mbozek

Why can't the participant hire an attorney to apply for the benefits by submitting the distribution form to the plan. The Participant could direct in writing that the payment be mailed to the participant care of the attorney. The attorney would then forward the check to the participant and the plan would not have to know the address of the participant. While it may cost the participant a little money it is worth it because the attorney client privilege should preserve the confideniality of the client's whereabouts.

The controlled group rules required aggregation once the plan sponsor has more than 50% interest in the plan sponsor. If the Dr. owns less than 50% of the partnership there should be no agregation of the Drs plan with the pship plan because there is no controlled group. However, the CG group rules are complicated. What are the issues being raised by the pship? To be sure your client should retain counsel to review the CG rules.

This post should be under 401(k) plans not nonqualfied deferred comp. Self employed persons can maintain 401(K) or PS plans provided that the non discrimination rules are followed.

Since a qualified plan is not required to accept rollovers it could elect only to receive rollovers from a conduit IRA but I dont know what hassles there would be in dealing with personal IRA accounts. The Plan admin will refuse to accept after tax amounts in the qual plan which are separately accounted for in the IRA. Frankly it may be more difficult to to determine if the amount transfered from an IRA originated in a quaified plan then separating after tax money in the IRA which must be separately accounted for.

Are these stock traders self employed or employees of different employers? Self employed persons have no basis to defer incoem because ther is no separate employer who withhods payment.

Need more information: Does the sub maintain the 401(k) plan or does it participate in the plan of the parent? Is the sale to a company who is not part of the controlled group with the plan sponsor? The question is whether the sale of the sub will result in the termination of the subs employees in the plan.

What is the maximum amt of LI in the plan? As I understand it LI in a DB plan is limited to 100 x the monthly benefit which is maximum of 13,333 or $1,333,300. Can the plan provide for a greater benefit? I question how great an estate planning tool LI is since the proceeds are considered owned by the employee at death and are included in his gross estate unless paid to a spouse or a charity. Paying the proceeds to the spouse only defers the payment of the estate tax until the spouse's death. Otherwise the LI proceeds will be taxable unless the unified credit amount ($1,000,000 in 2002, 1.5m in 2004 is available). The estate tax rate starts at 41% if the there is no unified credit available. I really dont think that business owners who adopt a 412(i) program think all the collateral tax and economic consequences through when adopting such a program-- they are only interested in the tax deductions and income tax free LI benefits.

I dont think the participant has a claim against anyone except the plan administrator/ fiduciary if he/she can be found but the S/l may have expired for a breach of fiduciary duty. This is the problem when particpants leave their benefits in the plan upon termination instead of reqesting a distribution

I dont understand the queston. A SAR sep is not a qualified plan because it has no assets, so there is nothing to freeze. All assets are held in IRAs owned by each employee who participate in the program. An employer is not required to maintain a SARSEP plan and can cease accepting contributions at any time.

If the er is going to apply for a determination letter then a notice to interested parties must be give to participants 7-10 days before the request is filed with the IRS.

Before you can correct the mistakes you have to answer the question of whether excess contributions can be removed from the employees iras. IRA contributions are 100% vested and the custodian may not permit the er to remove the contributions because of the risk of a lawsuit from the participants. There maybe nothing that can be done for persons in (2) and (3). As to the failure to make contributions the only recourse is to make up the missing contributions to the participants. Also how far back is the failure to make contributions? If the violation is more than 3 years old the s/l to disqualfiy employer contributions will have expired ( 6 yrs if the contributon is more than 25% og gross income for the er). There is a question of whether the employees could sue the employer for the missing contributions. There is also the question of whether an employer can retroactively correct mistakes to a SEP plan after the time for making contributions has expired to avoid the loss of the tax deduction ( and the inclusion of the contributions in the employees income since the plan does not qualifiy as a SEP).

Doesnt this get back to the basic difference between a 403(B) plan and a qualified plan- because a 403(B) plan has no assets there is limited reporting. The assets are held in an annuity contract (or a mutual fund which is deemed to be an annuity contract) owned by the employee. There is no reason to do a sar for a 403(B) plan for provisons that do not apply.

What have the particpants in the mp plan been told -- Did they get statements showing that they are100% vested. Or does the SPD state that they are subject to 2/20 vesting but that participants have been given 100% of the aco**** balances as distributions even though they were not vested. If it is merely an admin problem in that accounts were recorded incorrectly then it can be changed. If the participants have been told that they are 100% vested then the plan has two choices: continue 100% vesting and terminate the plan or restate the vesting on the grounds that the plan terms require that the vesting be corrected.

dispite what the regs requirem many partnersips and their accountants delay making 401(k) contributions for owners until the partner's draws have been established under the profit sharing formula of the firm. Some times the conribtions are delayed until well into the following year. The deferral is justified on the grounds that until the draws are known the partners dont know how much to contribute.

Its ok as long as the employer does not make any contributions to the 401(k) plan or allocate any forfeitures in 2003. Q- how is the er going to make salary reduction contributions to the 401(k) plan after year end. You should check this out.

Dol has no program for reviewing plan documents. Under ERISA a plan must be administered in accordance with its terms to the extent plan is consistent with title I of ERISA. The DOL has no jursidiction over enforcing tax law changes. I am trying to determine what would be the DOL sanction if a plan is administered in accordance with the current IRS requirements instead of its terms, e.g., plan applies final 401(a) (9) regs or provides for contributions based on EGTrra changes instaed of plan document provisions. If the failure to conform to language changes causes no harm to plan participants or actually benefits them I dont see harm to the plan participants. I dont think the DOL would require that the excess contributions be removed from the participants accounts. Some 403(B) plan providers/vendors are slow in making amendments and some employers are little slow in adopting amendments.

