mbozek

Under Rev Rul 61-146 employer reimbursements of individual health insurance premiums paid by employees are excludible under IRC 105 and 106 if the employee is obligated to purchase the Insurance in order to receive the reimbursement or alternatively if the employer pays the insurance company directly for the policy owned by the employee. Also arent retirees considered employees for health insurance coverage under Rev. rul 82-196?

That's not much comfort to the 20,000 or so Enron employees who had their retirement benefits offset by the value of the Enron stock as it was in 1998. I dont think Enron is the only employer with a grandfathered ESOP plan that can be adapted in a floor offset plan. Besides I think my post said "floor offset plans still exist".

According to news reports Enron had a floor offset arrangement in which DB benefits were reduced by the value of annuity benefits derived from the value of Enron Stock.

As a former chief justice of the NY State Ct of appeals used to say "a prosecutor can indict a ham sandwich." The Gov has to prove an intent not to pay for the securities beyond a reasonable doubt. By the way arent the brokerages supposed to have internal compliance depts to prevent this kind of thing? In an ERISA plan how would this play out? would the investment mgr/fid be making purchases of stock and then selling stock by the end of the day to zero out the cost of the trade? Or would this be a transaction involving stripped US gov securities which make a play on the difference in the time value of money from day to day? There are some valid trading strategies where investors smultaneously buy stock and sell S & P futures and vice versa to take advantage of market discrepances

Mandatory withholding of pension payments under title IV-D are not subject to the procedures for QDROS. Employers are required to carry out mandatory withholding after the order is received or they will be liable for the amounts which they fail to withhold. The employer is immune from liability to the employee for amounts withheld under this provision. The authorization for this legislation is at 42 USC 666(B). Subsection (B)(8) specifically includes pensions and retirement benefits as income subject to mandatory withholding. Counsel must review the notice to determine if it has been issued under the authority of Title IV-D.

If employer files timeley extension Rul 66-144 permits deduction of contribution made during extension period even if tax return is filed by due date. However, contributions made after due date are not deductible if employer has filed tax return without requesting extension. PLR 8526004.

The deduction of the employer contributions for restorative payments is governed by rev. Rule 2002-45 and PLR 200230044.

Then the contribution becomes an allocation for the limitation year in which it is contributed. See Reg. 1.415-6(B)(7)(ii) -contribution must be made by 5 1/2 months after the end of the taxable or fiscal year within which the limitation year ends. Plan does not say when contributions are due because of poor drafting.

Whichever is later. If the plan must be nondiscriminatory as of date of temination should not all contributions made up to date of termination be included in the 5310 submission in order that plan be reviewed by IRS? This includes any forfeitures reallocated from a suspense account, if any, as of end of plan year or upon termination.

Check the instructions for the 5300 form under multiemployer plan other.

Why not call the decline what it really is a net loss... Why call it some thing else that the participant will not understand (negative addition- huh?) ?? How about total contributions followed by net loss = net change in assets

Public pension benefits may be subject to child support under a QDRO issued by a state court, state ct garnishment orders or if the order is issued by a state agency authorized to recover funds under the Child Support Enforcement Act pursuant to state law (IV-D program) where the custodial parent entitled to public assistance assigns to the state the right to recieve child support from the non custodial parent which has not been paid. In other words the state agency can collect the back child support owed to the custodial parent from pension benefits due the non custidal parent. See Dol Opinion 2002-03A. In the case of a public plan the authorization to collect the child support issued by a state agency would be sufficient without the need to conform to the QDRO requirements. You need to have the order/notice reviewed by counsel.

It is my recollection that the IRS issued model amendments for 20% withholding and the a17 changes for M & P plans which did not require formal adoption by the employers who had adopted the plan. The M & P sponsors merely issued the amendments to the employers as an amendment to the existing M & P plan which had received TRA 86 approval. You need to find out if plan received such an approval and the amendents were attached to the M & P document. However, the plan would need to be amended for GUST. IRS has delayed expiration of GUST remedial amendment period for M & P plan adopters until later of 12/31/02 or 1 year after IRS approves gust amendment. If Employer is still using the Kemper plan it can adopt the Gust amendents for the kemper plan after approval by the IRS or adopt a gust approved plan of another ptype sponsor. I think you should contact Kemper to find out the status of their plan for GUST amendments before looking at CAP. You should also review IRS announcement on remedial amendment period for M & P plans on IRS web site.

