mbozek

Not true. A few years ago in the Circuit City case the US Supreme Ct upheld the right of an employer to require mandatory arbitration as a condition of employment to resolve disputes arising under federal employment laws under the theory that the Federal Arbitration Act encourages the use of arbitration to resolve disputes. Since ERISA does not preempt other fed laws an employer can require mandatory arb to resolve a claim under ERISA. The only question is whether the insertion of the arb clause in the plan is sufficient to foreclose the employees rights. In the CC case the employee had to sign a form agreeing in advance to arbitration. In employment contracts with arb clauses the employee signs on to the terms.

Is this a 457(b) plan and not a 457(f) plan since the annual deferral is within the $13,000 maximum permitted under 457(b) to an emplyee who does salary reduction. One risk to the employee is that 457 assets are subject to claims of the employer's creditors. The payments under a 457 plan are generally deferred until termination of service. Why not read the plan document to see when payment are made. I dont understand your reference to " general assets in the trust" since there should be no seperate entity. What type of plan is receiving 13% of comp? If the board has questons regarding deferral it should consult with counsel or the accountants for the employer.

Why? The employer can stop contributions by amending the plan after 12/31/10 if the current provisions expire.

While some participants do show up at a later age to claim benefits, there is a real possibility that participants who fail to claim benefits at 70 1/2 are dead or may have used a stolen identity. Also a participant will receive a notice of a deferred vested benefit payable from a plan when applying for SS benefits. The problem with this notice is that many participants will be unable to contact their employer to claim their benefits because subsequent mergers, consolidations, bankruptcies, name changes, etc. will make it impossible to find the Plan Admin to claim benefits. This is especially true in certain industries such as telecom. Under IRS rules a plan can forfeit the benefits of a participant who cannot be located when the benefits are payable subject to reinstatment if the participant claims the benefits at a later date. The plan can make a reasonable search to locate the participant such as through a locator service. I dont know if the IRS will notify the plan if it is unable to deliver the notice to the employee and in any event the PA should have the current address of a participant in order to send a certified letter with notice of the benefits in case the participant or beneficaries show up at a later date to claim back benefits.

A: I have had similar run ins while reprepresenting IRA custodians with divorce lawyers who refuse to admit their ignorance regading the division of IRAs. One lawyer who represented his father in a divorce (?) told me he would have me held in contempt because I refused to accept a QDRO he had a ct approve for an IRA. He refused my offer to revise the order to divide the IRA. I dont know if the IRA was ever divided but I never heard from him or the court. There seems to be a misconception among the divorce bar that custodians must accept QDROs once they are approved by a court. They never read the custodial agreement to see how the IRA is divided in divorce and think that custodians will cave in to intimidation. If you need help blowing them off let me know.

JS: I dont think the bank agreed to allow the distribution to the heirs because of the fear of fiduciary liability since a bank has no fiduciary duty to its customer unless it agrees to act a a fiduciary, e.g., to manage investments. The ministerial act of opening an IRA account for a customer and processing the forms does not make a financial institution a fiduciary. IRA account agreements will usually have a statement noting the that the bank is not responsible for the lack of a bene designation or a change of beneficary which is not received by the bank. The bank agreed to divide the account in order to close the file and limited its risk through the indemnificaton by the beneficaries.

I have seen enough proposed legislation to know that only the legislation actually enacted by the sausage factory on the Potomac counts. In the current atmosphere legislation must have bipartisan support to be enacted which doesn't seem to be present. I would be interested in what are the deferred compensation provisions in the AJCA.

What does the plan document provide regarding the liability of the remaining employers for the benefits of a participating employer who goes bankrupt?

Q- Was the distribution reported to the recipient on a 1099-R? Were the funds transferred to another custodian as a rollover or a trustee to trusteee transfer? I thought that trustee to trustee transfers are not reported to the IRS.

Tell them to check with the plan admin. to see if there is a model QDRO which can be used. Also many M/P and 403(b) vendors have model documents. They should be aware that the custodian /trustee for a M/P or volume submitter plan cannot approve a QDRO because it is not the plan admin. They should be aware that a QDRO cannot be used to divide IRAs because the custodian is not a fiduciary. There needs to be a separate provision dividing the IRA under IRC 408(d)(6).

What pending rules are u referring to?

It seems that small employers are oblivious to the fact that, compared to other plans, a 401k plan is a very inefficient delivery system for providing tax deferred retirement benefits. The employers adopt these plans to permit salary reduction and use expensive delivery systems such as variable annuites and payroll system plans which offer B shares coupled with high admin costs/fees that can reach 5-6% of assets. In many cases the annual annual investment return is wiped out by the costs which are usually passed along to employees. As a comparison, the annual fees for an IRA,SEP, Simple, 403(b) or HR -10 plan account are no more than $30 which is waived if the account has 50-100k. The investment fees can be a low as 50-100 basis points. Small employers should consider lower cost alternatives to a qualified plan such as a SEP, Simple, or even an IRA option (where contributions will increase to 5k by 2006). Given the fact that 75% of all taxpayers are in the 15% tax bracket a Roth IRA would be better alternative to a 40k(k) plan that charges participants 5% in admin costs/mgt fees.

