mbozek

The 1996 US model tax treaty explicitly includes lump sum distributions in addition to periodic payments. Also the 1995 US- France tax treaty now includes lump sum payments as well as periodic distributions as being subject to taxation only by the country of residence of the employee who earned the benefits. YOu should check the IRS publicaton on tax treaties for a complete listing.

I am not familiar with your situation; however IRC 1361©(2)(A) and 1361(d) limit ownership of S corp stock to certain types of trusts. I do know that an IRA cannot be a shareholder of an S corp Rev. Rul 92-73 because it is not an eligible trust.

Whether it is taxable is a separate issue from whether it must be paid off. The parties can agree that the loan will be paid back so that the employee will not have retirement benefits reduced and part of the payments will be after tax because the loan is regarded as basis. Also why is the employee required to treat the loan as a non taxable event? After all a taxpayer is not required to take a deduction of mortgage interest or property tax deductions.

Any party to a divorce where retirement benefits are involved needs to have counsel experienced in the division of benefits in the state where the parties reside to avoid such consequences.

The answer is yes but the question is what standard-- Stock options can be valued at any time befor expiraton under several different financial formulas the most common being the Black Sholes formula. The Stock option program may also have a formula.

I think he is referring to the right of an ex spouse to collect SS benefits based upon a former spouse's earnings as long as the parties were married for at least 10 years and the ex spouse has not remarried. The benefits are paid by SS not by the working spouse. However, ss benefits of a wage earner are not subject to division upon divorce because the benefits are not alienable so I dont understand what his last sentence is referring to (unless it is employer provided benefits). I dont understand what is his reference to tax burdens and fines (other than 10% prematuare distribution tax from IRAs) becuase almost all benefits can be transferred without adverse taxation under qualified plans, 403(B) plans, 457 plans, IRAs, nonqualified plans and stock options programs.

K: Under the facts as orignally described, the issue was the acquiror's plan had to accept all investments in plan A. The merger could provide that Plan B will not accept certain assets from Plan A. Also if a fiduciary does not feel that it can follow established precedents and a legally adopted plan amendment he /it should resign or be terminated by the sponsor not expending unnecessary resouces on trying to review established law.

401: If I am not stating the cases correctly please provide contrary authority. I understand your reservations but under the current precedents this is the law as applied by the Supreme ct. which lower courts are constrained to follow. As an example, the 2nd circuit court of appeals recently reversed a district ct opinion that the federal death penalty law as unconsititutional because of the risk that innocent persons could be executed. The appeals ct said that the district ct could not depart from existing precedents of the Supreme Ct because the law was settled that the death penalty law met all applicable guidelines for fairness. Separately, under the Jacobson case, plan amendments regarding plan investments are not subject to fiduciary action because the employer bears investment risk under ERISA. Therefore, employer action to reduce investment risk is a settlor decision, the same as a decision to curtail benefits or terminate the plan. A fiduciary who disagrees with an employer decision on plan investments can always resign.

KJ: Preambles are not legally enforceable - they state only the opinion of the DOL and cannot overrule Sup Ct precedents. By the way the three Sup cases cases previously cited were handed down after the 404© regs were issued.

Under the applicable rules an employee who continues to work after age 70 1/2 must take the first RMD no later than April first of the year after termination, i.e., 4/1/03. An employee who waits until 4/1/03 to take the RMD for 02 must take the 03 rmd by 12/31/03 which could put the employee into a higher marginal tax bracket for 03 (tax rates will not be reduced in 03). Since there is only a 3 month deferral the ee should take the 02 rmd by 12/31/02 unless there will be a large deduction available in 03 or the rmds for 02 and 03 will be less than the ees 02 salary + the 02 mrd. The only way to defer the rmd for 2002 would be to retire 1/1/03.

I dont understand your queston. Is it a valuation issue or are u asking if there is a taxation event? Also stock options are issued pursuant to written programs in which the questions you ask are defined in the document.

