mbozek

Recovery of legal fees is left to the discretion of the court.

Your facts are too jumbled to give a coherent answer. Who is principal who gave the power to the agent, (who you refer as the POA)? Was it the IRA owner, the spouse? What is the property that the agent/POA has authority over? Is it the inherited IRA in which the spouse is the beneficiary? A trust? Who is the trustee and what property does the trustee control in the trust? Is the trust the beneficiary of the IRA distributions? POAs are governed by state law and each state has different laws and rules regarding the powers that can be delegated to the agent. NY has a statutory short form POA that lists 16 separate powers that the agent can be given if the principal wishes to delegate authority. The principal can delegate all or some of the enumerated powers. Also the powers of attorney granted to the agent expire upon the death of the principal who granted the power. Finally the agent is a fiduciary acting on behalf of the principal and cannot take action under the POA to benefit himself, even if the power to take action is delegated under the POA.

If she is taking the entire 10 as a taxable distribution she will be subect to 20% withholding tax on the $2000k pre tax earnings or 400. She could then roll over $2000 to the new employers plan using $400 of her own funds and convert $8000 to the roth. She could also reduce her w-2 witholding for the rest of 2011 to offest the $400 taxes withheld. This solutuon assumes that her entire distribution from the 403b plan consists of $2000 in pre tax funds and $8000 in after tax contributions. It also assumes that the plan treats the amount contributed as after tax contributions as a separate plan from any employer contributions for distribution purposes. There is no 10% penalty tax if all taxable funds are rolled over.

cant the Plan admin do a SS # check to determine if participant is dead? Most employers have acces to SS Data base of deceased participants. How does the plan contact participants who have changed address? Or does the plan admin expect the participant to contact him or her when the checks stop?

I dont see how excess assets would be possible unless the Doc never retires. More likely scenario is that Doc will quit med practice for personal or medical reasons in a few years leaving plan only partly funded which will result in doc losing part or all of his benefit. Given the volitality in the investment markets over the last 11 years and the fact that 75% of investment advisors fail to beat their benchmarks I think you are being overly optimistic of over funding the plan over a period of less than 20 years. Also Doc would have to commence retirement benefits at 70 1/2. Isnt the max benefit that can be paid during the first 10 years after the plan is established phased in on a pro rata basis which could result in reversion? All I am saying is that any any advisor who recommends a DB plan based on above facts had better provide full disclosure of all the risks that may result in the Doc not receiving the benefits that he is expecting or have adequate malpractice coverage.

For a 64 yr old doc the question is what is his exit strategy- how much longer will/can he work, how much of a benefit will he accrue, does he have employees who will recieve a benefit, what will be the normal form of benefit, etc. When he terminates the plan will an annuity have to be purchased for employees? Actuarial expertise does not guarantee that there will be enough plan assets to pay benefits from an insurance co annuity if interest rates remain low. Whoever becomes his plan advisor will have to put in plenty of disclaimers of financial risk regarding the sufficiency of plan assets to pay for all benefits. Big risk for Doc is that when he terminates the plan, there will not be enough plan assets after other employees receive their benefits to fund 100% of doc's benefit.

How does the PA know that the employee has changed address? The same bank account can be used by the participant after a move. There is an old IRS ruling from the 80's that held that once payments commence they cannot be stopped except under the suspension of benefits provision or death.

Other reasons for limiting employee contributions include making sure employees have enough wages to pay for health care, tax and FICA withholding, child support and other amounts withheld from pay b/c plan admin does not want to make decisions on priority of withholding amounts and having to deal with employee objections.

How does a multiple employer 457 plan for a NP operate since the assets of each plan sponsor are subject to the claims of that employers creditors. In a multiple employer plan are the assets segregated since the is no irrevocable trust exempt from the claims of the employer's creditors which has title to the assets?

403b plans are like 401k plans- plan may limit the % of comp or $ amt that employees can contribute to the plan even though there are no ADP % limits for HCEs to contend with. Universal availability allows employer to require more than $200 contribution per year.

414k "Certain Plans" states that the plan is a defined benefit plan which provides a benefit derived from employer contributions which is based partly on the balance of the separate account of the participant. Neither DC plans (414(i)) or DB plans (414(j)) are limited to employer contributions. While a 414(k) plan is a form of DB plan which provide benefits derived partly from a separate account it does not appear that employees can contribute to the separate account b/c a 414(k) plan is not a DC plan under 414(i).

Having authority to approve plan loans would make you a fiduciary.

