mbozek

Excess contributions and earnings are included in gross income in the tax year deferred. See Reg. 1.457-4(e)(1) and (4).

Its a benfefits, rights and features problem. Plan cannot limit certain investment options to HCEs. However if participant is eligible for inservice withdrawal, account balance can be rolled over to an IRA at ML.

Still not true in Wisconsin. http://www.dor.state.wi.us/taxpro/news/091030.html I was on an ACLI conference call today (unrelated matter). They mentioned the Wisconsin situation with Roth conversation but there was also mention that Wisconsin may not be the only state that hasn't adopted conforming law. Does anyone have any insight into other states that may fall into this category? NJ and PA.

government plans can set any period of service they want to use.

Just because the attorney and client signed off doesnt mean the plan has to accept it. I would get a waiver from the participant that authorizes a pro rata distribution. Given how the stock market is behaving the last few days the plan doesnt need to be at rsik

unless the plan document says otherwise it is eligible comp.

How is the 100k being reported to the IRS? As W-2 income, a dividend or what? If it is w-2 income is it excluded as comp under the plan because it paid after he has terminated?

A participant cannot avoid being taxed by not cashing the check. Taxation occurs when the check is mailed.

My response was directed to the question of whether a government employer WOULD be subject to ERISA I which is not possible because of the statutory lack of jursidiction of the federal courts to hear cases involving public employers. The reason I referenced prototype plans was because in the LA case a government entity had adopted a prototype plan which like all Ptype plans required that the plan conform to the applicable provisions of ERISA that govern qualified plans. The federal court dismissed the complaint on the grounds that it had no jurisdiction over a claim against a public employer who had adopted a plan which included ERISA provisions even though the plan had voluntarily agreed to be subject to ERISA. I am not aware of any case brought in a state court based on ERISA rights against a public employer who adopted a retirement plan intended for employers subject to ERISA, although it may be possible. There are ERISA provisions that apply to public plans, for example, in those states that have enacted a law that requires public retirement plans to follow the fiduciary provisions of ERISA. I think NY state has enacted legislation to pay benefits in the J & S form in some of its teacher retirement plans. In the absence of state law a public plan could adopt ERISA provisions that would apply to benefits but it would need to make sure that the provisions adopted did not violate state laws for public retirement plans, e.g., the plan could not prohibit alienation of benefits by employees convicted of a crime if forfeiture is mandated under state law or have a shorter period of vesting service.

Since the exemption from ERISA for government employers is statutory it is not possible for a government employer to adopt a prototype plan or agree to be subject to ERISA under which ERISA provisions would apply. There is a case in LA (state) fed courts on this issue.

The reason the IRS and Labor did not intervene in the bankruptcy cases involving alienation of benefits is that ERISA does NOT preempt other federal laws such as bankruptcy and the bankthe bankruptcy courts had the authority to order a turnover. It was up to private litigants to have the Supremes review the claims of creditors tgo benefits since the Federal agencies could not challenge the validity of the federal law they administered.

Has it been your experience that state courts always know, understand and follow such precedent? Last time I researched it, since Marbury v. Madison (1802) US Supreme Court decisions are the law of the land which require that state courts adhere to its precedents. I thought the question of states and their courts being required to follow Supreme Court precedents was put to rest in Brown v. Board which has been around for 54 years. You know something I dont know?

How is that possible when (except in CA, maybe) the PA is not a party to suit or subject to the state court's jurisdiction when there is a valid remedy under state law. As noted in the Legislative history of REA "Of course the provisions of the bill (REA) do not affect any cause of action that an alternate payee may have against the participant. For example, if an order is determined to be qualified after the 18 month period, the alternate payee may have a cause of action under state law against the participant for amounts paid to the participant that should have been paid to the alternate payee." I thought the question of a whether a PA can violate a state court order designating who was entitled to benefits under a plan was settled in the Kennedy Case where the Supremes held that notwithstanding any contrary valid legal right of another person to plan benefits under state law/court decree or contractual agreement, the Plan Administrator was only obligated to follow the terms of the plan in paying out benefits to the party designated under the plan. The Kennedy case cited the above language in REA's legislative history by noting that the rightful claimant under state law could always pursue the payee who received benefits under the plan in state court to recover amounts paid.

A plan administrator has to follow the terms of the plan not state ct orders. I dont understand why you are saying that the PA should violate the terms of the plan and deny the loan request even though there is no adverse consequences to the plan for issuing the loan.

