mbozek

The DOL believes that no more than 25% of plan assets should be in one investment.

Two issues: 1. I dont think the IRS will allow an IRA to be opened by the representative of the decedant. There is case law on this. The rulings only allow the spouse to transfer retirement funds of the decedent to an existing IRA established by the decedent before death. 2. I dont think the IRA custodian will allow a personal representive to open an IRA in the decedent's name or ss number. There may be other restrictions in the USA Patriot Act that would prevent this transfer.

I thought the 9/30/03 deadline applied to M & P and volume submitter plans. Individually designed plans had to be be amended for EGTRRA provisions that the employer wanted to take advantage of (415 & a17) by end of 02 plan year.

There are numerious plrs accepting deductible contributions mailed by the due date for both IRAs and hr-10 plans and the IRS has never questioned the contributions because it is no different than the rule for filing a tax return. The taxpayer needs to retain proof that the contibution was mailed out on the due date by a certified receipt or other documentation. Or the contribution could be made by a wire transfer.

IRC 404(a)(6)/ Rev. rul 76-28 permit deduction to be taken for the prior year if the contribution is made by the last day for filing return with extensions. If the contributions are made after the date for filing the tax return with extensions, then under 404(a) (1) the contribution is deducted in the taxable year it is made, E.g., Contribution made on Nov 1, 2003 for employer with a calendar tax year is deductible in 2003 but not 2002.

US citizens working abroad can exclude about 80k of income from us taxation. If you have w-2 income for tax purposes you can open a roth IRA even if you are self employed and pay no us taxes. Self employed persons have net earnings from self employment not w-2 income.

The DOMA provides that a spouse for all purposes under federal law is defined as a person who is legally married to a member of the opposite sex.

While IRAs are not subject to the QDRO rules, a tax free division of an IRA requires a court order or separation instrument. See IRC 408(d)(6). A direct transfer to another person's IRA is a taxable event. Failure to follow the rules for divison of the the IRA will result in taxation of the IRA owner because the custodian will report the transfer as a distribution. Read the IRA custodial agreement for specific rules. The money saved by doing it yourself is not worth the risk of taxation so the client should get professinal advice

yes to the same extent as any IRA can invest in RE ( e.g., subject to the PT and UBIT rules) and finding a custodian who will hold RE as an asset.

Since the employer is reducing your pay by 2000 you will not be subject to FICA tax since it will not be paid to you. Second, employer contributions under a qualified plan are not subject to FICA taxation. Only an employee's election to reduce salary is subject to FICA tax under IRC 3121. An employer can make participation in a retirement plan mandattory as a conditon of employment.

One could ask the more interesting question which is what is the penalty if a 125 plan is not amended to comply with recent changes in the law? Some changes which do not pertain to 125 (e.g., HIPPA) could be viewed as optional since they do not affect the plan's tax status. Can a 125 plan be disqualfied for the failure to be amended with the changes to the law even if the plan is operated in accordance with 125? Prop. regs 1.125-1 Q-2 only requires that the there be a written document. There is no amendment period under the proposed regs. There is no requirement that plan be approved or even signed by the employer (compare proposed SEP regs 1.408-7(b) which require that the SEP instrument be signed by a responsible offical).

Barry: The IRS only cares about recovering taxes from who ever was responsbile for payment, either the employer for witholding taxes or employee if the limit on plan loans is exceeded. In some plans there is no central administration because of the risk that the plan administrator will be held liable as a fiduciary to the employee under state law for any problems. In some states the employer who is designated as plan admin is legally a fiduciary. Some attorneys believe that the employer will not be liable if it does not act as a plan administrator if the employer only remits contributions to the vendor. The employer enters into a hold harmless agreement with the vendor for indemnification in the event the employer is laible for taxes or penalities.

GB: This is a business dispute between the parties who will use every legal weapon at their disposal. Some prosecutions for embezzlement/fraud begin after the theft becomes public knowledge, either in the newspapers or by a lawsuit. If there is a basis for prosecution it would not be a good idea for Dr A to attempt to recover the 12k. But Dr. A will have to determine whether he wants to proceed in ct.

