mbozek

Why not set up a flex plan and channel the employer contributions into each employees account. As the employees incur out of pocket expenses they can be reimbursed from the account. Making the reimbursement on a taxable basis reduces the value to the employee, e.g, at a 20% income tax rate $750 payment is worth only 600.

100 % withholding is impossible because of all of the other witholding allowances in addition to FICA and state taxes: loan repayments, cafeteria plan contributions, child support, alimony ,united way, etc. that can be taken out of an employee's pay. Use a fixed amt, e.g. 50%, which is an easy standard.

#1 answer. If the social and the name dont line up the 100% withholding may be returned or there will be an inquiry by the IRS to correct the ss no. For less than $100 there is not much risk if plan treats the amt as a forfeiture or uese the account to pay admin expenses because the employee cant be located. Otherwise plan sponsor/ admin could become involved in a drawnout process to find the correct ss no. of somecone who may have given false ss. information. But see second thought on this issue in next paragraph. #2 If same ss no. was used for withholding of income tax for this employee why are you questioning the ss no. now? Bottom line question- If IRS accepts the funds under 100% withholding (because the IRS previously accepted income tax withholding for this employee ) why do you care if it goes to wrong person?

While accounts under a non profit 457 plan cannot be rolled over to an IRA, they can be transferred tax free to another 457(B) plan. IRC 457(e)(10). The reason for the distinction between np and govt 457 plans is that for many govt employers, the 457 plan is the employer sponsored retirement plan for all employees not just members of a select group or HCEs which is a restriction for NP plans.

A VEBA is a tax exempt orgainizaton under IRC 501©(9) and is subject to the rrestrictions on conflict of interest, related parties, UBIT, etc for an any TXO. A Government plan would be subject to any restrictions on investing by a government plan under state laws as well as state law restrictions on investing by non profit organizations.

What do mean by distribution fees?

Here is how to analyze the issues if you want to invest the time: Any fees or expenses that can be charged to a participant must be in writing somewhere since the plan must be administered in accordance with written terms. Review your SPD to see if expenses are disclosed and if necessary get the plan document to see what the terms are for charging fees. You can request an spd from the plan admin. Plan can charge reasonable fees for administration costs but the terms have to be disclosed. Plan adm. can charge you .25 a page for plan document but SPD should be free. You might also get an idea of the plan expenses by reviewing the last two annual reports (5500 form) filed by the plan with the fed government to see what expenses were charged for all participants. You have the right to get a copy of the 5500 although the plan can charge you .25 a page. If the permissible charges are not stated in plan document file a claim for benefits with the plan administrator requesting a review /refund of the charge. The requirements for filing a claim for benefits is stated in the SPD. The plan administrator is required to respond to your claim in writing within 120 days and if your claim is denied PAdmin must refer to the provisions in the plan which authorize such charges. If the response evasive or vague or the pa doesnt respond you can file a complaint with the Pension welfare Benefits Adminitration of the US Dept of Labor which should be listed in the local phone book or check the WEB site. However, I am not sure how they will treat the claim. I wonder what kind of admin expense could be justified for nothing more than reporting the amount of your investment in a mm fund on a periodic basis. E.g., IRA custodians charge no more than $30 a year for providing similar admin and reports - I know clients who have been charged excessive fees for nominal services... You need to follow the money.

You should consider the following issues: 1. What were the employees told about the catch up? Did the plan sponsor reserve the right to change or revoke the catch up election? 2. The catch up as I understand it is a maximum of $1000 above what the employee could otherwise put in under the ADP/ plan provisions. It may be that the employees will not be permitted to make 1000 catch up but something less and the catch up amt could be recharacterized as an excess contribution and returned to partaicpants under the plan provisions. 3. You should consider unwinding the provision/ canceling it asap and then trying fit the catch up contributions into the normal ADP/402(g) limits. By the way are all of the employers in the controlled group allowed to make their own decisions. Cant the parent require that all plans contain the catch up. 4. You may just have to figure out the lesser evil -- returning the the catch ups or risking disqualfication for failure to comply with universal availability. Years ago I advised a client to return employer contributions made under a 403(B) plan earlier in the year because they violated the nondiscrimination requirements limited accruals by HCEs. The employer provided a 204(h) notice on the reduction in contributions as and the excess was returned to the HCEs before the end of the year.

IRS has routinely approved qualfied plans for personal workers...Never heard of the issues you raise. Sometimes the workers are employed by a separate corporation.