The answer depends on the type of advisor. If the advisor is a regestered rep licensed under series 7 he can only collect commissions. Whether he can act as a plan administrator depends whether the brokerage firm he works for would allow him to also collect fees as the plan admin. Few brokerage firms would allow such an arrangement b/c the broker would be at risk of acting in a conflict of interest selling products to the plan participants while acting as a plan representative which could put the firm at risk. Need to check state laws b/c most state do not regard 403b plans as a retirement plan subject to fiduciary rules. If he is an RIA he cannot collect commissions from trades and can only represent the plan as a fiduciary for which he is paid fees. Check his agreement with the plan to see who he represents and what fees he can collect. If he is a fiduciary to the plan he cannot collect commissons from participants.

The following is what I found in a 5 minute google search: 1. IRS pub 557 section 3, Section 501©(3) organizations states the following: "A state or municipal instrumentaility may qualify as a 501©(3) organization if it is organized as a seperate entity from the government unit that created it and meets the other tests of a 501©(3) entity. Examples include ... hospitals." 2. ERISA section 4(b) exempts governmental plans from regulation under ERISA. Section 3(32) of ERISA defines a governmental plan "as any plan established or maintained for its employees by the ... government of any state or political subdivision or by any agency or instrumentality of any of the foregoing." Taking 1 and 2 togeter it appears that a local government can establish a public hospital which is an instrumentality of the local government as a 501©(3) organization and the hospital can establish a 403b plan exempt from ERISA since the hospital is a government instrumentality. Q Did you have legal counsel review this matter before taking the course of action to regulate the plan as subject to ERISA? Thanks. We were not having issues with the establishment of the 403(b) plan because the entity had its own tax exempt status. Since the 403(b) plan had employer money it morphed into a covered plan.....the issues were more along the lines of explaining to the client that it would have to file 5500s for one plan and not the other. I dont understand what you are saying. If the entity sponsoring the 403b plan is exempt from ERISA because it is a government instrumentality then all plans of the entity are exempt from ERISA b/c gov. plans are statutorily exempt from all requirements of ERISA including filing 5500. A gov. instrumentality cannot maintain a pension plan exempt from ERISA but choose to maintain a 403b plan with employer matching contributions to be subject to ERISA because ERISA does not apply any plan maintained by the gov. entity. Both plans will be exempt from ERISA b/c a gov. plan cannot waive its exemption from ERISA. The problem you are ignoring is that the 403b plan is subject to state laws regarding its benefits, which may conflict with provisions required under ERISA. Since the plan is not subject to ERISA, ERISA would not preempt applicable state laws such as laws requiring forfeiture of benefits which result from conviction of a crime. Q how did you explain the difference in treatment? Is the hospital not contributing to the pension plan?

The following is what I found in a 5 minute google search: 1. IRS pub 557 section 3, Section 501©(3) organizations states the following: "A state or municipal instrumentaility may qualify as a 501©(3) organization if it is organized as a seperate entity from the government unit that created it and meets the other tests of a 501©(3) entity. Examples include ... hospitals." 2. ERISA section 4(b) exempts governmental plans from regulation under ERISA. Section 3(32) of ERISA defines a governmental plan "as any plan established or maintained for its employees by the ... government of any state or political subdivision or by any agency or instrumentality of any of the foregoing." Taking 1 and 2 togeter it appears that a local government can establish a public hospital which is an instrumentality of the local government as a 501©(3) organization and the hospital can establish a 403b plan exempt from ERISA since the hospital is a government instrumentality. Q Did you have legal counsel review this matter before taking the course of action to regulate the plan as subject to ERISA?

Its my understanding that a government owned entity such as a hospital can be designated as a 501c3 tax exempt organization while retaining its goverment status.

There is no RMD for 2011 based on owners age b/c owner died before his required beginning date, 4/1/2012. Spouse who inherits IRA can deem it to be her own IRA by not taking MRD on inherited IRA due 12/31/12 or roll it over to her own IRA and in either case commence RMDs at 70 1/2.

Even the IRS only goes back to 1989 http://www.irs.gov/pub/irs-tege/cola_table.pdf In 84 there were few $ limits (other than 415) b/c Congress only began limiting $ amounts in plans in the 86 Tax Reform Act to lower revenue loss to make the tax revenue equal the reduction in tax ratres. Prior to 87 the limit on elective 401k contributions was $30,000 which was the 415 limit for a DC plan. In 87 it dropped to $7500 subject to Cola increase. Prior to 87 there was no limit on employee comp included for pension plans in 86. The dollar limit only applied to self employed persons. In 87 it was 200k subject to cola. The current HCE definition was added in 86 to be effective in 87.

