mbozek

See anything contradictory there? As a great president reminded us on more than one occasion: Be glad you dont get all the government you pay for.

Regulatory agencies always ask for things they are not entitled to under applicable law just to see what response they get from the plan administrator. If there is no record of which employees received the notices then respond that no list was kept. If there is no requirement to keep such a record (see Q2 below) then there is no penalty for not providing it to a government auditor. If the auditor insists on evidence of compliance, the carrier can file an affidavit prepared by counsel that to the best of its knowledge provisions of the regs requiring notices were complied with. Q1- Do plan administrators keep a record of all employees who are sent a 402f, J & S notice, DB funding statement, blackout notice or one of the other 50 or so notices required under the IRC or ERISA? It seems that govt agencies do not see any limits on the administrative burdens to be imposed on plan administrators in order for some bureaucrat to check off a box on an audit form. If plan administrators want proof that notices were sent to each participant then they will have to pay extra to have the records compiled and stored. Q2 ERISA 107 provides that plan administrators required to file any report or to certify any information under ERISA keep all vouchers, worksheets, receipts and other information needed to verify such records for a period of 6 years. Is compliance with the notice requirements requested by the auditor required to be reported on the 5500 or other govt report which requires that the plan keep records of the notices sent for 6 years?

Why would any reputable TPA or advisor recommend toxic waste to a client? ROBS are sold to unsuspecting entrepreneurs as legitimate tax free way to get money from a retirement plan into a business because the 401k plan established by the start up gets an IRS determination letter which makes the transaction "legal". What the promoters dont tell these fools is that the determination letter does not protect the plan in operation if any of the following rules are violated. 1. nondiscrimination .ROBS plans must comply with the benefits, rights and features provisions to prevent discrimination against non owner employees. Most ROBS plans are set up to provide for issuing of stock in the start up company only to the owners at the inception of the company and never include non owner employees. 2. use of plan assets to benefit the promoters. Promoters want to get paid up front so they request their fee from the plan assets which can be a prohibited transaction subject to the 15/100% excise tax. 3. failure to get a legitimate appraisal as to the value of the company purchased with plan assets. Most appraisals for the the value of the shell company purchased with ROBS plan assets base the company value on the cash that will be transfered to the company by the plan in exchange for the stock. From what I understand the IRS does not accept this appraisal of as a fair value for an ESOP stock. Other violations include failure to file a 5500 5500-EZ if the plan assets are below $250,000 or failure to file a corporate tax return. The biggest reason against transferring personal retirement assets to a ROBS 401k is because 80% of all start up businesses fail in the first few years leaving the owner with a loss of the retirement assets and a big tax liability from the IRS for violating the above tax laws. The fall 2010 edition of IRS Employee Benefits news has an article on ROBS and their risks.

Wonder if that is before or after the fact that normal retirement age is 67 in 2025? Or is that the majority of the reduction to which they're alluding. The "19%" reduction in benefits is based on the difference in SS benefit % (not actual $) at age 65 for an employee born in 1960 who will retire in 2025 to one born in 1936 who retired in 2001 and is derived from 3 components: 13.3% reduction in benefits (6.66% reduction for each years early retirement before 67), 5.1% income tax on SS benefits and 1.4% for the loss of first year COLA at 65 which was moved back from June 1 to Dec 1 in the year age 65 is attained. The three figures are multipled by each other so as to come up with a combined reduction factor of 19% in 2025. Of course there are several factors that will affect the reductions. For example, anyone attaining 65 in 2011 will only have a benefit reduction of 6.66% and two thirds of SS beneficaries were not subject to income tax in 2010. For these retirees the reduction in benefits is about 8% at 65. As previoulsy noted the changes in SS benefits were effective 27 years ago and everone can get a free estimate from SS of benefits at their full retirement age by going online at SS.

JCarly: If your ex has commenced benefits the plan may not pay you any benefits at this time because it would violate plan terms. For example, if he is receiving benefits as a single life annuity the plan could say that under that form it does not pay benefits to another person. If your divorce decree is not specific enough to tell the plan administrator what benefits you are entitled to under his retirement plan you will need to have a DRO approved by a state court defining your benefit rights which will then be submitted to the plan. The plan administrator is not going to interpret your divorce decree to determine what benefits you are entitled to under the plan. You need a lawyer to prepare the DRO to be approved by a court in the correct state or if you ex contests your request for benefits. The $300 QDRO (if its available) only applies to simple cases. Because of the above complicaions you do not have a simple case.

What is the document that you are requesting a court to enforce? Is it an OR divorce decree? If it is a DRO then your attorney should be able to determine where it is filed. Is the QDRO for a defined benefit plan? Has your spouse remarried? The QDRO is being filed pertaining to the marital settlement of the divorce decree. The QDRO is for a defined benefit plan. I am trying to draft the QDRO myself based on the model sent to me by the plan administrator. I am trying to save the money I would have to pay an attorney. I do have Pre Paid Legal though and I could call them and ask the question. Well if your ex remarried you may lose some or all of the benefits you could have been awarded in 1995. Why did you wait 16 years to file for the QDRO? As for filing on your own, dont even think about it. You need a lawyer who knows QDROs to figure out in what state you need to file the DRO. You may be able to submit the DRO in NJ if you can get the divorce decree admitted as a judgment in that state. You could then have the NJ court approve the DRO. As it is you will need a lawyer to determine if any of your rights to plan benefits have been foreclosed because of the passage of time, remarriage of your ex or his retirement.

