mbozek

I dont understand the question. for deduction purposes the net earnings from SE are reduced by 1/2 of the SE tax. 1/2 of FICA tax on 14k is $1071. But there is no income tax due on amounts paid as FICA tax.

I dont think that you have provided proof that 457 plans are low cost when compared to 403(b) plans. All retirement plans permitting salary deferral have cost structures which are passed on to participants. Govt 457 plans have additonal costs including trustee or custodial fees, record keeping requirements and 12b-1 fees. Also 403(b) plans allow employees with 15 years of service to defer an additional 3k a year for up to 5 years above the maximum permitted under a 457 plan. School boards should focus their limited resources on more important matters such as the quality of the education provided and the cost to taxpayers instead of providing more perks to teachers since where I live 75-80% of the district budget goes for wages and benefits. Adding another benefit program only increases the administrative burden on school staffs and accounting personnel without providing any benefit to the students or taxpayers who foot the bill for the school districts. Finally employees who do not like their choices in a 403(b) plan can make IRA/Roth contributions of 3k (increasing to 5k) to a low cost provider.

What do you think?

there are hundreds of cases. They are located at 29 USC 1104(a)(1)(B). As a general rule a one year decline in the value of plan assets not an indication of imprudent investment, e.g., in Oct 87 the stock market had a one day decline of 22% and did not come back to the Oct 87 level for 16 months.

Yes if you can find a bank that wants only this business but I dont think the bank would want to administer such a small amount without acting as the trustee for the qualfied plan assets.

A PT by the IRA owner is deemed a taxable distribution of the entire deductible IRA to the owner. IRC 408(e)(2). Distributions from a Roth IRA are treated under the same rules as distributions from an IRA. IRC 408A(a). See IRS pub 590, P 59 for taxation of Roth IRAs. Also the 10% penalty tax will be due if the owner is under 59 1/2.

Where is there a legal requirement that participants in TSAs must be offerred a no load fund under a TSA? Even ERISA does not require that participants in self directed accounts be offerred no load funds. I am interested in state laws or cases that govern the selection of TSA options.

GB: I am interested in any cites regarding your statement of activities that create fiduciary status to school districts that make 403(b) plans available. Some of the practices you cite, e.g., selection of providers and collection of reasonable charges for providing services to the plan do not make a 403(b) salary reduction plan of a TXO subject to the fiduciary provisions of ERISA. See DOL reg. 2509-3-2(f).

There are PLRs that permit the entire RMD for the first year to consist of after tax contributions that are paid to the participant in a lum sum distribution.

I am not sure what all of the above posts mean other than that that each of the platforms for deferrals by public school teachers have different cost structures based upon the type of funding vehicle and service provided. 403(b) plans are the primary vehicle because 401(k) plans are not available. Also I disagree that school districts that offer a 403(b) program are fiducaries because the district permits employees to make contributions by salary reductions. The districts do not sponsor or maintain the plans and should not have any responsibility for administration or investment choice because these costs as well as litigation risk for poor investments should not become liabilities of the taxpayers whose taxes support the school district. Also no employee is forced to contribute to a 403(b) plan and could elect to contribute to an IRA or Roth IRA. Because the 403(b) platform has to be sold on an individual basis it will have costs associated with the distribution system, e.g, use of agents and salesman. However even low fee 457 plans and qualfied plans and have hidden costs such as obtaining an IRS determination letter, frequent amendments, administration, record keeping and trustees fees. If one wants to follow Jon Chambers advice the plan also needs to hire and investment advisor. The costs of maintaining qualified plans can be passed along to the participants. In short there is no free lunch for any salary deferral platform available to employees and the costs of each are ultimately borne by the participants.

QMCSOs are authorized under Section 609(a) of ERISA to enforce the rights of dependent children of the employee to be covered under an employer's health plan pursant to a DRO or order issued pursuant to valid state administrative process. The QMCSO reduces state welfare agency cost of health care for dependents. There is no employee consent. Generally, a QMCSO cannot require that the plan provide any benefit not otherwise provided by the plan e.g., add dependents if dependents are not otherwise eligible. The cost of the dependent coverage is charged to the employee as a wage garnishment. Some states, e.g., NY, have passed legislation holding the employer and group health plan personlly liable for dependent medical expenses if the dependents are not enrolled under the QMCSO.

