mbozek

Mab: It could be worse. You could be a NY Giants fan. Talk about embarrassment. All Giant fans are in a state of depression. IRC 6047(d) provides that the plan admin is required to file reports including 1099-r for all distributions. But I guess the plan admin could provide the info to a third party trustee or payor who will prepare the reports as the agent for the plan admin. The IRS regs should be on line on the IRS web site but I have my own copy. There may also be an IRS publication on reporting and withholding of pension distributions (Circular E?) available on line.

I found this thread while watching the Jet game and have a question: does anyone read regs? Reg 1.3405-1T A-14 states for a mult er plan that the association or committee or group of representatives is the plan administrator. However, the P Admin may transfer the the duty to withhold to a payor by providing information to the payor. See E-2 of the regs. I dont have the time to see who is responsible for reporting the distribution as the Jets are up 17-0. I agree with J cheek- many pension plans transer the responsibility for reporting and withholding to a bank or other trustee who actually makes the payments.

Without looking at the regs I think the valuation date is a material term which should be disclosed in the SPD- Otherwise how will participants know how the value is determined?

What does the SIMPLE plan document say about frequency of employer matching contributions?

I am not aware of the precendial authority of the Gray Book. Also a plan can go in and out of effective availablility for plan years if Non HCEs attain the minimum account balance due to investment return rates or the account balance of certain HCEs is not sufficient for the option. However, under the BRF regs cited above, a different right or feature exists if the right or feature is not available on substantially the same terms. The issue then is whether allowing an investment option to be offerred at two different loads rates which are less than 20% different is subsantially the same terms. Without any further guidance from the IRS there is no authority that the options are not available on substantially the same terms. Also be careful what you wish for, because many funds are issued with different cost structures such as A, B and C shares, 12-b1 fees and other distinctions in charges which if deemed to be a violation of the BRF rules could require termination of purdent investment options in violation of the fiduciary rules. Who would police the differences and review the investment materials? As long as the plan does not incorporate investment option terms as part of the plan but merely make the options available as an investment option the plan sponsor has substantial authority for concluding that the charges/minimum amounts under which the option is offerred is not a BRF under the plan. If the IRS wants to clarify the matter at a future date then the Plan admin can conform to such IRS ruling. Eg. Rev rul 96-47 defines substantial detriment to a voluntary distribution in excess of $5,000 under Regs.1-411(a)(11)-1.

The IRA owner needs to read the custodial account agreement to to determine what are the disclaimers of liability by the custodian. Most custodians limit their liability for incorrect rollovers and require some statement for the IRA owner that the distribution is eligible for a rollover. I dont know what you mean by "knowingly accepts" inelgible funds. What kind of knowledge is imputed to the custodian? Also any question of liability by a securities broker is subject to mandatory arbitration.

See IRS regs 1.411(a)-11 for a provison that prevents the plan from containing a provison that results in a significant detriment to a terminated employee electing to leave the funds in the plan. This provison is not a BRF applicaton but applies as a general qualificaton matter. The purpose is to insure that distributions of vested benefits in excess of $5,000 are made on a voluntary basis.

T: you need to review the plan document to see how comp and service is credited. If A B and C are part of a controlled group because they are owned by the SE then comp and service of A should be counted.

The agreement can provide for a trustee to trustee transfer of assets of all employees who are being transferred under the terms of the deal. Or the there can be no provision for asset transfer and the employees can rollover the assets to the acquirors plan if there is a provision to accept rollovers. If acquiror's plan accepts rollovers then there must be due dilligence to make sure that the seller's plan is qualified under IRC 401(a). Also the purchase agreement should contain a provision about crediting of service of the transferred employees under the acquiror's plan. Usually the provisions credit all service with seller for eligibility and vesting purposes under acquiror's plan.

What did the purchase agreement provide regarding transfer of benefits and crediting of service of the acquired employees?

The BRF rules only apply to a provision of the plan. The cost/ fee structure of the fund is not a provision of the plan since the fees are set by the fund which is not part of the plan. This provision is no different from a requirement of a broker for a minimum amount in order to open a directed brokerage account under a qualified plan. These provisions are filed with/approved by the appropriate regulatory authority which has jurisdiction over the securities laws. Since the minimum is not set in the plan terms it is not a BRF. My own view is that 5.7% is an extremely high load charge for any fund and there must be alternate funds with lower fees with the same risk/ reward profile.

It depends on the conditions of the termintion. Was there a written termination or resignation by the employee? It is possible for the employee's last day of work to be 12/20 but then he/she could elect to take 2 weeks vacation and terminate on the last day of vacation. This is different from the employee terminating employment on 12/20 and then receiving a lump sum payment for two weeks vacation pay on on the next payroll date, 1/4. You need to discuss this issue with the employer and the payroll service provider to determine the procedure for paying vacation. You may find out there is no difference in procedures for employees who terminate employment and collect vacation pay.

Section 83 applies to any transfer of property (other than cash) to an employee or independent contractor on account of the performance of services from a plan that does not meet the requirements of IRC 401(a) or 403(B) if the property is not subject to a substantial risk of forfeiture. Property includes cash value of life insurance, annuities, stock or an interest in a irrevocable trust. The property is subject to ordinary income tax and FICA tax as well as state taxes. There are extensive regulations on Section 83 as well as IRS plrs.

The reason you havent found anything is because it is not supposed to happen. Presumably the excess is subject to some excess contributions tax. The only thing for the er to do is ask the custodian to remove the excess contributions from the employee's IRA but the custodian may refuse unless the employee consents because the IRA is the sole property of the employee.

