mbozek

Some Govts such as FLA have established qualified plans for one time contributions as a incentive for voluntary retirement. Contributions usually include accrued vacation pay or disability pay. The advantage of making contributions to these plans is that no FICA tax is owed and the employee can rollover the distribution to an IRA.

Most 457 plans documents are provided free through funding entities such as mutual funds and ins cos. to employers who use their products. Only other source of documents are tax advisors who are knowledgeable of the requirements for 457 plans and charge a fee to prepare documents. In addition to documents there are several forms which must be provided to participants and beneficaries.

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A QP can always be terminated for any legitimate business reason, such as employee dissatisfaction, cost or change in the law. The reasons are in the IRS termination guidelines.

I think we need to know what type of advice is being provided. An employer can provide retirement planning advice to employees as a tax free fringe benefit under IRC 132(m). However employer provided financial planning for non retirement purposes would be a taxable benefit. An employee can retain his own investment advisor for his retirement benefits to act as his fiduciary under ERISA 404© and pay the advisor from his account.

There is no statutory deadline which requires a contribution to a DC plan other than a MP type plan for which contributons must be made no later than 8 1/2 months after the end of the plan year under IRC 412. The 12 month requirement is for claiming the contribution as an allocation under 401(k). The failure to make the contribution by 30 days after the date for filing the return results in the contribution not being allocated for the plan year. The 404(a)(6) deadline is for claiming a tax deduction for the prior tax year. The failure to make the contribution by the date for filing the tax return only prevents the er from claiming a tax deducton for the prior year but the er can claim the tax deduction for year the TH contribution is made. This question is no different the the question of when the er must make a discretionary contribution to a PS plan.

The issue is whether the Drs c3 are part of a controlled or affiliated svc group with the univ. med school or hospital. This is a very complex area and needs the advice of counsel. See if counsel for the university will provide an answer.

Before trading options you should check the CBOE website for info on what options trading is permited for IRAs since IRA assets cannot be used as collateral for margin loans and some options require that the account holder be personally liable for losses. These activities are regarded as prohibited transactions which will disqualfiy the IRA /and result in penalty taxes. Also I dont know of any brokerage that allows short selling on an IRA.

I think the answer depends on how the benefit is provided. Constructive Receiept occurs when the employee has a choice between cash and a deferral, e.g., the employer's policy provides that employees who opt out of health ins will recieve additional wages which can be deposited in a 403(b) plan. If the 403(b) plan provides for a larger employer contribution for persons who do not participate in a health plan there is no CR because the employees do not have a choice of receiving cash and the er contribution is exempt from fica tax. IRS rulings permit employer contributions of excess vacation and severance pay into a qualified plan which are exempt from FICA tax as long as the employee does not have the opportunity to receive cash.

The 15 year rule is available only for employees of an eligible employer, e.g. hospital. There are very specific rules as to when a Dr can be considered an employee of a hospital. The drs need to retain tax counsel. I dont know who you mean by "they can be considered a qualified employer"

I think the only option is to sue the employer under either ERISA or common law contractual duty to make the required contributions. Otherwise there would be no effective remedy to enforce the requirement for making contributions under the plan. However, if the employer has no assets there can be no recovery from a corporate officer under the fiduciary requirements unless the contributions are declared to be plan assets.

See ITPE Pension Fund v Hall 334 F3d 1011, 2003 WL 21403477. Employer contributions are plan assets only if the agreement between the fund and employer specifically declares the contributions to be plan assets. In absence of specific language, company officers are not fiducaries with personal liability for payment of delinquent contributions.

There are no restictions on who can be named as a beneficary of a retirement plan. However, naming a non person as a beneficary can resulting a shorter period for distribution of benefits. By the way only entities designated under IRC 501©(3) are charities. Other NP are not eligible for charitable contributions although they can be designated as beneficaries.

What does the plan document provide regarding the obligation to contribute and the obligation to recover contributions? This is a matter to discuss with counsel for the plan.

Employer contributions are deductible in the tax year in which they are made or in the prior year if made by time for filing the income tax return. IRC 404(a)(6). The deduction is limited to 25% of covered comp but cannot not exceed the 415 limits. While contributions in excess of the 25% limit can be carried over to the next year and deducted for such year, contributions which exceed the 415 limits may not be carried over and deducted in a subsequent year. Notice 83-10, F-1, F-3.The deduction is made by claiming it on the tax return. Rev. Rul 76-28. The plan document determines how the excess contributions are to be applied. What is not clear is whether contributions which do not in the aggregate exceed 25% of covered comp can be carried over to the next year and deducted under 25% limit on comp. to the extent excess contributions which exceed the 415 limit remain in the participant's account. Or even though the excess contributions are removed from the participant's account and transferred to the suspense account are the amounts still deemed to exceed the 415 limits in the year of contribution and thus not deductible in the subsequent year? You need to read the Notice 83-10 to find the answers to the above. Why not reallocate the excess contributions among the remaining participants for 2003?

