mbozek

This is a common problem in partnerships where expenses and allocations among the partners cannot be prompltly completed. Pship position is that until phsip income can be determined by accountants partners do not have earned income and cannot determine amt of 40lk contribution since they cannot determine what their ADP % is. It is a defensible position in practice and it is unlikley that the firms ar going to change their acounting practices to conform to DOL rules. I am npot wure how the dol would tereat such a violation since it is on behalf of the two self employed owners not a rank and file employee for whom ERISA was intended. A more important question is whether the contribuition can be made for the prior tax year when it is not made until 3/1. IRS re

I dont think there is any requirement that a distributing plan must provide proof of being qualified (which is a farce anyway since it is only issued as to the form of a plan as of given date in a past year). If the TPA finds it burdensome to deal with the onerous requests of counsel for the receiving plans who have nothing better to do with their time or are billing their clients for this type of nonsense, then the TPA can simply say no. The participants can always rollover the distribution to an IRA since few custodians require more than an affirmation from the participant that the plan is qualified and then roll the funds from the IRA to the new employer's plan.

Mandatory 20% fed withholding taxes is required from all qualified plan distributions in excess of $200 except : periodic payments for more than 10 years after tax amounts tax free rollovers distributions which cannot be rolled over States generally treat distributions as as wages subject to estimated withholding, e.g., 80% of taxable amount in NJ. If a participant wants to avoid mandatory withholding why not do a tax free rollover to an IRA and then take the distribution. IRAs are subject only to estimated tax payments.

The shares of stock in demutualizatoin are awarded to the owner of the policy and if the policy is held by an ERISA plan the shares must be used for the exclusive benefit of the participants. In a DC plan the LI is usually purchased on the life of a participant and the premiums are paid from the contributions allocated to the participant's account and the LI is an asset in the participant's account. The participant designates the beneficaries of the LI proceeds. Therefore the shares of stock should be allocated to the participant as an asset in his account since the shares are analagous to a dividend. If the policy was issued to trustee of the plan and paid by general employer contributions to the plan for the benefit of all participants then the LI is an asset of the plan and the shares should be sold and the value allocated among all the participants of the plan. in this case the trustee is the beneficary of the LI proceeds. You really need to read the plan document to see how LI is treated under the plan as an asset in order to answer this question.

Mike: the case you are thinking of is Estate of Ashman v. IRS, 9th circuit, 10/26/00 in which a taxpayer failed to rollover $100,000 of a $725,000 within 60 days of distribution in 1990. However taxpayer filed a return showing that entire 725K was rolled over. After the s/l expired in 1993 taxpayer recieved a distribution of 100k and tried to claim that it was not taxable because the initial 100 k was not rolled over within 60 days of distribution. The ct applied the dutiy of consistency because the taxpayer had shifted position in reporting the amounts. The estate of King, 48 TCM 450, 7/9/84 stands for the opposite situation-- a taxapayer who fails to include an item of income because of another taxpayer's mistake can assert the expiration of the S/l. Remember even after the 1998 IRS reform act the IRS has no obligation to cite positions favorable to the taxpayer.

If Vanguard reports to IRS that you made a contribution of $3000 then for IRS purposes you can rely on that statement. According to the Vanguard forms that I have seen fees are added to the amount of the annual contributon. Question of $15 fee is an audit issue but IRS rarely audits IRAs and taxpayer has substantial authority under rev rul for treating fee as a separate charge if it is identified. Remember worst case is that excess is subject to 6% excise tax which would result in annual tax of 90 cents.

Many church plan sponsors like sponsors of government retirement plans do not obtain determination letters for retirement plans. There a First amendment issue similar to the exemption of churches from filing a 990 form with the IRS. Second a church plan is subject to limited requirements for qualification. You need to have counsel review the plan and its opeation to determine wither is meets te necessary requirements for qualification.

There are two options to consider : 1. Freeze the plan- no further accruals will be permitted but distributions will be made as each participant terminates service. An employer is not required to make contributions to 457 plan in order to maintain its tax deferred status. 2. Just terminate the plan and make distributions to all participants - the participants have taxation on the entire distribution. Remember that since a 457 plan is a non qualified plan there is no consequence of termination other than taxation to the participants which is either immediate or deferred. There is no adverse consequence to the employer. As long the account balances are taxed there is nothing else to worry about. If the employer wants to defer immediate taxation then just stop deferrals and pay out the participants as they leave employment.

IRS Rev. Rul 84-146 permits the deduction of IRA fees and expenses by the IRA owner as a miscellaneous deduction under the same conditions as a deduction of fees and expenses for qualfied plans provided that the fees are paid to the IRA service provider by the owner and do not come as a reimbusement from the IRA. For this discussion a fee is not a charge for the cost of buying and selling an investment in the IRA. The IRA fees and expenses must be separately identified in a statement sent to the IRA owner. According to the statement from Vanguard for tax purposes you made a $3000 contribution and paid a deductible expense of $15 subject to the 2% floor under 67.

MIke: Duty of consistency only applies to same taxpayer who makes tax error and later trys to benefit from it. See Estate of King, 1984 tax ct case for precedent. In King a partnership failed to include pship income as income to partners . After s/l for taxing the partners expried IRS audited pship and attempted to tax partners on income that was not included in pters tax return for closed year. Tax ct held that failure of pship to include income to partners could not extend s/l for partners and income was now not taxable because s/l expired. Since disqualification would be attributed to employer sponsoring the plan the employee could benefit from amts being treated as after tax income.

