mbozek

Even for someone who is not at the pre tax maximum the figures are not mathematically equivalent because of the additional time for compounding without income tax by a Roth results in a residual value which is higher than a tax deferred account after taxes are taken out. example: Employee age 30 in 20% tax bracket defers $100 @6% for 40 years in a 403(b) plan which will be worth $1028.57 at age 70. Assume employee takes distributions over 25 years @6% which will yield an annual payment of 58.22 or 46.57 after 20% tax is paid. Total net paid to employee is 1164.25 (25 x 46.57). If employee makes same contribution to Roth there will be only $80 to invest after 20 is removed to pay tax but distribution can be deferred during life of employee and spouse. Assuming an additional 20 years of deferral the Roth account will be worth $2639 at the death of the spouse. (80 @ 6% x 60). A 25 year payout to a beneficary @ 6% will yield an annual payment of $149.37 which is exempt from tax. Total amount paid to beneficiary is $3734.25 (25 x $149.37). The reason your example shows no difference between the tax deferred and Roth accounts is that it assumes same deferral period for both the Roth funds and the tax deferred account which eliminates the significant advantage of the tax free compunding and payout of the Roth over a longer period than the tax deferred account. In other words the comparison between a roth and a tax deferred account is apples to oranges because the Roth provides a greater net value to a taxpayer who is willing to defer use of the funds for a longer period than what is allowed for a tax deferred account.

There is nothing in ERISA which forbids a plan from accepting a valid POA which complies with state law. A-27 applies only when no consent is given by a spouse. Authority under a POA is valid consent because it conveys authority to act on behalf of the spouse to the attorney in fact. Some states (NY) have poa forms which permit the principal to spcificially authorize the attorney in fact to make retirement plan decisions. In other states generic language in the POA can authorize a waiver of benefit rights. You need to review the POA with counsel to determine it would permit consent to waive benefit rights under applicable state law. The plan admin could also obtain an indemnificaton/holdharmless agreement from the plan participant as insurance against a claim by the spouse.

You are missing the obvious - the comparison is between apples an oranges. In a Roth the employee has already paid income tax on the contribution so the Roth calculation begins with less funds than the 403(b). Employee in the 20% tax bracket can invest 100 in a 403(b) annuity but only 80 in a roth after taxes on the comp are taken out. During deferral the net amt invested in the roth will be less than the amount in the 403(b) annuity because of this difference. But the 403(b) distributons must commence at 70 1/2 and tax paid while the Roth can be deferred during both the life of the owner and spouse and paid over the lives of the beneficaries. At some point the amt available in the Roth will exceed the net amt available from the 403(b) annuity after taxes are paid. You also ignore the fact that the marginal rates of taxation on a lump sum at distribution will be greater than than the tax rate on the roth at the time of deferral. One variable which cannot be predicted is future tax rates on the amount of the 403(b) distributions.

I am curious as to how foreign nationals would make salary reduction contributions to a US trust in their foreign currency which may require violation of foreign currency laws by their employer. The foreign employer can refuse to accept the contributions.

I dont think these people even know about ERISA and how to enforce their rights. The DOL has no interst in enforcing their claims. Also many foreign countries have currency laws which prevent their citizens from investing their currency abroad to convert it into into us$ so excluding them will prevent the sponsor from violating foreign laws.

Same as the increases in 402(g) -14k in 05, 15k in 06.

Why not amend the plan back to the beginning of 2004 to exclude any foreign nationals. Generally a qualfied plan can be amended during the year back to the beginning of the plan year. Check the closing agreement to see what the provisions are regarding benefits for foreign nationals and if there is a board resolution excluding these employees. Usually foreign nationals are excluded from US benefit plans and are covered by a plan in their country.

If the CB plan was a conversion from a traditional DB plan then the accrued benefit can never be less then the benefit on the day the CB plan was effective. The lump sum benefit can never be greater the the maximum 415 benefit as discounted to the participant's current age (unless the NRA is the fifth anniversay of the commencement of participation).

As long as the fee is reasonable and disclosed in the SPD. FAB permits charging expenses against the accounts of individual participants because of the utilization of a plan service.

I havent seen any commentary like that. The FAB states that plans may provide for allocation of expenses to the account of an individual participant and uses monthly check writing fees as an example of an expense that can be charged to a participant's account.

What dol guidance are you referring to?

