mbozek

Frist thing plan needs to do is to have tax counsel review the plan's status as a qualified plan. As David noted auditors do not determine whether a plan meets the requirements for qualification under the tax law. When was the last IRS determination letter for the plan issued?

I concur with JPOD. IRS auditors know that 4975 does not apply to 403b plans so that question will never be asked in the unlikely event that 403b plan is audited by IRS. DOL auditors don't audit plans for compliance with IRS requirements so they do not ask about filing IRS forms. Bottom line is Plan sponsor is not required to file any form with IRS or DOL to notify agency of late contribution to a 403b plan.

Austin: DOL will not give credit under 502i penalty for amount paid to IRS under 4975 because they are charges under different laws. DOL will expect its payment.

Austin: do you get paid by the number of forms you file? 403b plan cannot file a 4975 form for PT because it is not a plan which is subject to excise tax. If plan files 5330 it will need a lawyer to straighten out the mistake of paying an incorrect amount of excise tax on a transaction that is not subject to the tax. Why bother creating problems for the client when there will be no problem if DOL never follows up with the client?

If the plan is not qualified there can not be any rollover to an IRA. Solution is to eliminate disqualifying provisions though IRS VCR program.

The penalty is discretionary and is imposed by the DOL. DOL notifies the plan of the violation. Plan has 90 days to correct the PT or appeal the DOL decision. See DOL reg 2500.502-i. Its not like the tax law where tax is paid when 5330 form is filed to avoid late filing penalties. I don't know if the DOL reviews the 5500 forms or whether the 5% penalty would be levied if the plan has cured the violation of 501i by the time it is notified of the violation by the DOL. This is the classic regulatory conundrum of if a tree falls in the forest and no one hears it is there a sound?

Its not unusual to see keough (HR10) plans maintained after the death of the owner by the surviving spouse. I recommend closing it because of the admin issues and cost of maintaining qualified status. Some plans are closed down by the executors.

I haven't researched the question but as I understand it the IRS can only enforce the IRC PT rules under 4975 which require payment of tax on PT.Since 403b plans are exempt from PT under 4975 no 5330 is filed because there is no tax due. No brainer. See instructions to 5330.

Does the plan have an IRS determination letter stating it is a qualified plan?

This is too complicated to be discussed without having counsel review all of the applicable laws including the rules under FINRA that govern the payment of commissions to registered reps. I know Series 7 brokers who are brokers of record on their own IRA accounts or accounts of family members who avoid ERISA/PT issues by waiving their commissions. I don't know if this would be a PT if the Broker received incentive comp or bonus from plan sponsor for meeting certain level of commission sales even if no commission is paid on the 401k trades. Financial services industry comp is extremely complicated and there are many forms of comp that may be a problem when retirement plans are the client.

Back in the day about 30 years ago I learned that there were flat benefit DB plans for union employees that paid the same amount to all members regardless of years of service or final pay. Other plans paid x $ for each year of service, e.g. 1000 for 20 years = $20,000. I never heard of a DC plan with a flat benefit payout but I don't know enough to say its not permitted under IRC. Is this a union plan, a NP plan?

Plan document not trustees, states what distributions plan will have. ERISA does not require that a pension plan offer a lump sum option. DC plan which is a money purchase plan must offer a joint and survivor annuity benefit to married participants as the normal retirement benefit. Money purchase plan provides for fixed annual contributions by employer to the plan. Trustees cannot change benefit options provided in plan.

Reg 1.409(a)(9)-6 Q/A-1(a) states that distributions of a participant's entire interest under a DB plan must be paid in the form of periodic annuity payments for the life or joint life of employee and beneficiary. "Once payments have commenced over a period the period may only be changed in accordance with A-13 of this section." Seems like an automatic distribution without an election is an annuity payment for life under the plan.

The pension deduction on line 28 of the 1040 is only for SEPS, SIMPLES and qualified plans. I don't think a UK pension meets the requirements for the tax deduction anymore than a tax free rollover from a UK pension would be permitted to an IRA.

