mbozek

403(B) plans are available only to persons who are employees, not independent contractors. I dont know what you mean by contract employee. The question is whether the person is an employee for income tax withholding purposes. A church plan is not required to have a written plan document because it is not subject to ERISA. The only requirement is that the employee sign a salary reduction agreement if there are employee contributions. The contract employee is not required to be included in any specific plan.

E: You have been given the mushroom treatment- the plan admin and TPA have kept you in the dark and thrown manure on you. there is no way that fees for maintaining an account are a loss under any admin rules---- someone has been deceiving you and there is case law on this under ERISA. You should definitely file a claim for the amount of the fees on the basis that they are not a loss and secondly the plan has not disclosed that these amounts would be deducted from your account as required under ERISA. I did not expect the DOL to do anything. You could also ask the company that sent you the report the basis under the plan for hiding a fee as a loss-- in many venues this type of action can be called fraud/ deceit.

Yes - it is a violation of IRC411(a)(11) which requires consent of terminated participants with balances in excess of $5,000 to a distribution. reg 1.411(a)- 11©(2) states that consent is not valid if significant detriment is imposed on participant who does not consent to a distribution. IRS issued a rev rul. on this issue a few years ago.

Under IRC 6501(e) S/l is extended to 6 years if amount excluded from the return (i.e., outstanding loan balance) exceeds 25% of gross income.

The S corp can set up a discretionary PS plan and make a deductible contribution of up to 25% of the compensation of eligible employees. Plan can exclude all employees who work less than 1000 hours a year but exclusion would apply to owners who work less than 1000 hours a year.

If you know the year he terminated then check the 5500 schedule SSA for the plan in which he participated to see the amount of his vested benefit. Separately the participant should receive a statement from SS of vested benefits at ERISA plans when he applies for SS benefits. It is most likely that the employee is a vested terminated participant in some sucesssor plan to the plan in which he participated as of the date he terminated employment. Also ask the employee for any benefits statements he receive from the plan to prove his benefits.

The plan could minimize admin problems by offering a directed brokerage acct through one broker: Schwab comes to mind -- they do this all the time and have the paperwork down pretty good. Each participant could invest in whatever investment media they chose- most fund families are available through Schwab as well as individual stock and bonds. I dont know what the cost is but should be charged back to the participants who elect this option the same as commissions. I have advised several clients on adding a directed brokerage acct to a DC plan and no one has ever had problems with the accounting issues. Please advise of the accounting problems. If you hire a competent firm to act as the broker then the problems you you cite should not occur.

ERISA does not prohibit/restrict any particular class/ type of investments by a plan. The only restrictions are on employer stock/RE by pension plans. Plan Fids are supposed to apply the modern portfolio concept of asset allocation among all asset classes ( stock, bonds, cash) to maximize return with the lowest risk. The plan fids are responsible for adopting an investment policy statement to allocate assets. I do question the prudence in investing in muni bonds which provide a lower return than corporate bonds since interest is tax exempt to individuals. Because a qual plan is a tax exempt entity under IRC 501(a) and any payment to participants are taxed as income under IRC 72 there is no sound reason for a qual plan to hold muni bonds that are tax exempt. However, a plan could taxable muni bonds that pay a premium interest rate.

Why not send them a letter / email asking them to cash the checks. Tell the participants that if the checks become stale the plan admin. will deposit 100% of the pension distribution with the IRS and they can apply for a refund from the IRS.

Why not offer either a directed brokerage account under 404©where each participant can select their own investments/ funds and hire their own advisor or make each fund that a participant wants to invest in an investment choice under the plan under 404©. All participants could invest in each fund. KJ: according to the WSJ about 15% of all 401(k) plans offer directed brokerage accounts. The PT issues are manageable in public co and minimal in privately held co.

fidu: Could u be more definitive in what you are talking about. If a plan is trading securities it must open an account with a broker and must pay for the securites the same as any other customer, under the rules set by the SEC, i.e., 3 days after purchase and present the securites sold within the same period of time. If the plan maintains an account with the broker the plan can use funds in its brokerage account to pay for purchases or the proceeds can be kept with the broker to pay for future trades. I dont know how this is "free riding" since the funds are fungible.