While 403(B) plans are required to be administered in accordance with the law there is no requirement that the plan be amended to conform to changes in the law because a 403(B) plan is not required to be administered in accordance with its terms. Only qualified plans can lose their tax exempt status if they are not amended by the end of the remedial amendment period.

I recently attended a meeting of financial planners where a speaker extoled the virtues of 412(i) plans over traditional db plans because of the ability to make larger deductible contributions (although he never explained how the funds could be extracted from the plan). The presentation was based on using the excess contributions to buy life insurance. I really do not know why making additional contributions to a 412(i) plan is a selling point if the benefits limits are the same as a regular db plan. Also the promoters of 412(i) programs frequently market their products through the use of professional journals. The Nov /Dec 2000 edition of Planner publshed by the AICPA had an article by a promoter who stated that the max deduction under a 412(i) plan for a 55 yer old business owner earning 170k would be $146k versus 103.9k for a traditional db plan because the 412(i) plan is funded using the guaranteed rate of the insurance contract which is much lower than the actuarial assumption for the plan. (Part of the reason the rates are so low is that the insurance co must pay a large commission to the agent/promoter.) Can the er get away with excess funding by following the contract terms or is there a legal restriction on the amount that can be deducted? Since I am not an actuary/accountant I would like some opinion as to whether this kind of funding is permissible and whether an actuary must sign off on the assumptions used or can the employer merely establish the plan, buy the contracts and deduct the contributions required under the contract without any oversight or review by an actuary or accountant.

While all state have laws prohibiting the practice of law by non lawyers, the limitaton of the practice of tax and related laws to lawyers has not been enforced because of several obstacles. First non lawyers such as enrolled actuaries, accountants enrolled agents can practice before the IRS without violating state laws. Second there is a question of whether adiminstrators, TPAs banks, trust co practice law in the course of their professional activites merely becuase they provide documents to clients for review and administer plans in accordance with the provisons of the IRC and ERISA. Thirdly there is a question of whether an action commenced by a state bar association to restrict qualfied plan work to lawyers would be a violation of federal anti trust laws--- Bar associations are private associations who can be held liable for restraint of trade, e.g. forcing customers to pay more because of a monopoly on the services. The last attempt to restrict qualfied plan work to lawyers was brought by the Fla bar in the 80s-- It was not aimed just at actuaries but at all providers of prototype plans, trust companies and consultants. It was rejected because of the anti trust issues it raised as well as first amendment issues.

403(B) annuity plans are subject to minimal 5500 filing because the plans have no assets-- the annuity benefits are owned by the employees. There is no distribution of a payment upon termination or death because the account is owned by the employee. I dont think that an ssa form is filed by a 403(B) plan.

I see three separate issues here: 1. the PT issue both on the DOL and IRS 15% pt tax by paying the benefits from the employers corporate account instead of plan assets. Obviously the PT issues is an audit matter but it would be real painful if the employer has to p ay the tax and reimburse the plan for use of Assets-- I guess it up to counsel to determine if the PTE can apply here but why pay for a legal opinion when it is cheaper to open a checking account for the plan. Paying benefits from the employer's account is non uncommon where the plan assets are held by a custoidan who does not have payment authoirty-- The Er trays to save expenses by having the distribitions paid from the employer's general account and then having the custodian pay the distribition to the er. which leads to issue No. 2. 2. Distribution issue: If the Er cuts the check from its own account is this a distribution from the plan eligible for a tax free rollover? Who prepares the 1099 and whose tax ID number is used on the 1099? If the er cuts the check from its own acoo**** I dont think the distribution qualifies for rollover treatment because the benefits are not paid from the plan. This means the employee could be taxed on the distribution at least until the s/l expires after 3 or 6 years. This leaves the er with a big exposure for ee taxes. The employee would be subject to the 6% ecess contribution tax for each year the amount is kept in an IRA. 3. Benefit claim. If the payment is made by the er, cant the employee sue the plan for his /her accrued vested benefits on the grounds that employee has never received payment of the accrued benefits from the plan. How would the plan admin defend against such a claim. By using a fraudlent 1099 from the plan as proof of payment? The employee could also claim that the transfer of assets to the ER was a PT which would be running the pt issue up the flagpole. I dont think the er can make payments from its general accounts under the PTE cited above without an ERISA / IRS violation. If the ER dosent want to pay for a checking account from the plan then the er should use a SEP or simple plan where the contributions are placed in the employees IRA and there is no need to make a distribution from the plan. Of course the er doesnt get the option to use forfeitures for contributions and has to cover part timers but is is a better way to adminsiter the plan.

While I have not reviewed the revised 204(H) regs I recall that 204(H) was intended to apply only to pension plans and not profit sharing plans.

NJ only excludes employee contributions to a 401(k) plan.

The rules are clear: as long as any employee has the opportunity to make salary deferrals then all employees who work at least 20 hours a week and are not students must be allowed to make salary deferrals. There can be no closing of the opportunity to defer by employees because a 403(B) plan is not subject to the eligibility rules of IRC 410(a) or ERISA 202. There is no requirement that an employee must defer salary under a 403(B) plan--only the requirement that all eligible employees be allowed to elect deferral at all times.

While a third party cannot seize a participants assets held in a qualfied plan unser ERISA, a participant can make a voluntary assignment of benefits to a third party benefits provided that the assignment is voluntary and revocable. In some cases the nursing home may accept an assignment of the participants benefits as payment for nursing home care.