mbozek

A 403(b) plan does not report assets on the 5500. 403(b) assets can be transferred to a qualified plan or IRA upon termination of employment or upon 59 1/2 in both ERISA and non ERISA plans or to another 403(b) contract at any time under Rev rul 90-24.

There are no assets to distribute in a 403(b) plan because there is no trust, only annuity contracts in which the participants have an ownership interest.

You need to hire tax counsel to review the PT rules of IRC 4975 which prohibit a fid (the IRA owner) from using IRA assets for the benefit of the fids personal account which could happen if the owner needs the IRA investment to complete the purchase. Also the IRA cannot engage in a sale, purchase or lease of plan assets with a fid even for FVM. Violation of the pt rules results in the the entire IRA being taxed as a distribution, not just the amount invested in the PT.

the owner of more than 5% of the employer is required to commence MRDs from qualified plans after 70 1/2. So you will be required to receive distributions form your plans this year unless vesting is deferred in the DB plan. You will be required to commence mrds in any 401k deferrals made this year. Also the max DB benefits are phased in 10% per year so that in yr 1 the max benefit accrual is 16.5k year, 2 33, etc. Dont know how you fund for this benefit if you are past Normal retirement age at inception of the plan. Before you start up this plan you need to talk to an actuary and accountant.

Under a plr a partnership can contribute an elective deferral for a partner as late as the date for filing the pship tax return with extensions if the contribution is made from the partner's draw, i.e., the share of profits due the partner for the pship tax year if the partner has signed a election by the end of the tax year.

E: 5 USC 8432b applies to the Federal Employees Thrift plan not plans subject to ERISA. ERISA DB plans are required under the Davis decision to give benefit accrual for all periods of military service prior to enactment of USERRA.

The QDRO should explain the death contingencies- either payments are forfeited, remaining payments will be made to participant or payments will continue to bene of spouse. There is no legally mandated choice or option to continue benefits. Have you asked the plan administrator?

Why would the DOL grant an exemption to such an obviously illegal transaction?

IRC 414(p)(3) provides that a QDRO cannot require a benefit form or option for an AP not provided by the plan. So if a plan provides only for a lump sum payment upon approval of the QDRO the QDRO cannot permit the AP to retain the assets in the plan. 411(a)(11) does not require consent of a beneficary before a distribution is paid.

Under a US Supreme Ct interpretation of the Veterans Reemployment rights act, the predecessor of USERRA, veterans were required to be reemployed without a loss of senority including benefit accrual in db plans for periods of military service. Alabama Power & light v. Davis, 1977. USERRA extended the requirement to provide benefits for periods of military service to DC plans.

Silly question: What does the plan provide as payment election for AP? Some plans provide that only option for AP once a DRO is certified is a distribution of the AP's account which will not require consent under the 1.411(a)-11 regs since only a participant with account > than 5k must give written consent. If the the plan permits the AP to remain as beneficiary in the plan after the QDRO is issued then the AP's consent is required for a distribution which exceeds 5k.

Why? a small employer can easily justify limiting investment options to one family on the grounds of administrative burdens, costs to employer of using multiple vendors, use of reputable low cost provider, small number of employees who partricpate, etc. If an advisor doesnt have the confidence to make such a judgment call then the employer can adopt a SR plan subject to ERISA and limit investments to one fund family as a settlor decision.

Under the PT rules of IRC 4975©(1)(E) a fiduciary cannot use plan assets for the benefit of the fids personal account such as living in the home and a fid cannot lease assets from a plan-©(1)(A). A third party not related to the fid could lease the residence from the plan.

I dont think any employer would intentionally adopt a qualified plan that extends benefits to independent contractors, leased employees and illegal aliens who perform services as common law employees if they knew they could adopt plans that exclude these people from the eligible group of employees who participate in a plan. The problem is that employers are not made aware of this option at the time the plan is adoped by the parties who set up the plan. It has nothing to do with an advisor knowing immigration law but making the client aware that ERISA permits exclusion of illegal aliens, independent contractors and leased employees from eligibility to participate in the plan. At the minimum the client should be made aware of the risks in adopting a plan that does not exclude such persons from eligibility. It would be inconsistent for the IRS to allow an employer to adopt a amendment that denies retoactive benefit accruals for service prior to the date of reclassificaction as an employee but not allow a retroactive amendment to exclude illegal aliens from participation in the eligible group since they both have a retroactive effect on benefit accrual. There is nothing to lose in adopting an amendment eliminating benefits for ilegal aliens because the worst case scenario in adopting a retroactive amendment is that it would apply prospectively. In any event an employer can require an independent contractor or leased employee to sign an acknowledgement that they are not eligible for retirement benefits to start the ERISA s/l clock ticking for filing a claim for benefits.

