mbozek

buy the index funds

I dont understand your question. There is no requirement under Title I that a 403(B) plan be a money purchase plan. The only requirement is that a MP plan is subject to the funding standards and must provide a J & S annuity. A 403(B) plan with discertionary employer contributions is not a mp plan because there is no fixed contributions. The same rules apply as to a qualified ps plan without the need to set up a trust, qualfiy the plan and file 5500s. By the way a 403(B) plan can also be adopted as a DB plan.

No employee who makes over 200k should be allowed to leave without receiving some form of severance pay in return for signing a waiver of rights under ERISA, ADEA, Title VII, wage hour, etc, plus non compete and confideniality. Thats what clients should do to protect themselves from lawsuits. Actually it should apply to any employee who makes 100k or more.

There is no authority for requiring 403(B) annuity plans to make fixed contributions either. The 403(B) audit guidelines make no mention of a J & S annuity as a requirement for a 403(B) plan nor is there any mention of a requirement that a 403(B) plan be a money purchase type plan. Reg 1.401-1(B) (1)(i) states that contributions to a money purchase pension plan are fixed without being geared to profits.

now that the a17 limit is at 200k and salaries are depressed I dont think there will be a problem with a top hat plan limited to ees who earn over that amount. Anyway the DOL has never issued any regs on what the top hat group is- so DOL enforcement is impossible. In the 90s there were many corporations who used the old super TH limit of 90 k as the cut off.

The income tax deduction is 50% of AGI with the excess carried forward.

A 403(B) plan funded with custodial accounts can provide for discretionary employer contributions the same as a PS plan without a J & S annuity benefit. There are 403(B) plans out there that are treated as ps plans. The IRS recognized long ago that a np employer can maintain a ps plan in which the employer made discretionary contributions.

An excess benefit plan exempt from ERISA provides benefits soley in excess of the IRC 415 limits. ERISA 3(36). Providing benefits in excess of the a17 requirements negates the exemption and makes the program a top hat plan.

The employer can establish a separate 403(B) plan for discretionary employer contributions instead of a qualfied plan. The 403(B) plan would be subject to ERISA but would not need to get a determination letter from the IRS or file a detailed 5500 each year. The benefit could be paid in a lump sum without spousal consent. Unless the employer will contribute more than $28,000 to the discretionary contribution plan (14% of comp) there is no reason to have a separate qualfied plan.

Since the college is tax exempt she can take an itemized deduction for contributions equal to the amount of the benefits from her income tax. This shoulld be explained by a tax advisor. She needs to be told that retirement plan funds are not assets of the college-- they are in a qualified plan for the exclusive benefit of the employees or in a 403(B) annuity contract for the participant.

There is a symantical ambiguity in the answer- If the participant already owns the house (e.g., each spouses usually owns an undivided interest in the entire residence as tennants in the entirety with a single deed) how can acquiring the right to the other spouse's interest be acquiring a primary residence? In other words a T by E could only be converted to sole ownership but the undivided interest would still be the same. On the other hand if each party owned 1/2 interest as a tennancy in common which is a separate legal interest for each with separate deeds then maybe the purchase of the 1/2 not owned is the purchase of a primary residence since it is the purchase of a separate legal interest in the primary residence.

The pension proposal is revenue driven because it replaces pretax deferral (IRAs/457) plans with after tax savings which will increase the govt's take in the next 4 years. 401k deferrals will decline as non hces elect to contribiute to RSAs and LSAs making it difficult for HCEs to contribute on pre tax basis. Also the proposal provides for conversion from pre tax accounts to after tax accounts by paying the tax over four years. Finally the pension changes are aimed at lowering dc contributions by eliminating the ways in which larger contributions can be made for owners and HCEs (e.g., intgergration, cross testing). Small plan sponsors will not increase contributions for non HCEs in order to continue the same contributions for themselves but will more likely terminate the dc plans and make contributions to the RSAs and LSAs. Whether the elimination of taxation on distributions in the future years is 0 capital gains or 0 income tax is irrevalent- the result will reduce federal income tax on distributions after W leaves office.

