mbozek

An employee can be excluded from a plan based upon job classification. However, an employee cannot be excluded because of status as a part time employee if the employee completes 1000 hours in a plan year.

Of counsel is used by law firms to designate an attoney who is neither a partner nor an associate. In otherwords of counsel do not share in the firms profits nor does of counsel receive a salary from the firm. Of counsel are usually independent contractors.

403(B) plan are different from qualfied plans because they have no assets- all assets re held in an annuity or custodial account owned by the employee. I dont know what you mean by taking over a 403(B). There is no way to transfer the assets of a 403(B) annuity to a 401(k) plan.

Lisa: The proposed regs are not binding on the taxpayer and therefore cannot be enforced by the IRS. See IRC 7805(B). Also under IRC 6501 the IRS generally has three years for collecting back taxes. If the IRS cant figure out the guidance for 125 plans 25 years after the section was adopted why should taxpayers be penalized for adopting thier own procedures? See IRC 125(i).

I dont know anything more than the final regs. Perhaps you should contact Majorie Hoffman, the IRS attorney responsbile for drafting the MRD regs for her opinion.

I guess you have a problem if the soft ware being used does not conform to the determination for TH status as provided in the plan document.

The TH provisions in the plan will determine when then plan is TH not the comments of IRS speakers. Reg 1.416-1 T-22 defines the TH determination date as the last day of the preceeding plan year (except for the first year). T-24 does not require inclusion of contributions due for a plan year which are not made as of the determintion date for such year.

About 5 years ago Bank of America offerred its employees a opportunity to transfer 401(k) account balances to a cash balance plan which permitted the employees to select the same investments in funds that were available under the B of A 401(k) plan. BofA promised that the value of the transferred assets would never fall below the opening account balance on the date of transfer and the transferred accounts were booked as an increase in DB plan assets with no offsetting liabilities which allowed B of A to show an increase in surplus plan assets which was credited to the corp. earnings for the quarter in which the transfer occurred.

Trustee to trustee transfers of IRAs are permitted under Rev. Rul 78-406. An IRA can alawys be divided by the owner. Under the PLRs cited, a surving spouse who is the beneficary of the IRA can request that the IRA be divided into two or more IRAs in the name of the deceased owner as an inherited IRA. However, I do not know of any ruling that allows the spouse beneficary to make a tax free rollover from a Q plan to an IRA to be established in the name of the decedent participant. Also I dont believe that the transfer can be made by a trustee to trustee transfer in Rev. rul 78-406.

SEE 11 USC 901, et seq. for administration of tax collecting entities that file under bkcy law. You are right that the taxpayers are not guarantors of municipal debts or interest payments on bonds but if a municipality does not come up with a plan to repay its debts after declaring bkcy it will never again be able to borrow money because it will have no credit rating- so practically speaking the govt must come up with a plan to pay back creditors. Thats why Orange co. came up with a reorg plan. Also since a govt cant go out of business the creditors could not sell municipal assets such as vehicles and RE owned by the govt.

Well then you can argue that position before the bankruptcy or state courts. The issue that you are thinking of the Rhode Island state pension plan where the legislature increased benefits for itself in excess of the 415 limits and the IRS required the benefits to be reduced which violates the constitution which prevents reduction of benefits. However RI is not a bankruptcy situation. The constitutional provision you cite only prevents a state legislature from imparing contracts. A Fed. bankruptcy ct is not part of the state legislature and the Fed. consititution expressly reserves to Congress the right to pass bankruptcy legislation. Bankruptcy is is different from the labor agreement between a state or local govt and a group of employees which provides for salary and retirement benefit accruals for a period of time (such as three years). After the contract expires then state entity is free to renegotiate a lower rate of benefit accrual during the next contract.

Any individual, business or Govt entity can declare bankruptcy. Orange County, Cal declared bkcy a few years ago when they made bad investments in derivatives. Once the govt declares bankruptcy its operations and liabilities are determined by a fed. judge. Since a govt can't go out of business and must continue its operations Govt bankrupticies usually result in creditors taking a small percentage of the amounts owed up front and agreeing to a long term payout of the remaining debt from the govt which issues bonds secured by future revenue and then raises taxes to pay for the bonds. Plan participants are unsecured creditors who are at the end of the line in terms of getting paid off. Usually in a bankruptcy the retirement plan is terminated and the benefits are paid out to the participants to the extent there are funds in the trust. If the plan is underfunded the participants will receive a % of their vested accrued benefits. I dont know how a state consitution can mandate the continuation of future benefit accruals priot to the time the benefits have been earned, (e.g. does this mean a state govt entity can never terminate a retirement plan) but that is for the constitutional lawyers to answer. Maybe the answer is that the plan can be amended in bankruptcy to cancel future accurals.

Chris: I think that the rulings you cited were issued to allow an IRA opened before the owner died (and naming the spouse as the beneficary) to be divided into two or more IRAs in the name of the deceased owner at the request of the spouse. Under the rules for custodial IRA accounts the beneficiary suceeds to all rights under the IRA that the IRA owner had, including the right to divide the IRA. I would be interested in any IRS ruling that alllows the surviving spouse who is the beneficiary of a participant's interest in a qualified plan to make a tax free rollover to an IRA issued in the name of the deceased participant naming the spouse as beneficiary.