It would have been helpful if you had provided this information in your initial post. Following info is provided so you can decide on a course of action. 1. Pship tax return is due 3 1/2 months after year end. One 5 mo. extention is permitted so pship tax return is due 9/15. 2. Under Rev rule 76-28 employer contribution for 2010 must be made by date tax return is due with extensions, or 9/15. 3. reg. 1.415-6(b)(7)(ii) provides that employer contribution can be treated as annual addition for prior plan year if made to trust not later than 30 days after last date in #2. So it may be possible for pship contribution made between 9/16 and 10/17 2011 to be allocated to partner for 2010 even though it would be deductible by the pship in 2011. 4. If the pship includes the pension contribution as the partners 2010 income on the K-1 which can be deducted from his income on his 2010 1040 but is deducted by the pship in 2011 there is a question of whether the Pship would have to file a form 8202 because the treatment on the amended 1065 is inconsistent with tax treatment to the partner. There is something called a small partnership excepton from this rule which is why this question needs to be reviewed by the firm's accountant. There may be other accounting rules which I am not aware of or I may have misunderstood the above pship accounting rules (since I disclaim any skill set in accounting) which is why your Q can only be answered by the firm's accountant.

I think the employer should adopt these amendments as of the date of adoption of the new prototype plan in order to confirm that the employer has adopted all amendments required under the new sponsor's plan to maintain qualification beginning with the date the plan is adopted. Adoption of the 415, heart etc amendments of the new prototype sponsor is required b/c they will be the documents that the employer will be using for 2011 and future years. If the new prototype document does not contain these required amendments then the IRS would claim that the new plan is not in conformance with the regs as of the year it was adopted. Adopting these amendments again as part of the new plan would not change the fact that you timely adopted the amendments under the prior plan which is why you need to retain those documents forever.

Who is I? ??? As I have said previously only the partnership can change amounts on the 1065. If the plan formula would require an increase in the partnership contribution on behalf of the partner whose k-1 income is increased on the 1065, then yes the amount on line 13, code R would increase. If the maximum contribution permitted under the plan has already been reached the answer is no. It all depends on the plan formula. This is really an accounting Q. What does the firm's accountant say about increasing the firm's contribution for the partner under the plan if the 1065 income is increased? Will there be any tax issues in making such a contribution? One further Q which can only be answered by the firm's accountant is whether increasing a partner's allocation to the retirement plan would require reallocation of the firm's income and expense deductions which would result in different income/deductions on the other partners' 1065s. This is why the firm's accountant should be the person answering this Q.

A partner cannot amend the 1065 b/c that form is prepared by the partnership which is a separate tax entity. The Pship can amend the 1065 to correct an amount reported for the partner in the tax year the same as an employer can amend a w-2 form for an employee to reflect correct income or 401k contributions. The partner who receives a corrected/amended 1065 can then amend his own tax return using the corrected information on it. As I stated previously a partner does not contribute to the partnerhip's retirement plan. Only the firm can make such a contribution, such as by withholding an elective contribution from the partners draw and contributing it to the plan. So if a partner's business income on an amended 1065 is increased by $10,000 which results in a $9,000 increase on line 17 of the partner's 1040 but there is no change on line 13 Code R of the 1065 in the amount contributed by the partnership to its retirement plan for the partner either as an employer contribution or elective deferral, the retirement contribution made by the pship on behalf of the partner will remain the same and the partner is taxed on $9,000 more income. Under the IRC there are differences in how income and deductions are reported by partnership and allocated to the owners (partners) on the 1065 and how the partners report the pship income and the corresponding deductions to their partnership income on their individual 1040s. You still have not responded to my Q of whether the amount on line 13, code R of the 1065 was increased on the amended 1065 given to the partner.

Assuming that the 457 plan is operated by the government entity that was the employer, the assets of the 457 plan could be distributed to the participants after the plan is terminated and rolled over to the 403b plan. You need to review the 401a plan provisions for termination and distributon of assets.

The 1065 is an information return filed by the partnership (similar to a 1099-R) reporting payments to the individual partners for the year. The Pship does not pay any income taxes. The amounts reported on the 1065 are included in the partner's 1040 which are filed under the extension for individual returns.

Partners are treated as self employed individuals, same as a sole proprietor, for tax purposes and report their business income listed on the 1065 on the 1040 Schedule E, line 28. (Sole Prop report their Sked C income on line 12 of the 1040). After adjustments, amount reported on Sked E winds up on line 17 of the partner's 1040. Line 13, Code R of the partner's 1065 includes the amount which the firm contributed to the firm's retirement plan for that partner, e.g. 401k plan. The partner deducts the line 13, Code R amount on line 28 of his 1040, same as a sole prop. The Q is whether the line 13 code R amount was amended on the 1065 which means that the amount of the firm's contribution for the partner was increased. While I dont do tax returns I am assuming that if the 1065 is amended by the firm, then the partner can file an amended 1040 taking into account the larger pension contribution the same as any other adjustment to income made to the 1065. Edit: If only the partner's income is amended without changing the line 13, Code R amount, then the retirement plan contribution for the partner remains the same b/c a partner cannot make an individual contribution to the firm's retirement plan. Only the firm can contribute to the firm's plan on behalf of the partner.