mbozek

A sole propritor can defer comp for a common law emplyee the same as any employer because deferred omp is a matter of contract between the employer and the employee. See Rev. rule 61-30. However any earnings on the deferred comp will be taxed to the sole propr. unless the assets are invested in LI. why would an employee want to enter into dc with a SP who could die or go out of business? Also why would the ee want to defer comp if there is no earnings being paid on the amount of deferral?

I though that under the revised SPD regs 2520.102-3(l) fees and expenses on an individual account are required for plan years beginning Jan 1, 2003. This would include fees relating to investments.

As a general rule a plan may provide different vesting schedules for different groups of employees so long as the vesting provisions are not structured to evade the vesting requirements of ERISA. See reg. 1.411(a)-3T.

If you contributed to a deductible IRA why not convert the IRA to a Roth IRA this year. You would only have to include $1165 as taxable income and you could then get the benefit of earnings on Roth being exempt from income tax. By doing a conversion you avoid 10% premature distribution tax if you are under 59 1/2.

No- the 457(B) plan provides for a deferral of 11,000 of vested amounts under a nonqualified plan and the 457(f) can plan provide for deferral of amounts in excess of 11k if the deferrals are subject to a substantial risk of forfeiture. govt employees over 50 can defer an additonal 1k under a 457(B) plan.

Govt penson plans are exmept from the J & S requirements imposed by ERISA and the IRC. See ERISA section 4(B). One of the three states that requires J & S annuity for govt workers is NY.

No corporation/business enters into the type of transaction you described without some written agreement negotiated by lawyers. You need to get the document to see what provisions there are regarding benefits or you need to talk to your client's attorney to discuss how the benefits are to be handled. It is possible that the purchase agreement does not contain any provisons relating to benefits or prior service with x corp (I recently represented a client that bought a co that was a sub of another corporation in which there were no benefit provisons and no plans were part of the deal) in which case the the acquired employees are treated as new hires to the plan sponsor.

As I indicated in my prior post state laws will apply including any applicable state laws govening employment e.g., NY state labor law Sect 193-199 as well as judicial decisions on enforcement of contracts. Also non pension federal laws will apply such as age and sex discrimination to prevent discrimination in benefits based on sex or against employees over 40 if there are 15 or more employees (sex) or 20 (Age).

Federal law ( ERISA) prempts state laws which apply to private pension plans. However, public retirement plans established by a gov entity are are exempt from ERISA . Therefore, state laws apply to gov pension plan.

The Albertson cases never discussed the taxation of the earnings to the employee. The question was whether the employer could deduct the imputed earnings on the deferred comp each year as they were earned rather than when the deferred comp and earnings was paid to the employees. The Second Albertson's case held that the interest portion was deferred comp as well as the amount of deferred compensation because deferred comp is not deducted until it is included in the employees income under IRC 404(a)(5).

A: All of the custodians I have worked with accept PLRs as authority for tax free transfers because they are the only authority for many types of transactions involving IRAs. I have never had a custodian reject a request for a tax free transfer becuse the plr which supports the transfer requested by a taxapayer may be reversed by the IRS at a later date. As a practical matter is is unlikely that the IRS will issue an adverse ruling to a taxpayer after issuing a fovorable ruling to another taxpayer on the same facts because: 1. the second taxpayer can withdraw the ruling request before the irs issues an adverse ruling and 2. the taxpayer would be able to point to the prior ruling as the basis for the IRS acting favorably since the IRS cannot act in an arbitrary or capricious manner and treat similarly situated taxpayers differently. The IRS could only revoke the first ruling. If the custodian thinks there is some risk to the tax free nature of the transaction then the custodian will require that the taxpayer sign a hold harmless agreement and agree to indemnify the custodian for any tax penalities. Since plr are expensive and can take several years it is not practical to require that a taxpayer get a plr where the IRS has ruled favorably on behalf of another taxpayer. Bottom line is that the custoidan will lose the rollover to another IRA funding entity. Finally there is no procedure for the IRS to review tax free rollovers other than an audit of the taxpayers 1040 and if the transaction is audited the taxpayer can always cite the PLR as authority to the examing agent who would then have to convince the IRS to issue a contradictory ruling. Last point: I dont think the 86 ruling you cite contradicts the 96 ruling permitting the tax free transfer to the inherited IRA. It appears they are talking about different issues and the 96 ruling is on point in allowing a tax free transfer of the Q plan interest to an IRA as the interest of the deceased participant.

see reg. 1.61-11 pensions and Rev. rule 60-31 for authority that deferred compensation is wages because it is paid for services rendered to the employer. Also see reg 1.404(a)-12 for deduction of deferred comp in year emplyee includes it a compsneaton. There is no provision for payment of earnings on deferred comp to be treated as interest.