If the company has filed Ch 11 then all obligations including pension contributions will be stayed.If the employer has filed for bankruptcy there is no money to pay pension contribitons. If sponsor does not temrinate plan then PBGC will because of exposure for paying guaranteed benefits if accruals continue. Only exception is if plan is fully funded on current basis which is unlikely in a ch 11 situation because the er usually has been getting funding waivers. If the plan has accrued funding obligations it is up to the ct to decide what will be paid-- If er is bankrupt then pension plan is an unsecured creditor and plan will be terminated to prevent addtional liabilities being incurred. I dont think the creditors committee would approve of continuing pension accruals/contributions paid by the estate while they get a lower payout. In most workouts the db plan is replaced by a 401(k) plan.

q: U need to consult a tax advisor on your question. nonprofit 501©(3)s are incorporated under state law and incorporation is filed with sec of state and np may be required to file IRS 990 form if their revenue exceeds a certain amount ($25,000?). Agencies and instrumentalities of govts are usually created under state law or local laws and are sometimes incorporated as a public benefit corporation.They usually do not file a 990 since they do not accept charitable contributions from the public although some get c3 designation. There are some hybred orgs that have characteristics of both private and public entities. Some private ©(3)s get all of their funding from st gov yet they are not govt entities and plans are subject to ERISA. I once had a private c3 client whose employees were participants in a st gov retirement plan- I advised the client that there was no 5500 filing required because the employer did not maintain the plan. If in doubt why not file a 5500? it is a no brainer for a 403(B) plan. Its cheper than hiring counsel.

SIMPLE plan contribution cannot be made in any year in which benefits are accrued or contributions made to a qualified plan, 403(B) annuity or SEP. IRC 408(p)

Need to read the plan to see what must be credited as hours of service. Under dol regs hours of service excludes hours for which employees is paid under WC or disability insurance laws. payments of wages. Plan which incorporates dol hrs of service reg can exclude service for which wc payment is received. State wc laws regarding counting of wc payments for pension service are no not applicable because they are preempted by ERISA.

The consent rules do not apply to a 457 plan- Therefore it is up to the employer to decide whether the employee would be required to submit a request for a distribution. This a design issue. In most plans the employee does not make an election of benefit at the time particpation commences. Also a participant may make a one time election to defer commence of benefits after benefits beccome available.

How about form over substance-- the IRS thinks of a 403(B) plan as an employer sponsored retirement plan for 501©(3) and public schools which is similar to a qualified plan. Since the spouse of a participant in a Qual plan cannot inherit the deceased ret. benefits it can't be done in a 403(B) plan for consistency reasons. However, the deceased's interest can be rolled over to an IRA or another 403(B)/qual plan in which the spouse is a participant. There is no logic to this IRS position.

Remember that there can be only one rollover from the IRA within any 12 month period. The second withdrawal is treated as a taxable distribution. However a transfer from a regular IRA to a Roth IRA does not count toward this limit. Also the amount that can be rolled back to the IRA cannot exceed the amount recieved, e.g, any dividends paid during the 60 day period will be taxed as income to the IRA owner. I would be very wary of using the securities as collateral for any loan because the lender may not release the securities before the expiration of the 60 day period or sell the securities. John: There is no withholding on regular IRAs because the owner can opt out of voluntary 10% withholding. If the funds are returned within 60 days there is no taxable distributoin.

You need to refer this matter to an experienced tax practitioner. The statute of limitations for collecting back taxes is 6 years where a return is filed. The worst case scenario is that the plan was not qualified for 1990 and 1991 but no taxes can be collected for those years since the s/l has expired. The IRS position is quite stupid because if the plan contributions for 90-91 are disqualified then the allocations for those years are now after tax amounts for which no taxes could be collected when distributions are made. The client could claim that it had two separate plans- the disqualfied plan for 1990 and 91 and the restated plan beginning 1992 which is qualified. PJ correctly adds further limitations to an audit: it is not a fishing expedition to review actions in closed tax years beyond the open years for an audit. What your client needs is experienced counsel to rebut the agent. It will cost money but it will get the IRS off their back.

the distribution event requirements of IRC 403(B)(11) are applicable to all 403(B) plans including churches because they apply to the individual participant.

IRC 403(B)(11) restricts the distribution of salary reduction amounts to death, age 59 1/2, termination , disability or hardship. Tax free exhange can be made under rr90-24 any time.

Under bkcy law all obligations are stayed once a petition is filed. Once a plan sponsor goes into bkcy then the db plan will be terminated by the er or the PBGC as a distress terminaton to cease benefit accruals. The PBGC will assert varous claims against the company under Section 507 of the Bkcy law to gain a priority over other creditors. Under section 365(d) of the bkcy law an executory contract can be terminated retroactively to the date of the filing of the bkcy petition. You really need to find a bkcy atty to advise you on this matter.

The BRF regs refer to terms and conditions provided under the plan. Some brokerage house set minimums that they will accept for individual accounts because smaller accounts are too expensive to set up and administer and this is not a term set by the employer under the plan. The practical problem is that the plan may be able to make the directed brokerage option available to participants with balances less than 100k but only at a higher price for trades, admin, etc. If there is a cost /benefit trade off is using a broker that sets a floor on directed brokerage accounts inherently discriminatory? Would a two tier pricing structure for accounts, eg., over/under 100k be a nondiscriminatory BRF because it makes directed brokerage available to all participants?

I dont know anything about Ohio law. Sorry.

or at the end of the calendar year. I dont know what all the possibilities are since there are no rules.

state law may require disclosure of terms of the loan and the consequences of default in more explicit language, e.g., any collateral expenses such as cost of collection, atty fees, etc. Also state labor law may regulate loaning of money by employer to employee. Each state has different laws.