(vii) does not require that multiple contractors be permitted- it only requires reasonable choice in light of all relevant circumstances, including number of employees affected, the variety of available products, the administrative burdens and cost to the employer and possible interference with employee performance resulting from direct solication by contractors. There is no requirement that an employer allow direct solication of employees by salesman in an exempt 403b plan. Other factors can include reputation of the provider and low cost of funds. I dont know who would bring a claim against the plan in federal court on such a facts and circumstances basis. I am not aware of any employer who has been found to have mantained an ERISA plan because it limited a 403b program to the funds of one provider.

Of course the disclaimant cannot disclaim any greater rights than possessed by the disclaimant under the instrument governing the property to be disclaimed. And a minor's rights cannot be discaimed without state ct approval. However, a disclaimer under 2518 is not required to conform to a state disclaimer law in order to be valid. See reg 25.2518-2.

Joel: public 457 plan assets are exempt from employer's creditors because the 457 plan is open to all emplyees and is the regular retirement plan for many small govt employers. NP 457 plans are available only to top hat employees so there is no reason to provide 457 assets with greater protection that assets of profit making Non q plans. Proposed legislation on non qual plans will apply to NP 457 plans but not govt plans. MW : there is no requirement that a non ERISA 403(b) plan must offer investments from more than one provider and many small plans use one provider to avoid admin burden on employer. I have clients who use a single provider such a vanguard or T/C for all plan assets to achieve economies of scale. The salary reducton funds are kept in a non ERISA plan to avoid spousal consent for loans and lump sum distributions.

A: Why does a qualfied disclaimer have to comply with state law requirements? IRC 2518 does not require a disclaimer to meet state law requirements and ERISA would preempt state laws. The only valid reason to for comply with state renunciation laws would be to avoid state gift tax in the few states that have a gift tax.

What is the 410(a) problem?

Who would you rather be: The advisor who recommended that the employer adopt a plan that pays benefits funded by the employer to illegal aliens or the advisor who recommends that the employer amend the plan to deny payment of benefits to illegal aliens, if, in the unlikely event they make a claim for benefits under the plan and choose to sue in federal ct after they exhaust their appeals (assuming that they have not been deported in the meantime).

The only back end T/C charge is a 2.5% disintermediation fee for electing a lump sum from the fixed income (TIAA) annuity paid under the GRA contracts holding employer contributions. There is no charge for distributions from CREF or salary reduction 403(b) plans funded by TIAA.

If the plan will incur those costs, why not adopt a simple 401k plan so that assets are exempt from creditors of the employee, plan loans will be available and the employees accounts can be charged for the costs?

If this is a individually designed plan why not amend to limit eligibility as of a certain date, e.g. ,only employees hired prior to Sept 1, 2004 are eligible to particpate and wait until the ineligible group exceeds 30% of workforce when the plan can be opened to new members. Need to avoid violating the 410b requirements on a operational basis. If this a ptype see if there is a write in option to define eligible employees as described above.

While the amendment would apply prospectively, the plan sponsor could request IRS approval of a retroactive amendment on the grounds of mutual mistake, i.e., the employer never intended to employ illegal aliens since it is against the law and the employee was mistaken in believing that he was eligible for benefits because he not was permitted to work in the US with false identification. The sponsor has nothing to lose and if approved would have grounds to deny benefits.

F: Who is charging the fees and for what kind of services? I dont see why any other party other than the the custodian needs to charge the IRA accounts for services since the only required action is for the er to make a discretionary contribution to the ee's IRA which is reported to the employee. I thought that SEP or SIMPLE plan were designed to eliminate the admin costs of TPAs so that all contributions would go the participant's accounts.