mbozek

The only time there is a use for the EIN is when a report must be filed such as a 5500EZ or a 1099R or if a 5300 is requested. A few years ago it became public that the IRS routinely inactivated/cancelled EINs when there had been no reporting activity using the EIN after a number of years until it was pointed out that EINs were required for many types of entities even if no reporting was required. I know that some vendors who updated prototype plans for EGTRRA and Heroes Act required that the plan sponsor submit its EIN in order to have the provider process the request and issue the revised plan. What doest seem to have been answered in this discussion is whose EIN is required to report a distribution from the solo qualified plan: the employer's or the trust that pays the benefit? Does the trust have to have its own EIN to report a one time plan distribution on the 1099?

Several years ago the IRS stopped using the term keogh plan to claim the deduction for retirement plans for self employed persons on the 1040 and now refers to self employed SEPS, Simples and qualified plans on line 28. Keogh plans still live on in IRS regs 1.401(e)-1 to 6 most of which are obsolete.

An EIN will only be required if tax reporting is required, such as for a distribution. I would like to know what IRS instructions say that a SS# can be used in place of an EIN. All IRS instructions say its not allowed, e.g., SS-4

Where have you been hiding? Years ago when solo Qual plans exempt from ERISA filed the schedule P to start the S/l running for plan violations, the owners used their own SSN until IRS stopped the practice around1997-98. I remember schwab sending out letter informing owners to get tax ID # for plan.

Using owner's SSN for plan/trust reporting is not allowed b/c plan/trust is separate tax entity. Employer must have ein for reporting, eg. filing, 5500EZ. See SS-4 form and instructions to request EIN for plan/trust by fax. Edit: more than one EIN maybe required. Plan sponsor who is self employed must obtain employer EIN to file 5500 EZ. A separate EIN needs to be obtained to report distributions from the trust. See 5500 EZ instructions for line 2b which state that SSN can not be used.

That makes no sense b/c annuity owners are not required to notify insurance co if they marry after contract is issued. Why would the insurance co be liable to spouse for paying the designated beneficary under the annuity contract in non ERISA plan without knowing that the participant later married? Since annuity owner is sole party who can change beneficiary designation, insurer is obligated to pay designated beneficaries in non ERISA plans.

Mrs A is the beneficary only if the 403b plan is subject to ERISA. Otherwise Mrs B is the beneficiary unless removed under a state law provision, e.g., on account of divorce.

If ps plan paid normal form of benefits in lump sum then spouse became beneficiary of 100% of benefits and prior beneficiary designation is no longer valid. Spouse cannot disclaim 40% of benefit and direct that it go to only daughter so that daughter would pay income tax. If plan accepts 40% disclaimer of benefits by spouse then 20% would have to be paid daughter and 20% to brother. If plan permits spouse could assign 40% of her benefit to daughter but would have to pay income tax on such transfer plus any 10% penalty tax. Check with attorney for estate to see if spouse could disclaim other property she inherits from participant which can be transferred to daughter without spouse incurring income tax.

SEPS have unlimited protection from bankruptcy creditors while all IRAs of a taxpayer are only protected from bankruptcy creditors up to a total of $1,093,000. SEPS/ IRAs have same protection from general creditors in many states that are available to qualified plans. In NJ there is unlimited protection from all creditors except for fraudlent conveyance and QDROs.

Do what JFK did when he received two contradictory messages from the Soviet premier during the Cuban missle crisis at the same time: one threatening to start a nuclear war and the other offering to withdraw the missles from Cuba. He responded to the second message and ignored the first. Same thing here. Acknowledge the one favorable to your client and call the IRS for confirmation. Also did the two IRS responses originate from different IRS field offices which may account for the contradictory responses. Its possible that the late notice was processed before the IRS entered the extension request into the data base, e.g., the date on the late notice is prior to the date granting the extension.

Couple of points to consider: 1. LA is a community property state with its origin in french law for which there are no comparable laws in the other 49 states. NY is an equitable distribution state where the judge has discretion to divide up the marital property but property acquired before the marriage or by gift is exempt from marital division. 2. Most posters on this board are experts in retirement plans not divorce procedures. Your sister's divorce counsel would be better able to answer your questions. 3. Roth IRAs are property subject only to division under LA law. Roth IRA can be divided by a divorce decree and part of it transferred tax free to the other spouse.

Do you know of any tax court cases or PLRs showing the Service has adopted this point of view? The concensus I'm aware of, and my google searching concurs, is that if the money is distributed at any time from the plan in which the QDRO occurred, then the distribution is exempted from the early withdrawal penalty; but if the money is moved out of that plan to any other plan or IRA, then it loses the QDRO exemption and subsequent w/drwls are subject to the penalty. I think the operating assumption is that any distribution to an AP of benefits awarded under a QDRO is pursuant to a QDRO even if there is no distribution language and I doubt whether any AP would ask for a ruling on this issue as long as the distribution is coded as a distribution exempt from the 10% penalty. Also many plans have provisions that permit distributions to an AP at any time if a QDRO has been approved by the plan admin which provides plausability that the distribution is made pursuant to the QDRO.

If the distributions to the AP are made pursuant to the QDRO. Its up to tax counsel to make that call.

Considerations before submitting a VCP application. 1. All participants with a deferred vested benefit under the plan are notified by SS of the existance of the deferred vested benefit within 30 days or so of the date their SS benefits commence. About 90% of SS benefits commence by age 65. Assuming that the address of the plan administrator listed on the SS notice form is still current, living participants would contact the plan to request benefits. If the participant is deceased SS notifies the surviving spouse of the existance of the benefits when the spouse applies for SS benefits. 2. The failure to claim benefits at 65 or 70 is likely due to the death of the participant so you need to check a database to determine if the participant is alive or the date of death.

