mbozek

If the participant elected life w/10 yr certain and named the girlfriend as beneficary he would incur the gift tax if the beneficary designation is irevocable.

Under the Carmona decision, spousal rights to a survivor annuity vest when the participant spouse retires. If there is no spouse at retirement there is no spousal survivor annuity benefit that can be paid if the participant marries at a later date. See 1.401(a)-20 Q/A 25(a). The reason that plans don't pay a survivor annuity to a non spouse is not just the additional cost but because the participant incurs a taxable gift equal to the value of the survivor annuity when the benefit vests, i.e., when the benefit commences. If the benefit value is more than $13,000 the particpant must file a gift tax return even if no tax is due. There is no taxable gift for transfers of a survivor annuity to a spouse.

sell the stock. Amount contributed to purchase stock is regarded as after tax contribution.

In order to obtain benefits, an illegal alien who used false documentation to obtain employment must provide the plan with official documents which prove his identity such as a passport which has his photo in order to receive payment. The plan would then revise its records to state his true identity. Second the individual must get an ITIN from the IRS under his real identity which will allow the payment to be reported for tax purposes. In order to get an ITIN the individual must provide evidence that SS has rejected the individual's application for an SS number. Given the difficulties of getting the necessary documents to obtain benefits it is unlikely that the participant will ever claim benefits. If the plan has a provision that permits forfeiture of benefits due to the inability of the plan to locate a participant whose benefits are due, the benefits will be forfeited if the participant cannot be located, subject to restoring benefits if the individual provides proof of identity and an ITIN at a later date.

I dont file forms for clients but p3 of the 8955 instructions allows filing by using a personal computer to complete the form online at the irs website and then printing the form with the appropriate bar code that captures the information entered on the form.

As I understand it the non alienation provision of the IRS regs provides that if a QDRO transfers the participant's retirement benefit to the AP as a beneficiary, e.g., a separate account in the name of the AP, then the AP becomes the owner of the benefits and can designate a contingent beneficiary in the event of death under the same provisions that apply to any beneficiary. The contingent beneficiary will be taxed under the MRD rules or the rollover rules. See reg. 1.401(a)(9)-8 q/a-6(b)(1) which provides that the beneficiary of the AP will be treated as the designated beneficiary for the purpose of receiving MRDs after the death of the employee.

I am having a problem understanding how the owner can order the trustee to back date the date of sale. In accordance with its reponsibilities under the IRA agreement the trustee will record the sale on the date the property is sold. period. The IRA owner has no authority to direct the trustee to back date the date of the sale. If the IRA owner persists in this illegal request the trustee will resign as custodian. End of story. What am I missing?

If the AP is designated as the beneficiary of the 401k account for amounts transferred under the QDRO, then the funds are the property of the spouse same as any other plan beneficiary and will be inherited by the spouse's beneficaries who will be taxed under the rules for distributions including rollovers to an IRA. See reg. 1.401(a)-13(g)(4)(iii)(B) QDRO cannot provide a greater right to designate a beneficiary for the AP's benefit than the participant's right. So if the participant can designate a beneficiary for his/her plan benefit, then AP as beneficiary will have the same right to designate a contingent beneficiary for the amount of the AP's account balance under the plan.

Most 401k plans provide/require that assets transferred to the ex spouse must be placed in a separate account under the spouse's control. All divorce decrees I have hever seen provide for the spouse's assets to be segregted from the participant's share in a 401k plan since the spouse has the right to designate the benficiary of her own benefits and select investment options. It is up to the plan as to whether the spouse's benefits can be paid before the benefits are available to be distributed to the participant. Most plans allow distributions to ex-spouses after the QDRO is approved because they do not want to deal with ex spouses as beneficaries under the plan. In any event I dont know why you should be concerned if the ex spouse can withdraw her share of the particpant's funds after the divorce since they are her funds.

I believe that as long as the plan contains employer contributions that it would be subject to ERISA. Best approach is to adopt new 403b plan to accept only employee contributions as of a prospective date which meets the requirements for exemption from ERISA under DOL regs.

As I understand it, the 2009 8955 must include information on any participant who terminated in 2008 with a vested benefit held in an annuity contract in a 403b plan subject to ERISA where the participant did not receive a lump sum distribution. The participant will receive a notice of non existant vested benefits under the plan when SS benefits commence even though the participant will receive notices of the amount of benefits from the annuity provider. The 2010 8955 covers the same situation for 2009. Participants who terminated with a vested benefit from an ERISA 403b plan before 2008 will never be reported to the IRS along with all participants who terminate from the 90% of 403b plans that are exempt from ERISA.

