mbozek

Making AT contributions to a 401k plan has become a popular topic on investment websites for individual investors who are looking to maximize roth contributions. Usual procedure is to make AT contributions and then if plan permits take an annual distribution of AT funds if plan has designated AT account as a separate contract under IRC 72d or e. Taxation will be limited to earnings attributable to AT amount. Purpose is to max out contributions to a Roth by also making annual contributions to a Roth IRA. I am not saying its a good idea but only that it is generating a lot of interest by investors believe that they will save taxes by making annual inservice conversions of AT funds to a roth IRA.

There are two separate questions. 1. Failure to take MRD in prior years is solely the responsibility of the deceased owner. It is not transferrable to the estate or the beneficiary. IRS penalty does not apply to taxpayer who did not own the asset in year that tax was incurred. Beneficiary can take the 2014 MRD by Dec 31 since deceased did not take it. 2. Claim by charity to IRA depends on state law. For example in NY a will provision designating a beneficiary can override a prior IRA designation if the will provision specifically identifies the IRA for which the beneficiary designation is to be changed because NY law permit the beneficiary designation of an IRA to be changed if specifically identified and made in writing by the owner. However a general bequest in a will designating the residuary of an estate to a specific party is not valid as to non probate property such as an IRA. Executor of estate needs to consult with counsel to determine how state law is applied.

Need to read the agreement with the IRA custodian. Most custodians who handle alternative investment such as RE, currency, private partnership interests, etc disclaim any responsibility for reviewing or reporting PTs and make it a condition of the contract that the IRA owner is solely responsible for complying with the PT rules and paying taxes if the rules are violated.

I have always asked for a copy of the signed contract to purchase the home.

The RMD rules apply to both qualified plans and IRAs. The same tables apply to both plans. Why not ask what the separate table is?

How much is due the employee in a lump sum?

Instead of terminating the 401k plan why cant the owner have the new business adopt the 401k plan so that both employers will be plan sponsors? This way the 401k plan would be ongoing for both employers.

Carole: I though the Op's question was about whether an employer could be sued under the Windsor decision by a same sex couple who live in a state that recognizes same sex relationships for all purposes as a married couple but calls it something than marriage (such as civil unions or domestic partnerships) because the employer includes the cost of the partner's heath insurance as taxable income. I don't think anyone disagrees that an employer can decline to offer spousal health insurance coverage under a group health plan but I don't think that under the Windsor decision an employer or employee can make a claim that health insurance for the domestic partner or civil union member must be excluded from the federal taxable income of the employee because the state law recognizes the relationship as being marriage for all purposes except in the legal definition under state law. If that were true then opposite sex couples who have entered into civil unions or DPs would also be considered to be married under state law even though they elected not to enter into a valid marriage which would make the state law distinction between marriage and DPs or civil unions meaningless..

The reason for not paying benefits to someone who has used false documentation in an I-9 to obtain employment is not because they violated US immigration laws but to defer paying their benefits until their correct identification has been established and they have obtained a Tax Id in their own name, either a TIN or a SS which complies with US tax law. If someone who has obtained employment as John Doe, SS # 123 is determined to be using someone else's identity, the plan can pay the benefits when John Doe provides a correct ID and a Tax ID. Otherwise the plan will never know if it is paying the benefits to correct person who earned them.

I thought the Majority decision in Windsor made it clear that the Federal government determination of who is legally married depended on the state law and that only same sex couples who were recognized as married under state law would be considered married under all of the 1000+ federal laws. Couples who are recognized under civil unions or domestic partnerships are not legally married and not eligible for benefits or privileges (e.g. tax treatment ) under federal law. In fact same sex couples who are legally married under state law must file a joint return or married filing separately, not as single. There is no basis for employees asserting discrimination under the 5th amendment (which was applied in the Windsor Case) because the employer does not provide tax benefits or spousal right to a pension benefit for same sex couples who are recognized as married in everything but the name if the denial is applied equally to both same sex and hetro sexual couples who have entered into the same legal relationships. Also there can be no 5th amendment claim by same sex couples who have entered into civil unions or domestic partnerships that their rights to rights to federal benefits are being violated under state law because the 5th amendment right of same sex couples to be deemed eligible for federal benefits if legally married under state law only applies to prohibit discrimination by the federal government. States are permitted to limit legal marriage to opposite sex couples.

One Question that needs to be asked is whether the lawyer wants the doc to make the contribution by 12/31/13 because the Doc is terminating his business, e.g., a PC, on Dec 31, 2013, before he joins the new practice so the plan sponsor would not be able to make a contribution on 3/15/14 because it is no longer an operating entity.

I would treat the rollover back to Plan A as a non taxable rollover. If it is treated as taxable income how can it be rolled back to the plan? As far as Plan B is concerned the amount returned is part of a rollover distribution from Plan A. Since plan A made the mistake of distributing an incorrect amount the employee should be held harmless. Plan B should file a 1099 for a rollover back to plan A since Plan B is treating the returned amount as pre tax rollover. I don't see any reason for different treatment if the returned amount comes from an IRA.

If the plan has not approved the QDRO the benefits due the AP can be paid from another source. Question is whether the parties need to get court approval to pay the benefits from another source and recind the QDRO. I don't know if a voluntary waiver and release by the AP's estate of a right to benefits granted by the QDRO would protect the Plan Admin from a lawsuit by the heirs of the AP's estate under applicable state law. Waiver and release of QDRO benefits should be obtained from each heir including contingent beneficiaries if the parties do not have the QDRO recinded by court.