Moe: See IRC 105(H)(4): a plan discriminates as to benefits unless benefits provided to HCE are provided for all other participants. This provision requires that benefits for non HCEs be provided on the same terms as HCEs. Requiring a waiting period for some participants but not others does not satisfy the requirement that benefits being available to all participants. See PLR 8411050, 8336065. Similarily a 11 month disparity in waiting period for benefits for nonhces does not satisify 105(h)(4). If equla service was not required for both HCEs and non HCEs then the plan could be designed to avoid providing meaningful benefits to non HCEs simply by requiring extended service before becoming eligible for benefits.

A: Do you have a cite to your statement that the rollover by the spouse of the decedent's Q plan benefits to the inherited IRA prevents the spouse from treating the rollover as contributed to the inherited IRA? The IRS ruling cited above relied on language in prop reg. 1.408-6 that said the spouse may elect to treat the inherited IRA as her own and did not include a transfer of assets of the deceased emplyee as an election to treat the IRA as the spouse's IRA. I dont see any tax evasion in allowing the transfer of Q plan benefits to the IRA since the spouse could elect to take distributions from both the Q plan and IRA without the 10% penalty tax. Combining the assets in the IRA does not change the tax result.

The rules require that the eligible employee have 15 yrs of service with the qualified organizaton which includes a church. One question how much service have you had with the church in you now serve? Second q- what is your relationship with the denomination? Third Q how much service do you have with the denominaton? There is an unanswered question as to whether self emplyed ministers can aggregate service when they work for several different churches in the same denominaton. Some tax advisors consider each church to be a separate employer.

Johng44: Effective Jan 1, 2002 the 457 limit is not agregated with the 402(g) limit. Therefore a employee can defer $11,000 to a 457 plan ($12,000 if age 50) and and equal amount to a 401(k) plan. If the employee works for an elibible NP the maximum amount of salary reduction is $11,000 to the 457 plan and $15,000 to a 403(B) plan.

participant could elect to pay off loan from another source, e.g., home equity loan or if the balance/interest rate is not to high, from a credit card or participant's spouse could take out a plan loan.

MGB: Under existing tax law a participant can 1. elect to take a Lump sum distribution and rollover only the taxable portion to an IRA and take mrd from pre tax funds, 2. allocate the after tax contributions as part of mrd payments for the account balance made over the participant's life expectancy under IRC 72(d) or 3. the participant can apply all the after tax amounts toward rmd payments for the year in which 70 1/2 is attained (or if there is enough AT funds and the AT withdrawal is made between 1/1-4/1 of the year following attainment of age 70 1/2) for the first two years of rmds.

The question is not whether the plan admin can continue the loan repayment after termination but why would plan admin want to be involved in such a headache. Employee can repay the loan before default occurs or can rollover the loan to an new employer's plan instead. Accepting loan repayments from the part is a real hassle because someone has to deposit each check to the plan and make sure it gets to part. account. If part defaluts then the plan has to go through default procedure which is administratively burdensome. Also if you do it for one person then you mustl do it for all terminated participants with loans. PA can rely on language of note requiring repayment by salary deduction.

Free: interest on a 401(k) plan loan is non deductible if the loan is used for personal expenses. Loan interest is deductible if the loan is secured by a mortgage on the participant's residence or if used for a valid investment purpose, e.g., purchase securities, to the extent permitted under the rules for margin loans. But this deduction is the same regardless of the source of the funds used, eg. if the taxpayer put an equal amount of money into a brokerage account and bought stocks, the deduction for margin interest the economic result would be the same.

Distributions from a 457 plan are permitted only after attaining age 70 1/2, upon separation from employment with an employer sponsoring the plan or hardship. There is a special provision for a one time cash out if the amount of the account does not exceed $5000. You should check with the plan administrator for the distribution options.

If the participant elects to receive a LSD of the account balance, the participant can use the after tax contributons to meet the rmd for 2002 and rollover the taxable portion of the of the account balance to an IRA.

The employer can require mandatory participation as a condition of employment the same as it defines the scope of the duties and the employee's salary. the Govt 457 plan could provide for ee contributions of up to 12k including the catch up and that the er contribution will go to a mp plan.

Has any one thought this through (assuming the plan can receive the stock as payment for the loan) what does the plan do with the stock? Since the stock is privately held there is no market for it. Can the plan sell the stock back to the plan sponsor?

Moe: Read the plan document especially the provisions regarding the duties of the plan administrator. Should be a provision that the admin has the responsibility to review participant's account and correct any errors. Excess contribution can be designated as contribution for the 2002 plan year.