mbozek

the er must follow the terms of the plan. That is why the plan should be amended to permit more frequent transfers.

Meggie: Hate to state to obvious but you must read the annuity contract to see if the annuity benefit can be cancelled for ineligible employees. Some contaracts will permit the employer to cancel benefits for ineligible employees and refund the money to the employer provided the appropriate indemnification is signed by the er in favor of the insurer.

Just amend the plan to allow employees to change their elections on a more frequent basis e.g., monthly.

ERISA does not proscribe any particular types of investments as long as the plan assets are diversified and the investments are prudent. However under IRC 408 (m), certain types of collectibles such as art, rugs, antiques stamps, coins and alcoholic beverages are prohibited investments for IRAs and employee salary reduction contributions to 401(k) plans. The prohibition does not apply to certain coins such as american eagle coins, .999 fine silver coins, platinum coins and gold, silver, platinum or palladium bullion as well as state coins.

Why not tell the part. that the plan will only do a direct rollover to the IRA & issue a revised 1099R for 2001 and transfer the funds to the IRA. Otherwise tell the part that it will be a taxable distribution.

Qualified plans in the securities industry typically have provisions for mandatory arbitration of claims by a participant. Also under a recent US supreme ct decision in Circuit City Stores v. Adams, an employer could require an employee to submit to mandatory arbitration as a condition of employment.

Kost : Arent all security purchases a promise to pay money or property in the future, e.g., the purchase of stock is a promise to pay for the stock upon delivery of the shares in three business days after the trade? Isnt a life insurance policy with a cash value an unsecured promise to pay money in the future? Yet They are property under Section 83.

Jon- Federal judical policy is to encourage arbitration over litigation. The Federal Arbitration Act which enforces a contractual agreement to arbitrate disputes is not prempted by ERISA. The US Supreme Ct has upheld agreements for mandatory arbitration of employment discrimination claims to the exclusion of all other remedies.

IRC 401:I dont think any of the doctrines u cite could be used as precedent to tax options given the existing Section 83 regs and the statutory language of IRC 1234. In the post 1998 IRS reform act world, the IRS cannot act like King Canute and just issue revenue rulings to stop practices that it does not like- It needs substantial authority under the tax law which is lacking. The fact that a loophole or exception is being utilized by taxpayers to reduce their taxation under the applicable regulations is no reason to curb its application if there is no change in Law (e.g., it is perfectly legal for us companies to incorporate outside the US to avoid paying US income taxes). If you or any other person really believes that variable options are not property within the meaning of IRC 83/1234 then come up with the authority. Otherwise, u are like the Don Quixotes of the IRS tilting at the windmills of tax deferral. Finally why won't the IRS position on 457 (f) wind up any differently than their waffling on split dollar life insurance?

KJ: To put this in the proper perspective is Charles Schwab, INc a fiduciary because it is the custodan of a qualified plan and signs a Schedule P? Second can you explain to me how can a trustee determines what is a proper instruction in the wired world of EFTs and and e trading? Third : what does all of this talk about being a fiduciary mean in the context of mandatory arbitration ?

If the employer is bankrupt the plan is just a general creditor. If the company is liquidated then there is no chance that any payment will be made. If the company comes out of bankruptcy then u need to see if the debt to the plan is discharged. If it is, then too bad. I dont know why the 5500 needs to be changed but that is an accounting question. It would be changed if contributions were listed as having been made or a receivable. There may be a claim against the fiduciary for failing to collect the contributions but only participants may have an issue with that.

Under the Dol regs only participants and beneficaries have a right to receive/request an SPD. Generally former participants who have cashed out their benefits are not participants and have no rights under ERISA. However a former participant who has cashed out benefits would be entitlted to an SPD and other plan documents, 5500s, etc if that person has a colorable claim to benefits under the plan. PS this is why u need a lawyer-- non lawyers cannot properly evaluate the plan administrator's duties. Disgruntled former employees like to harass the plan admin. General Rule is give them what they ask for because they will not understand what u give them. Give them the old spd because that is what is available.