The cleint needs to consult a tax advisor to review how the non benefit tax issues will affect the failure to repay so as to avoid the need to go to the IRS. For the nhce the default could have ocured in 2000 at the end of the quarter in which the loan was made or maybe the loan was in default on inception. Issuing a 1099 for 4000 distribution in 2000 may not result in any income tax to the nhce because the s/l for collecting back taxes generally expired on 4/15/04 if the 2000 AGI was above 16k. The loan to the owner is more complicated because the 3 yr s/l has not expired but perhaps there may be grounds for a recission of the loan.

Is this lifetime health ins benefits for retirees? I thought the issue was decided by the 2nd circuit in the Met life case about 15 years ago which held that the controlling documents were the plan and SPD and that extrinsic evidence cannot be introduced if the those documents clearly define the right to curtail benefits. Have you reviewed that case? The Met life case should be reported under ERISA 502. Also check the Curtis -Wright case decided by the US supreme Ct about 10 yrs ago that permitted a welfare plan to be amended to eliminate a lifetime health care benefit for retirees. These cases should have been researched before you went to trial.

General rule is that losing party cant raise new claims or defense on appeal that were not made at trial because the trial is supposed to be the fact finding process to determine the validity of the claim or defense. Otherwise there would be a never ending cycle of appeals which would be disguised trials of issues that had not been raised at trial. Appeals courts are not equipped to act as triers of fact. I am sure you will find the answer if you consult a legal reference book such as Moore's Federal Practice, not this board. By the way right to amend a terminated plan is not an uncommon feature and is enforceable like any other contractual term adopted by the settlor.

Since after tax funds cannot be rolled over from an IRA to a qual plan, any amounts rolled over from an IRA will be presumed to be pre tax. It is the participant's responsibility to know what portion is AT funds if custodian does not keep records. It is the participant's tax problem if AT funds are rolled over to a qual plan where it will be taxed again at distribution. The plan can obtain a statement from the participant acknowledging that all of the funds rolled from the IRA are pre tax. The rollover from the IRA can include funds contributed as a 403(b) plan or govt 457(b) plan.

The IRS recently issued a notice stating that same sex couples cannot file joint income tax returns because DOMA limits the term spouse to members of the opposite sex . Unless the courts decide that the language in 1 USC 7 requiring that that the term spouse under any federal law be a member of the opposite sex is unconstitutional there can be no QDROs for same sex couples.

Insurance companies permit former employees to take out loans because the annuity is required to offer a loan under state insurance law. The loan is paid directly to the insurer. Custodian accounts are not subject to state insurance laws. If the plan says that only currently employed persons are particpants for loan purposes then loans are not available to former employees.

While stretch IRAs permit long payouts it is at ordinary tax rates not cap gains or the special 5/15% rate for dividends. In addition naming a grandchild as a beneficary of the owner's IRA can trigger the 48% Generation Skipping tax if the child of the owner is alive and the value of all interests subject to GST transferred by the owner exceed 1.5 million. The GST tax is in addition to the 45% estate tax on transfers in excess of 1.5 million.

Gregory: Do you ever read plan documents? All qualified plans must provide that benefits must be payable no later than than age 65 but the plan can permit the participant to defer until age 70 1/2. An inactive participant's benefits can be commenced without the participant's consent at age 62. A missing participant's benefits can be forfeited at age 65 subject to reinstatement if the participant claims the benefits at a later date. At 70 1/2 the RMD must commence unless the participant is employed which is why benefits are forfeited if the missing participant does not claim them. These provisions are in the plan document.

There are no spousal waiver requirements for a 423 plan becuae it is not subject to ERISA. In a CP state 50% of all property acquired during the marriage is owned by each spouse.

You need to read the custodial agreement with Price to see what duties they will perform. You may have to sign the refund request as the fiduciary of the IRA.

The refund request is filed by the IRA since it is a separate taxpayer from whom the tax was withheld and is signed by the appropriate representative of the IRA. The refund should be payable to the custodian of the IRA ( ABC trust Co, as custodian for the IRA of John Jones or the IRA for John Jones). How did you plan to file for the refund?

Mandatory employee contributions are permitted on an after tax basis to a money purchase plan as a condition of employment. See rev. rul 69-277.But an after tax contributon is not made by salary reduction as you indicated initially. The only difference between a salary reduction contribution and an after tax contribution is that the salary reduction contribution is not subject to federal income tax. Both types of contributions are subject to FICA tax.

Did this arrangement receive a determination letter from the IRS? Under IRC 401k only a profit sharing plan (or a pre ERISA money purchase plan) can permit employee salary reducton pursuant to an agreement by the employee to defer salary. If there is no salary reduction agreement how is the employer obligated to contribute the employee contributions to the plan?

The IRA owner will have to file a canadian income tax return for the IRA requesting a refund.