See P 7 of Pub 590B -IRA account balance is adjusted by outstanding rollover as of Dec 31 that is not in any account balance at the end of the preceding year. Transfer increases the account balance of the receiving IRA by the rollover amount valued as of the date of receipt.

Why not just create a new plan effective in 2015 and merge the old plan assets into the new plan. Or file 5500s for all the years since 2000. I think the penalty is minimal -$750.

As I understand it a testamentary trust does not exist until the death of the beneficiary. Therefore the trust has no right to receive distributions while the individual is receiving RMDs. Under the RMD rules the individual beneficiary of trust that is designated as the beneficiary of an IRA will be eligible to receive the RMDs if the 4 above rules are followed.

Just what is this new calculation of the one half fica tax deduction? Pub 560 P 22 describes the fica deduction as the amount reported on line 27 of the 1040. There was a different calculation in 2010 for self employed owners who claimed the self employed health insurance deduction on line 29 but that was a one year event.

What would be the services provided for $5000? How much is the minimum investment required to open a managed brokerage account? 500,000?

Most of the 41 states which tax income follow the federal tax rules for 457 plans. NJ and PA tax most employee contributions to pension plans ( NJ exempts elective contributions to 401k plans). You need to check MA to see if it taxes 457 deferrals because MA is the only state other than PA and NJ that taxes IRA deductions.

tom: 401(a)(9) states that the plan must provide that entire interest of an employee must be distributed not later than the required beginning date or will be distributed beginning not later than the required beginning date in accordance with the regs. As the IRS has stated on many occasions a participant can always receive more than an RMD. I know of no IRS authority that allows a plan to restrict the amount of the distribution to the MRD. In the absence of such a provision the IRS 401(a)(9) regs do not permit a plan to limit distributions after 70 1/2 to the amount of the MRD at the participant's attained age. Under the regs plan document cannot be inconsistent with the MRD regs and RMD regs override any inconsistent plan provisions. It the document is inconsistent with the regs it must be interpreted to conform to the regs until it is amended to avoid disqualification. Whether allowing both distributions of a lump sum or a periodic distribution which can be the equivalent of a lump sum in the same subsection of the IRC is redundant is not relevant because that is what Congress wrote and the IRS regulations for RMDS do not permit a plan to limit distributions after 70 1/2 to the RMD amount. If you think the IRS regs allow RMDS to be limited to the minimum amount at the attained age go ask the IRS. I am only reporting what the IRS has written in the regs.

The -5reg Q/A1 reg does not say that the RMD must/can be cut back if it exceeds account balance. That's the problem. Further other MRDs regs don't allow such language. Reg (9)-1 Q/A-3 (a) states that plan must provide that distributions must be made in accordance with the 401(a)(9) regs and that plan document must provide that provisions reflecting 401(a)(9) override any distributions options in the plan inconsistent with 401(a)(9). Plan has to conform to the literal language of the -5 Q/A-1(a) language. Plan cannot have language restricting distribution to MRD amount at designated age because that is not permitted in the reg. If you have any authority stating that plan can restrict RMDS to minimum amount at attained age please provide it.

What would be the purpose of such a change? Is plan going to prohibit distributions before 60?

the IRS MRDs regs were written for qualified plans, 403b plans and IRAs. RMD Regs apply to IRAs except to the extent the regs under 408 and 408A provide different rules. Reg 1.401(a)(9)-1 Q/A-1 reg. 1.401(a)(a)-5 Q/a-1(a) states for a DC plan " The minimum distribution amount for a year is equal to the quotient obtained by dividing the account by the by the applicable distribution period....However, the RMD will never exceed the entire account balance on the date of distribution." Looking at above language Justice Scalia would say there appears to be an ambiguity in that the RMD could be any amount between the minimum distribution required at the taxpayers age and the account balance on the date of distribution.

If in fact the signature on the beneficiary designation is a forgery then the GF and the new beneficiary can be charged with committing forgery. Old beneficiary's lawyer should contact the DA. Old beneficiary could sue the parties for embezzlement which may induce the 2 participants to return the funds they stole to lower their sentences, assuming they have not spent the $. Plan could be liable for negligent administration.