Unemployment income is taxed because it is considered a payment from an employer to the employee which the ee did not make a contribution. Federal income tax is never levied on the portion of payments attributable to the employee after tax dollars, e.g., annuity payments under IRC 72 or disability benefits under IRC 105. Fed tax is levied on SS payments under the theory that it is an employer provided benefit for which the employee was not taxed under the IRC. In congress think the amount of the SS retirement benefit attributable to an employee's after tax contribution (5.7% of pay up to the FICA limit) equals about 15% percent of the SS benefits, hence up to 85% of the benefit (attributable to the er contributions and earnings on both er and ee contributions) can be subject to income tax. Since nothing is ever permanent in the IRC (e..g, universal IRAs only lasted from 82 to 86, comp limits on qual plans go up and down, etc.,) Congress can change the law prospectively to tax the earnings on any amounts contributed under a Roth IRA but not the amounts of a Roth IRA previously included as taxable income, e.g., Roth contributions or conversion amounts.

1.411(a)-11©(4)- consent is required for distributions prior to the later of the NRA or age 62. sorry

If the decedent divided the IRA up into separate shares on his death in the beneficary designation form and the guardian is properly appointed to direct the affairs of the minors property then there could be separate IRA accounts set up for each of the 4 minors. However the funds would have to be transferred by a trustee to trustee transfer not a rollover. Whether this transaction can be done is to be determined by counsel who will be compensated for hi/her advice.

Most states with income tax have some form of withholding requirement, e.g., NY, or require estimated tax payments equal to some % of state tax, e.g., NJ requires 80% of state tax due be paid quarterly. Failure to pay minimum amount will result in interest penalty being assessed and maybe an under payment penalty as well. Texas has no income tax.

The issue is still one of reliance on this informal guidance--at every conference I have attended IRS officials who offer informal guidance state that they are not speaking for the IRS nor are their views binding on the IRS. It makes mo business sense to take evan a minimal risk of losing the deduction when the er can simply make the contribution to the MP plan and then transfer the funds to the ps plan. But then again it is not my call.

There are a number of reasons why plan loans cant be offerred at 0% interest - IRC and Dol rules require a reasonable rate of interest so that the the loan is not considered a disguised distribution. Also the PT rules forbid benefitting a party in interest at the expense of the plan. In additon IRC 7872 imputes income to the borrower on below market rate loans and has recently been applied to split dollar life insurance. Dont know if 7872 would apply to a plan loan but I dont want to find out either.

This is the silly season for our elected representatives when they introduce legislation that has no possiblility of passing because they want to please their consitutiencies in the fall elections. E.g. House Republicans passed a bill which would make estate tax repeal permanent in 2011 but the Senate said no because it would cost $58 billion. This gephart legislation is the same -- since the House is controlled by the Republicans, tax legislation introduced by a Democrat has no chance of even being reviwed by the Ways and Means Committee especially when there is other major legislation pending before the Nov. election. There will be no major changes to the tax laws unless the Democrats get control of the House in Nov., because all tax legislation must originate in the House. The Gephart legislation is counter intuitive-- by eliminating Roth IRAs it will encourage taxpayers to contribute to regular IRAs and thus increase the revenue loss to the government. Sounds stupid but this is the silly season.

KJ: I guess the question is how much reliance can a client place on an informal opinion of unnamed IRS officials and who is going to tell the client that they can rely on this kind of answer as reported on the corbel website. Also the IRS cannot waive the spousal annuity rights of ERISA under the MP plan. As a famous movie character once said- do you feel lucky today? It really comes down to whether the employer's accountant will accept this answer.

Since IRC 410(B)(2) permits a plan to exclude non resident aliens with no us source income from participation, an employer could choose to include these persons as participants.

An employer can always make contributions to an employees FSA, see IRC125©, and the employee can allocate the funds among various options including contributing the funds to a 401(k) plan. see IRC 125(d)(2).