MK: Employers frequently give enhanced retirement benefits to participants in DB plans by increasing the accrued benefits for persons electing voluntary retirement ( 5 & 5) which is eligible for a rollover if paid from the plan. What you are thinking of are LS severance payments made by an er made under a voluntary retirment program which are not part of the DB accrued benefits. The issue is whether the er could make a contribution to the trust to make up the $30,000 loss to the participant and can the er take a deduction. The er must retain counsel to determine if it is doable but if the $30,000 is paid from the trustee for plan (and there are issues as to whether it would be an accrued benefit, violates the 415 limit or exclusive benefit rule, etc) then it is eligible for a rollover.

How about date for filing 990 form since allocations must be made by 990 due date in order to count as contributions for such year's 415 limits. For a calendar year plan I think the 990 is due on June 15.

What kind of favorable tax tax treatment is this participant eligible for? 5 year averaging was repealed after 12/31/99 and only employees age 67 or older are eligible for 10 yr /cap gains treatment. The particpant would also need to meet the requirments for a lump sum distirbtion in order to take favorable tax treatment. In order to determine the amount of the loss to the participant the plan document should be reviewed to determine what was the value on the date the distribution should have been made. If the participant has a been damaged by the late distribution payment because it is not in accordance with the terms of the plan then he/she should file a claim for benefits with the Plan admin. If the pa determines that the payment was due to a violation of the plan provisons then the PA can make a payment to participant from a suspense acount or the employer could make an additional contribution to settle the claim. The issue is whether the make up contribution would be considered an allocation subject to the 415 limits. The employer could always settle the claim by a payment outside of the plan provided the employee gives the necessary release and waivers against the plan. The employer needs to retain counsel to determine the options under the plan terms and whether an additional contribution would be deductible.

A debt must be listed on the petition for bankruptcy in order to be discharged. If it not listed as an unsecured loan the Plan admin will not get notice of the filing and will not recieve the order to cease withholding of repayments. A participant is not required to list the loan on the petition for bankruptcy. If the loan is not listed on the petition then the participant must continue repayments. If the loan is listed on the petition for bankruptcy and there is no objection the loan will be discharged. The discharge of the loan by the bkcy ct has no impact on the defaulted loan under the tax law since discharge releases the participant from the obligation to repay the debt. A loan in defaut is deemed distributed. Q/A-10. See prop. reg. 1.72(p)-1 Q 19(a)- a loan that is deemed distributed under 72(p) ceases to be an outstanding loan for Section 72, but is not deemed to be an actual distribution for qualification purposes under Q-12. A defaulted loan must be taken into account in determining the amount of any future loans. Q-19(B).

Could you explain the 404 violation? Was it that contributions to the plan for 2001 exceeded 25% of covered compensation or is it that the the er 10% discretionary contributions plus the deferral and match exceeded 25% of compensation under IRC 415 for each employee. What is the connection between average annual addition of 15.27% and the 404 violation?

ennemm: YOu should ask for a copy of the 5500 form the period in question, e.g. 2001 plan year if the plan was maintained on a calender year, to see what was reported as plan expenses to the DOL. Calender year 5500 must be filed by Oct 15, 2002. If expenses were not reported for any part of 2001 year then the participants should not be charged. A participant has the right to receive a copy of the 5500 form from the plan administrator. Also 5500 will tell you how many participants the plan had. I have had several clients who though that they were doing the right thing by moving into safe investments in their 401(k) plan only to find out that their account balances were being reduced for plan charges passed along by the employer. Unlike an IRA owner, qualified plan participants are a captive audience for this kind of thing because they cannot transfer the funds while employed. Best advice to a former particpant is to rollover the account balance to an IRA as soon as possible to avoid such charges.

