mbozek

If Co B was sold to another entity then you are not sucessor to B so send the check back to Principal. If your co acquired assets and liabilities of A it may be a stock deal not an asset deal and your co has assumed liabilities as well as the right to any inchoate assets of A since the dividends relate to a plan established by the prior employer. There are services that could locate the family member of the owners of X if you want to pay for the search. They usually deal with estate administration. The only other possible party for the funds is the state athrough escheat if you refuse to accept the check. How much is not a lot?

Some vendors/tpa have proposed that instant loans be issued in a manner similar to cash distributions from an ATM at a worksite location or by providing participants with a credit card which could activate a loan from an ATM.

Every decedent has an estate. If there are no living relatives then usually an administrator will be appointed to find the next of kin. Your job is to find out who will administer the decedent's estate. Usually it s a person appointed by the local judge or surrogate.

ERISA protection from creditors does not automatically extend to self employed persons or S Corp owners merely because there are common law employees in the plan sponsor. In some states the employer is considered to be the alter ego of the the owner and thus there is no separate entity for the bankruptcy protection. The theory is that an individual cannot put his own assets into a trust to avoid the claims of creditors. By the way there will be no federal protection for IRAs since the bankruptcy legislation has been defeated in the Senate.

Under the terms of the demutualization provisions of state law, the insurer is required to distribute the surplus assets to all policyholders of record. What happens after that is not their problem. Presumably unclaimed checks become abandoned property to be escheated to the state. The question is who is the check payable to? If it is co X then only a person who is authorized by Co X can cash the check. If the check is payable to Co A and and your client is the sucessor to /owner of Co A then it could be Co A property because Co A was the owner of the group annuity policy. You need to review the purchase agreement for Co A to determine what was purchased from Co X. Also there will be a practical problem in finding Co X owners since it is dissolved. There is no liability for benefits by accepting the assets- the participants were paid off years ago and under applicable law the only thing they are entitiled to are the benefits accrued under the terminated plan. Surplus assets are not benefits. However if the employer deposits the dividend check there is a question of whether this a reversion under IRC 4980 subject to the 50% tax. I have represented several employers who have received demutualizaton proceeds and each case is different. Your cleint needs counsel.

You can set your % at any number u want. 100% is merely the max. There is no minimum amt.

What kind of comp will be paid to the Dr? Passive income such as dividends and rental income are not wages for pension plan purposes. The Dr would have to be paid some form of salary for managing the company in order to get a pension contribution.

yes- If the custodian permits such a distribution- But the stock will be taxed as ordinary income. For tax purposes the FMV of the distribution is amount needed to meet the MRD requirement.

See Rev rule 69-277, 74-417, 71-24

The dividends are the property of whoever is the sucessor in interest to the employer who sponsored the terminated plans. Was Co X the sponsor /group policy owner? What is the relationship between Co X and Co A? There are only three possibilities for the dividend- contribute it a qualified plan, take it as income into the employer's general account or use it to pay additonal benefits to particpants under the terminated plans.

A participant with 15 years of service with a eligible 501©(3) employer can defer an additional 3k per year to a 403(B) plan for 5 years for a max of 15k which when combined with the 457 plan would total 27K.Contributions to a 401(k) plan would reduce the 15k contribution to the 403(B) plan but not affect the 457 contribution. See IRS pub 571 for definition of eligible employer.

An election to defer comp reduces current taxation of wages. But wages are not a preference item that can generate AMT tax like state taxes or the bargain element of ISOs. The only possible AMT implication is that deferral of a significant amount of comp will reduce the execs regular income tax so that if there are too many AMT preference items ( state taxes, med expenses, exemptions, ISOs) the AMT will kick in to reduce some of the tax benefit of deferral. The AMT tax rate for income up to 175,000 is 26%.

Why is it assumed that plan design is subject to fiduciary review. The decisions on the benefits to be provided under a plan by the sponsor are settlor decisions and not are subject to review by a fiduciary. ERISA does not regulate the benefits that an employer can provide to employees, it only provdies for enforcement of the promise the employer makes. Severance benefits are provided by the employer as a condition of employment and the employer can provide the benefits under any terms it wants. Since WARN benefits are a form of severance benefits there is no reason for the employer to pay both severance and WARN benefits. Also there is no violation of WARN since it is the severance benefits not the warn benefits that are reduced.

412(i) plans are marketed to small employers for two benefits: greater tax deductions that otherwise permitted under tax law (which may not be available to youger owners whose max 415 benefit will be less than 160k) and opportunity to purchase LI with tax deductible dollars. If 50% of total contributions are used up for non economic benfits to participants is this a worthwhile investment? Remember that tax deduction will not be more than 35% and this rate will decline in future years. At termination of the plan the participant will still have LI as an asset. The question is was this the most efficient way to purchase LI?