What is the document that you are requesting a court to enforce? Is it an OR divorce decree? If it is a DRO then your attorney should be able to determine where it is filed. Is the QDRO for a defined benefit plan? Has your spouse remarried?

Tom, Do we know WHY the delay with the EZ form? I suppose the immediate solution, especially if we want to get paid, is to file 5500-SF as a 1 participant plan. There are rumors that some IRS officials want the 8955-SSA to apply to more than ERISA qualified plans and to be retroactive. Or that the procedures in Ogden are not ready to accept the forms.

IRAs are not subject to QDRO rules since they are not assets of a qualified plan. IRAs can be divided in any amount provided in the divorce decree or property settlement and a portion or all of the IRA can be transferred tax free to an IRA of the other spouse. See Pub 590, P28. Follow up question: this pension has been in a rollover IRA combined with the participants Savings plan for 9 years. The non-marital portion of the work history is 11 years before the marriage (total of 36 years employment). At the time of retirement the participant was married for 24 years. However, at the time of filing the participant was married for 33 years. Realizing that the IRA will be divided by decree, is there any precedent for ruling in this particular situation regarding retro. Is it feasible that the pension be divided: 1. THe AP should be paid for 33 yrs of marriage/36 yrs of employment to account for the post retirement years 2. The participant can present the value of the pension at the time of marriage. Amount of AP's interest in IRA will be determined under state equitable distribution or community property law.

Surviving spouse who is beneficiary of a deceased spouse's interest in a qualified/403b plan can roll the funds directly to a Roth IRA without income tax witholding. See Pub 590, P 63-64. However estimated taxes may be required to be paid. See instructions to 1040-ES form.

DmcGovern: If the AP's interest is in a separate account which was approved under the QDRO (the 46K + 41.4%) and gains and losses attributable to that amount then there is no problem. If the AP's interest is still comingled with the participant's interest in the same account then you have a problem because the AP is a beneficiary with a right to the separate interest including making loans, designating a beneficiary, selecting investments. The AP has no right to know how the participant is investing his assets and the participant should not be investing the AP's account balance. What I dont understand is why are you resisting placing the AP's interest in a separate account.

According to the DOL the way to eliminate this problem is to send a revised 8955-SSA to Ogden when the benefits are paid out but who knows if the IRS will ever update the participant's vested benefit in its records to read 0. Only way to avoid paying out twice is to keep all records of payment and cancelled checks forever.

I dont understand why you believe that the plan should accomodate an outrageous request by an AP which could expose the plan to a lawsuit by the plan participant for failure to protect with his rights under the plan. Under 414p the AP is only entitled to amounts that are payable under a QDRO which is why the plan is supposed to segregate the amount payable to the AP when it receives the DRO. In your case the AP would be entilted to 41.4% of the account balance plus 46+k in the segregated account. This amount is separate from the participant's account. The AP is entitled to the gains and losses of this segregated amount. I dont understand why you feel that the AP is entitled any more of the gains in the participant's account just because she is asking for it. The plan can just say that it would be administrativley burdensome to recalculate her interest in any other manner and would interfere with the particpant's rights to his benefits under the plan. As a separate matter the plan could be at risk of paying out funds which are the sole property of the participant since the plan is supposed to segregate the AP's interest from the participant's separate interest in the remaining assets in the plan when it receives the DRO. The plan cannot segregate the AP's interest from the amount in the participant's account when it receives the DRO and then at a later date when it issues a QDRO withdraw additional amounts from the Participant's account because the AP wants it. For example, if the participant terminates employment after the plan receives a DRO the plan cannot refuse to pay him the portion of benefits in his account that have not been segregated for the AP. If the plan transfers additional amounts from the participants account to the AP account after the QDRO is approved it will be open to a claim that it reduced the vested benefit payable to the participant. By the way what is the opinion of the plan's lawyer on this issue?

IRAs are not subject to QDRO rules since they are not assets of a qualified plan. IRAs can be divided in any amount provided in the divorce decree or property settlement and a portion or all of the IRA can be transferred tax free to an IRA of the other spouse. See Pub 590, P28.

Governmental plans are exempt from non discrimination rules of 403b. Under IRC 414d plans of indian tribal governments are considered to be governmental plans for those employees performing essential governmental functions which are not in the performance of commercial activities.

