mbozek

how about applying for a funding waiver?

Non employee directors are regarded as self employed persons subject to SECA tax under IRC 1401. SECA tax is levied on net earnings from self emplyment under IRC 1402(B). Section 3121(v) rules for wages do not apply.

While there are plrs stating that taxpayers may defer pre 87 balances until age 75 it appears there is no express statutory requirement for distribution of pre 87 account balances since prior to 1986 there were no minimum distribution requirements for 403(B) annuities which are not qualified plans. 403(B) annuities are treated as annuity contracts under IRC 72. The 1986 tax reform act extended the minimum distribution requirements to the post 87 account balances. See Section 1852(a)(3)(A) of the 1986 Tax reform Act. Reg 1.403(B)-2 Q-3/a-3 states that the pre 87 balance must be distributed under the mdib rules in effect in on July 27 1987 interpreting reg. 1.401-1(B)(1)(i). My question is where is the statutory basis for subjecting pre 87 account balances to a mdib requirement?

There is no vesting requirement for employer contribututions under IRC 403(B). Thus there are no vesting requirements for contributions to a 403(B) plan exempt from ERISA. Contributions had to be vested for the purpose of the exclusion allowance which was repealed effective January 1, 2002. Employee contributions to a 403(B) plan subject to ERISA must be 100% vested. Non matching employer contributions to a plan subject to ERISA must be vested under either 5 year cliff or 7 yr graded schedule.

If the church plan is exempt from ERISA then the vesting rules do not apply.

My understanding is that there is a J & S required benefit for those NYS state educational employees who participate in the Optional retirement programs offerred by SUNY and CUNY. These programs are provided through outside vendors. There is no J & S requirement for salary reduction of the employees own contributions in a discretionary TDA plan.

My response was in the context of the prior posts regarding distributions from a plan in the controlled group. However, it is not clear that the terminated plan is part of a controlled group, especially if the acquisition was an asset transfer instead of a stock purchase.

No- see reg 1.1001-1(a).

The Plan admin has three options: Distribute the benefits as a lump sum subject to 20% withholding, transfer the assets to another DC plan in the same controlled group or treat the distribution as being subject to 100% IRS withholding and let the participant apply for a tax refund. The IRS withholding is used if the participant cannot be located. You cant keep the plan going indefinitely because under IRS rules all assets must be distributed within 1 year after the determination letter is issued in order for the plan to be properly terminated ( and not be amended for futher changes in the tax law). The procedure is for the Plan admin to send the participant a notice by certified mail with return receipt giving 30 days to elect a distribution or a direct rollover before the plan admin distributes the assets in accordance with one of the above options. If the participant fails to respond then the PA will transfer the funds. Note: Under reg 1.411(d)-4(B) a terminated ps plan that offers other options can be amended to eliminate the other options and make a ls distribution without the participants's consent.

K: I dont see any such requirement any more than a requirement that plan assets be fully invested in equities and debt at all times. There may be times when low interest bearing accounts are a safer investment than stocks or bonds and safe investments like T bills may not be available in the appropriate quantity, price, or maturity.

I think you need to focus on reg 2550.404a-1(B) - Investment duties of a fiduciary: Appropriate consideration with regard to a particular investment or course of action taken by a fid pursuant to his investment duties includes:( 2)(ii) © the projected return of the portfolio relative to the funding objectives of the plan. In some circumstances, e.g., an overfunded DB plan of a closely held corp, it may not be necessary to maximize investment return and the plan could put assets into low interest or non interest bearing accounts since there is no need to increase plan assets. While highly unusual it depends on the facts and circumstances of each case in order to make a prudent decision. There is no requirement that a fid make investment decisions that could result in an employer paying income/excise taxes upon termination of the plan in order to avoid a claim of not maximizing investment return of plan assets.

It is a matter of equity and administrative discretion. Clearly the participant is not liable becuase the loan payment was deposited on time. And the employer payment would be considered a contribution to the plan for the participants account.

Some benefit commentators have suggested that health and welfare service organization was intended for entities such as the Red Cross who combine health services (e.g., blood drives) with welfare (disaster relief).

A participant in a 403(B) plan who is subject to SS tax cannot contribute 100% of compensation to the 403(B) plan because FICA taxes must be withheld by the employer (7.65% of pay up to $84,900). State income tax (NJ and Pa) may also be withheld.

Fidu: What do you mean by assests must be invested and not idle?? Some plans keep a proportion of their assets in money market or other low interest funds for liquidiaty or opportunity investment purposes. Or are you questoning whether a plan can keep assets in a non interest bearing checking account. I dont know whether there is a requirement under ERISA that all plan assts must be invested all the time. The fid is supposed to act under the terms of the investment policy for the plan in a prudent manner but plan assets are not required to be fully invested in equity or debt instruments all the time.

I though there were cases involving Cal./Ore. vacation law where the cts held that state laws were preempted from applying to a veba which pays benefits to the employees but were not preempted if the VEBA reimbursed the employer for vacation benefit. As I understand the ERISA regs vacation pay which is made from the employer's general account is not a ERISA plan and benefits are subject to state law.

402(g) was added by the Tax Reform Act of 1986--- There is no definition or legislative history as to the entities that qualfiy as a health and welfare service agency /organization.

Simple Question : Whose fault is it that the loan was posted late? The employer? If the loan payments were made on time ( by salary reduction) then the ee cannot be held laible for late posting, interest, etc. Just wipe out the charges.

yes, if he is not subject to SS taxes.

yes-it was repealed 12/31/01

The IRS will accept requests for determinion on cash balance plans but spokesmen have stated that CB requests for plans which have been converted from traditonal DB plans are sent to washington for an indefinite review. It is my understanding that CB plan requests which are for new plans which are not conversions from traditional DB plans will be processed by the IRS. There may be another thread on this topic a few months ago.

I am not familiar with the born at home exception. My understanding of state law is that all births are required to be reported by someone, e.g, midwife, doctor, parent. Was this person born in a foreign country?

Do you think the trustee is going to want to continue such a responsibility? and will the bank acting as recordkeeper want to do such complex calculations for free??

I guess it will be the bank's problem to allocate the interest from the loans among the plan participants on a daily basis.

The loans under the PSP are plan assets. The plan administrator has two optons: continue the trust holding just the plan loans until all of the loans are paid back or sell the loans and divide the proceeds among the participants. If the loans are continued the ps plan can be merged with the 401(k) plan and the ps trust transferred to the 401(k) plan and the loan repayments allocated among the participants who had an interest in the ps plan. The non loan assets can be transferred to the 401(k) plan. This problem occurs whenever a plan terminates and has illiquid assets such as real estate that is in forclosure proceedings. I dont think that you can cancel the loan if the term of the loan has not expired and is not in default.