mbozek

Why would RE be a good investment for a nqdc? There are expenses with maintaining a RE investment that do not occur in other investments such as property taxes, insurance, maintenance, etc. In addition the owner of the property will have liability risk for negligence and environmental issues so I dont think too many trustees will want to own RE without a hold harmless agreement from the employer. Finally the transfer of the RE to the employee will be taxed as ordinary income and not capital gains.

My reason for suggesting that the client retain counsel is that ERISA 4021(b)(9) exempts only plans established and maintained exclusively for substantial owners. Since the plan did cover non owners there is an issue as to whether the plan is exempt from PBGC coverage under (b)(9) after termination of all of the non owners since it was not maintained exclusively for substanital owners. I dont think an acutary is qualified to render a legal opinion that the plan is exempt from PBGC coverage. Before writing to the PBGC it would be good to know if there is a favorable precedent instead of waiting for a response from the agency.

Doug: the company needs to retain counsel to determine if it is still subject to PBGC regulation if the plan terminates. No buyer will purchase the company if a plan is underfunded and subject to PBGC because the buyer will be responsible for the underfunding.

A qualified plan can restrict participation to us nationals and persons working in the US. Foreign nationals with no us source income can be put into a separate non ERISA plan.

MRD amendments if not previously adopted.

Alf. The creditors of the bankrupt employer are only entitled to property that was owned by the employer. Salary reduction contributions were never the employer's funds because they represent compensation paid to the employees. The plan admin needs to retain counsel to explain why the deferrals are not subject to the claims of creditors. But why hasnt the bankruptcy trustee been notified? In addition, plan assets are not subject to the claims of the employers creditors and under ERISA the fids must administer the plan for the exclusive benefit of the participants.

what/who is the entity that you are describing who sponsors the 401(k) plan? Is it the individual trustees who receive schedule Cs as independent contractors, the employees who receive w-2s, or the office of the trustee. You need to retain counsel to determine who is the employer who sponsors the plan. Bankruptcy trustees are appointed to administer the estates of bankrupt companies and individuals under the Federal bankruptcy code and there is no incorporaton or regulation under state law.

If the deferrals were made by the employees then the employer's creditors have no claim to the funds because the funds were never assets of the employer. Under the DOL plans asset rules the funds are plan assets once they are segregated from the employer's general assets. Who is advising the creditors on this ridiculous claim?

In order to take a deduction for a qualified plan, the employer must adopt the plan by the end of the employer's tax year. Rev. Rul 81-114. The employer can deduct contributions to a qualfied plan adopted by 12/31/03 for the tax year year ending 3/31/04.

I am not sure of what is the issue here. In the 030 PLR all that was done was retitle the IRA so as to permit direct payment to the beneficary (IRA of J. Jones, deceased, fbo Jane doe, beneficiary) with the bene tax id so as to permit the payment to the beneficary without the need to channel each payment though the estate. The distribution period did not change and the beneficary is the same so all of the MRD rules are complied with. While the estate would have taxable income for each IRA payment, it will deduct each payment made to the beneficary so as to 0 out the tax impact of the payments it receives.

Non profit organizations which are religious in nature are exempt from ERISA and filing of 5500s. See instructons to 5500. Only other exemption is for 403(b) plans which permit only salary reduction contributions.

I dont see how you can change the terms of the promissory note that the participant signed even if the plan requires a different interest rate because the note is a contract between the plan and the participant. The plan is stuck with the terms of the note that it prepared. Where the loan rates are higher than the plan provisons the participant can be issued a new loan at the correct rate.

There were no limits on salary deferral in qualified plans pre ERISA because there was no 415 limit. The only limit on salary deferral was the exclusion allowance for contributions to a 403(b) plan which limited all contributions, including salary deferral, to 20% of the compensation after reduction for elective contributions. See IRC 403(b)(2) repealed effective 1/1/02.

Merger of a qual plan with a 403(b) plan is not an option. However, the employer could terminate the Qual plan and allow employees to make a tax free rollover to the 403(b) plan. Future matching contributions could be made to the 403(b) plan. The employer should provide a 204(h) notice and a summary of material modifictions to the employees and file a 5310 with the IRS. the only reason for mataining a separate qual plan is that the contributions to the 403(b) plan are not aggregated with the Qual plan for 415 purposes. E,g., employee can have a allocation of up to $40,000 to each plan in 2003. Or employer could contribute up to 40k to mpp plan and employee could contribute as much as 17k to the 403(b) plan by salary reduction. In 2004 the max contribution to a 403(b) annuity will be 44k of which 19k can be by salary reduction. If the current MPP formula will result in an employee receiving more than 25k in 2004 then it would be advisable to keep the mpp.