I know the above response is over a year old, but I think it is incorrect. If you have future payments to yourself, you cannot roll over any of it into an IRA, because I am pretty sure roll overs have to be directly deposited into the IRA account, and not "hand carried" as you suggest. The best thing to do, as has already been suggested, is get someone, most likely at TIAA-CREF headquarters, NOT the benefits office at your university, to find the right answer. What do you think is incorrect? Are you saying that a participant cannot roll over any distributions that are paid to him by the plan? Do you have a citation?

Number of issues need to be reviewed. 1. Can spouse's benefit be reduced for excess payments made to employee? While spouse's benefit is derived from employee's accrued pension, spouse is a separate beneficiary entitled to own benefit. If spouse is receiving correct benefit that would be received under plan then plan may be required to recover excess from participant's estate but 6k is not worth the effort and there may not be any estate from which to recover the excess. 2. Latches. Since ERISA is a law of equity any attempt to recover excess benefits is subject to the doctrine of latches- unreasonable delay by plan which causes detriment to the defendant, e.g. spouse. Why did plan not discover the error for 5 years? There are cases where courts have refused to order recovery of retroactive excess payments b/c plan delayed discovery of benefits mistake for years and only allowed prospective reduction to participant which would not apply here because spouse is receiving correct amount. 3. Equitable Estoppel. The participant relied on erroneous estimate given by plan in making retirement decision. Therefore plan cannot recover excess benefits from estate. Edit: I am confused by the amount participant was receiving. Are you saying that the plan started paying the participant $600 a month but for the last 5 years increased the payment to $700 a month?

I dont understand how 80-26 applies to this situation. Loans are only permitted for 3 business days and the additional exceptions foir Y2K expired as of 12/31/2000.

Is form 8955-SSA required where vested benefits in a 403b plan are held in a individual or group annuity? P 3 of 8955 instructions provides that reporting is not required if benefits are paid before filing date but there is no definition of "paid". If cash is distributed the benefits are paid. Why should there be a distinction in reporting if the vested benefits are held by a third party outside the control of the plan administrator since the plan does not have beneficial ownership of the vested benefits in either case? If reporting is required on 8955 then at retirement participant will believe that supplemental benefits are payable from the plan in addition to the benefits held by insurance co.

Purpose of my comments was to highlight the difference in risk exposure of trustees/fiduciaries under ERISA and rules governing other professionals. A few years ago there was a case where a corporation retained a NY law firm to prosecute an an appeal of NY state taxes that had been assessed against one of the corp's subsidaries. Corp believed the assessment should be less than the amount claimed by the state tax dept.The firm appealed and ultimately the assessment was upheld. After the s/l for appealing assessment expired the corp parent turned around and sued the law firm for malpractice because according to an opinion by an accounting firm, under the NY tax law the sub would not have been liable for any taxes which would have been discovered if the firm performed due dilligence on the matter when it was retained. The NY court of appeals rejected the claim for malpractice on the grounds that the firm had performed properly within the scope its retainer agreement and could not be held liable for not reviewing matters not agreed to in its retainer agreement. In otherwords a law firm can limit is exposure to risk in the scope of responsibilities which is not available to fiduciaries under ERISA. It is my understanding that the proposed fianancial advisor regs that were withdrawn in Sept could provide vicarious exposure as a fiduciary to attorneys who review plan investment issues such as advising on the number funds, fees and classes of proposed investments for a plan as part of the due dilligence review performed by the attorney.

That's a rhetorical question, right? I'm not sure how I got here, but it's too disconcerting to think about. In any case, to everyone, Happy Holidays. No its a question that is ignored in the employee benefits community. Fulfilling the duties of a plan fiduciary/trustee is time consuming and filled with unexpected risks. There are too many ways to be be blindsided or be found liable for another person's illegal activities. A few years a financial advisor was a fiduciary to a qualified plan for the purposes of investing plan assets. However the plan admin/trustee was siphoning off assets by making false entries. After the trustee took off with the assets the plan sued the financial advisor as a co fiduciary even though the advisor did not have any involvement in plan administration. The court found the advisor liable as a co fiduciary because the advisor received the monthly statements of the plan assets and did not conduct due dilligence to review their accuracy. Now why would any one want to be a trustee or fiduciary?

