Demosthenes

As someone who is self employed, after tax contributions are not permitted in SIMPLE or SEP IRAs. If you make the contribution and fail to claim the deduction, the IRS will make it for you when they get around to matching up the 5498s and 1040s. Happened to a friend of mine, he had 2 IRA's in the same year, missed one from early on, never looked at all of the forms that came in before filing his taxes. Takes a couple of years for the IRS to catch up, but they do eventually get around to correlating those 5498s (and 1099s) with the 1040s and either sending you a bill or a check.

Well, DST and Trac 2000 have weighed in. Where are Sungard, Schwab, Wystar, etc? DST to Offer Market Timing ID Program September 15, 2004 (PLANSPONSOR.com) – In anticipation of new regulations regarding market timing following last year’s mutual fund trading scandal, DST Retirement Solutions is now offering an enhanced recordkeeping platform that allows retirement plan providers to define and identify short-term trading activity and assess early redemption fees. DST is hoping to catch the Security and Exchange Commission (SEC) wave that many expect will require fund companies to charge a 2% redemption fee on rapidly traded investments. By alerting retirement plan providers of possible infractions, the program will save providers from unwanted redemption costs due to a lack of identification of short-term trading, the company said “We felt it was important to help our client partners stay ahead of the regulations," said Jim Walsh, client service officer for DST Retirement Solutions, in a press release. "We are making it easy for retirement providers to adopt this capability and be nimble in anticipation of coming regulatory and market changes."

Agree completely with rcline46, this is the way it will be. It's time to evolve or become extinct (or at least have a big hole in the list of asset classes you offer) On Sub TA agreements, usually they require that you fulfill the duties of the Transfer Agent, if you have not been monitoring market timing and redemptions, you are already in breach. As far as replacing the funds, don't be surprised if the new funds have exactly the same requirements. Short term redemption fees, especially in index and international funds, are the norm rather than the exception. How about pushing the vendor of your recordkeeping system to automate the process? All the software vendors have known about this for 6 months, at least, and should have seen it coming a year ago.

Correct. IRA's must be combined to determine the amount of the required minimum distribution but any or all of the IRAs can be the source of the distribution at your discretion. IRS Publication 590 has all the details

You have just been whacked with the velvet banking hammer. Very common practice but I have never seen it expressed as blatantly as your client makes it out. I've heard banks say "we want to be your full service bank" or "if we could expand our relationship it would be better for you as well as for us" or "wouldn't it be great if there was one place you could go for all of your businesses financial needs". The implication is there but not a stated quid pro quo. However, there could very well be a specific trade off. It is completely possible that the more services you buy, the lower the fee per service. I'm not even sure the fee packaging would be a prohibited transaction. The PT or breach would come into play only if you could prove the employer put the screws to the Plan in order to get a better deal for the business. May be another rock to be turned over, what's AG Switzer up to these days?

A rose by any other name ... Call it what you will, the $ either belong in the plan or they don't. If the Trust doesn't send out a check, how will you correct? Adjust a future paycheck to reduce deferrals and use the over payment of the loan $ in substitution? This in a payroll system that already has problems with X dollars for Y pay periods. Wonder what the W-2 will look like? Not being argumentative but a judicious application of Occam's Razor might be called for.

Yes, it can and should be returned. It's a mistake of fact. If it's happening over and over, client might want to think about fixing their payroll system/vendor.

Many fund companies will waive the minimum balances if you sign up for regular monthly electronic fund transfers from your savings/checking accounts. The can be as low as $50 a month. American, Fidelity, Vanguard and many more offer this as an option and will waive annual maintenance fees to boot. One wrinkle to be aware of is that if you stop the fund transfers and have not met the minimums for an account/fund, the maintenance fees can kick in.

Under the Patriot Act, Broker-dealers are not required to look through a trust or omnibus account. However, if the participants are opening individual brokerage accounts, then they may be the "customer" and must provide the Patriot Act information SEC Final Rule Customer Identification Programs For Broker-Dealers (a)(4)(i)(A). However, that information is limited to verifying identity, it does not request personal holdings, net worth etc. Sounds like you are setting up an FBO account for each participant at American. To American, they may look like individual brokerage accounts triggering the request for suitability information.

The advisor may be attempting to collect personal information in order to build a prospects list for future direct sales outside of the 401k plan. Nothing wrong with that if you choose to volunteer the information. Making it a condition of participation in the plan/fund opens up a host of other issues. On the flip side of the discussion, if his response is that the info is required for the determination of "suitability" of the investment, that may be applicable if he is making specific recommendations on investments to the participants. If he's not making recommendations, have him re-read Rule 2310 of the NASD manual and tell him to back off. If he doesn't, threaten to place the business via another advisor or complain to American Funds directly. Tough to make a call until we know why he "needs" the info

Take the simplest route, Mary Jane got Martha to split the IRA by threatening Martha, a home health care aide making 30k a year with a costly and protracted lawsuit. I know, I know, none of my professors would have bought that one either. Except for the one that did personal injury law, I think that was his business model.