Steve: As the father of a marine (2ndMarDiv) let me try to answer your question. I am presuming that as a govt worker you are eligible for for a roth IRA because you are under the maximum income limit of $95,000. A person with wages can make an after tax contribution of up to $3000 per year to a Roth IRA. this amount will increase in future years. Unlike the traditional IRA there is no tax deduction for the contribution. However both the contributions and earnings will be exempt from tax when withdrawn. You can open a Roth IRA with any financial instituition: bank, stock broker, mutual fund family or credit union ( e.g., navy fed.) Look for an insitution that does not charge fees for opening or maintaining the account or limits fees to a nominal amount such as $10 a year. Fund families that have low operating costs such as TIAA-CREF or Vanguard fund family are ideal for a Roth IRA. If you know nothing about investing I suggest that you read some literature on investments before opening an acount. Since this is long term investing you would be best investing in an index fund which invests in equities such as a Standard and Poors 500 or Vanguard total market index to get growth over the long term with least risk.

The answer is yes but is more complicated than that. A US pension plan can include foreign workers but their benefits will be paid in us dollars. Penson payments from a qualified plan are considered US source income because the trust is a domestic trust under us tax laws so the foreign workers will have us income tax unless there is a treaty with the foreign country that exempts such nationals from us taxation. Under Section 4 of ERISA a us employer can estabish a pension plan for foreign workers with no us source income which is exempt for regulation under ERISA. A pension plan established in a foreign country would not be subject to us income tax. Also many foreign countries have currency restrictions which prevent payment of benefits in non national currency, eg. us dollars or transfer of national currency into us dollars. International pension planning is very complicated because it involves the local laws of the country where the workers reside. Most of the large consulting/ Accounting firms have special units that advise clients on maintaining such plans.

I am assuming that the mp plan assets have been transferred to the PS plan and that the MP plan was amended for gust and for any other changes applicable for 2002. If the MP plan still exists then the employer can make the contribution to the MP plan for 2001 and then the mp plan can transfer the assets to the participants accounts in the ps plan. I would not make the contribution to the PS plan for a 2001 contribution that was due to the MP plan because ps deductions are limited to 15% of covered comp and the conditions for contributions to a mp plan can be different than the ps plan (e.g., vesting, treatment of forfeitures, annuity requirement). Indeed the mp contribution is subject to the spousal consent requirement. The second reason for not making the contribution to the ps plan is that the merger/ conversion documents probably were not written to permit the last mp contribution to be made to the ps plan.

I think that there has been some miscommunications here. The purpose of filing a bkcy petition is to get relief from repaying debts. If the loan is not listed as a debt then the implication is that the loan is not a debt for which repyment can be suspended because the participant does not reqard the loan as a debt. There is no requirement that the plan respond to a petition in bkcy filed by a participant-- the plan adm is notified that the petition is filed and the plan is listed as an unsecured creditor. The purpose of the filing is to permit the plan admin to stop witholding of loan repayments from salary which the participant agreed to as a condition of the loan to comply with the requirement that there be a repayment schedule in order for the loan not to be deemed a distribution. See reg. 1.72(p)-1, Q-3(B) and Q-4. The loan may be a fiction but repayment procedure is a necessary fiction to prevent distribution. I dont know of any way that a participant can stop withholding on a plan loan other than by termination of employment if repayment by salary deduction is a condition of the loan-- State labor laws requiring the consent of a participant to withholding are preempted under both Dol ruling 94-27A (NY labor law) as well as federal case law, Hewlett Packer Co v. Barnes, 425 F Supp 1294, aff 571 F2d 502 (state laws which affect how a plan operates are preempted by ERISA), even if the state law applies to the employer instead of the plan. see Ingersoll Rand v. McClendon, 498 US 133. You can agree or disagree with following the procedure listing a plan loan in filing a bkcy petition but ther are not many plan admin who would want to hear that state law permits plan participants to voluntarily stop their loans at any time.