79+21=100 which is greater than 80% (5 or fewer persons own more than 80% of corp 1 and one person owns 100% of corp 2)

Ask for a second opinion. It has been a while, but why arent Corp 1 and 2 a controlled group since five or fewer persons own 80% or more of each corp and the same 5 or fewer persons together own more than 50% of the stock of of each corporation, taking into account the ownership of each person only to the extent such ownership is identical with respect to each organizaton. IRC 1563(a). If owner 1 owns 100% of corp 1 and 79% of corp then isn't the identical ownership in both corp 79% (greater than 50%)?

Under IRS rulings the plan must continue to pay a vested benefit to a participant until death. Participant can assign the payments to another person, e.g, a child, under assignment of benefit regs but must pay taxes on the benefits. She cant force the plan to cash the checks.

I am trying to figure out your question. Why would a church need to establish a veba which is a tax exempt organization if the church is tax exempt ? Is it because the affiliated organizations are not tax exempt? A grantor trust is not subject to the restrictions imposed on vebas- e.g., 200k limit on comp covered.

What kind of w-2 wages is he receiving? Did the owner agree to withdraw / terminate from the company which would entitle him to severance/termination payments? Employees can be paid wages under a severance agreement after they terminate employment which are subject to income tax withholding. I recently negotiated such an agreement for a terminated employee who will receive 18 months of severance pay, cobra benefits and can take an immediate lump sum distribution from the 401(K) plan because he is terminated from the employer. I think you need to review the terms of the owner's payment with the company's accountant.

Before the cheering stops remember that this administration does not walk away from challenges (Iraq) or opposition to its agenda (elimination of the estate tax). Also the tax proposal is revenue driven as well as agenda driven- the administration wants to decrease deductions to DC plans and increase revenue by having people convert pre tax assets to after tax assets. The agenda is to limit taxation to consumption by rewarding savings. One way or the other there will be revenue gains from retirement plans to reduce the deficits. Finally will ASPA be able to match the heavy campaign contributions by financial institutions to senior republicans on the tax committees to influence this legislation?

Is this program a 419A trust? Generally trusts are required to file a separate tax return using an IRS 1041 form. However, certain grantor trusts are exempt from this requirement if the income from the trust is taxed to the grantor. Your client should consult a tax advisor.

The ins co has to provide the spouse with a tax report stating what portion of the account can be rolled over. So ask for it. Generally the entire value of an IRA annuity contract can be rolled over to an IRA since an IRA cannot invest in Life insurance. In a qualified plan a participant's account can be invested in LI where the cash value is eligible to be rolled over and the death benefit is paid as non taxable proceeds to the beneficiary.

Govt cannot establish 401(k) plans after June 1986. But why would a govt er want to establish a 401(k) plan in place of a 457 plan which has no discrimination testing? Seems like a lot of unnecessary work. New tax law proposal will eliminate the differences between 457 and 401(k) plans.

In 1997 the DOL published "QDROs The Division of Pensions Through Qualified Domestic Relations Orders". The book consists of 91 pages and describes all of the statutory and regulatory provisions under the IRC and ERISA relating to QDROs. It is available on the internet at http://www.dol.gov/dol/pwba or by calling the PWBA at 800-998-7542.

Try Dol Qdro book. Appendix C has sample QDRO language. Any QDRO needs to be customized for plan provisons.

The plan admin needs to retain an actuary and attorney to determine the benefit entitlement as defined under the terms of the plan and the IRC. No one can give a reliable opinion on this complex issue based on the facts you have provided without a through review.

There is some delicious irony is all this but your client needs an independent legal opinion to determine if this expenditure is a prudent use of plan assets under state law as well as the terms of the plan. Many states have begun investigations and commenced lawsuits against corporations or investment mgrs for poor advice (e.g., the Fla retirement system is suing Alliance Capital for investing $300 million of the Fla plan assets into enron stock over a 2 yr period as it fell into bkcy finally selling out about a week befor it went under) to recover damages. NJ is suing 4 corporations for misleading NJ pension funds into investing in the cos. But these suits are being brought by the State Atty general, not the plans. What is the basis for the recovery action? If the mgrs acted in accordance with the investment instructions provided by the plan fids there is no liability just because the investments declined in value. Against what benchmarks are they basing their opinion of poor permfromance?. Asslo the board will have to hire investment advisors to review the investment decisions- who will pay for that cost? I think this a case where the board is trying a cya maneuver.