mbozek

Its a possbility athough I doubt it because the OP refers to plan exempt from ERISA which implies a salary reduction plan for a NP since church plans with salary reduction are automatically exempt. I dont understand the need for SEP /403b dual plans because there is a single 415 limit for both plans under the IRC which means that the employer contributions and employee deferrals could be contributed to the 403b plan. Only reason to have SEP is if plan sponsor wanted to to avoid 5500 reporting on employer contributons applicable only to NP.

Under IRS regs all 403b plans have been required to be in writing since 2009 regardless of whether the plan is subject to ERISA. The only exception are plans that ceased to accept contributions prior to 2009. Plan sponsor need to adopt a 403b plan that meets IRS regs ASAP. Q Why is TRP still servicing this plan without a written document? Q2 Who is the plan administrator? Is it TRP?

Catestrophic event such as a flood, tornado or act of terrorism which results in loss of data or delay in reconstructing the data beyond 4 months or terminating the contract would be more expenssive than waiting for the date to be reconstructed.

Hmmm, the exec. director said TIAA CREF told her that they don't do ERISA (at least that's what the phone rep said). Maybe he meant "we don't do ERISA for a plan your size". I should have said governmental plan exemption, i.e. public school districts. I thought teachers and such were TIAA CREF's wheelhouse. Not that it's important to what I'm trying to find out here. Just found this: http://www.pozekonpension.com/pozek-on-pen...erisa-403b.html Looks helpful. Thanks for your help Q, it's an ERISA plan. I think TIAA CREF gave the non-profit I'm speaking with some bad info. TIAA CREF had told them they were ERISA exempt, but they didn't meet: “To meet the terms of the safe harbor, the arrangement generally must offer a choice of more than one 403(b) contractor and more than one investment product.” (From that website). Although they did meet the other requirements. I want to walk away from this one. Beneguy: TIAA did not necessarily give bad info. You relied on bad advice. You have fallen into the trap of using financial journalists for legal and tax advice which is always a big mistake. Whether he was unaware of the applicable reg or just wanted to get noticed, Posek ignored the DOL reg on exempting salary reduction only non profit 403b plans from ERISA if they provide a limited menu of investment options. Reg. 29 CFR 2510.3-2(f) permits an employer sponsoring a 403b plan exempt from ERISA to limit the funding media or products offered to employees to a number and selection which is designed to afford employees a reasonable choice in light of all relevant circumstances including but not limited to: number of employees affected number of contractors who have expressed interest in approaching employees the administrative burdens and costs to the employer. There is no requirement in the reg that mandates two or more providers be made available. Only that the number of providers offer a reasonable choice in light of releveant circumstances which would include a lack of interest by providers in offering annuity products/ mutual funds to employess due to the small amount of assets in the plan or admin costs of using more than one provider. In most small 403b plans funded only by salary reduction it is impossible to get more than one provider because the amount of revenue is too small to support to mutliple providers or the admin cost become too expensive to employees or the employer. Plan admin in 403b plan funded by a single provider needs to document the reason for a lack of other providers periodically by contacting 403b providers who will indicate that they are not interested in such business or are interested in the business at a prohibitive price. It is my understanding that low cost providers such as TIAA CREF and Vanguard are no interested in taking on new salary reduction only business or require several $M in assets to take over a new plan.

So what you're saying is that if the employee requests a distribution, they employer has to oblige without the completion of the QDRO process? The Plan admin must check the plans QDRO procedure to determine if a distribution request must be held in suspense if the plan procedures provide that the Plan admin must review the DRO to determine if it is a QDRO. If the plan procedure provides that the plan admin may pay out distributions if a DRO has not been submitted at the time the request for distribution is received then the plan can pay benefits to the participant subject to the spouse requesting that the state divorce court order that the benefits be divided in divorce decree instead of a QDRO since a QDRO has no effect once benefits have been paid to the participant.

Answers: 1 Its permissible if the adoption agreement for the plan permits adoption of a discretionary formula. 2. Its valid as long it is not discriminatory in favor of HCEs under the rules of 401(a)(4). Always permissible as long as only NHCEs receive the additonal contribution. 3. see #2. If answer is no then employer can pay $5,000 bonus as W-2 income which employees can contribute as elective contribution to 403b plan or to a 457b plan. But there would be a problem if we did write the formula into the document and in a year in which an HCE were to receive this contribution, the plan would fail 401(a)($). Sure, the HCE could bonus the amount in via payroll reduction as you suggest, but the document still calls for this individual to receive a $5,000 ER contribution. I don't think we could simply not give the HCE the $5,000 while giving the $5,000 to however many NHCEs are eligible. That would violate the plan document, wouldn't it? I dont understand why the plan sponsor cannot limit the contribution in years when there would not be discrimination. E.g Adopt plan amendment as follows: "The $5000 contribution will be contributed to the account of an HCE in each plan year except to the extent such a payment would violate non discrimination provisions of the IRC applicable to the plan." The sponsor would make the payment as compensation outside of the plan.