I dont see how the distribution can be paid without the written request of the spouse. The issue is whether the recordkeeper can file a 1099-R showing a distribution for 2002. Even if the amt is distributed why cant the spouse do a tax free rollover as a preventive measure to avoid taxation. Her advisor should be able to come up with substantial authority for treating the IRA as being distributed as of 12/31/02. As an incentive for the recordkeeper not doing anything stupid how about the threat of lawsuit for failue to inform the spouse of the distribution issues they are now raising.

You need to get the beneficairy designation form that Mr. X elected when benefits commenced. The Plan admin should have a copy or maybe its in Mr. X's records. Fact that benefits were being paid on single life basis does not mean that option was elected by Mr. X. A participant can elect benefits on a Joint life basis but actually receive payments on a single life basis. Also why cant the spouse rollover the account balance to her own IRA if she is the beneficary of X's account balance? Mrs. X needs her own tax advisor- She cannot rely on anything the Recordkeeper is saying. The reg cited by the recordkeeper applies only if the recalculation method was elected by X for a single life payment. You need to confirm what option was elected by X when MRD began. Finally there are ways to avoid the 50% tax penalty if a properly prepared request is sent to the IRS by a tax advisor.

You need to go to the person/attorney who negotiated the merger of the local govt plan with pers and ask who has the obligation to pay benefits to retirees who terminated before the merger with Pers under the merger agreement. This issue should have been negotiated by the parties. There is a contractual obligation of the local govt to pay benefits to retirees which is separate from the legal obligation of Pers to pay retirement benefits for persons who retire after the merger with the Pers system. If Pers did not assume the liability to pay benefits for current retirees under the merger agreement then the Local Govt has to continue the payments or purchase annuities for the retirees.

First Thing: Mrs X needs to hire a competent tax advisor to review the issues- She cannot rely on opinion of tax liability by TPA which cannot give legal or tax advice. Second focus on important issues-IRS only cares if MRD is paid not who it is paid to. If spouse is correct recipient of payments after death spouse has a legal claim for benefits against party who recieved the funds. Q1- were payments after death made to Mr. X's estate which then paid the spouse? Q2 how far back were the incorrect payments made? Statute of limitations for underpayment of income tax is generally 3 years which means that taxes on payments before 1999 cannot be collected by IRS. Q3 Who was the proper beneficary of the payments after MR X's death? Under 87 prop regs there were distribution options where payments were elected for a fixed period over joint lives of employee and beneficiary but the employees chose to receive a larger payment based upon life expectancy of employee. Payments would continue under joint life option to beneficary after death of owner. 87 reg options are available until end of 2002 if plan permits. Your client's adivsor has to do a lot of fact finding to determine the answers to the above questions.Q4 has a correct MRD been taken for 2002?

What is the tax benefit that the client wants for 2002 that requires a SIMPLE plan? It appears at this point that the employer is trying to adopt the 2% non matching contribution for all employees with income of 5k. The client could still adopt a Qualified PS plan with a 2% formula if an adoption agreement or similar document can be completed by the client on 12/31. (I am assuming that a prototype adoption agreement can be faxed/emailed to the client.) Secondly the client could adopt a SEP plan by the date for filing the employer's 2002 tax return with extensions and make a nondiscriminatory 2% contribution for all employees with service in 3 of last 5 years. Third, the employer could make a contribution of up to $3000 to IRAs for selected or all employees by April 15, 2003 without adopting any plan. Fourth, why are u questioning the accountant if he is willing to assume the risk that the SIMPLE IRA can be established for 2002? After all the accountant will be filing the employer's tax return claiming the tax deduction for the simple IRA. Remember the fund company cannot give legal or tax advice- the disclaimer in on all of their materials.

One of the problems with some CPE materials is the quality of the information and lack of references. As far as the IRS regs are concerned thre is no default event as long as the loan is repaid. Also I dont know of any such restriction in making hardship distributions. Perhaps you should ask the author of the CPE materials for a citation of authority for such a statement.

I wonder what the Bests or Moody's rating is of those co that want to attract such business.

I thought that payments which are required in order to recieve a PBGC Determination of plan sufficiency and termination are deductible under IRC reg 1.404(g). Section 404(g) provides that an employer may deduct in the year paid any amounts paid under ERISA 4041(B) or 4062 without regard to the normal 404(a) limits. See PLR 8229130. ERISA 4041(B)(1)(D) provides that a plan may terminate under standard termination only if, when the final distribution of assets occurs, the plan is sufficient for plan liabilities. If the employer cannot recieve a deduction for contributions made upon a final distribution of assets after the year of termination there is no reason for the employer to complete the termination of the plan and the PBGC will be forced to terminate the plan under ERISA 4062 and require the employer to make a payment which will be deductible.

Since the sucessor plan must maintain all of the provisions required for a MP plan, the procedures are the same as a merger, i.e., the restated plan must contain the MP provisions as well as the PS provisons.

Beneficary designations and distribution options are a matter of contract between the participant and the insurer or custodian. The contract will spell out the options. Also I dont think an insurer will agree to separate accounts which creates the possibliity of adverse selection which can increase the the amount of the payments to beneficaries.

The terms of a distribution from an ESOP is a condition of employment which is defined in the plan. The plan does not have to allow hardship distribution. If distribution is limited to age 55 and there are no hardship distribition then the funds are not available. Q- are funds available if you terminate employment?