mbozek

GB: Regardless of whether there is a PT, a contribution of an employer's promissory note does not constitute payment which is deductible as an employer contribution to a retirement plan until the note is paid. Don E. Williams Co. v. US, 439 US 569 (1977). I dont know whether the proceeds from the sale of the note by the VEBA would be deemed payment by the employer since the note is a plan asset and the deduction could be delayed until the employer paid the holder of the note. It would be easier for the employer to sell the note to a third party and contribute the proceeds to the VEBA. An employer contribution of a promissory note of another party would be a deductible payment at its FMV.

You really need to retain a competent tax advisor to answer this queston. Is the employer a private or public entity? The max deferral for a non profit 457 plan is 13k and it cannot be used in conjunction with a qualified plan because only highly compensated emplyees or select members of mgt can participate.

Wouldn't the insurance co be able to compute cash value of the contract, since it is their product. I assume that the ins co will issue some form of 1099 to the employer. Otherwise the value would be the value of the account balance under the plan on the date the employee is vested.

Under 457(f) the property is taxed to the employee at its FMV, e.g., the account balance of the annuity on the date there is no longer a substantial risk of forfeiture. Reg. 1.457-11(a)(1). You dont need an actuary to do a calculation. For distribution purposes the amount included for tax purposes become the basis and the installments are taxed under the annuity rules on the amount of any payments which represent interest or earnings.

We have heard this manta before from the same people who profit from the trading of securities. If active trading is so profitable, why do 70% of professional managers fail to beat the indexes in any given year. How does an individual investor beat those odds? This sound like a replay of day trading.

By eliminating the above clause, it allows employer contributions to a 403(b) annuity for employees of any govt employer, not just public school employees, in an amount permitted under IRC 415.

In the states that I am familiar with there is no problem in getting the participant to give permission since the participant is a party to the action and can be ordered to give consent to the PA to provide info to the AP or spend some time in jail for contempt of ct. In cases where the QDRO is issued after divorce, the Ct retains jurisdiction over the parties to insure compliance. The problems occur when the AP delays the preparation of the QDRO for several years after the divorce and then goes to the PA directly to collect the benefits. The requirement to disclose information on plan benefits is no different than disclosure of other assets, e.g. brokerage accounts, off shore bank accounts, business interests,etc. since the ct will order the partiies to provide financial information to the other side.

I thought that Lucas v. Earl had to do with assignment of income, eg. person who earns income cannot assign it to another person, not CR by a person who earns income. Anyway IRS has issued several rulings which allow the transfer of accumulated vacation pay or disability pay from an employer to a qualified plan upon the consent of employee of without CR as long as ee has no right to receive the benefits as cash because cash would trigger CR.

I thought that the consent requirements do not apply after the death of the participant. Reg. 1.411(a)-11©(5). The consent requirement prior to age 62 only applies to the participant. See reg. ©(4).

Only if wrapped in a mutual fund or annuity.

yes they can, if the investment causes a loss to the plan, e,g. a ct orders the DB plan to disgourge the profits made in the Ponzi scheme. Usually the only the sponsors of a ponzi scheme are sued for losses, not other investors.

We are not talking about a cafeteria plan where the ee has a choice between cash and a non taxable benefit. The question is whether there is any income tax due if the only choice an employee has is between two non taxable benefits, e.g., deferral under a 457 plan or health ins. Since neither benefit is included in the employee's income there is no constructive receipt which requires the amount to be included in income under IRC 451. Amounts which are contributed by an employer to a 403(b) plan are not include in an employees income. IRC 403(b)(1). They are not the same as cash.

This is not exactly true. Roth IRAs are subject to the prohibited transaction provisions of the IRC which could result in the earnings on roth contributions being taxed if the owner engages in a PT e.g, using the assets as collateral for a margin loan.

I thought that to have a cafeteria plan the employee must be offered a choice between cash and a tax deferred benefit, e.g health ins. IRC 125(d)(1)(B). Offering a choice between two non taxable options does not create a taxable event because there is no cash is available. This no different than offering the ee a choice between a 403(b) annuity contribution and health care. Everett do you have a ruling for your position since neither benefit is currently taxable to the employee.