I am confused about what is going on. What has been decided? What is the advisor developing? I have never heard of an investment plan document. You must be referring to an investment policy statement which must be approved by the fiduciaries regardless of who drafted the document. In any retirement plan subject to ERISA, the fiduciaries are personally responsible for the selection of prudent investments which are limited to mutual funds and annuities. I dont know how your employer can allow an advisor to negotiate the conditions of investment management for plan assets with an investment company or insurer which would expose the fiduciaries to personal liability without the advice of counsel. My suggestion is that the employer hire ERISA counsel to guide the fids on the process of selecting investments for the plan. I have advised many 403(b) plan sponsors on the proper design and implimentation of an investment policy. If the plan is not subject to ERISA then state laws apply. I dont think you can do much on the withdrawal penalties if the fees were stated in the documents signed by the plan representatives. It would be better to invest future plan contributions in other investments until the penalty provisions lapse.

While the plan can be adopted at any time, salary reduction contributions could only be made between the date the plan is adopted and 12/31. For most nhces a roth IRA would be a better choice especially if the nhce is in the 15% tax bracket (Married couple with no kids could have w-2 income of about 72k and be within the 15% bracket.)

I am assuming that the excess payments are from a DC plan not a DB plan. Any checks payable to a participant which are cashed after death should be be placed in the estate's account. Endorsement of the check by another person would constitute fraud or conversion under state criminal or civil law. Usually a strong letter from the attorney representing the plan will result in a return of the funds. If the payments are made by wire transfer why didn't the plan reserve the right to reverse the transaction in the case of overpayment?

Under reg. 1.402(g)-2(a), the salary reduction dollar limit for a catch up eligible participant shall be increased by the applicable catch up limit set forth in reg. 1.414(v)-1©(2), e.g. $2,000 in 2003. Since all salary reduction contributions to tax deferred plans under 401(k), 403(b) and SAR-SEPs must be aggregated there is only one catch up limit per participant. The multiple plans exception allows a participant to treat aggregate contributions made to two or more plans as catch up eligible contributions even though the contributions in each plan do not exceed the 402(g) maximum. E.g., 50 year old particpant contributes $6,000 to plan 1 and $8,000 to plan 2 in 2003. Participant is deemed to contribute $12,000 under 402(g) limit and $2000 under catch up limit even though neither plan treated elective deferrals as catch up eligible. reg.1.402(g)-2(b).

This client needs legal and tax advice to determine how the progarm should be structured. A qualified retirement plan must be established as a domestic trust established in the US. The first of many questions is whether the client is incorporated in Bermuda but has operations in the US which requires it to file a US income tax return. If the answer is yes then the client can establish a qualified plan. If the client does not conduct business in the US which requires a US tax return then it would need to establish a plan under the laws of country in which it is subject to. There are other issues such as whether the plan will cover non resident aliens with no US income, etc.

The client can file a 5310 after the funds have been distributed but there is one caveat- in the unlikely event that the plan is deemed to discriminate in favor of the HCEs, the plan cannot reallocate any account balances. Also there could be problems if the plan was not timely amended for Gust and EGTRRA. Since the assets were distributed almost 2 years ago there is no benefit to applying for a determination ltr at this time.

Why does an amendment to the plan require a software application? Just write up an amendment to the plan and have it adopted in accordance with the terms of the plan to provide that the plan administrator must receive all FSA claims within 90 days after the end of the plan year. The other alternative (if the plan permits) is for the plan administrator to promulgate an administrative rule that requires that all claims must be recieved within 90 days after the end of the year. After making the change send each participant a summary of material modifications notifying them of the change.

I dont understand what you are trying to do. A transfer of IRA funds from one trustee to another trustee is not considered to be a distribution and there is no withholding. If you recieve a check from a custodian you can elect out of the 10% withholding and roll over the check to another IRA custodian within 60 days.

The over 50 catch up is a additional amount above the 402(g) limit permitted per participant. Thus the 2003 maximum salary reduction for a participant in one or more 401(k), 403(b) and SAR-SEPs is $14,000. However, a public employee can defer an addtional $14,000 in a 457(b) plan maintained by his employer.

Yes. See ERISA 403(b)(1) and (5).

There are two separate prohibitions against age discrimination in ERISA: IRC 411(b)(1)(G) which was part of ERISA, prevents a reduction of the accrued benefit on account of any increase in age. Since the accrued benefit is the benefit payable at normal retirement age which was 65 (IRC 411(a)(7)), the benefit formula cannot reduce the annuity payable at NRA on account of an increase in age. IRC 411(b)(1)(H) applies to benefit accrual after NRA. (b)(1)(H) was added in 1986 when Congress protected employees over age 70 from age discrimination and eliminated the option to exclude employees hired within 5 years of NRA e.g. 60, from participation in a DB plan. According to the IBM court both provisions apply to benefit accrual in a DB plan.