Correct. If the QDRO only orders a division of the participant's account and the distribution is determined according the provisions of the plan, there is an issue that the distibution is not being made pursuant to the QDRO. If the QDRO provides for the AP's interest to be distributed is doesnt matter how many distributions are made by the AP.

Under 72(t)(2)© all distributions pursuant to a QDRO are exempt from the 10% tax. There is no limitation on time of distribution after QDRO is issued. What creates ambiguity is whether the distribution to the AP is made pursuant to the QDRO or otherwise made under the terms of the plan. If the QDRO awards the AP $100,000 and allows withdrawal of the 100k then all distributions are pursuant to the QDRO regardless of when made. If the QDRO orders the participant's profit sharing account to be split equally betwen the parties and 100k put into a separate account of the AP as a beneficiary and the distribution is made under a plan provision that allows distribution at any time there is a question of whether the withdrawal by the AP is pursuant to the QDRO or is made pursuant to the plan provision which is subject to the 10% tax.

The hard part will be to get the IRA company to NOT issue another 1099. That in the end is what I have found to be the the pain. Most IRA companies basic default position is any money leaving an IRA is a 1099 event. And while the broker might want to do it right he is most likely not in charge of the 1099 being issued. It is the company that he works for or uses to clear his accounts. So take this from somone who has been there and done that.. Have a long talk with the broker about the 1099 issue and make sure it gets done right up front. You don't want to be running around next Jan when the 1099 comes in the mail trying to fix it. Esop guy: Its a waste of time to discuss 1099 issue with broker because broker has no control over how distribution from the IRA will be reported. Distribution reporting is handled in another department. Best solution is to roll the amount needed for the MRD back to the plan which will make the MRD.

Since all DC plans can permit self directed accounts the restriction will apply to any plan which permits participants to direct their accounts including a Roth account. Investement decisions by a trustee as fiduciary of the plan is a different category than investment decisions directed by a participant for his own account which is recognized by both ERISA and the IRC. Your interpretation of IRC 408(m) would create a violation for every plan participant who also acts a trustee of a DC plan including a plan that only covers both spouses where one spouse is the trustee/fiduciary for plan investments or the owner of a business with common law employees who acts a the fiduciary. If the IRS believes that the self directed account rule of IRC 408(m) applies to an owner/trustee who sponsors a solo PS or other DC plan that does not permit self directed accounts then it can easily update the 27 year old proposed 408(m) reg as the service did when it applied the wash sale rule to IRAs a few years ago.

Prop reg 1.408-10© provides that an individually directed account is an account under a plan that has the effect of permitting the participant to invest or control the manner in which the account will be invested. This indicates that application of the rule depends on who directs the investment. If the plan is a generic PS plan where the employer/plan sponsor acting as the plan fiduciary directs the investment of the plan's assets then the collectible rules do not apply. If the plan is a solo 401k where the sole participant has an individual account which is self directed then collectibles are not allowed for either employer or employee contributions. Best option is distribute the coins as an RMD before terminating plan and rolling over the balance in same year, because first asset distribution must be an RMD. Also the final 5500EZ is due 6 months after the last assets are distributed from the plan.

The assignment of the loan to the transferee plan is subject to all the provisions of the plan loan terms including the requirement to make all loan payments and the term of the loan. If 3 months of loan payments are due when the loan is assigned then they must be paid to the transferee plan by the end of the next calender quarter following the first missed payment and the payments will reduce the balance of the loan. Loan regs are at 1.72(p)-1.

If the only other salary reduction plan in your non profit organization (Employer A) is a 401k plan, termination of the 403b plan of employer B and distribution of accounts will not the eligibility of A's and B's employees to contribute to the 401k plan. This assumes that there is no other 403b plan in A's controlled group.

That's what I am geeting at. Taxes are due on gains if its not a qualified distribution.

Htaylor: 1. what the amount of your Roth contribution? 2. what is the amount of the distribution received in 2009? 3. If 2 is greater than 1 you have a taxable distribution because you were not 59 1/2. Code J is the symbol for early distribution. If 1 is greater than 2 you have a loss deductible on schedule A as a misc. expense. 4. If you have other Roth IRA accounts that were not cashed out in 2009 you need to follow the procedures in IRS pub 590 P 67, ordering rules for distributions, to determine taxation.

I would like to know what cites the attorney has because it is contrary to the practice in custodial documents used by financial service cos. Every 403b7 custodial account I have reviewed and drafted has a provision that permits the custodian to resign and distribute the funds on 30 days notice or purchase an annuity. No securities lawyer ever objected. Also the custodian is not regulated under state securities laws subject to the rules that regulate brokers and the resignation by either the custodian or client is a contractual provision that the client agres to in advance. Resignation by the custodian also appears in all IRA agreements. Every custodian wants the ability to resign from an account if it becomes aware that that the account is being used for an illegal or suspicious activity such money laundering or illegal trading to avoid being accused of participating in such activity by regulators. Finally I dont understand her distinction between a trust and custodian in directing payout. In most Q plans the trustee does not exercise discretion over paying out benefits but only makes payment when directed by a plan fiduciary such as the plan administrator.

403b7 custodial agreements permit custodian to cash out a participant if the plan is terminated and sponsor no longer pays fees to custodian. Generally custodian will ask participants to rollovefr funds to an IRA or custodian will purchase annuity contract. Custodian cannot be stuck with liability risk for maintaining custodial accounts in accordance with applicable law after plan is terminated and there is no plan administrator to provide instructions to custodian. 403b regs specifically allow plan assets to be distributed to participants by a rollover upon termination of the plan. Also 403b plan needs to distribute all assets in order to be terminated under IRS regs. Bigger Q is whether B's assets can be distributed after acquisition. Need to review reg 1.403(b)-10(a).