Any mutual fund under IRC 851 can be an investment in a 403(b) plan.

If they don't amend their 2003 return the IRS will audit their return for underpayment of taxes and demand the back taxes and interest. Thewy need to talk to a tax advsior as to why they should amend their return.

H: You seem to overlooking the obvious- how can a Plan admin trust any information requesting a distribution provided by a former employee who has committed identity theft? If Joe Blow is fired for providing false information that he was legally permitted to work in the US and he submits information that he is really Joe Schmoe, an illegal alien who is a citizen of country X, why should the PA accept this substitute information as correct, especially since the information will be provided from foreign countries where false identification is easily available? The PA who pays such a claim will be open to claims from later claimants who will claim to be Joe Schmoe with no way to sort out who is really Joe Schmoe. The risk to the PA is in having to pay multiple claims to imposters.

I dont think the plan should take any action regarding the claims of the ex spouse without being served with a DRO since there is a good argument that any benefits that the ex was entitled to under the plan under the divorce decree were forfeited when the ee died without a DRO since apparently there is no mention of surviving spouse benefits. The only option for the ex spouse is to return to the divorce ct to see if a DRO can be issued retroactivey for SS benefits and then serve the DRO on the PA. The PA can reject the DRO for survivor's benefits because IRC 414(p) prevents payment of a benefit which is not permitted under the plan. The facts are similar to Samaroo, 193 F3d 185, 1999, a NJ case where the ee died 3 years after divorce. The divorce decree provided that the spouse would receive 1/2 of ee's pension benefits but there was no provison for survivor benefits if the ee died before retirement. After death the spouse returned to NJ ct and had the divorce decree amended to provide for survivor benefits. The FEd ct held that any entitlement to spousal benefits under the plan had to be determined as of the date of the ee's death. The post death revision was not permitted under a QDRO because it would increase the plan's liability over what was intended under the plan.

Why does the employer care whether the contributions are made with pre or after tax dollars as long as they are made. Since the ee cant be forced to contribute to a cafe plan, he can make the contributions for health ins with AT dollars. Older ees who are close to retirement want to maximize their SS benefits.

Haywood: All workers are required to complete a W-4 form for wage witholding in the absence of filing another form, eg. 8233. There is no exemption from filing a W-4 for non resident aliens who are not legally permited to work in the US since they are not permitted to work. Since retirement benefits are deferred wages a Tax ID # should be required for distributions unless the employee can prove he is a resident of a country that has a tax treaty with the US. I think the exceptions for requiring a tax ID # for non resident aliens who perform services in the US applies to individuals who do not meet the substantial presence test, e.g., a foreign entertainer who is paid for a 1 time guest appearance in the US, not some one who is working on a continuous basis in the US, even though it is illegal.

Under ERISA an illegal alien has a right to benefits accrued under the plan. However, the participant will have to provide proof of identity satisfactory to the Plan ad. and a tax Id in order to receive payment. If the ee was an illegal alien it is unlikely that such documentation will be provided. Under IRS reg. 1.411(a)-4(b)(6), the benefits of a participant may be forefited if the plan cannot locate the participant after benefits are payable provided the plan has such a provison. (e.g., the participant does not respond to correspondence sent to his last known address.) The benefits would have to be reinstated if the participant or beneficiary makes a claim for the benefit at a later date.

I dont know how financial institutions can make money on such accounts since the fees cannot exceed the income earned on the account and the investment is not supposed to risk principal. Money market funds are paying 40-60 basis pts. The plan can retain accounts of terminated employees and charge the account for the cost of maintaining the account without charging the accounts of active participants.

If the employer is paying you an additional 7% why isnt this being contributed by salary reduction to a non ERISA plan so that only FICA tax is due? An ERISA 403(b) plan in which the contributions are made by the employer (and no FICA tax is witheld) does not result in additonal expenses other than filing of a 5500 form which does not require much effort and a written plan document which the vendor will provide. Your finance director needs to retain someone who can explain a 403(b) plan in which the employee is not paying tax on the contribution. Note: a 403(b) plan can only be established by an employer that is tax exempt under IRC 501©(3) or a public school. Other non profit employers can establish a 401(k) plan.

You need to determine exactly what happened. Did A and B merge to form C or Did A merge into B, or did A dissolve first and A's partners/employees become partners/employees of B. Depending on the circumstances one or both plans may have survived although I dont know how this affects compliance under the nondiscriminaton rules. (generally the plans have a grace period for compliance until the end of the year following the merger). Your clients may need to retain counsel to derermine how to proceed since the accountant doesn't have a clue.

I dont think the the employer can take any corrective measures make up the salary reduction since the 2003 tax year has closed and the employees were paid their salary. The only question is whether the employees have a claim under ERISA against the employer for failure to withold the contributions, if the employer was acting as a settlor in failing to withhold contributions, and not as a fiduciary. Also the employees are contributorily negligent because they should have noticed that no amounts were withheld from their paychecks.

You can send him a lump sum distribution.

Is the NP a 501©(3)? ONly a c3 can have a 403(b) plan. There are also threads at this site.