Since plan cannot terminate until it distributes all assets Plan admin has the following choices: 1. accept the POA and distribute all plan assets to participant after receiving a hold harmless agreement. 2. wait until spouse returns next year and signs waiver. In the meantime plan must file 5500 and perform admin functions for 2014. Q1: is POA permitted under plan document or plan admin procedures? Q2: what is amount of lump sum distribution? assume spouse's share would be 50% which would be max exposure.

When ERISA was enacted in 1974 all contributions eligible for tax deferral under 403b had to be 100% vested. It was assumed that only vested contributions could be counted for determining the 415 limits. However, in the 90's the IRS published some guide line, ruling etc which concluded that for 415 purposes non vested 403b contributions would be included as employer contributions in the year the contributions were made instead of in a later year when they were vested which permitted employees to receive the max amount under the 415 limits in each year they participated in the plan. So providers began including language that allowed for deferred vesting of 403b contributions up to the 415 limits. To comply with the non reversion provision of ERISA 403c the plans contain a provision that forfeited amounts are transferred to side fund or suspense account in the contract that is used to fund contributions in the following plan year.

Bencor received IRS approval for volume submitter DC qual plans of public employers to receive lump sum contributions of terminal payments of sick pay and leave because public plans are exempt from the nondiscrimination rules under 401(a)(4). IRS suspended approval of future qual plans established for receiving one shot payments in 2005 but I don't think the IRS revoked the qual status of existing plans. I don't know any more because I am not involved in that market. It seems that the existing plans can still accept new contributions.

why not call the custodian or SEP prototype sponsor?

1.see reg. 1.401(a)(9)-6 Q/A-1(d) single sum distribution. 2. see same reg Q/A-1© annuity commencement

If father was trustee then son as executor of father'/s estate is the successor trustee of the plan. Participants should contact nearest EBSA office to open an investigation and give agents son's phone no and tell them that son authorized payment of his father's benefits to himself but will not facilitate payments to other plan participants. Then sit back and watch son's legal bills grow.

I don't know of any obligation to pay interest on a pension distribution that is not cashed by the participant. It is likely that many of the checks were sent after death or the participant had moved and either left no forwarding address or the time for forwarding had expired. There may still be a problem if the check is paid to the participant/estate of the deceased and there is no personal representative who is legally authorized to cash the check in which case you may want to make the check payable to nearest beneficiary defined in the plan and get a hold harmless agreement. AS for the outstanding payments of periodic benefits you need to determine the date of death so that the plan does not overpay back benefits. Plan is not liable for failure to pay benefits if participants did not notify plan of a change in address. Plans do not have to spend assets to find lost participants. Usually participants will notify plan if a check is not received. Plans should have disclaimer in SPD advising participant to notify plan admin of change in address. To identify deceased participants see if plan can get access to SS database of deceased SS beneficiaries.

IRC 401(a)(2) does not apply to 403bs because the assets of the 403b are not held in a trust so there is no prohibition on forfeitures reverting to employer before termination. Forfeitures can be held in a side fund and used as contributions to other employees' accounts. If forfeitures revert to a profit making employer forfeiture will be subject to up to 50% tax on reversions plus regular income tax which is why forfeitures are rarely done.

Issue I see is that 403b plans are not qual plans and operate under their own rules in a parallel universe with 401k plans for the employees covered under the 403b plan. I have given you cites to 2 regs indicating that the two plans are not aggregated. You should check the preamble to the 403b regs and 401m regs to see if their a specific reference to this issue. See recent link to discussion of aggregating 403b with 401k contributions http://benefitslink.com/boards/index.php?/topic/54562-401a4-and-403b-plan/ I don't have any more information.

why not treat them as separate plans each meeting the 401m requirements? Reg 1.401(m)-2(a)(1)(iii) provides that a plan with only HCEs is deemed to satisfy the ACP test. So the 403b plan will meet the requirements for ACP testing under reg. 1.403(b)-5(a)(1). The 401k plan will meet the requirements for ACP because it only covers non hces.. I don't know if you can aggregate the two plans under the rules of 1.410(b)-7(a) since one is a 403b and the other is a qualified plan. second even if the two plans can be aggregated under 1.410(b)-7(a) I don't think aggregation could be applied to combine contributions to the 403b plan with the 401k plan if an HCE is not eligible to participate in the 401k plan. See reg .401(m)-2(a)(3)(ii) which states that HCE must be eligible to participate in more than one plan in order to aggregate contributions.

Decline in business or discontinuation of the business is always a legitimate reason to terminate the plan w/out violating the permanency requirement. IRS cannot force an employer to maintain a plan if the employer cannot make sufficient contributions to fund it.

I would politely explain to the son or his attorney that he has a choice. He can perform the duty of plan administrator to distribute the benefits due the other employees as he did for the plan assets he inherited form his father or he will be contacted by the EBSA as to why he is delinquent in performing the duties of plan administrator which he was expeditiously able to do for the assets he received from the plan. Once EBSA gets involved the legal fees he will pay will change his mind. It only takes one call from a participant to get the EBSA involved. Don't know why anyone wants to take the risk of tangling with the EBSA. I dont know how the son could authorize payment of his father's benefits from the plan without acting in a fiduciary capacity on behalf of the plan for all participants. He cannot be a fiduciary for payment of some benefits but not others. If AXA is the fiduciary then they have the obligation to pay all of the other participants, not just the son. Appointing the son as plan administrator is a no brainer since son is automatically the owner of the business by virtue of inheriting the business and can appoint himself or another party to act as PA to pay benefits.