I would not rely on a 15 year old plr. The case law provides that income is taxable in the year it is paid by the employer or plan, not the year it is received by an employee. Checks are frequently mailed on Dec 31, to meet year end requirements, e.g., MRD. A taxpayer cannot change the timing of the taxation of income because it is not received any more than sending the check back to the payor will will negate the inclusion of the amount paid in income. If the plan sent the check 2 years ago then the distribution would have been reported as taxable income on a 1099-R for 2001. There may be one exception to this rule. If plan cancels the prior check which was never received and sends a new check the taxpayer could take an audit position that the funds were paid in 2003. The plan would have to revise the 1099-R to show distribution in 2003 and the participant would need to file an amended return for 2001.

Under some state laws the business would have a a right to offset amounts owed to Dr. A by the amount he embezzled. Also Dr B as an owner may not be protected by state or federal laws protecting employees. This could also be viewed as a business dispute between two owners subject to agreements they signed. The Check for 12k could be held in escrow until the matter is resolved. The rights of Drs A and B will be resolved by lawyers or the cts.

A PS plan is required to make substantial and recurring contributions in future years. A 0% MPP does not require any employer contributions ever. The MPP plan is used as a place to park rollover money so the owner can take a loan, e.g., in a consulting business that will never turn a profit.

The IRS is only concerned with collecting taxes from a responsible party. For public employers the issue of fiduciary liability for mistakes in a 457 plan is a matter of state law. In some states the district can be a fiduciary if it administers a plan or retains discretion. You need to have counsel review the applicable laws.

Q: from what account did A steal the funds? If it was the company account used to pay the deferrals to the trustee then the employer could claim that Dr. A stole from himself and thats why there are no funds to pay the plan. If there is a conversion of the funds by an owner I dont see why the employer has to make the thief whole. There is a general principal of equity that a wrongdoer cannot profit from his own wrong doing. ERISA claims are claims in equity. You should get your own counsel but I would have no problem in refusing to fund A's account.

Maybe you ought to ask the attorney on what basis the plan never existed. Rev. Rul 81-114 states the requirements for establishing a plan. If the employer has no income or profits then there is no tax deduction for a contribution but that does not mean the plan is not in existance if it is adopted before the end of the year. Also a plan that accepts only rollovers can be a qualified plan such as mp plan which has 0% employer contributions. Finally the contribution can be refunded if it was conditoned on its deductibility under IRC 404(a). See if the plan year can be changed so that it ends in a subsequent tax year of a the employer when a tax deduction can be taken.

A 401(a) plan refers to any qualified plan. From your description your husbands contributions were made to a form of qualified plan called a "thrift plan" in which employees made after tax contributions which were matched by employer contributions. The distribution can rolled over to an IRA or retirement plan. If he rolled over the employer contributions and the earnings there is no tax on the withdrawal of after tax contributions. However, he will be taxed on any earnings on the after tax amounts which are not rolled over to an IRA or retirement plan.

The IRS has no authority to determine who is responsible for a mistake in contributions or distributions. The IRS will assess the tax due under the tax law for the error against the employer or employee who may have a legal remedy against another party such as the TPA or provider who made the mistake. The liability of an employer for a 403(b) or 457 plan under the tax law can be difficult to determine where there are multiple vendors who act independently and there is no plan administrator who aggregates contributions of an individual participant or amounts borrowed from loans.

My practrice is to provide the divorcing parties with a model QDRO at no cost which has the basic provisions with blanks for the variable provisions which the parties can fill in. I have found that most divorce attorneys will accept a model QDRO because it cuts down on the amount of work they have to do and makes it easier to get approval from the Plan admin. Most dc plans have few variables and can be used by all parties with little modificaton. If parties want exotic or complicated distribution options or calculations then they should be charged for the cost of doing such calculations because the plan is not a charity and the plan should not absorb the cost.

SEE IRC 404(a)(8) which refers to definition of earned income in IRC 401©(2). Under the recent tax law amendments, comp under 404(a) is not reduced for 401(k) deferrals. The max deferral is 20% of the net earnings from SE after reduction for 1/2 of the SECA tax.

What is a 457 e 11 plan? I never heard of it.

You have to read the notice to determine when the stay is effective. Usually the creditor ceases collection of the debt upon reciept of the notice. I dont know how the plan could make a distribution to the participant under these circumstances. Also I always have the plan admin advise the participant that stopping the loan payment will result in a default and income taxation on the outstanding balance of the loan. You should give him an opportunity to continue to pay off the loan to avoid default.