How can a state court order a plan administrator to deny a loan? Under the preemption provisions of ERISA state courts cannot control plan administration. The state court could order the plan participant not to borrow as a matter of having jurisdiction over the participant in the divorce action.

Give the AP's attorney a deadline to submit the DRO to the plan and inform him that in the absence of a DRO the plan will be required to follow its terms and roll over the funds. A rollover to the participant's IRA would be subject to the jurisdiction of the state divorce court which could order the participant to transfer some or all of the IRA to an IRA in the name of the AP which would be no different in result than if the court issued a DRO to the plan.

If the SEP is maintained by the non profit employer and no employee owns more than 50% of the NP then the contributions are not aggregated for 415c purposes.

if the ex's share is much less than 15k the employee should be able to find a way to transfer other assets under MA law which will avoid the need to expend $thousands in legal fees, e.g., transfer a non taxable asset at the after tax value of the plan benefits.

Since the non employee cannot be recognized as an Alternate Payee under DOMA there could not be any alienation of the employee's benefits under a QDRO or a rollover to the APs IRA. However, if the plan permits, the partner of the employee could be designated as a beneficiary of the employee's benefits that would be paid when a distribution event occurs, e.g. termination, but the amount paid could be taxable to the employee under the assignment of interest rule and could not be rolled over because the partner is not a spouse. Stay tuned- Congress is considering whether to repeal DOMA and there is litigation in MA over the validity of DOMA.

Clients can chose to limit the scope of the retention of counsel. There was recent case where the NY court appeals court held that a lawyer who was retained by a client for the purpose of filing a tax appeal under a specific tax law provision which was unsuccessful, was not liable in malpractice for not considering or researching an alternative theory of recovery involving another tax law provision which would have been successful on appeal because he was not retained by the client to pursue the alternative theory. Clients can choose to ignore past violations which have been discovered and take audit risk as welll as disregard advice of counsel to correct the past violations. I dont see how the IRS rules could require counsel to reveal any past violations counsel is aware of which are not part of the submission for which counsel has been retained, e.g submission of plan for determination letter based on amendments to plan because it would violate attorney-client privledge. As I recollect IRS determination letters are limited to form of the plan and not to operation of the plan which can always be reviewed separately. As for the client's risk in signing tax returns I dont see how any tax law violation could be proved because the client could always claim ignorance or that it was going to remediate the operational glitches in the plan and/or that the violations were not substantial.

The question is who whould ever challenge the the existance of the trust and why? The IRS? Keogh plans have been around since 1962 and most of them have a custodian who holds the assets. The IRS ignores certain common law trust rules such as the requirement that the trust have assets as of the end of the year in which the plan waa adopted in order to be deemed in existance for tax deductions. Why wouldnt you have the same problem with IRAs? You should also check stgate law. Some states may no longer enforce the merger doctrine.

Isn't that the purpose of reg 1.403b-10(a) which allows a distibution of a 403b contract to be rolled over to another plan under 403(b)(8). Since the contract remains subject to all of the rules under 403b after distibution from the plan (e.g., MRDs) it is eligible to be rolled over to an eligible retirement plan.

Tell the employer to unretire and find a way to make some money each year to continue contibutions to the plan even if a nominal amount, say $10 per year. Why deal with stupid companies such as vanguard when there are other prototype providers who will not be so rigid in their interpretation of the IRS rules for a client who has a substantial account balance? Any other advice is a waste of time. The other other option is to terminate the plan and rollover the distribution to an IRA and be done with this nonsense.

Since Company A purchased the stock of B it is legally the sucessor in interest to B with all of the legal rights to ownership of B's assets. Have you asked A's counsel what are A's legal rights to the forfeiture funds such as contributing them to a plan sponsored by A or using it to pay expenses of A's plan? Since the plan has not been terminated under the IRC maybe it can be merged with a plan sponsored by A and the forfeitures used in accordance with the provisions of A's plan.

Assets in an unfunded nonqualified plan are general assets of the employer which can be seized by the employers bankruptcy creditor's. In re IT group, 305 BR 402 (2004). In a Rabbi trust the assets must be subject to the claims of the employer's creditors. Thank you. While assets are subject to claims of creditors, I am concerned about past practice in terms of secured and unsecured creditors. If the employees are not secured creditors they will be general creditors who usually receive less than 10 cents on the dollar for their claims.