mbozek

Your lawyer needs to discuss with the plan admin how far back the plan will go to reconstruct the investment performance of your account to determine the ex's interest in the plan assets. Plans are not required to go back and reconstruct investment returns for 19 years especially when the ex spouse has delayed submitting a DRO. Most plans will only go back 1 to 3 years because of the administrative burdens or will require that the parties pay for an accountant to reconstruct the returns (assuming records can be located). Under DOL rules the plan can charge the participant for the costs of a QDRO which could be thousands of $. Better solution is for you and your ex to come to an agreement as to her interest in your plan assets as of today and ask to have the state ct approve that amount as her interest in the plan under the DRO which will be submitted to the plan admin.

What is the anti assignment problem you are alluding to? The TIAA product is either a group or indvidual annuity contract which has a loan provision. An ERISA pension plan can be funded with an annuity instead of a trust where the annuity contract holds plan assets. See ERISA 403(b)(1). The loans are only available through TIAA which is a fixed annuity contract which pays an adjustible interest rate that cannot be less than 3%. The loan rate is determined by TIAA and the participant continues to earn the contract interest rate and dividends on the borrowed amount. If the contract interest rate is 3.5% and the loan interest rate is 5.5% the net cost to the partiicipant is 2.0%. I am not sure why everyone is getting excited about this. Loans on TIAA contracts have been around for over 20 years. It might help if you actually read ERISA.

I guess like anything else, the less you deal with something, the more complicated it is. But I will say there do seem to be a lot of rules that appear at first glance to apply to the exact same situation (5 year rule, life expectancy, special rules for spouses, the list goes on). There is a simple solution: tell married clients not to die in the year they turn 70.5 or before April 1 of the following year and the complexities you described go away.

How I wish that was true... I can't seem to get my hands around these rmd's right around the date of death... So the play here then is 1) leave in the plan for 4 years OR roll to an inherrited IRA for 4 Years (electing the 5 year rule) 2) Roll to an IRA and elect to treat it as her own to switch back to the uniform life? I guess that was the conclusion in the last thread, it just seems like such a loophole... Why are you making this so complicated? While the 5 year rule is the default distribution option, spouse has the right to roll over the plan distribution to her own IRA any time after death until December 31, 2013. If spouse does not roll out of plan by 12/31/13, entire account balance is subject to MRD by 12/31/14 or payment of 50% excise tax. There is no RMD because participnat died before RMD commencment date (4/1 of year following year age 70.5 is attained)

In PLR 200242044 the IRA owner died in 1998 when he attained 70 1/2 but before the MRD were required on 4/1/99. The surviving spouse elected to the take periodic payments for 5 years and at the time of the ruling had taken three payments- 1999, 2000 and 2001. The spouse requested a PLR allowing the rollover of the balance of the IRA in 2002, the 4th year after death of the IRA owner. Citing the above reg and Reg 1.408-8 A-5 the IRS confirmed that the spouse could rollover the balance of the IRA to her own IRA in 2002 and the distribution would not be taxable to the spouse in that year. The only difference between facts in the ruling and Austin's scenario is that if the 5 year payout of a distribution from a qualified plan is elected by the spouse, the rollover to an IRA must occur no later than the end of the 4th year to avoid application of the MRD rule under reg. 54-4974-2. If the decedent is the owner of an IRA, a surviving spouse who fails to take the MRD of the account balance by the end of the 5th year after the IRA owner's death would not be subject to the 50% excise tax for failure to take the MRD because such failure merely results in the spouse being deemed to treat the inherited IRA as her own IRA under Reg. 1.408-8 A-5. RMDs would not commence until the year the spouse attains 70 1/2.

I believe - I'm pretty sure - that the 5 year election carries over to the recipient plan or IRA. So while it is true that the RMD from the OLD plan is 0 in year 5, it is 100% in the recipient plan or IRA. That is, no, you don't get to skip on 3 years of RMDs. See PLR 200242044. I dont understand your logic. If the spouse withdraws 100% of the account balance in year 4 then the 5 year requirement of IRC 401(a)(9)(B)(ii) has been satisfied. Once the funds are rolled over to the IRA then the MRDs for the IRA apply, not the MRD from the transferror plan. See reg. 1.401(a)(9)-7 Q/A-2.

According to Reg 54.4974-2 Q/A-4(b)(3) there is no RMD until the fifth year after the death of the employee. Therefore any amount rolled over in year 4 would not be considered an MRD which cannot be rolled over. The MRD from the plan in year 5 would be 0. This option would be available in the case of any participant who dies before April 1 of the year after 70 1/2 is attained b/c the five year deferral is available until MRDs are required and MRDs are not required until April 1.

The RMD required for each distribution year must be made in the calendar year. If the 2010 RMD has been distributed, then the rest of the accrued benefit can be rolled over.

Is your 403b payment a complete distribution to be made in 10 annual installments or is it an annuity which is guaranteed for the greater of 10 years or life? If the payment is the former you will have to take a MRD due on the 403b plan under the MRD rules, e.g. 1/27.4 at 70 1/2 but the excess over than amount can be rolled over to an IRA. Note: you need to check with TIAA on how the payment will be made. Generally payments made over a specified period of 10 or more years are ineligible for a rollover. However If the 10 payments are made over a period of only 9 years you may qualify for a rollover of the excess. If your annual distribution is paid in the in the form of an annuity for the greater of 10 years or life, the entire payment is considered an MRD which cannot be rolled over.

