mbozek

A Govt CB plan will not have any problems getting IRS approval because govt plans are exempt from nondiscrimination requirements and age discrimination provisions under ERISA which prohibit the use of a formula which uses time value of money to determine the accrued benefit at age 65. However, a public employer plan will be subject to state age discrimination laws which may prohibit discrimination against younger employees. The fed ADEA does not protect employees under age 40. You need to retain counsel to review all legal issues.

Why not ask the beneficiary for a valid marriage certificate? No certificate, no eligibility for rollover. Also the lawsuit would have to be brought against the IRS because IRS rules do not not allow the rollover of benefits by persons who are members of the same sex as the deceased owner.

You are dealing with two different financial organizations. As a broker Shwab has a program called one source which allows advisors who place client assets with Schwab to be paid from the fund assets. See section 9.3 of the Schwab IRA agreement. Fidelity is a mutual fund family which does not allow for the hiring of advisors. Why dont you put your assets with schwab so your advisor can get paid?

What does the agreement with the IRA custodian say about payment to advisors? As a general rule any assignment of of benefits to another person is a taxable distribution to the IRA owner but the payment of expenses to a third party for service should not be taxable.

Since no state recognizes same sex marriage at this time I dont see how there could be a rollover by the bene. Also, under the defense of marriage act, the definition of spouse under any provision of federal law is a member of the opposite sex.

I was once asked to review a $3,000,000 acquisition for benefits issues 2 hrs before closing. The deal closed before I could make any recommendations. If the purchase agreement is silent then the benefits to B employees will be determined by A.

Since the trust is a taxable entity under the IRC, the transfer of the proceeds will result in taxable income to the trust. There is no rollover from a qualified plan to an IRA of a non spouse.

The answer to the question is usually found in the terms of the purchase agreement. In many cases there is is a clause that says the acquired employees will receive comparable benefits to what they had under the former employer for a period of time after the acquisiton. If the document is silent then the acquirer can make any changes to future benefits after the closing. Why not call A's lawyer?

501©(18)(D) limits employee deferrals to the amount permitted under IRC 219(b)(3). There are very few of these entitiles in existance. They were established by labor unions to provide for employee funded pension plans.

And just what do you buy? I dont know any mutual funds that requirepaying for the expense of maintaining your investment for property taxes, ins., lawyers, etc.

I dont see any compelling need for a plan to impose a penalty on transactions by participants simply because it offers a fund that does not impose a penalty. Many funds are not susceptable to trading abuses because the price does not vary much on a day to day basis e.g., bond funds and index funds. Some funds limit volitile price swings by using fair value pricing of securities traded in foreign markets. I dont think that there is any basis under the fiduciary provisions of ERISA to impose penalty on trading by a participant in a fund that does not impose such a penalty to protect the other participants who make up an insignificant proportion of all investors in the fund. I dont think there is any support in applicable law for a plan to impose such a penalty or to transfer penalities collected to a fund company. The plan could limt any potential for abuse by limiting the trading frequency of a participant to the extent permitted under the 404© regs. I dont know what the fiduciary liability would be if the plan did not impose a penalty. The real risk in penalizing frequent trading in a fund that does not provide for a penalty is that the fund co will object because it will deter investments by participants and result in a withdrawal of the fund as a plan investment for all participants.

Q I dont see a substantive distinction between a rollover of a loan and a transfer of the loan between a plan trustee to another trustee since the loan is a plan asset. Reg 1.401(a)(31)-1 Q 16 recognizes that.

RCK: Will the plan establish its own penalty for round trip trade in addition to any fees imposed by the SEC to deter such trading? I dont see how the plan can turn over plan assets to the fund which are not required under the fund's prospectus or agreement between the plan and the fund. It doesn't seem to be reasonable comp by the plan under ERISA. Maybe Kirk can lend his expertise as to whether this can be done. I have no problem with the imposition of any penalty or charge by the Fund on transactions by plan participants.

IRS began issuing determination letters to public employers who established 401k plans in the 80s. The Tax reform act of 1986 revoked the right to issue determination letters for public plans adopted after may or june of 1986.

