mbozek

State payroll laws applying to benefit plans are preempted by ERISA 514.

If the contribution is not made by the date for filing the income tax return with extensions, the deduction will be taken for the tax year in which the contribution is made.

There is no advantage for a plan to own real estate because the plan gives up all the tax advantages available to an individual, e.g., deduction of interest, taxes and depreciation, loss of capital gains taxation and UBIT tax on borrowed assets at 35% rate. In addition there are significant legal expenses and other charges for RE ownership that must be paid from plan assets (e.g. taxes and insurance). Finally the trustee for the plan is personally liable for negligence and environmental violations which occur on the RE.

While an employer can have more than one retirement plan, an employer can only provide retirement benefits for compensation earned by the employees. If the ER has transferred employees to a leasing company the employees will be paid by the leasing co. not the employer and will be eligibile for benefits from the leasing co.

mming- what is the basis for your statement tht a plan cannot put a lien on assets? The UBIT rules impose income taxation at the rate for trusts on gains from plan assets which are pledged as collateral for a loan but does not affect the qualfied status of the plan.

This question can only be answered by tax counsel who is expert in disclaimers and gift taxation. The client will have to pay for this advice.

The 401(a) (9) regs do not determine when a person become a beneficiary after the death of the owner because that is a matter of contract between the owner and custodian. IRAs are non probate property which are inherited by operation of state law by the beneficiary upon the death of the owner. You need to read the IRA custodial account. Every custodial account I have ever reviewed provides that the beneficary receives all the rights of ownership upon the death of the owner including the right to direct investments and take distributions.

While the US Supreme Ct has stated that there is no prohibition under the Constitution to retroactively changing a tax provision for a prior year to increase taxes, it is highly unlikely that a republican congress would ever do so because of the adverse reaction from the public. In 1993 the Clinton administration pushed through increases in tax rates retroactive to the beginning of the year and reduced includible compensation for qualified plans from 230k to 150 k for the 93 plan year. It is likely that any change in taxation of Roth IRAs would be prospective for future years, e.g., limiting taxpayers who are eligible to contribute rather than taxing the earnings on the accounts in future years because of the taxpayer's expectation of tax deferral at the time the contraibution is made. When congress abolished the universal IRA in 1986 it allowed amounts which had been contributed by taxpayers above the AGI limit to remain tax deferred for future tax years. One thing that is certain is that the Roth contributions would not be taxed in any event because there was no tax benefit at the time of contribution.

Why not have the employer adopt a resolution eliminating the 401(k) salary reduction feature as of a prospective date, e.g., 7/31. The plan would have to be amended for all EGTRRA amendments for the 401(k) plan effective for 2003.

The bill is dead in the Senate because it carries a revenue loss of 50B by accelerating the increased deductions for IRAs and salary reduction plans to 5k and 15k respectively.

Under the proposed regs the plan must assume the risk of losses which exceed the amount of the employee's contributions.

Does anyone believe that this legislation would be considered by the Senate in its present form?

Maybe Pa.

The incorporated entity is a successor employer under IRC 414(a) which can adopt the current plan and continue all service credited under the prior employer.

There are other cases which limit Treasury's authority to issue regulations interpreting a statute to those rules for which there is an express intent under the statute or legislative history, see US. v. Meade (US Sup Ct.) and Household Finance, since the Treasury can only administer the law. Needless to say the validity of these regs will be litigated in the future.

There are two characteristics of 403(b) plans that are relavent: 1. assets in a 403(b) plan are not held in a trust and asset information is not reported on a 5500. 2. Plans may use individual custodial accounts or annuities so that involvement of the plan sponsor is limited to determining eligibility and making the contributions. Most brokerage houses have custodial accounts under 403(b) between the participant and the brokerage where an individual broker is the registered representative of the participant. The brokerage does not keep records on an employer level because the only records are kept by each participant's broker. The employer could replace this arrangement with a new plan for amounts contributed after the effective date by designating a new mutual fund or annuity company for plan contributions. The employer needs to retain counsel to review the applicable documents a determine how a new plan can be established.

If they will not respond to your request for payment then your only recourse is to sue the cleint for payment for value of the work performed.

The reason for mandatory participation is to prevent adverse selection against the health carrier, eg, only older or sick employees would elect health care coverage if it was voluntary because they would be the persons using the benefits.

Spouse retains rights to plan benefits, e.g., 50% survivor annuity must be paid to spouse even if lump sum distribution including present value of 50% survivor annuity was paid to employee.

Why isnt this legal? Requiring that an employee contribute to a health or retirement plan is a condition of employment. The employee can decline to contribute by not accepting employment.

I have heard that this provison was added at the request of mutual fund families who thought it would allow them to gather more assets by having qualified plans transfer accounts of missing participants to deemed IRAs for which the fund families could collect an annual fee. But why would the sponsor want to give up assets which share in plan expenses and which are potentially forfeitable to provide a financial benefit for the fund family? Mandatory transfer only applies if plan provides for involuntary cash outs of 1000-5000. Plan can limit cashouts to account balances of less than 1000.

I really dont understand why the employer wants to transfer the employees to a leasing organization if the employer will continue to make the pension plan contributions. I dont see any economic savings by moving the employees to a leasing entity. Second, the employer has signed the CBA with the union regarding the rights and benefits of the union employees. The employer cannot unilaterly transfer its employees to a non participating employer without being brought before the NLRB for violating the CBA. You should read the CBA. For participating employers multiemployer pension plans are like the roach motel- you can enter but you cant leave without paying the withdrawal liability. Your client needs to retain labor counsel.

If the contributing employer is a party to the CBA then then withdrawal liability will be applied against the employer. Why whould the union realase the employer from withdrawal liability just because the employees are transferred to a leasing organization? If the leasing organizaton goes out of business then union would not have any recourse for recovery of the pension liabilities.

As long as the rollover is not made to a deemed IRA established under a qualified plan, the IRA rollovers are treated as plan assets for loans and investment alternatives.

It is highly unlikely that Congress would retroactively revoke the tax benefits of a Roth IRA for contributions made in prior years. What could happen is that Congress would prospectively curtail the benefits of a Roth IRA for persons in higher income groups for future contributions as was done with the universal IRA after 1986. From 1982-86 all taxpayers could make tax deductible IRA contributions. However, after income tax rates were reduced under Tax Reform Act of 1986, only taxapyers who are not participants in a qualified plan or whose AGI is below certain limits could make a deductible IRA contribution. Under the principle of federalism, states are free to tax roth IRA earnings. Some states (NJ and PA) do not allow for state tax deductions for deductible IRAs. Most states do not tax roth IRA earnings but you should consult your tax advisor for rules of a specific state or check the state tax site on the internet. Whether a Roth IRA is subject to creditors is also a matter of state law. Virtually all state divorce laws consider a Roth IRA to be property subject to division in divorce if it was acquired during the marriage.