A person can waive marital or support rights to an IRA on account of separation or divorce by signing of a prenuptual agreement valid under state law in which such rights are waived. These rights can also be waived after the parties are married. In a community property state each party has the right to 50% of all property acquired during the marriage.

government plans are subject to IRC 415.

Retirement benefits of sole propreitors and sole owners of corporations are not protected from creditors in bankruptcy under Patterson v. Schumate. Thus it is up to each circuit ct to decide whether the non alienation provisions of the IRC offer protection from creditors under the Bankruptcy law to a sole owner. See In re Raymond Yates, 2002 WL 597034, the Sixth circuit held a sole shareholder's retirement benefits are not excluded from his bankruptcy estate because such person is considered to be the employer, not an employee. Hiring a nominal employee to make the plan subject to ERISA would not work since the bankruptcy law has provisions to prevent the defrauding of creditors and judges have broad powers to seize assets. In Yates there were three other participants yet the ct held that the owner's benefits could be included in the bkcy estate.

Treat it as a forfeiture and distribute among remaining participants or use it to pay final admin expenses. If you dont have a correct ss no you cant send to IRS as 100% withholding or escheat it to state. Remember cant terminate plan until all asets are distributed.

Yes but the plan will usually contain a provision permitting amendment at the election of the employer. The only issues is whether the plan would forbid an amendment that reduces a participant's rights and whether plan could be amended to eliminate this provision. Need to check the plan document.

you could ask the participant's tax advisor for an opinion as to whether the couple will claim a medical expense deduction for such treatment. Or you check the IRS plrs under IRC 213 to see if there have bene any rulings.

The employer refund to the employees does not cure the excess contribution. The funds are still in the trust in violation of IRC 401(k)(8) which requires the excess contributions and attributable interest be distributed by 12/31/99... I guess the plan has been disqualified and needs to apply for VCR. By the way how were the refunds reported to the IRS? Did the plan have similiar problems in later years? Second: How can the employer get a refund from the trust -- isn't this a Prohibited Transaction under IRC 4975©(1)(E)..fiduciary dealing with plan assets in his own interest or for his own account or the lending/exchange of money between the plan and a disqualified person under 4975©(1(A). This PT should be reported on the 5500.

Yes if there was such a state law in the governing jurisdiction, e.g., the state where the retirement trust was sited or where the plan had its principal place of business. I have never heard of a state law that protected such a right.

It has been a while since I looked at it, but I thought that under existing law employer provided health ins was the primary coverage for employees over 65 who were covered under employer group health ins. and medicare was the secondary carrier. Employees do not have the choice of dropping employer coverage in favor of mdeicare

Usually such responsibility is spelled out in the administration agreemnt between the Plan admin and the TPA. Unless otherwise specified, the responsibility for keeping track of defaulted loans falls to the plan admin.

There is no remedial amendment period for 403(B) plans which are only required to be administered in accordance with the law not with the terms of the plan. However, if you are amending a plan you should make each amendment retoactive back to its effective date, e.g., USERRA is dec 1994 in the remote case that the plan is audited (even though the IRS audit manual notes that the provisions are not determinative of compliance-- the agent is to review whether the plan complied with the law in operation).

The employer has the following options: 1. continue payout on the grounds that it was validly entered into at the time of separation under the terms of the plan 2. with the employee's consent suspend payment upon reemployment. Plan should be amended. Under Dol reg. 2530- 203-3 a plan may provide for suspension of benefits in pay status but is not required to do so.

1. right to direct investment is a BRF 2. brf must be made available on a nondiscriminatory basis, e.g. avalable only for rollovers. 3. limiting brokerage windon to account over 500K would most likely be a discriminatory brf since nonHCE are not likely to have such amounts. I dont know what you mean by Fiduciary grounds since directed brokerage will be investment responsibility of employee not fiduciary.

ONly if they are eligible for such additional options. A new spd need not be provided to a retired participant or beneficiary if an spd and smm furnished on the date of retirement. No there is no penaly for not providing the spd.

Ask the IRS for the citation of authority for their position since the cut back rule does not apply to non ERISA plans. Under 1998 IRS reform act the IRS is required to provide a taxpayer with any citation of authority to a position taken.

A 403(B) annuity is not a qualified plan- it is an employer contribution to an annuity owned by the employee. If the employee defaults on the loan, the outstanding balance is included in taxable income in year of default. The annuity is not disqualified. There is no consequence to other employees' 403(B) annuity contracts because of a loan default by one participant.