Well, not to be flip, but there's a lot of money at stake. The kids see the plan language that says mom loses any claim to the death benefit as an ex-spouse, and they are next in line. The only exception is for QDROs, and there wasn't one when the participant died. So they think the money is theirs and might well sue to get it. On the other hand, there's plenty of support for the proposition that the decree should be read as either a DRO that can now be perfected or, under the circumstances, a QDRO. The decree doesn't mention death benefits. The DB plan has a special lump-sum death benefit. The formula is complicated, but there will be nothing left after it is paid. Although the form on file names the ex-spouse as primary and the children as contingnent beneficiares, ex-spouses are deemed to pre-decease the participant and don't get this benefit unless the participant re-designates them after the divorce. That didn't happen here, so the kids are the now the designated beneficiaries. The only exception is for QDROs. As we've been discussing, there was no QDRO on file when the participant died, but the decree had just been entered. Uber: I think counsel for the plan needs to focus on the question of whether the divorce decree contains sufficient information to meet the material requirements for a QDRO under existing precedents. Failure to list the address of the AP is not a material omission. The intent of PPA section 1001 was to clarify that death of a participant before a QDRO was approved would not preclude a plan administrator from issuing a QDRO if the divorce decree or proposed DRO met material requirements for a QDRO. For example, if the divorce decree awarded a separate interest in plan benefits to the AP as a specific $ amount or % the death of the participant before a DRO was presented to the Plan admin would not prevent the plan administrator from approving the divorce decreee as a sufficent to meet the requirements of a QDRO since the separate interest would give the AP all of the rights accorded to a beneficiary under the plan. However, amending a DRO or a divorce decree after the death of a participant to create a new benefit right not present in the divorce decree issued before death (e.g., surviving spouse benefit) would not be permitted because amendments of QDROs to add benefits after death are not permitted.

There is no requirement under ERISA to record any hearing or to hold a hearing but the plan could get a Video recorder. More importantly why does the plan admin allow hearings which is bad idea since the Plan admin has to come face to face with the claimant and provides documentary evidence that could be used by a court against the plan? There is nothing that can't be said in writtten materials.

The SSA form is now an exclusive IRS form and is to be filed with the IRS office in Ogden, UT, hence the need for extensive review to make sure the IRS office will be able to handle the processing of thousands of SSA forms. Also the SSA forms due for 2009 will have to filed with the 2010 SSA forms. Maybe UT is where some of those 200,000 new federal employees will be based.

I have requested 5500-EZ twice, last being three weeks ago. Got a postcard from the IRS 10 days ago apologizing that EZ form is not available. No need to re order. I wonder what Federal departments the 200,000 federal employees who have been hired in the last two year went to work for. Cant be IRS.

Who is asking the q? Plan admin, Trustee? If it is the plan then you should ask plan counsel if a DRO can be issued by the state court after one party dies. While a divorce proceeding is dismissed if one party dies before the decree is issued, many states allow the court to retain jurisdiction over the divorce proceeding if one party dies after the decree is issued and issue a DRO. If the divorce decree alone will meet the requirement for a QDRO then the plan has two choices- wait for a party to file for the benefits and follow the procedures for reviewing a claim for benefits under ERISA 503 to determine who is entitled to the benefits or file an interpleader.

I dont understand what is your concern with CA joinder preventing distribution of the benefits from a terminated plan. According to the the Senate Finance Committee report for REA after 18 months the amount segregted in the plan pursuant to a DRO is to be paid to the participant. There is no exception for joinders under the QDRO rules. However, the alternate payee can bring an action in state court to recover the amounts paid to the participant. I dont see how the plan can be forced to retain funds after termination when the plan provisions require that the assets be distributed to the participants. There is no harm to the alternate payee who can bring a suit under state law against the participant to recover the funds. Edit: Have you ever had the application of CA joinder to ERISA plans reviewed by counsel? Under CA family law section 2337(10(d)(1) joinder is not necessary for plans subject to ERISA because of the availability of a QDRO to devide the plan benefits.

I agree with Masteff. All MLP are required to list the amount of UBIT on Part III, line 20V of the K-1. The IRA custodian then computes the amount of the tax due on the 990-T and pays it from plan assets. The IRA owner should consult the partners instructions for reporting of UBIT. UBIT does not result in disqualification of the IRA.

Q- Why does owner think there is any tax issue other than UBIT? Since the IRA is a tax exempt entity under the IRC, all income received by the IRA from the MLP (other than income subject to UBIT in excess of $1,000) is exempt from income tax.

According to the intstructions to form 2848, an Unenrolled Return preparer can only represent a taxapayer with regard to a tax return he or she prepared.

Under 402(g) if the participant does not receive the excess contributions by Apr 15 of the following year then the contributions must remain in the plan and are included in income tax for the year contributed. There is no 10% tax. When the excess contributions are distributed for reasons permitted under 401k, e.g., termination, age 59 1/2, etc they are taxed again. Note this rule only applies to excess contributions which result because the employee contributed to 401k plans of two unrelated employers in the same tax year for which the employee must initiate a request to receive a refund of the excess payment before Apr 15. It does not apply to excess 401k deferrals made to a single 401k plan.