Answers: 1 Its permissible if the adoption agreement for the plan permits adoption of a discretionary formula. 2. Its valid as long it is not discriminatory in favor of HCEs under the rules of 401(a)(4). Always permissible as long as only NHCEs receive the additonal contribution. 3. see #2. If answer is no then employer can pay $5,000 bonus as W-2 income which employees can contribute as elective contribution to 403b plan or to a 457b plan.

Before you spend plan money on hiring a fiduciary consider the following: 1. Most IRAs permit accounts to be opened by an adult over 18 or a parent or guardian of a minor who is the beneficiary. Many financial institutions that sponsor IRAs are established under federal charters which limit application of state laws. For example, IRAs sponsored by national brokerage firms usually state that they are governed under NY or DE law. The first question is whether a parent or guardian can open an IRA with a federally charted financial institution in CA for a minor child as IRA beneficiary. 2. If the IRA can be opened by a parent acting a guardian for a minor beneficiary, the plan can pay the beneficiary designated under the plan. If the plan permits a parent of a minor child to be the designated payee for the child as beneficiary then the plan can pay the benefits to the parent regardless of state law b/c the plan is only required to conform to ERISA, not state law. A recent case illustrates this concept. In Estate of Kensinger v. URL Pharma Inc, 3rd circuit, 3/20/2011, the spouse of a plan participant waived all rights to his 401k benefits in a property settlement incorporated in the divorce decree. However the participant never removed the spouse as the designated beneficiary under the plan. After the employee died the estate and the ex spouse both claimed the benefits. Following the 2009 Supreme Court decision in Kennedy v. Dupont Savings and Investment Plan, the district court awarded the benefits to the ex spouse as the beneficiary designated under the plan. The district court also held that the estate could not assert a claim against the ex spouse in state court to enforce the waiver in the divorce decree because the ex spouse was the beneficiary designated under the plan. On appeal the 3rd circuit upheld the payment of the benefits to the ex spouse as the designated beneficiary but reversed the part of the decision which prohibited the estate from pursuing a claim against the spouse in state court. The 3rd circuit reasoned that what transpires between the parties after the benefits are paid by the plan is solely a matter of state law for which the estate could pursue recovery of the funds as a breach of contract. Similarly a payment of the IRA benefits to a parent acting as the guardian of a minor child under an IRA account would be permitted under ERISA subject to a state agency asserting its rights against the parent after the funds are distributed. 3. Any state law prohibiting payment by the plan to a parent would be preempted by ERISA under the US Supreme Ct decision in Egelhoff v. Egelhoff. 4. The plan can only make such a distribution to the parent if there is specific langauge in the plan permitting payment to the parent for the benefit of a minor beneficiary. Needless to say the plan administrator needs to consult with counsel before making payment.

If the HR people are not paying attention to you, they will pay attention to your attorney. See what hapens when the attorney tells HR tey are liable for the misdirected funds.

Whether or not a tax return can be amended after the 3 year s/l has expired, it would not be possible to change the designation of the TIRA to a Roth IRA because of the Doctrine of Consistency which the tax courts apply to prevent a taxpayer from taking advantage of a tax benefit after the S/L expires to avoid tax on a provision which has expired. A taxpayer retroactively changing the designation of a TIRA with AT funds contributed more than 7 years ago to a Roth IRA would avoid taxation of earnings in the TIRA under IRC 408(a) and application of the pro rata rule. Secondly a conversion can only be accomplished by redesignation of the TIRA as a Roth IRA which requires inclusion of all income in the year of conversion. Retroactivley redesignating the TIRA as a Roth for years beyond the statute of limitation would violate the doctrince of consistency because the effect would be to eliminate taxation on those earnings. Third taxpayers are responsible for determining how an investment will be treated under the tax law and to confirm its correctness. There is no redo other than by amending a tax return.

Q/A-14 protects the receiving plan from adverse tax consequences as long as the Plan admininistrator reasonably concluded that the rollover is a valid rollover contribution. There is no requirement to have a formal review procedure. Information documenting that the transferring plan is an eligible plan can be obtained in several ways such as asking the participant for the most recent account statement or retirement benefit estimate, the request for distribution that the participant signed to elect a RO, a statement listing the RO amount, the plan information from the SPD, 402f notice, etc which contain information to substantiate that the transferreing plan is an eligible plan. Some plan information is available on line.

I dont think a REIT is subject to UBIT b/c it is not a master limited partnership subject to UBIT. In any event UBIT can be avoided if the REIT investment is purchased in an ETF.