The mrd rules only apply to amounts held in an IRA. If there is no balance in an IRA then no mrd is required,

Prudence is a requirement for fiducaries. Plan sponsors who do not want to have risky investments in the plan can eliminate the investment by plan amendment because settlor decisions to amend plans are not subject to the prudence requirement of ERISA. This is settled law as rendered by the US Supreme Court in Jacobson v. Hughes, Lockeed v. Spink and the Curtis Wright cases. If you had read the facts you would had seen that the case involved the merger of a plan with a odd investment option ("Off the wall") which the acquiror did not want in its plan. There is nothing that requires that such an investment be included in the acquiror's plan just because ione employee likes it. I have been involved in many mergers where all of the options under the seller's plan were terminated and transferred to options under the buyer's plan. In fact the way to eliminate any prudence question is to not allow the investment as an option in the the aquiror's plan. My position is consistent with the existing law that allows a plan sponsor to make amendments to it plan to insure that it does not incure any risk that the sponsor does not want to assume since a participant has no right under ERISA to any particular investment option. Also I am still mystified as to what would be the ERISA claim by a participant if the investment was curtailed by an amendment as permitted under the terms of the plan [please explain]. I am also not sure of what the prudence process would be in this case and what would be the cost. If plan sponsor action to terminate a plan is not a fiduciary act then a decision to amend a plan to eliminate an option is not a fiduciary act.

If an employee is eligible to participate in a 401(k) plan as of 1/1 they should be allowed to commence salary reduction beginning that date. While they do not have to be enrolled on 1/1 they must be given the opportunity to commence salary reduction as of 1/1. What other options are there?

After tax money in an IRA is considered distributed on a prorata basis in preportion to the total assets of all IRAs of the owner. See IRS Pub 590. This accounting problem is why it is better to recieve the a/t money since there is no tax and only roll over the pre tax money to an IRA. Why would a participant want to tie up after tax money not subject to income tax in an IRA, have the earnings taxed at ordinary income tax rates and be be subject to the accounting problem of annual allocation between pre and a/t money?

If this is a np employer then why bother with the timing of a contribution; after all the plan is unfunded and the contributions are general assets of the employer the same as in a plan for profit making employers. In a Govt plan there is a requirement under the prop regs that the contribution be made within a reasonable period of time, whatever that is.

Tell the bank to read IRS pub 590 or see IRC 408(d)(3)(A). The prohibition on rollovers of IRA originated funds to an qualified plans was abolished after 12/31/01

H- Many US tax treaties provide that foreign nationals are exempt from US taxation if the foreign country exempts us citizens from taxation. Need to review the IRS publication on tax treaties for each country. Also non a US citizen (including a resident alien) who is married to a US citizen is not eligible for the unlimited marital deduction under the Estate and Gift tax laws. Gifts are limited to $110,000 per year and the estate tax exclusion is $1,000,000.

Resident aliens are non US citizens who have a legal right to permanent residence in the US, e.g., they are married to a US citizen. A resident alien is subject to both US income for all income and US gift/estate tax laws. A non resident alien is a non citizen who has the right to live/work in the US for a period of time but then must return to his /her own country or may have a residence in the US. Non resident aliens are subject to us income tax for US source income but not US estate/gift taxation. US taxation of non citizens may be modified / eliminated under a tax treaty.

No- a VEBA cannot be merged with a qualified plan because it cannot provide deferred compensation. A VEBA can be merged with another veba or extra benefits can be provided to the participants upon termination.

I dont understand the question. The suspension of payments by the bankruptcy ct does not have any impact on whether the loan payments are in default under IRC 72(p). There is no exemption under the loan default provisons for a suspension of payments because of the filing of a bankruptcy petition.

The income is taxed at the treaty rate. As a general rule income earned by a citizen of another country with which the the US has a tax treaty is usually taxed only by the foreign country and is exempt from US income tax. There is an IRS publication on tax treaties with foreign countries which should be consulted to determine what is the correct withholding rate.

This type of question should be addressed to the plan administrator because plans can have their own rules.

If he defers the payment of deferred comp until death then there will be no income or estate taxation if the property is transferred to a charity because there is an unlimited deduction for charitable contributions under the estate tax.

You need to read the terms of the plan document to determine what happens. One answer is that the LS distribution is payable to the estate of the decedent since the J & S was waived. Another possibility is that the election is recinded because the participant died before the distribution date and the benefits will now be paid to the surviving spouse.