Doesn't IRC 1234(a) define an option as property for capital gains? Section 1234(B)(2) defines property as including stock and securities, commodies and commodity futures.

I guess I am a little skeptical as to why big employers with multiple payrolls and locations cant deposit the contributions in 7 days since they are paying their employees by electronic transfers to banks and are required to send the witholding taxes to the IRS by EFT ( usually by the next business day) as well as state tax withholding. What administrative problems prevent sending each payroll's 401(k) contributions to the fund provider by EFT at the same time? All of the 401(k) vendors have EFT procedures to accept funds.

This is pure speculation on my part but is the IRS anticipating that Congress will revise the rules and tax options with no readily ascertainable fmv under some of the reform proposals in Congress. I know that there is a proposed legislation to change the IRS rule that would tax stock options as wages for FICA purposes.

Under IRC 4975©(1)(E) it is a PT for a fiduciary to deal with plan assets in his own interest or his own account. Pressumably voting the plan shares would benefit your client in his individual ownership. Your client has three options: Hire an independent fiduciary to make the decision to purchase the stock, rely on the fiduciary's judgement that this is the best deal for the plans under the circumstances of a forced merger initiated by a government agency based upon an independent appraisal of fmv and vote for the merger or abstain from voting the shares of the plans and have the merger take efect without his vote.

You should check with the employer's accountants to confirm that the payments under the 457(f) plan are deemed wages paid by the employer in the year the employee is vested in the deferrals. If the payments were vested in a prior year (e.g., because the employee terminated in that year) but are being paid out this year then only the earnings on the vested deferrals are to be taxed as this years wages. I dont understand the reference to trustee.

According to information that I cited in my prior post there does not appear to be any authority for the IRS to distinguish in taxation under IRC 83 between similarily situated taxpayers based upon employment by profit making or np employers. Is this correct? If so then wouldn't the IRS regs be struck down by the courts as arbitrary and capricious?

You could also invest your money in a low cost mutual fund family such as Vanguard funds out of Valley Forge, Pa. Check their web site or call the 800 operator. Banks will either put u into CDs or charge heavy loads for their mutual funds.

Is this IRS policy limited to 457 plans or will it apply to nonqualifed DC Plans of profit making employers under IRC 83?

tks carol

PJ: U seem to be spending too much time infront of the tube instead of backing up your statements with ct precedents, not just committee reports. See De Bruyne v. Equitable Life, 920 F2d 457 for an example of the difficulty of pleading and proving a claim for breach of fiduciary duty because of investment losses in a pension plan. You should also review the sanctions under Rule 11 that can be levied on plaintiffs and their counsel who file frivilous motions and claims.

I dont know. If the accountant is willing to review the employers records (and the employer is willing to pay for the cost of such a review) there will be an outside review. Would any accountant like to respond as to whether there is any responsibility to verify the information provided by the employer for this as well as all of the other information submitted by the employerwill for completing the 5500.

I dont understand what you are asking about? Are you referring to due dilligence inquiries which are conducted prior to a takeover or acquisition? If so the answer is no because there is not enough time to do an operational review before closing nor are pension plans regarded as being so important in an acquisiton to hold up the closing until there is an audit of the plans operation. I have been involved in several acquisitions where the deal is closed before all of the necesary documents, e.g, plan document, determination letter, annual reports, etc have been delivered no less reviewed. The buyer usually relies on the representations of the seller that the plan is in compliance with the IRC and ERISA, is a qualified plan and that all required contaributions have been made. Many times the buyer realizes what a mess they bought only after the acquisition. As buyer's representative I have become quite adept at writing due dilligence reports that caveat all of the unknown factors and risks in benefit plans that may be encountered when insufficient information has been provided by seller.

This makes sense, since most employers do payrolls and witholding taxes by EFT there is no reason not to transfer the 401(k) contributions at the same time.