This is a tax question not a benefits q and depends on whether the plan would be deemed to be doing business in NC. An entity that does business in a state, e.g. ,maintains an office or has employees working there is doing busines and is subject to state tax laws. However, if the plan/employer does not have a presence in the state there is no requirement to comply with state laws. Was the distributon paid to an employee who worked in NC for the employer or did the plan merely make a distribution to a retired employee who lives in NC. I dont know if a plan would be considered a separate entity from the employer for state tax purposes.

Why not call counsel for Y and ask what the terms of the sale were- Asset or stock. I am assuming that the sold practice was incorporated. Also the purchase agreement should have some reference to the service credit for the acquired employees, assuming that it is well drafted so why not review it. No one can give you an answer without reviewing the purchase documents. There may be a problem if the med practice was unincorporated.

I dont know of any reason for an 501c3 entity to adopt a 401(k) plan instead of a 403(b) annuity because of the additional costs/ reporting, etc which comes from maintaining a qual plan. The only advantage (if this is an advantage) is that employees in a k plan can invest in individual stocks and bonds. All employees can contribute 13k to a 403(b) plan since there is no ADP to limit contributions by HCEs. Best solution is to terminate the k plan establish a 403(b) plan and allow employees to rollover the proceeds to a 403(b) plan. A 403(b) plan is not considered a successor plan under the proposed 401(k) regs. A 401(k) plan can not be restated as a 403(b) plan because a 403(b) plan is not a qualified plan. Termination of k plan should not be difficult if only contributions are salary reduction. There may be a question of how to transfer outstanding loans in the 401(k) plan. By the way, why does it cost 10k do an audit of sal reduction assets in a k plan?

Was the 9/30/03 amendment a timely Gust amendment?

Since a plan must be administered in accordance with its terms, the funds deducted from the paycheck of an ineligible ee must be returned to the employer so that they can be refunded to the employee. Otherwise the er is liable for the failure to pay wages to the ee under state labor laws. Since the mistake of fact provision in ERISA was written before 401(k) plans were authorized under the tax law to permit employee contributions it should not be construed to prevent the correction of a mistake. There are numerious IRS rulings which permit the correction of mistakes in compensation without any adverse tax consequences to the employee, eg. Rev. Rul 79-311, refunds by employees of amounts previously paid by employer as commissons to employees for which employees were not entitled is not taxble income.

reg 1.72(p)-1 Q/A-10 loan is in default if participant fails to make a payment. If the failure to repay was discovered in the same tax year that that the loan was made I would rescind the loan and issue a loan for the same amount and a new 5 year period since the terms of the loan were not complied with from inception (no valid contract was performed if payments were not witheld). Note: This is an aggressive concept to most members of this board and requires review by counsel. Most people would perfer that the loan be considered in default and taxable to the participant which creates issues of liability for the plan administrator and employer.

Under IRS loan regs the loan is not in default as long as the loan payments are withheld from pay. The employer owes the money to the plan to repay the loan payments and the Plan fid has a legal obligation to collect the loan amounts from the employer.

NQ benefits are taxes as ordinary income and are withheld as W-2 wages.

why is this retoactive? Plan can always be amended to provide for involuntary cashouts of participants with less than 5k balance.

I have difficulty in relying on DOL opinions and pronouncements on the applicaton of ERISA which are not supported by statutory or regulatory authority (remember the recently revoked DOL opinion forbidding charges for QDROS which did not have a citation for its conclusion that was issued during the previous administration). In the real world the divorce bar ignores the DOL opinion because it is easier to get the employee's consent for release of plan information on the same terms as other financial records or have the ct order the participant to give consent to releasing the records to avoid wasting time. One could draw an inference that the DOL has an inherent bias in favor of the claims of APs in QDRO matters.

Bank of America did something similar in 1998 when it allowed employees to transfer 401(k) assets to CB plan which were treated as accrued benefits protected by the cutback rule.