I dont believe that an IRA can be opened by a legal representative of a decedent in the decedent's name. I think all IRA custodians require that the owner open the account. However, I dont know why the spouse cannot leave the account balance in the plan until she turns 59 1/2 and take withdrawals as needed unless the plan requires a distribution upon death. I thought the spouse could defer commencing distributions until the year the employee would attain age 70 1/2. You need to read the plan document.

The DOL filing fulfills the R & D requirements of ERISA.

A separate share for each IRA beneficiary with separate life expectancies can only be established if the IRA owner designated a separate account for each beneficiary in the IRA beneficiary designation. Designation of separate accounts in the trust is not sufficient.

A 457(B) plan would permit the exec to defer an additional 12k in 2003 (increasing to 15K by 2006). All you need is a plan document- no IRS approval or 5500 reports are required. Total deferral for the exec is 26K. If exec works for an eligible employer defined in IRC 402(g) and has 15 yrs of service, an additonal 3k can be deferred in the 403(B) plan.

Some consultants do not know that a 403(B) plan is available only to public schools and 501©(3) employers. I dont think this plan can be corrected in the 403(B) program because the er is not eligible for a 403(B) plan. I don t think plan is eligible for the VCP for qualified plans if it did not receive an initial determination letter. Q- did the employees make salary reduction contributions? If not then consider recasting the arrangement as a qualified plan if the plan had a written document and met the requirements for govt plans or a 457(B) plan if the employees made salary reduction contributions. Nonconforming govt 457 plans can be corrected without penalty. Also the s/l for liability for back taxes by employees if the plan is not qualified under 401(a) or 457 is generally 3 years. The best option may be to correct the plan prospectively and wait for the s/l on collecting taxes on prior years to expire since the IRS does not audit govt ret programs. Going to the IRS may open a can of worms if there is no IRS procedure to correct the mistake. If the entity is maintained by a govt then it is automatically exempt from ERISA regardless of whether 5500s were filed. A govt organization can not elect to be subject to ERISA . Note: If the sponsor is a fed govt agency then it could be eligible for the Fed govt Thrift plan.

While in theory the plan admin. can sue to recover the overpayment there are some practical problems which may prevent recovery: 1. Choice of law- I dont know what would be the correct choice of Fed Ct. in which to bring an action- The Plan admin could sue in the Fed District court in the state where the Plan is administered and then serve the AP where ever he/she lives (assuming you can find the AP). Or the Plan Admin could sue the AP in the state where he/she lives. However you will have to retain counsel in the state the suit is filed to do this and Fed ct lawsuits are expensive. 2. Statute of limitatons- The S/l for benefit payment issues under ERISA is the S/l under the applicable state law for a similar claim. The S/l for claims in contract/equity are usually no more than 6 years. The client has to determine what state law applies and then find the state S/l for that type of action. 3. latches- this a lawyer term and it is used where a party who has a valid claim unreasonably delays commencing an action for recovery which results in injury to the defendant. 5 years to discover a mistake is a long time and the AP may be able to assert that the money was spent, given away or is now needed for valid purposes. The Plan admin needs to determine the amount of the overpayment and then retain counsel to review the above issues.

Why not rollover the distribution to an IRA and save the cost of QDRO? Under IRC 408(d)(6) an IRA can be divided between the parties by a divorce decree and the spouse's portion can be transferred tax free to her own IRA. It is much cheaper and simpler to divide an IRA interest because there is no need for the IRA division to be approved by a plan administrator. The only reason to use a QDRO is if the spouse desires to receive some cash instead of rolling over the entire amount. Under IRC 72(t) a distribution pursuant to a QDRO which is not rolled over is exempt from the 10% penalty tax. Any withdrawals by the spouse from the IRA prior to age 59 1/2 are subject to the tax. If the spouse is over 59 1/2 there is no need for a QDRO. By the way protecting the assets for his children only applies to his pension assets which remain after the QDRO. Any pension plan assets acquired during the marriage are subject to division in divorce.

The controlled group rules of IRC 414(B) and © apply to non profits as well. Thus a NP that owns 100% of the stock of a for profit corporation is part of a cg with the business. The GCM and related PLR which allow aggregation of 2 np based upon common board membership were issued to permit a single 5500 filing. There is no basis in the regs for aggregating nps based upon board membership. Under the 414(B) regs a corp cannot be part of a cg with a np if the np does not have any stock/equity ownership which is owned by the corp. Since a GCM is not precedent (it is merely a legal opinion which must be adopted by the IRS to be binding) I dont think the IRS could use it in an audit to determine CG status. The IRS position is that CG status is to be determined solely under the 414(B)/© regs.

There used to be a practice called 'secunding' in the financial services industry where employees would be loaned out to an unrelated business for a period of time. The employee's salary & cost of benefits would be paid to his/her employer and the employee would continue to accrue benefits under the various retirement plans while secunded to the other business.

I dont think there is any correct answer- just choices. One choice is for the parties to go back to the court and request a modification of the QDRO now that they have remarried. I dont think they will do so because it costs money. (Also I have never herad of a QDRO being unwound once payments start.) The Second choice is for the plan admin. to continue payment to the spouse based on the QDRO and recognize the spouse as beneficiary for the remaining spousal benefits payable under the plan. Presumably the total of the two segments will equal 100% of the survivor's benefit under the plan.

I dont see how a US court could assume jurisdiction in the case since a final decree was issued in UK. US courts generally defer to court decisions in other countries which have the same legal system as the US. I dont see how a US court could change the UK divorce decree.

Since the divorce ws granted in the UK, UK law governs and any changes or reopening of the divorce would have to be by a UK court.