What does the plan document say about adoption by a sucessor employer. A well drafted plan permits a sucessor to adopt the plan. Otherwise why not have the LLC adopt its own SEP for the 1/1/03 plan year?

The prohibition applies to plan assets, i.e, amounts that are contributed to the plan. A benefit that accrues to the plan sponsor's personal account prior to the time a cash contribution becomes a plan asset cannot be a PT. That is why the transaction is structured so that the card holder makes the advance to the company bank account before making the contribution to the plan since money is fungible, i.e, the card holder could use the advance to pay bills in order to have other cash in the bank account needed to make the contribution. Also the PT applies only if the sponsor receives a benefit from a party dealing with the plan. The facts do not indicate that the credit card co has any relationship with the plan but rather issued a line of credit to the employer. This is clearly different from the IRA owner/ sponsor receiving a cash payment or gift from the custodian for opening an IRA/HR10 plan provided that the credit card co is not the plan custodian. If a cash advance is used the funds are usually available within 48 hours.

There is a prohibition of funding a plan with a promissory note or other credit instrument. However, this does not apply if the contribution is made with a cash advance since the plan will receive the dollars and the card holder will be deemed to have taken out a loan. I really dont see a PT problem if the cash advance is used since the loan is used to generate the points before the funds become plan assets. Would there be a PT if the cardholder writes a check against his line of credit to accumulate points and then deposits the check in his personal bank account to pay the contribution? From the plan's perspective dollars have been contributed, not a loan. There is no PT because the dollars which accumulate the points are not plan assets. The points credited on a cash advance deposited directly to the plan trustee would generate the points before they become plan assets.

The plan administrator has to make a decision as to whether to report the transactions as PTs which will necessitate amending the 5500. (I recall there used to be a question on the 5500 as to whether the plan engaged in a PT). The PA needs to retain a tax advisor to determine whether the 5500 should be amended and who would be responsible for paying the PT tax. By the way many corporate employers have similar restrictions on reimbursements of employees for business trips so I dont think the DOL was out of line.

Unless otherwise exempted from ERISA any plan for employees that provides for a deferral of income until retirement or termination of employment is a pension plan subject to ERISA. Excess benefit plans are exempt from ERISA. Unfunded Top hat plans are exempt from all ERISA requirements except reporting and the claims procedure provisions. However a top hat plan can file a simple notice with the DOL that meets all reporting requirements. Since a top hat plan is subject to ERISA, state laws are preempted.

Did the anyone sign an admission that the transactions were a PT? If so then there is proof that a PT had occurred. The IRS collects the PT tax from the persons who benefit from the PT. There is a second stage tax of 100% if the first tax is not paid.

Yes and no. Yes if the non qualifiied plan has property payable to an employee (depending on whether state law regards non qualified plan benefits as property subject to Escheat laws). No, if the plan is subject to ERISA, e.g., a top hat plan, because state laws are preempted by ERISA. Amounts payable from an unfunded excess benefit plan could be subject to state law because such plans are exempt from ERISA.

There is no authority under the tax law or regs for 100% withholding of a missing participant's accrued benefit without consent. That is the basis for the IRS position. I dont think you have any basis for concluding that the participant will eventualy collect the withheld funds if the 1099 cant be forwarded. Under the tax law a refund request must be filed within three years of the due date for filing the tax return. So there will always be a risk that the participant could make a claim for benefits from the plan admin. Forfeiting the benefit is permitted under the vesting regs of 1.411(a)-4(b)(6) so there is no disqualfication risk. Or try one of the locater services, e.g., equifax.

Withholding of income due an employee or beneficiary requires statutory authorization to prevent violation of the non alienation rules. Reg. 1.401(a)-13©(1). Under IRC 3405© a plan administrator is required to withhold 20% of a taxable retirement plan distribution which is not rolled over to another retirement plan or IRA. Reg. 1.3405©-1Q-3 permits a distributee to enter into an agreement with the plan admin or payor to withhold more than 20% of the taxable distribution. There is no authority for the the plan admin/payor to withhold amounts in excess of 20% without securing the distributee's agreement or obtaining a valid power of attorney from the distributee. Why not forfeit the benefits and use the proceeds to pay plan expenses.

The employer has the following options : 1. Do nothing. See if any former employees ask about whether their benefits are vested. 2. Vest the terminated employees. Remember only employer contributions for employees with less than 5 or 6 years of service can be forfeited. If the amount is small why not vest? 3. Hire an attorney to review whether a partial term occurred. General rule is that partial termination requires involuntary elimination of at least 20% of the covered employees. However, there are issues as to what participiants are put in the denominator. 4. Ask the IRS for a determination of whether a partial termination occurred. Option 1 is no cost, option 2 costs only the amount of the forefited benefits. Option three and four will require the sposnsor to pay real dollars.