This story sounds a little fishy- Why would a DOL investigator allow clear violations of the pension laws involving misuse of plan assets to be settled informally without a closing letter or penalties? DOL policy is to publicly disclose settlements and punish responsible parties. I think the DOL investigator suckered the trustee to admit to violations of pension laws and criminal laws that were documentated in the 5330/5500s as PTs. The documents you prepared were the smoking gun that identified the trustee's involvement in the fraud. This evidence was then turned over to the Dept of Justice which has jurisdiction to bring criminal charges under non ERISA provisions of federal mail fraud /wire fraud laws. My feeling is that there is more to come in criminal charges against other parties. Filing false documents signed under perjury is a criminal offense which can result in a visit to Club Fed. The Feds want the trustee to give them information against other parties in return for pleading guilty to lesser charges. Q Did the trustee have his own counsel during the DOL investigation? If not this was a big mistake. Anytime there is misuse of plan assets separate counsel should be retained for all parties. Never believe a Federal agent who says "I am from the government and am here to help you." This is just another reason why being a plan trustee creates risks of criminal actvity which begs the question why would anyone want to be a plan trustee?

You need to check with HR to see what happens. In some cases there will be no deferred sales charge for withdrawals on account of attaining a specified retirement age. Under federal law retirement benefits must be available for distribution no later than age 65 which would prevent a penalty being enforced. But each retirement contract can have different terms. If the plan is subject to ERISA, the federal pension law, then your wife has a right to receive a summary plan description (SPD) which will describe the major provisons including deferred sales charges imposed on withdrawals.

It doesn't work that way. The employer is not supposed to make money off of the plan. If they insist on trying this, they need an ERISA attorney who is familiar with the PT rules. There are several DOL opinion letters going back 25 years on what plan administration duties performed by employees can be billed to the Plan. The earliest letter is referred to as the Maldinato opinion after the attorney who requested it. While some expenses directly related to plan administration which are performed by employees can be charged to the plan, there are strict accounting and administrative requirements such as keeping written records of hours worked by employees on plan matters and having receipts for all expenditures that are billed to the plan. Plan sponsors usually give up on trying to bill employee costs to the plan after they see the detailed record keeping requirements.

The most comon reason for the assets to remain with the insurance company provider is that deferred sales charges would be due on the assets held in the ins. contract if they are removed before a specified period has elapsed, say 3-7 years after the contribution was made. What this means is that the ins co will continue to hold the assets until the penalty period expires. After expiration the participants will be free to transfer the assets to the plan of the acquiring agency without paying a deferred sales charge. HR should know the date the deferred sales charges expire and % of the DSC imposed on transfers before the expiration. Usually its a sliding scale based on withdrawals beginning with the year the contribution was made, e.g, 7,6,5,4,3,2,1% fee in each year until 0% in year 8. In this example a contribution made in 2011 could be withdrawn without penalty in 2019.

Good Q. As noted previously under DOL opinons, state child support orders under 42 USC 466 are subject to all rules for QDROs which would include obligation to inform participant of action taken.

in this case both. What do you do when a substantial asset in an IRA is currently illiquid and difficult to value? i suppose you could give it a zero or close to zero value but what if you are wrong? Under IRS regs it is the responsibility of the IRA owner to have assets not publicly traded periodically appraised by a qualified appraiser to determine the FMV. If the IRA owner does not comply with this requirement then the IRA will be subject to various penalities under the IRC. If the client does not want to retain competent tax counsel to advise them of the rules that govern IRAs with these kinds of assets then the client should not retain such illiquid assets in the IRA. Scuba: what is your relationship to the IRA owner? I think you are in over your head.

There are two different laws in play here. Under state community property laws each spouse is deemed to own 50% of assets acquired during the marriage. Therefore the IRA owner usually cannot designate a non spouse beneficiary of more than 50% of his IRA without spousal consent. However for federal tax purposes IRC 408(g) provides that all of the income distributed from the IRA will be taxed to the IRA owner instead of 50% to each spouse that would apply if state community property laws were applicable. From the facts above it appears that what has happened is that spouse was sole beneficiary of the IRA which is permitted under CP law and has disclaimed husband's 50% community property interest in his IRA which is no different than if a spouse in a non community property state disclaimed 50% of the entire value of the IRA in favor of a successor beneficiary. Spouse will be taxed on all distributions from the 50% of the IRA that she did not disclaim. Tax advisor familar with CP needs to review the facts to confirm that spouse has properly disclaimed 50% of interest in IRA.

You get what you pay for. Or as a President once said be glad you dont get all the government you pay for.