mbozek

There is no need to track basis for PA tax purposes because retirement plan distributions after 59 1/2 are not subject to PA tax. If worker moves to another state distributions will be subject to state law of residence regarding taxaton of distributions, eg, NY exempts 20k of retirement distributions for each taxpayer from state & NYC income tax, NJ exempts all employee contributions to all plans/IRAs other than 401k from NJ tax regardless of whether employe lived in NJ when contributions were made, etc. Its the employee's problem to determine state tax liability.

There is no IRS requirement that plan amendments need to be ratified by board action. Most corp delagate authority to adopt plan amendments to a corp offricer e.g., president, CEO, HR director, etc because the board does not want to be bothered with such mundane matters. Even if board approval is requried most corp allow corp officer to sign subject to subsequent board approval at any time. At most its a ministerial matter of corp governance. Also some amendments are pro forma because no discretion is permitted. Document is signed and in put in a drawer.

Plans do not have to consistent as to who is the default beneficiary if there is no designated beneficiary. MRDs rules do not require that the beneficiary be same person under all plans of the employer. MRD rules require payment to a designated beneficiary but do not specifiy who that party can be. Since there is no spouse, the 403b benfits will be distributed to the employee's estate.

I believe that the IRS issued a PLR years ago denying valuation of property in an IRA based on a minority interest discount.

Did you get this solved? I have a similar situation. Divorced in Germany but lived and saved into 401K in the states. Any ideas of what to do? You need to get the divorce decree approved as a domestic divorce decree in the state where the party resides and then see if a state ct will approve the divorce as a QDRO or have a state court approve a QDRO based on the divorce decree.

IRC 129(d)(4) limits the benefits of a DCAP program for owners to no more than 25% amounts paid or incurred for dependent care assistance during the year. That means if the employer pays $5000 in dependent care assistance only $1250 can be provided to the owner. IRC 129(a)(1) provides that the exclusion of up to $5,000 for DCAP is available if assistance is furnished pursuant to a program that is described in subsectiion (d).

I dont understand why the 6% tax would be applicable. The participant requested a rollover and the funds rolled over were the tax deferred funds of the participant. Therefore there was no excess contribution. Only penalty for failure to provide 402f notice is some nominal amunt say $100. 402f is not a qualification requirement. At most failure to provide 402f notice would be an audit issue.

Why is it important to know what should have been done but was not done?.

A 5% ownership interest is not determined by the amount of $ paid to a partner if the $ are not considered profits of the business. Reg 1.416-1 T-17 states that in a non incorporated business a 5% owner is any employee who owns more than 5% of the capital or profits of the employer. In a corporation a 5% owner is any employee who owns more than 5% of the value of the stock or 5% of the voting power of the stock of the corporation. Many businesses (e.g. law firms) designate employees as partners to make clients feel that they are getting a higher level of representation than an attorney who is an associate or counsel. However, non equity partners do not receive a share of the firms profits or make a capital contribution- they are paid based on the hours they bill or amount of business generated by their clients and they are not personally liable to creditors of the firm. You need to ask the client if the non equity partner shares in the profits of the firm or has made a capital contribution.

So there was no taxable distribution in 2008 because both distributions were direct rollovers. I have a queston as to whether a participant who fails to deposit a direct rollover with a custodian can request a change in distribution option to elect a lump sum when the new check is issued. While the plan can reissue a new check to the same payee to replace the stale check originally issued to comply with the requirement to distribute the benefits, I dont think the participant can elect to change the distribution option to a lump sum because the doctrine of consistency prevents a taxpayer from benefiting from a failure to comply with a tax provision that was previously elected, i.e., a direct rollover. I am assuming that the taxpayer listed the distribution from 2008 as a rollover to avoid taxation even though no rollover occurred. I dont think the taxpayer can now elect to receive a taxable distribution of the funds that were previously reported as a rollover in 2008 because there would be two different tax reporting events for the same distribution. Participant needs to consult with a tax advisor before electing a distribution of the funds.

I am assuming that at the time the plan was terminated in 2010 all plan assets were reported as distributed on the 5500. Just re issue the checks to the same payee since legally they are entitled to the funds. Q were 1099Rs issued in 2008? If so did the participants pay income tax on the distributions or were the checks issued to the participants as a direct rollover to a custodian but never deposited with the custodian? I would inform the participants to check with their tax advisor regarding tax reporting. If the checks were payable to a custodian as a direct rollover there is no time limit for depositing the funds in the IRA or plan.

Not all claims are covered by insurance or reportable. If you dont know the reason for the audit why not wait until you are sure that the matter is one covered by your insurance policy. My concern is that the insurance co would use your filing of a notice of a possible claim as a reason to raise the premium even if the cliam was not coverd under the policy. What if this is a random audit?

Isn't Sked A for TIAA b/c it is an insurer? Are the balances on 1/1/11 greater or less than the amounts on 12/31/10? All I can say is that for quarterly reports sent to vested plan participants, the 12/31/10 values are the same as the the opening value on 1/1/11 and the participants closing values on 12/31/11 are the same amount as the opening balance on 1/1/12.