You need to ask the court what documentation is necessary to approve the QDRO such as a revised divorce decree or property settlement agreement of the parties agreeing to the division of the pension benefits or even a letter signed by both parties consenting to the divison of the property under the divorce decree. You also need a lawyer.

Need to check the terms of the plan but under IRS rules max 25% deductible contribution would be: 7500 for employee (25% of 30k) 49k for owner (25% of 196k) because under 401©(2) the contribution for the owner must be subtracted from his 245k earned income from SE Isn't his earned income, after taking into account the retirement plan deductions, se tax adjustment, etc. in excess of 245,000? Then you reduce the earned income to the maximum allowed by law 245,000, and that amount is used ultimately to determine the 404 deduction limit (25% of 245,000)? For the purpeses of a deduction as a SEI, his compensation is his earned income within the meaning of IRC 401©(1) which is 245k minus the contribution made on his behalf (49k) or 196k, not 61.25k (25% of 245k). IRC 404(a)(8).

Because there is no risk. The IRS has stated that a receiving plan does not have to request a copy of the determination letter in order to determine that the contribution is a valid rollover contribution. If the plan accepts a rollover later determined to be invalid there will be no advere consequences, if at the time of the RO the plan administrator reasonably concludes that the contribution is a valid rollover contribution and distributes the contribution and any earnings if at a later date the rollover contribution is determined to be invalid. See reg. 1.401(a)(31)-1 Q/A-14.

I agre with Masteff. RR 86-142 was issued to prevent brokerge commissons being deducted as a business expense on the 1040 sked A to evade the limits on deductible IRA contributions.

Rude and incorrect, wow. The reg cited is from 1963, before parity of self-employed individuals which came with TEFRA in 1982. I will not waste my time finding cites but I am sure that reg is superseded or otherwise inapplicable now. The IRS pub makes no mention of not allocating forfeitures to self-employeds, therefore there are no restrictions since that is the ultimate authority. Birde: You keep insisting that everything I cite is incorrect but you "will not waste your time" to come with any authority for your position that the IRS calculation in Pub 560 for determining how a self employed person can claim a deduction for contributions to a qualifed plan is wrong. I think you are dancing in the dark. I cited reg. 1.401-11 specificially to demonstrate that under the legislation enacted to allow SEI to participate in qualified plans, Congress intended that different rules would apply to deductions and allocation of benefits than the rules which aply to employees. Saying that you are sure that a reg is superceded or inapplicable is not substantial authority which a client can rely on. If TEFRA had intended parity of of all provisions for Qualified plans of SEI, Congress would have repealed 401© and (d) and the deduction rules of 404(a)(8) which apply only to SEI. Since those provisions exist the distinctions in qualified plans for SEI continue to apply.

Pro: You need to disabuse yourself of the notion that the little you know is all there is to know about the deduction and allocation rules for SEIs in qualified plans. There are three IRS regulations 1.401-11 to 13 which set out special rules for participation of SEI in qualified plans which are different than the rules for corporate emplyees.. For example, reg. 1.401-11(b)(3) does not permit the allocation of forfeitures to a SEI's account which is clearly different than the rules for corporate employees. As stated in the regulation, the legislation allowing qualified plans for self employed persons "extended SOME of the tax benefits allowed to common law employees who participate in qualified plans. However the tax benefits allowed an SEI are restricted by limits which are placed on the deductions allowed for contributions on such individual's behalf." Thus the IRS recognizes that there are many differences in how a SEI treated under a qualified plan.

The IRS pub is wrong and a distraction from this discussion. What substantial authority do you have for concluding that it is wrong?

Need to check the terms of the plan but under IRS rules max 25% deductible contribution would be: 7500 for employee (25% of 30k) 49k for owner (25% of 196k) because under 401©(2) the contribution for the owner must be subtracted from his 245k earned income from SE

Austin: I have explained the IRS methodology for a self employed person claiming a deduction for a contribution to his pension plan under IRC 401©, pub 560 and the 1040. However I do not prepare tax returns and a taxpayer needs to consult with his or her tax advisor. What I can say is the rule of aggregating the deductions for owners and employees under 404/415 applies if the plan sponsor is a corporation and the owner is an employee. What seems to be overlooked is that when Congress allowed self employed persons to participate in qualified plans 50 years ago it created a separate structure for taking deductions in 401© to limit tax avoidance which is distinct from the rules which govern deductions of contributions for owners who are corporate employees.

For the purpose of reg 3-3(d) the benefits are fully guaranteed because TIAA is a legal reserve life insurance company which is required under state law to guarantee all payments under the contract. If the annuity benefit under the contract is $1000 a month then TIAA guarantees 1000 a month. Just what part of guarantee dont you understand?

