mbozek

Option 1: Under IRS termination guidelines a substantial owner can forego the part of the benefits until the liabilities of other plan partaicipants have been satisfied to facilitate the termination of the plan if plan is subject to Title IV and does not affect the minimum funding requirements in the year of termination. Option 2: The only basis in the plan not subject to taxation are employee contributions. Employer contributions are made on a pre tax basis even if no tax deduction is taken by the sponsor, e.g., if employer has a net loss for a the year.

?- Under ERISA the assets of the plan are not subject to the claims of the employer's creditors. The Bankruptcy trustee usually appoints an administrator for the plan who will usually terminate the plan and pay off the participants. There is no govt agency that administers DC plans of bankrupt employers since the plan is subject to the jurisdiction of the bankruptcy ct which has discretion over how the expenses for winding up the plan will be paid.

WDIK: I am not sure what you are trying to prove. If the plan was timely adopted before the end of the employer's tax year (i.e. by 10/31) then the employer can deduct the contributions for that year because the plan is deemed to be in effect for the entire year, regardless of the date of adoption. Rev. Rule 81-114 states that position clearly. It appears that the agent is attempting to prove somehow that the plan was not adopted by the end of the employer's taxable year; therefore the contributions made after the end of the taxable year but before the due date for filing the return cannnot be claimed as a deducton for the tax year in which the plan was adopted.

GB-" the prior November to any October is always in the previous calendar year" is accurate but irrevalent for the purposes of deductibility since it is the employers tax year, not the calendar year which determines the 12 month period. A plan adopted in Oct would be adopted in a timely manner if the employer's tax year begins on the prior Nov. 1. See IRC 404(a)(6); Rev. Rul 81-114.

Ther are several issues regarding the date the plan was adopted. There is authority for plan adoption when a valid trust is established by year end even if the plan is not signed until a later date since the plan can be expressed in more than one written document. See Rev. Rul 81-114. The reg refers to adoption of the 401(k) "arrangement" which is a broader concept then the term plan. Second if the plan was established by board resolution, the board resolution could constitute authority for adoption of the plan and the signing of the plan would be a ministerial event. Obviously the IRS want 401(k) plans to be adopted before any deferrals by salary reduction.

Why would there be any refund? Check the plan document for plan consequences of disqualfication. The tax consequence of disqualfication is that the VEBA income will be treated as taxable at either the trust or corporate tax rates.

See Fender Sales,Inc v. Comm, 22 TCM 550 (CCH) 1963. The employee could return the funds as an erroneous payment, see rev. rul 79-311, since the funds were to be used to purchase a residence. The recission must take place in the same year the funds are paid to the employee.

You need to retain a tax advisor. Generally only funds in US established plans can be rolled over to an IRA which can then be rolled over to a Roth IRA. You should also check the IRS web site (www.irs.gov) for a free tax publication on taxation of foreign nationals under US tax treaties. Recent changes in the treaty between the US and UK affect taxation of retirement benefits in several ways.

The tribe needs to retain tax counsel to review the proposed changes. I dont understand the reference to multiple employer plans since a 403(b) plan is not a qualified plan and an employer cannot obtain a determination letter for such a plan. Also I dont know what regulatory issues need to be addressed if no employees make over 90k since there would be no ADP/ACP testing.

Rev Rul 76-28 allows an employer to deduct contributions in the prior tax year made by the due date for filing the tax return with extensions if the plan treats the contributions as received on the last day of such year and the employer claims it as a deduction on the tax return. If the employer's tax yr ends before the plan year, then only the pro rata portion of the contributions attributable to compensation paid up to the end of the tax year will be deductible. Rev rul 90-105. Rev. rul 77-82 applies to DB plans only.

A withdrawing employer has no recourse to the courts. An employer who questions the amount of wthdrawal liability must request mandatory arbitration.

Sicne 403(b) plans are not subject to the TH rules I dont see how there would be any aggregation of this plan with qualified plans for TH purposes.

Sorry, the UBTI exemption is for $1000 of UBIT income not UBIT tax.

There is no termination procedure for 403(b) plans because there are no assets to distribute to participants since they own the annuity/ custodial accounts. When a 403(b) plan is terminated the plan sponsor should decide how to handle any non vested assets either by fully vesting the assets or using the assets to pay plan expenses. Nobody thought through what should be done when the plan was terminated. One option would be to distribute the surplus to the participants by transferring them to the participant's accounts. Only other option would be to amend the plan to provide for reversion of the assets to the employer on the grounds that the employees had no vested right to the funds. see ERISA 403(d).

Ubit is only assessed if the amount of the tax exceeds $1000. Since an IRA is taxed at the rate for a trust there would be no UBIT tax due if the gain was less than about $6850.

Any limitation on the rights of an employee 40 or older under a benefit plan which is not imposed on younger employees is age discrimination. See 29 USC 620 et seq. Since an employee can continue to work after NRA there is no presumption that the loan cannot be paid off.

What empoyer contributions are you referring to and what section of 403(b) requires ADP testing since 401(k) applies only to qualified plans?

I have never seen any software program for AAP. Each plan needs to be individually crafted to meet the particular requirements of the law for the employer. Employers usually retain outside counsel to prepare AAPs to avoid errors in submitting the programs.

Good plan drafting provides for reallocation of the forfeitures among the remaining participants as of the end of the year or use them to reduce the er's contributions for the year. This avoids the issue of retaining forfeitures.

Maybe I dont get it but how can a 403(b) plan have a forfeiture account if the plan does not have assets. All of the contributions are held in accounts/ annuities owned by each participant. Therefore a 403(b) plan does not have trustee. While part of the account can be subject to forfeiture under the terms of the plan, there is no plan forfeiture account since there is no trust holding assets of the 403(b) plan. 403(b) plan forfeitures retained under an ERISA plan become plan assets which must be held in trust for the exclusive benefit of the plan participants if not otherwise distributed. The fiduciary cannot use the funds to pay expenses of another plan even if it covers the same participants. The plan admin should consult counsel to to determine the best course of action. By the way what did the 403(b) plan document say should be done with forfeitures??

GB: I suggested two options: 1. a separate 403(b) plan for the HCEs because there is no ADP testing and continue the 401(k) plan for the non HCEs. 2. Terminate the 401(k) plan and put all the employees in the 403(b) plan which will reduce the admin costs because it is not Q plan. If all ee are in the 403(b) plan then there is no exclusion of any employees.

Q: A 403(b) plan can exclude participants in a CODA from the universal availability requirement for the 403(b) plan. Therefore the plan could exclude the non HCE's from eligibility in the 403(b) plan.

Withdrawals from a qualified plan which are eligible for a rollover are subject to 20% withholding. Reg. 1.3405©-1 Q 2. However it is the responsibility of the Plan administrator to withhold. Q-4 .If the brokerage is not the plan admin then the Plan admin is liable for the penalty for the failure to withhold. Q-7.

There is an issue of whether a firm that is not licenced in a state can collect fees it is owed. California courts have held that a NY firm that represented a Cal. corporation in a matter arising under federal employment discriminaton law could not collect fees it was owed under a retainer letter because it was not licensed to practice law in Cal. Since collecting a fee would be a matter of state law you should check the case law for recovery of fees by out of state firms.

yes there is no ADP test for a 403b plan, but why not put all employees in the 403(b) plan.