What does the CBA agreement say about this? Normally the CBA is binding on the er who signs the agreement and its sucessors in interest. A principal owner of an incorporated entity is not the employer. A start up company not affiliated with the er who signed the CBA would have to negotiate a new CBA with the union. This issue needs to be reviewed by labor counsel.

this is a horror story involving IRAs: An IRA owned by a decedent designated his ex wife as the bene before they were divorced. Decedent did not change designation after divorce. Decedent was a resident of Hawaii which provides that upon divorce spouse beneficiary designation is automatically revoked. After IRA owner's death the ex spouse requested a distribution based on bene designation. Spouse received the IRA proceeds and rolled it over to her own IRA before executor for H's estate found out.

A SEP is regarded as an employer sponsored DC plan and is aggregated with other DC plans of the same employer for 415 limit purposes. See IRC 415(k)(4). Maintaining a SEP has no impact on contributing to a DB plan for this year.

The cleint needs to retain tax counsel to review the applicable rulings and opinion letters regarding ownership of the employer by the IRA and the IRA owner because custodians do not give legal advice.

A 403(b) church plan is exempt from all of the nondiscriminaion requirements of the IRC including the requirement to provide universal availability of salary reduction. IRC 403(b)(1)(D). There are no IRS approved prototype documents since 403(b) plans do not recieve a determination letter from the IRS but the 403(b) vendors usually have a model or sample document which should be reviewed by counsel before adoption.

I dont see any PT violation under IRC 4975 because the funds used to pay taxes are not plan assets and there is no sale, exchange or lending of property between the plan and the sponsor. However, the client cannot deduct the taxes as a contribution to the plan or as an expense of the client because the taxes are not a legal obligation of the client.

Restricting investments to securities traded on a national exchange and mutual funds is not a bad thing because it prevents investors from poor investments such as privately held securites, foreign investments,collectibles and RE. If the language in a plan document is not appropriate then select another vendor. Finally the institutional trustees/custodians provide systemized procedures for routine administrative functions/recordkeeping that a trust must observe. The employer can always hire an outside investment advisor to manage investments

He is required to take the RMD that the wife would have taken for 2003 from her PS plan. Reg 1.401(a)(9)-5 Q-4. I am assuming that the wife did not take her mrd for 2003. If the MRD was taken then he is only required to take the MRD due on his account for 2003.

yes- if he has at least 60k in net earnings from self employment he could make a contribution of 12k to a SEP or HR-10 plan. Deduction is 20% of net earnings from SE. He cant make a contribution with pre tax dollars to another 401(k) plan in excess of 12k if he is not age 50.

Jon: Even using your numbers an actively managed fund only has about a 1 in 3 chance of beating an index fund over the long term and has significantly higher mgt expenses. One could question whether an actively managed fund could ever be a prudent investment. So why can't a small plan limit investments to 5 - 8 index funds of a low cost provider and meet the 404©/ prudent man rule to provide a broad diversification with the lowest cost without the need to retain an investment advisor. While all investment funds are susceptiable to violations, no index funds have been cited by the regulators. To limit risk the plan could use only funds that use fair value pricing.

While the above checklist is extremely helpful, there is a practical problem in that most plan admin/ fids for small or medium size plans don't have the the time , attention span or financial resources to do a though review. It is difficult enough to get DC plan fids to draft an investment policy statement let alone to gather information on fund cos. Why cant small plans invest in index funds with a low cost provider such as Vanguard without trying to analyze contradictory and opaque information on 8000 mutual funds when 75% of the active manageed funds fail to beat index funds in any year.

B: isnt the reason why the IRS does not question predecessor service is that the determination letter only approves the form, not the operation of the plan? The only way the IRS will know who actually gets service for a predecessor employer under the plan in operation is if the plan is audited.

While IRS pub 570 ( P12) does not restrict who can be the trustee of an HR-10 plan, the obvious question is why would a SE person want to incur the cost of preparing a trust document as well as the headache of being a trustee, including obtaining a TIN #, etc. when there are many vendors who will provide a pre approved plan and trust for free or at a nominal cost of $30 a year?

You should either contact the employer or review the severance agreement that you signed if any to find out if there is any restriction on your return. The IRS does not regulate rehiring of employees.