I agree that under unusual facts in the above hypo the DOL could approve a pte for the purchase of the owners residence by the IRA. But the economic downside, e.g., payment of escaling rent, taxes, maintence fees, etc by the IRA owner, payments to independent fid during the term of the lease, payment of legal fees for PTE and cost of appraisal will deter almost all IRA owners from requesting the PTE. Finally no more than 25% of the IRA assets could be invested in the residence.

See P 18 and P 33-34 of IRS Pub 590 located at www.IRS.gov for answers.

The program you are thinking of allowed individuals to sell accounts receivable payable to business they owned to a Corp which was wholly owned by their Roth IRA at a discount. E.g. A, a cash basis taxpayer, is a consultant who holds a promissory note or contract to recieve payment of 6k in the future from one of his customers. A sells the note to Corp B which is 100% owned by A's Roth IRA for 3k. The roth IRA collects 6k in cash and A declares income of only 3k. There is no PT if the owner of an unincorporated business acts as incorporator of the business and directs the Roth IRA custodian to purchase 100% of the stock of the company as an asset of the IRA. The dividends paid by the corp will be paid tax free to the Roth. I dont believe that there could ever be a set of facts which would permit the use of IRA assets to puchase a personal residence for the IRA owner since the primary purpose would be to benefit the owner personally by allowing him to live in the residence rent free. If the DOL approved one ruling then the promoters would solicit the millions of home owners to apply to the DOL for identical rulings for a hefty fee.

Two Q: 1. who will keep the penalty - the fund or the plan? Is this penalty in addition to a charge by the fund? 2. Is the fee necessary for plan administration and is it reasonable as required by ERISA. I dont think a plan can impose a charge on participant actions as a deterrent. Most of the frequent trading occurs in funds where stale pricing creates the opportunity for arbitrage by buying or selling a fund after foreign markets close, e.g, international funds receive prices on foreign securities at times that are 6 or more hrs old before US markets close. This allows US investors to make bets without risk because they know which direction the fund will open at the next day. Fund managers are moving to change this practice and replace it with fair value pricing which will take changes after the close of the foreign market into account.

Lending documents are written by banking lawyers who want to minimize risk to the bank so they write documents that claim assets which cannot be seized, eg. pensions, IRAs, LI. Every lending document for home mortages contains some statement claiming retirement benefits as an available asset and the mortgrage app requires that amount of pension benefits be listed. However pension benefits in an ERISA plan are not subject to creditors claims.

Prior to some date in may or june of 1986.

If the stock is restricted there are conditions on when the stock can be sold, vesting, sale price, etc. which require that the stock be tendered back to the company. The employees can only buy the shares out right if they are sold publicly on a stock exchange or through NASD. Most privately held companies are not listed on an exchange so there is no market to sell the stock other than to the company that issued it.

The only difference I have with KJohnson's opinion of this issue is that he believes that the DOL might approve a PT exempton allowing an IRA to purchase the owner's residence whereas I do not think it would ever be approved. The problem is that the people who write articles about having an IRA own your home have no conception of the technical and legal issues involved.

Tell me more about this. I thought that there is a tax CT case (Harris) which held that using your IRA to purchase your residence was a PT which disqualified the IRA. Whats the twist in this scheme? Who is the promoter?

I dont think that state laws permitting same sex marriages would have any impact on an ERISA plan because the Defense of Marriage Act specifically provides that no benefit under federal law is available to a spouse who is the same sex as the employee eg., tax free coverage of dependents under a health care plan or 50% J & S. Also only state laws relating to regulation of insurance companies are exempt from ERISA and same sex marriage laws are laws of general application. It is questionable whether a state law recognizing same sex marriages in one state (MA) could be enforced against an insurance contract issued in another state which does not recognize same sex marriages.

The best alternative would be for the Plan Admin to notify the participant of the mistake and request that the participant direct the custodian to do a trustee to trustee transfer of the MRD back to the plan and have the plan send the MRD to the participant. This is requires that the MRD be distributed by Dec 31. If the participant does not return the funds then the PA should inform the participant to withdraw the MRD from the IRA by 4/1 and file the 1099-R showing the amount of the rollover. I think there is confusion on what is a distribution. Under the IRC a direct rollover to an IRA custodian is not a distribution to the participant even if an MRD is included in the amount rolled over.