No. Only recourse is to recover excess from participant or from TPA who made mistake.

I am limiting my comments to #4: Under state insurance laws dividends are not guaranteed. Many insurance companies have reduced or ceased dividends because of decline in profits or changes in economy or need to increase reserves.

See below link to PSCA discussion on fee disclosure of brokerage windows in FAB 2012-02. It is also online in benefits in the news may 29. http://www.psca.org/uploads/pdf/government...FAB_2012-02.pdf

If an ERISA plan does not provide for an annuity as the normal form (i.e. plan is funded with mutual funds) then the surviving spouse benefit is 100% of the account balance. 50% QPSA would be normal benefit form if the plan provided for fixed contirbutons each year and an annuity was the normal form of benefit ( e.g., a 403b plan funded with an annuity contract.)

If it is a direct rollover to a roth IRA there is no tax withholding but the employee is responsible for sufficient tax withholding or paying estimated taxes. An employee can avoid penalty for underpaying estimated tax by increasing w-2 withholding up to 12/31. Indirect rollovers to a Roth IRA are subject to 20% withholding.

In an ERISA covered plan the spouse on the date of death is the beneficary of 100% of benefits if spouse did not consent to beneficiary designation.

Are you saying that the employee received a distribution from the plan that was $500 above what he should have received? If so, I believe ERPCRS requires that the plan sponsor attempt to recover the overpayment. State law may impact what could be withheld and the hoops the employer must jump through before withholding pay. Also want to add that if it was a distribution and it was direct-deposited somewhere, you might be able to recover it directly if your direct deposit form contains language about debiting accounts in the event of an error. My past employer had that language on the form, so any time someone signed up for a direct deposit, they were agreeing to have overpayments directly debited as well - sure made things easy in the rare event an overpayment was made. If the situation is such that the total account balance is correct and there's just an imbalance between sources, then I agree with ERISAtoolkit - a resourcing of the money should fix the problem. I dont think that overpayment can be recovered in the event of a rollover if there is language in the direct deposit form about debiting account in the event of an error because account balances in an IRA are considered non forefitable (Reg. 1.408--2(b)(4)) and the custodian will be exposed to a claim form the IRA owner if funds are removed without permission. Similarily non alienation requirement prevents funds from being being removed from a qualified plan. I dont thinnk state labor laws would permit docking employee pay by $500 because plan assets are not wages and in most states employer can only recover overpaid wages by bringing an action against employee for the overpayment.

I dont understand you question. A financial institution can serve as the trustee for assets which means trustee has legal title without providing advice on plan investments which is the responsibility of a fiduciary. ERISA 403(a)(1) expressly provides for a trustee of a plan to be subject to direction of a named fiduciary who is not a trustee in which case the trustee shall be subject to the proper directions of such fiduciary made in accordance with the terms of the plan and which are not contrary to ERISA or the authority to manage, acquire or dispose of such assets is delegated to one or more investment managers.

three questions: 1. what was the nature of the significant legal expenses? 2. what does the plan say about who is responsible for expenses arising from the review of a QDRO? 3. What does the plan provide about types of contributions can be made to reimburse the plan for expenses relating to plan administration?

I dont understnd what is being proposed under Q3. Under the IRS rules (see reg. 1.72-16©(4)) the difference between the face amount and the cash surrender value of the LI policy is is treated as death proceeds of LI exempt from income tax. This amount is paid to the beneficary the same as the proceeds from any LI policy. It is not retained in the plan to be paid as an RMD. Only the cash value portion of the LI is trated as a taxable distribution for RMDs. If the designated bene (Jack) disclaims his interest in the death benefits, the LI death proceeds will pass income tax free to the contingent bene designated under the LI policy or if there is no contingent bene to the default bene under the LI contract. If Jack directs the death proceeds to be paid to someone who is not the next successor beneficiary designated under the policy then he will be deemed to have made a taxable gift eligible for the $5M exemption for lifetime gifts.

If the plan is subject to ERISA spousal consent is required before anther person can be designated as beneficiary. If ERISA plan provides fixed contributions of the money purchase kind where an annuity is the normal form of payment spousal death benefit is 50% of account balance. If plan is exempt from ERISA the terms of contract will apply unless there a state law, e.g., community property.

The attorneys/actuaries are ony implimenting the continual barrage of legislation mandated by a Congress that is always trying to prevent the last crisis from occurring in the future or protect plan participants from some imagined risk be it investment risk (QDIA, annuities,) or insufficiently funded plans (PPA). Congress cannot protect plan sponsors from obsolescence (Kodak, Borders), inability to control expenses when revenue declines (all airlines, domestic steel co) etc. I have read reports that ERISA and tax laws for pension plans have been revised more the 25 times since 1974. It is interesting to note that ther are some regulations that were, proposed or revoked as long as 30 years ago that have not been adopted or deleted (think Carter regs for disclosure). There is a constant churning of rules and polices which morf into different forms as administrations change from on party to the other which requires constant revision to the procedures regulating retirement plans.