BFREE: arent the most of processes you describe automated and entered on a data base to minimize the time? Secondly arent many of the expenses you mention, e.g., benefit packets, participant inquiries, distribution requests settlor expenses that cannot be charged to the plan? Q are 5500 costs a settlor obligation because it must be filed by the sponsor? I dont think plan can charge the employee to receive a benefit plan statement that is required to be given by law. The cost of document revisions can be passed along only if they affect the plans qualfied status. I think the problem is that some employers are trying to pass off all of the costs of operating their plans to their employees without regard to the DOL rules and dont whan to be responsible for any costs.

Plan would only be required to be amended for Gust amendmnts effective in 1997, e.g. veterans reemployment act, 1996-7 tax act provisions. Dol does not have any authority to disqualify a plan. Plan can be disqualified by IRS but the S/l for denying employer deductions in a disqualfied plan is 3 year years from date er filed tax return. If last contribution was 1997 then s/l expired march 15, 2001, unless contribution exceeded 25% of gross income in which case the S/l would be 6 years, April 15, 2004. If IRS disqualifies plan now the S/l for including the employee benefits as taxable income expired on April 15, 2001 ( if benefits were distributed in 97) or on April 15, 2004 if the benefits exceed 25% of Gross income for 97. Termination of DB plan must be reported to PBGC but PBGC is only concerned with amt of benefits paid. There may also be a s/l for PBGC review after termination. If corporation maintaining the plan has been liquidated it is unlikely that IRS would ever be able to collect back income taxes even if S/l has not expired because owners are not personally liable for corporate income taxes. However, there could be liability by "a responsible person" for back FICA taxes on benefits included as taxable income if s/l for FICA taxes has not expired. The client needs to consult with tax counsel to determine whether any further action is required or whether s/l for agency review has expired.

I fail to see how the admininstration of a plan for three participants which is invested in money market funds could generate $3000 in fees a year. Maybe some one could tell me how many hours is required to do the administrative work involved ( and describe what admin is really required other than a quarterly statement). By the way what do TPAs charge as an hourly fee? At $100 an hours thats 30 hours of work. ERISA only allows the payment of reasonable fees. It appears to me that the fiduciary did not do proper due dilligence in reviewing the fees and merely decided to pass them along to the participants who as a captive audience had no choice. This is the usual pattern when the fiduciary is also the owner of the business. There is no reason to maintain a qualified plan which has such an outrageous fee structure when an employer can establish a SEP or simple or just allow participants to establish their own IRAs. Investing directly in the market is not a bad option when you consider the that trades can be made for $10-15 each with no admin fees and capital gain for sales. Also the funds are available when you want it. But if it any consolation, the employees of Enron were screwed even more than ennemm.

Isnt the a17 limit a limit on the amount of aggregate comp which can be used to determine benefits in a plan year. It is not a limit on the source of the funds that are used to make contributions. For example if a plan participant makes 400,000 year and elects to commence salary reduction on July 1 why cant that person defer 12k including catch up on comp paid in the last half of the year?. Many plan participants make 401(k) contributions from comp paid in the last month or two of a plan year. I have never seen a plan provision which restricts this practice for persons who have exceeded the a17 limit.

Egtrra amendments are required for those provisions that apply to the plan in the year terminated. Some revisions are optional, eg. catch up provision and some are not required, eg., plans do not have to increase comp. to 200k. Master/Prototype plan sponsors provide a list of amendments that are required in year plan is terminated.

403(B) annuity plans can only be established by charitable organizations that can accept tax deductible donations under IRC 501©(3). IRS regulates these entities and requires some of them to file income tax returns. Non profits are also regulated by state attorney generals and are subject to restrictions on how money is spent. NP must have a legitimate business purpose and its tax exempt status must be approved by IRS after maiking a detailed filing of its purpose and operation. NP can have its tax exeempt staust revoked if it acts in a manner that is contridictory to its exempt purpose.