It's not a SEP (where 25% is actually the 415 Limit and the Deduction Limit). Being a qualified plan, the deduction is 25% of all compensation, but the resulting compensation after all contributions to the owner is added to the total employee compensation for calculating the 25%. Remember, the 415 limit goes to 100% of compensation in a qualified plan. You would be entirely correct if it were a SEP, but the TPA is correct for the qualified plan. The 20% is merely an algebraic method of getting to the 25% limit. You should never mistake 20% written as a rule. If Net Schedule C is $100,000 and the owner receives a contribution of $20,000, then Earned Income is reduced from $100,000 to $80,000. $20,000 is 25% of $80,000. There is nothing to preclude the owner from receiving $30,000 (and having earned income reduced to $70,000), if that $70,000 (when added to the Compensation of all other "eligible" employees) keeps overall contributions less than 25%, then you're fine. What MAY also "blow your mind" is that the owner's elective deferrals and "employer contributions" are deducted on the same line on the Form 1040. Don't worry, this situation burns everyone; got me 10 years ago Good Luck! That not the way the IRS calculates the amount of the deduction. See Pub 560 P 22 for deduction worksheet for self employed. Under your example $100,000 of net earnings from SE (step 3) would be multiplied by the maximum rate of 20% (step 4) for a deduction of $20,000 (step 5). P 23 rt column under Rate table for self employed contains the following * comment under plan contribution rate of 25% which corresponds to a deduction limit of 20%: "* the deduction limit for annual employer contributions (other than elective deferrals) to a SEP, a profit sharing plan or a money purchase plan cannot be more than 20% of your net earnings (figured without deducting contributions for yourself) from the business that has the plan. " IRC 401©(2)(A)(v) provides that in computing the earned income of a SE person, employer contributions on the owners behalf must be deducted. If $30,000 is contributed for a self employed person with sked C income of $100,000, the earned income will be reduced to $70,000 and the contribution % would be 43% (30/70) which exceeds the maximum 25% allowed under the IRS table. Also the deductions for employee contributions is taken on Schedule C of the 1040 which reduces net income from SE whereas the owner deducts his contributions on line 28 of the 1040 after doing the calculation on P 22. The contributions are not combined. See P 16, col 1 of Pub 560.

There are 2 different questions being discussed here. In AO 2010-01A the DOL held that it was unable to conclude that benefits in a TIAA Traditional annuity (but not CREF) contracts are eligible for a limited exemption from certain reporting requirements as a fully allocated contract for 5500 reporting purposes. The exemptions are located in Reg. 2520-104-44(b)(2). Also the AO does not refer to benefits of terminated participants. Austin's Q pertains to whether a terminated participant whose benefits are held in a TIAA OR CREF contract is counted as a plan participant under unrelated reg. 2510-3-3(d). DOL reg 3-3(d), which has been around since ERISA was enacted, excludes former employees as plan participants if their benefits are fully guaranteed by an insurance company where the employee can enforce his/her benefit rights solely against the insurer and the contract, certificate or policy has been issued to the indvidual. This exclusion is mentioned in the 5500 instructions. Last time I looked a regulation trumps an AO issed under a different provision of ERISA. If the benefits are provided under an guaranteed annuity contract then the insurer is solely liable for payment, not the plan or sponsor and the terminated participant has no interest to be paid from the plan. The 3-3(d) exemption does not apply if the participant also is entitiled to benefits under the plan held by a non insurer such as a mutual fund provider. In otherwords, whether or not a TIAA contract is a fully allocated contract for reporting purposes has no effect on whether a terminated plan participant whose benefits are held in a TIAA or CREF contract is excluded from being counted as a participant under the provisons of 2510-3-3(d)(2)(ii). Obviously plan sponsors whose T/C plans are subject to ERISA need to consult counsel to determine whether a terminated participant is included as a participant for 5500 reporting.

The TIAA-CREF position is derived from DOL reg 2510.3-3(d)(2)(ii): An individual is not a participant or beneficiary covered under an employee pension plan if A. the entire benefit rights of the individual 1.are fully guaranteed by an insurance company licensed to do business in a state and are legally enforceable by the sole choice of the individual against insurance company, and 2. a contract, policy or certificate describing the benefits to which the individual is entitled under the plan has been issued to the individual, or B. the individual has received a lump sum distribution or series of distributions that represents that balance of his or her credit under the plan. Every participant in a T/C plan recieves some description of the benefits to which they are entitled such as a certificate or insurance policy. Edit: The above exclusion applies only if the employee can legally enforce the benefits by requesting payment from T/C. If the plan has to approve the participant's request before benefits can be paid by T/C the above exception does not apply.