!

Great. Thank you very much!

Thank you for the responses. But apparently, there are some situations where this doesn't work. I just spoke to the claims department of an insurance company involved in this question. They said that some of their annuities used for funding IRA's do NOT allow the surviving spouse, in this situation, to name a new beneficiary. But most of the newer ones DO allow this option. Could this be possible with mutual funds as well? In other words, perhaps it is not a matter of law, but the controlling language in the IRA document - so that Merrill Lynch could allow it and Vanguard would not, etc.?

I've searched some prior threads, and some of them come close, but don't directly answer my question. Suppose the IRA owner dies. Spouse is beneficiary, and their daughter is contingent beneficiary. Spouse does not want to roll the proceeds to her own IRA, as this will restrict her ability to withdraw funds without incurring a 10% penalty. However, she wants to be able to change the contingent beneficiary listed in deceased husband's IRA. Say she gets remarried, for example - she wants funds to go to new husband - not the daughter. Can she do this? While one part of me thinks that as long as the IRA is maintained in the husband's name, no one can alter a beneficiary designation, it also seems that as primary beneficiary, since she has the right to withdraw the funds at any time, she should be able to name anyone she wants. Who controls - current bene or the husband's previous and recorded designations? Thanks!

I think it's a very good question. Probably because I am actually waiting for a call back from someone at the DOL on this very same question! When (or if) I receive an answer, I'll post it here. Personally, I am expecting a negative response. And even if someone says, "Yes, you can do this" it doesn't necessarily mean that if you file on this basis it will be accepted. They might just say "oops - someone gave you a wrong answer." But if allowable, it would be well worthwhile to amend the plan to immediate eligibility, hire a part time person and contribute a few bucks for them, then file under DFVC. I just don't think it'll be allowed for those years that there were no employees. I did note that if you have several years of delinquent forms, with only 1 year as a large plan, that you must pay penalties under DFVC as a large plan for ALL years. While that has nothing to do with the question at hand, it does indicate to me that there's perhaps an inclination to hit you with the worst while still remaining within the DFVC parameters. If so, seems even more likely that they wouldn't allow the proposed solution. But I'm making a pretty tenuous connection! Anyway, we'll see what they say.

I don't recall it, but that doesn't necessarily mean I'm not old enough. Might just mean that my mother didn't buy it. My smart*** teenage son (who must inherit this tendency from my wife - couldn't be from me) maintains that I was born sometime in the Dark Ages.

All true Red Sox fans are eternally hoping for the best, and expecting the worst. So even though we secretly hope that this is the year, we'll publicly predict a complete collapse. That way we won't be too disappointed. I call it optimistic pessimism. I think it's pretty much the way New Englanders are about the weather. For example, if you say to a Californian, "Sure has been a beautiful summer" the Californian will agree. A New Englander will respond, "Yeah, but we're going to pay for it - it's going to be a hard winter." But if you say, "Boy, has it been a lousy summer" the New Englander will respond, "Yeah, and that means this weather pattern will carry over to winter." If you say, "This winter sure was warmer than usual" the New Englander will respond "Yeah, so the whole darn summer will be hotter and more humid than usual." See how it works? Same with the BoSox. So they are going to collapse in September. (But SSHHH - maybe THIS is the year...)

Agree with prior posts. There are also fun things like voting vs. nonvoting stock that can get you burned in a hurry. That's why I always recommend an attorney's opinion.

This gets a little tricky, I think. Is the purchasing company maintaining the existing plan? I believe that GCM 39824 says that if there has been an ASSET purchase, as opposed to a stock purchase, that there is a "severance from employment" with the prior seller, unless the purchasing employer either continues the old plan as a new plan sponsor, or if the assets are directly transferred in a trustee-to-trustee transfer (rather than an elective transfer or rollover.) But I'm going from memory without rereading it. The document probably defines a "distribution event" or "distributable event" or something along those lines, but may not be specific enough when trying to distinguish between a stock purchase and asset sale.

Be careful on that 2004-58 extended date. I don't believe it applies in all circumstances. See the final two paragraphs of the section "Extension of Effective Date" of that Announcement 2004-58.

This is very interesting. I don't have any answers, although a literal reading of 411(b)(1)(G) does not, to me, support the position that the IRS appears to be taking. I wouldn't say that the reduction described is "on account of" any increase in age or service. It's on account of a decrease in pay. Do you interpret the IRS position to be that you'd compare the highest accrued benefit under the "old" high average salary with the benefit calculated under the "new" high average salary, and you'd get the higher of the two? Or are they saying that you'd apply the highest average salary to all years of service? I'd think the former...

I deal with qualified retirement plans, so my question here is purely as a consumer. The 11th circuit U.S. Court of Appeals barred a participant's state malpractice claims, and instead said that it falls under ERISA. The physician recommended treatment was denied by a CIGNA HMO "approval nurse," who allowed the use of the recommended antibiotic, but denied hospital admission and said that it must be treated on an out-patient basis. Bad things then ensued. For regular people - what are the implications of this? If justified, who could you sue, and for what? Is this decision sort of anti-consumer, or is it relatively neutral, and just requires a suit in a different venue? Does it really limit your recourse, or just sort of change it? Just curious - not planning on any lawsuits! Thanks.