Take the 20k max out of the plan which will leave 1k. Sooner or later the plan will send you the balance because of the costs of maintaining your account in the plan. If this is a DB plan the plan will send you a lump sum for 1k because of the deminimus amount of the annuity you would receive.

What do you think the tax consequences are? See IRC 404(a)(5) and IRS pub 560 P 15.

See Reg 1.457-10(a)(2)

The payments will meet the MRD requirements if they satisfy the requirements for annuity payments under Reg 1.409(a)-6 which permits distributions over life of owner and non spouse beneficiary which meet the incidential death benefit rules.

See Reg 1.401(a)(9)-5 Q/A-1(e) which allows the MRD requirement for a DC account to be satisfied by an annuity that meets the requirement of 1.401(a)(9)-6 A-4. I have seen descriptions of IRA annuity products that state that the beneficiary payout will be paid only in the form of periodic payments.

Reluctance of the AP to cooperate in getting a DRO is not unusual especially when the benefits will not be available for many years such as in a DB plan when benefits are not available until the participant's earliest retirement date. The usual reason is that the AP does not want to spend the money for a QDRO if there is no immediate economic benefit. APs will become interested in filing a DRO after participant retires or has remarried. I have reviewed DROs filed 15 years or more after divorce (one was filed after the AP found out that the employee had died for which benefits could not be paid to the AP since employee was unmarried.) I dont know what more H can do other than to send a letter to AP requesting that she participate in obtaining the DRO so he has a record. If the AP ignores the request she will be out of luck for survivor's benefits after the employee remarries and may also be out of luck for a share of the employee's benefits if he retires before she submits a DRO. Of course, the AP could always ask a state court to order the employee to pay her the benefit amounts she is entitled to under the divorce from his personal assets. In some states there is a statute of limitations on enforcing a court order.

Only two ways: 1. Set up a conduit trust that receives each RMD from the IRA and then passes the payment to the beneficiary of the trust. RMDs are based on life expectancy of the trust beneficiary. This requires a lawyer and someone who will act as trustee which costs $. 2. Purchase an annuity policy that pays the MRD as the only distribution option after death of the owner. You have to pay for the cost of the annuity and the agent's commission.

Governmental pension plans are exempt from regulation under ERISA, See Daniels-Hall v. National Education Association, 2008 WL 2179530 (W.D Wash). They are also exempt from the Uniform Prudent Investor Act. State and local government retirement plans are subject to state fiduciary rules that apply to public plans, e.g, CA. However, some states such as FL exempt plan officials from liability for performing their official duties under the doctrine of soverign immunity. FL AGO 89-63.

See IRS Pub 590 P 28 and Worksheet 1-5, P39-42.

If they want to go through the pain of filing under the new 5500 requirements and pay the late fee for failure to file for both years why not let them do it? (Last time I looked the fine was a max of $750 per year if the 5500 is filed late. Dont know if this is still the max penalty) My one question is whether they will be subject to the audit requirement in 2009 for plans with more than 100 participants which could cost 10K. The other possibilty is whether they could have one plan for both organizations to reduce the filing to one 5500.

If the consultant is an agent for the investment advisor then the contribution was made on time. If not I dont think the IRS will know or care. What I would lke to know is to whom did the plan sponsor send last years contribution?

Most vendors have opted to use only the last 4 digits of the SS number to reduce the risk of identity theft. For example Wage Works matches up the last 4 of the social with DOB to identify customers accounts. Other vendors use a unique identifier. I thought that the trend in IT is to move away from using the 9 digit SS as an identifier to reduce the risk of theft of customer ID. Also I thought TIAA is prohibited from using the full SS under state laws (CA) that are not prempted by ERISA from applying to the retirement accounts of public employees. It is my understanding that about 50% of TCs account holders are participants in public plans. Its easier to use the last 4 SS digits as an identifier in the entire TC data base than to have separate identifiers for the public employees and the ERISA employee's accounts.

Is the IRA owner going to operate the business or is the owner going to be a passive investor?

The purpose of this legislation is to create a revenue gain for the amount of funds converted by participants to a Roth 401k by year end and over the next 9 years to allow Congress to reduce taxes on small businesses before the November election. Note Roth accounts would be permitted in 457b plans which is projected to gain $1B. Employers have been pushing for this legislation because employees who are eligible for inservice withdrawals are increasing the transfer of funds from 401k plans to Roth IRAs which reduce the amounts available to pay the fees under the plan. These employees believe that their taxes will increase next year and in retirement so they are paying taxes now to avoid future tax increases (even though most will be in a lower bracket in retirement) regardless of the message from inside the beltway that tax rates will not increase for taxpayers below the 33% bracket ($200k). They also expect Roth conversion to reduce income tax on their SS benefits. Others are converting so that they will not have to take MRDs. I concur with the analysis that the funds transferred to the Roth 401k plan must remain in the plan in order to preserve all of the attributes of a qualfied plan, e.g, protection from creditors, MRDs, etc. I expect the legislation will define who will be eligible to make the transfers in a manner consistent with existing legislation and regulations. But I am going to wait until the law is enacted.

But it needs to be enacterd first. There will be time to worry about what it means when it is enacted. I dont understand what you are trying to say. Are you saying that the conversion/distribution of a pre tax account to a Roth account in the same plan is a distribution that removes the Roth account from the plan so as to eliminate provisions that apply to other Q plan funds, eg. protection from creditors?