Not True. Merger agreements permit the acquiror to decide when and how to accept assets from another plan in its discretion, eg. the assets will not be transferred if the buyers plan has a disqualfiying provison. The other investments in PLlan A can be transferred to Plan B. There is no reason to make two plans liable for such an investment. Also at some point the participant will be able to take a withdrawal of the unacceptable investment , at termination, or if a PS plan, as an inservice withdrawal or if permissible Plan A can be terminated and the assets distributed to the participants.

There is no requirement that an employer provide for a distribution to an employee upon termination of employment. If the plan requires that you attain age 55 before you can recieve your benefit then you have no other options unless the plan provides for an automatic cashout of benefits with a value of $5000 or less.

covered comp is the sum of all compensation paid to all employees who participate in the plan not in excess of the 401(a)(17) limits. If the Dr is the only participant then covered comp is 200k but max deduction is limited to 40k because that is his max contribution. If Dr has a sec or assistant who has a salary of 50 k then covered comp is 250K and deduction is 62.5k if Dr is incorporated. Yes- SEP can be established for only one year. However all employees with service for three years in last 5 years must be eligible to participate on a non discriminatory basis. SEE IRS pub 590 for sep rules. Also cash is fungible- as long as doc has comp from services he can use spare cash as contribution for plan. SEP can be established as late as date of filing of tax return for employer with extensions.

Why would a sponsor want to show employees other provisions that might be more favorable to them then the terms that the emplyer has adopted ? It seems that not only there will be confusion but also resentment. Check the box spds are really passe in today's world of desktop pubishing and computer generated products. Why not just eliminate the provisions that are not in the document? Most vendors will supply a sample spd over the internet which can be edited to eliminate unnecessary language.

Q1- what is the covered comp for the Drs. business? The max deduction for the employer is the greater of 25% of covered comp (exclusive of employee 401(k) contributions) or the amount necessary to meet the minimum funding requirments of the IRC. 2. Is this plan going to be adopted by 12/31? If not the employee can establish a SEP or PS plan and contribute up to 25% of covered comp for 2002 plus the $1000 catch up contribution. The SEP does not have to be adopted by 12/31/02. 3. If there are no other ee than the spouse, the Dr. can establish a 401(k) plan and contribute up 11k plus contribution to the plans in 1 or 2(or make the $1k catchup to the 401K) plan) . But the total contribution to all DC plans for the Dr. is limited to 41k.

I am not sure what you are asking. PA tax law does not allow for deduction of any employee contributions to a 401(k) plan from taxable income. However, PA law does not control whether an employee can elect to make a catch up contribution which is deductible under federal tax law.

No- a SEP is not a qualified plan. The MP plan can be terminated and the proceeds rolled over to an IRA which is part of a SEP.

The failure to permit universal salary reduction for eligible employees results in taxation of all deferrals to the 403(B) contracts for all participants for the year in which the violation occurs. Prior and subsequent years deferrals are not affected. In effect the deferrals are transformed into after tax contributions. See 403(B)(1). There is no ADP testing for 403(B) salary deferrals. See thread by Brennan on 12/4 under 403(B) plans for reference to correction procedure for this problem.

I am still at a point where under ERISA a plan sponsor has no fiduciary obligation to accept any asset from another employer's plan into any plan it sponsors because the asset is not subject to any fiduciary rules (assuming for this argument that such rules apply to a settlor decision) until it is an asset of the sponsor's plan. Second refusing to take an asset that is not appropriate under the acquiror's plan does not require a prior due dilligence review by a fiduciary. For example a plan can refuse to accept an asset because it permits only quarterly transfers while the acquiror's plan uses daily valuation for all investments or because it benefits a small number of persons. If you follow your logic on fid responsibility then every plan that accepts rollovers will be required to conduct a due dilligence review before denying an odd asset transfer request (e.g., RE, mortgages, limited partnerships, futures, options, sector funds, individual stocks, brokerage accounts, foreign or non publicly traded companies) that are not currently permitted in the plan. I would like to know how many plan administrators would want to provide for such an review for rollovers

But Why would you want to do this? The entire IRA account will be taxed as ordinary income at your marginal tax rate under both federal and state tax laws and you will be left with the remainder of the account to recieve as a distribution. If you plan on using the IRA for retirment needs you should not convert to a Roth IRA.

It seems that the comments have gone far beyond the original question of whether a purchaser of a company can can limit investments options of assets transferred for the sellers plan to those which the buryer considers to be suitable and consistent with its funding policy. A plan sponsor can refuse to accept an investment option from another plan into the sponsor's plan which the sponsor deems to be unsuitable under a purchase agreement. The sponsor is not required, nor is the fiduciary required, to do any kind of due dilligence review since the asset is not part of the acquiror's plan.