First, let the injured employee know that you are going to make the disclosure, then do it. If you're worried about a suit from the injured employee, imagine what will happen if one of the "cleaners" tests HIV positive and you didn't make the disclosure. Regs aside, you have a moral and ethical obligation to make the disclosure and give your employees every chance they can get to minimize the risks to themselves, their spouses, significant others, people they meet in a bar etc. etc.

Jon, good discussion of the semi-hard fund closure and transfer agent versus recordkeeping systems. Expect the lines to continue to blur as fund companies push requirements through the Plan's omnibus funds and down to the participant level. I wouldn't be too concerned with the current capabilities, it's just a temporary gap. In the near future, recordkeeping systems will have to be able to treat a participant account just the same as an individual's brokerage/mutual fund account. Otherwise, clearing broker's just won't deal with them

SEC Proposed rules at http://www.sec.gov/rules/proposed.shtml SEC Spotlight Testimony and related articles http://www.sec.gov/spotlight/mutualfunds.htm

K man I remain unconvinced, if I didn't get it, I shouldn't pay taxes on it. Mwyatt As for the SEC investigation, is it the pay-to-play one? Having trouble keeping track of who's getting investigated by whom, late trades, market timing, annuities, insurance brokerage, consulting arrangements, fees, and revenue. Assuming it's the pay-to-play investigation, the outcome will depend on the level and accuracy of disclosure. Even if a fund company is paying for shelf space, it won't be an issue if the payments are disclosed. I know of many companies, and I'm sure you do too, that have crafted an offering based at least in part on the revenue stream from the funds. All in an effort to keep explicit costs down "If I don't have to write a check, it's not an expense". Also, it's going to be a major effort to answer all the questions and provide all of the documentation requested. Good topic for a new thread especially with some input from people who are actually wading through the requests.

wmyer, My usual position is that consistency is the hobgoblin of little minds, but in this case I'd have to reverse myself. For the RMD, I'd reduce the account by 5075 with a net check of 5000 and the 20% would be on the check amount.

Of the daily val systems with which I am familiar, they universally deduct the fee, then distribute the assets, generating a check and 1099r for the balance net of the fee. Look at it this way, a participant cannot take constructive receipt of a fee deducted from the account, and therefore has no tax liability for the fee amount. How can I be taxed on money I never received? Another way to put it, what makes a term fee different from a maintenance fee? If you deduct an annual maintenance fee from an account, the fees don't accumulate as an accrued tax liability.

Yep and the IRS is fully aware of it and doesn't care although maybe not in the sense that you would think. Assume that a participant takes a loan from a 401(k) plan (no after tax dollars) and repays via payroll deduction. There is no provision to exempt loan repayments from withholding. Thus, the repayments are made from after tax dollars into a pre tax account and will be taxed a second time at distribution. In a sense they become pre tax without the benefit of an exemption from payroll taxes. It's not stated, just inherent in the regs, the IRS is fully aware of it, their response has been "Too bad, so sad!".

How large is the book of business, number of plans, total participants? What is a typical plan configuration interms of numbers and types of funds, complexity of design? Is it model, prototype or individually designed plan documents? All this and more go into the selection of software for the DC business. If you'd like to email me, I can send you a draft "Request For Proposal" that is designed for institutions looking to outsource the servicing of thier defined contribution business. It would be readily adaptable for a software vendor search.

Coming soon to a Transfer Agent, Clearing Broker, or Fund Complex near you, restrictions on accounts with short term trading fees. At least one fund complex and one clearing broker will be shutting off trading ability unless TPA's with omnibus accounts certify that they can track, collect, and remit short term trading fees. Latest date I've heard is end of the year but it could be sooner for some Fund complexes I define omnibus accounts as one account/plan or one account for the business as opposed to individual accounts for each participant. What I have not heard is when the major vendors of recordkeeping systems plan to deliver functionality for short term redemption fees. I'm interested in hearing from people working on the Schwab RT, OmniPlan, Wystar, and Relius platforms. Have you heard anything from your vendor?

Although, as a matter of policy, some clearing brokers require CIP info for all accounts without regard to the source. Oft times, the clearing agent cannot tell if the account is ERISA related, just that the transactions are not reportable or that the reporting goes through the broker/dealer.

Tax tip 2004-62 "You can contribute to either a traditional or Roth IRA until the April 15 due date of your tax return, without extensions" http://www.irs.gov/newsroom/article/0,,id=108515,00.html Same wording on IRS Pub 590 p.11 Extensions for filing do not create extensions for contributing.

What was the deceased's legal residence? My understanding is that rules in effect for the residence govern.

First thing I thought off was distributions, tax treaty vs. non treaty nations, backup withholding and 1042-s rather than 1099-r.

p. 36 of IRS publication 590