I am NOT saying this just because I'm a BoSox fan, but I found the Yankees organization request for a forfeit to be disgusting and completely lacking in class. Glad to hear that at least you came through it relatively unscathed. And we'll all hope that Ivan falls apart or heads back out into the middle of the Atlantic. Good luck!

Appleby - FWIW - I looked into this a bit - mostly because the concept of someone disclaiming funds that were otherwise coming to them is so alien to me, and it piqued my interest. I say, show me the money! But the disclaimers by the executor in the case of a nearly simultaneous death, for example, made a lot of sense. I don't read the 25.2518-2 reg as specifically requiring deference to local law. But maybe this comes into play in certain circumstances if it is an executor doing the disclaimer? This is way out of my bailiwick, so you'd have to be charitable to even rate my opinion as superficial - it probably isn't even that good. Here's a link to what I thought was a very good article, that told me far more than I wanted to know... you may find it interesting in your deliberations. It appeared to me, on a quick skim, that perhaps the issue of "severability" under local law is no longer an issue? (if that was even what you were referring to - perhaps not) Happy reading! http://www.fpanet.org/journal/articles/199...p0599-art13.cfm

I don't know that there is a definitive answer. There are definite opinions, but which opinion you choose is another story. As Kirk points out, referencing RR 65-295, one opinion is that such a participant is not considered a beneficiary under the plan, and hence the compensation may not be usable in calculating the deduction limit. Alternatively, one could interpret 1.410(b)-3, which states that an employee is considered as benefitting if they are eligible to defer, as an argument that it is allowable to consider the compensation of such employees when calculating the limit. Has anyone had any discussion with some of the IRS movers and shakers on this question? Maybe they figure that 415 will limit the allowable allocations to such an extent that this deduction question doesn't turn out to be a big issue?

Interesting question came up. We have a client (actually former client - we cancelled our contract with them because they would never get us data on time) who is moving their administration to a bank. According to them, the reason they are moving the admin and assets to the bank is that the employer is taking out a business loan, and the bank will give them a better loan rate if pension admin and assets are with the bank. In case this ever comes up with a client we want to keep, I'd appreciate opinions on this. It certainly seems like a prohibited transaction to me, and I can't locate a PTE that seems to allow it. Any thoughts? (take this with a grain of salt anyway - this client is a bonehead, and may well be misunderstanding what the bank said or is doing.) Thanks.

That's correct - no life insurance allowable in an IRA.

I'm not an attorney, but I must say I find it hard to believe that this isn't somehow involving criminal action. Forging somebody's name on a document has to be illegal somehow. Any of you attornies have an opinion on this? Did you contact the District Attorney? Or maybe the NASD/SEC could spike his wheels if he's playing any games with variable annuities? I admire your forbearance, but if he does it with you, who knows what other illegalities and fraud he is perpetrating? Seems like he ought to be stopped...

If he doesn't have a business, then there's a different issue. I do believe there must be a legitimate business in order to sponsor the plan (whether zero formula or not) in the first place.

See PLR 200027058. I also believe the IRS has publicly stated, at ASPA meetings or some such forum, that it is permissible.

Fascinating! Horrifying, but fascinating. I can't wait for the next installment. Tell me, is he going to look good in his prison uniform? "But he that filches from me my good name, Robs me of that which not enriches him, And makes me poor indeed." Edited - I couldn't remember the exact lines, so I paraphrased earlier.

Lori - re the timing of signing the deferral election - 1.401(k)-1(a)(6)(ii)(B) deals with this issue for partners. Most TPA's that I know of interpreted this to apply to sole props as well, even though they weren't specifically mentioned. It seems unlikely that they would be treated differently. Apparently, the IRS would tend to agree, as in the PROPOSED regs (see prop. reg. 1.401(k)-1(a)(6)(iii) they specifically mention sole props as well.

I agree with jquazza. However, there are those who believe that this treatment is only for unincorporated partners, and does not extend to the sole props.

"a rather persistent insurance man" Is there any other kind? I can remember my grandfather, when I was in high school about a quarter of a century ago, singing some little ditty that went something like, "there's no one with endurance, like the guy who sells insurance..." But on to your question. I'm not sure it lends itself well to generalities, but certainly there are many situations where the insurance premium is deductible for the prior year. Example - 2004 calendar year plan and fiscal year, end-of-year plan valuation. You wouldn't even know how much insurance to issue, and hence the premium, until sometime in 2005 when you complete the valuation. Most of the plans I've seen backdate the insurance to 12-31-04 in this situation. And as long as the premium is paid on or before the tax filing deadline (with extensions) it should be deductible for 2004. Obviously there are many, many possible permutations to the above scenario, so I wouldn't rely on it too heavily!

And just to expand upon Rbutler's observation, many unincorporated sole props want help in calculating the proper contribution for themselves. We don't do any admin on SEP's, but we get this request a lot. If we ever decided to do this, we would certainly bill the employer for our services.