mbozek

Thank you again mbozek, the Plan's limitation year was the same as the plan year and corporations physcal year 3/1 to 2/28. Rene If the converson was adopted before the end of the 1999 limitation year (2/28) then it should be ok but you need to check both the old and new regs to confirm what the IRS issue is because I dont do 412i/412(e)(3).

Good question. It has been a while since I looked at the 415 regs, old or new, but I remember that under the old regs benefits limits were determined on "a limitation year" which could be any 12 month period designated in the plan. If no election was made the limitation year was the calendar year. Maybe one of the actuaries who are more familar with the old regs can answer your Q.

what is the purpose of a 75 year old converting? Conversion to a roth makes sense if the Roth owner will be in higher tax braket when retired or to remove income from his estate that will be taxed at a lower rate than the 45% estate tax rate which only applies if the estate is more than $3.5M and is not being transferred to a spouse or charity. Paying taxes on a Roth conversion is not a good idea if the deferral period is short and the funds will be inherited by beneficaries who will be in a lower tax bracket. Speculating on future tax rates increases is a meanlingless exercise unless the taxpayer is in the top 1-2% of earners, e.g. $200k+. Even if tax rates increase for higher bracket taxpayers next year, history demonstrates that tax rates follow election cycles as well as bugetary cycles. If there is regeme change in 2012 or 2016 rates would go down as they did in 1980 and 2000.

Have you considered that guidance that is cited in the 1999 ASPA meeting may not be a governing rule because IRC 415(e) was repealed effective Jan 1, 2000. (Reg. 1.415-7 carrys a legend in CCH reg book (2007) that the reg. does not reflect the amendments made to IRC 415 after 12/30/80.) Reg 1.415-7 is titled "limitation in case of of defined benefit and defined contribution plan for same employee." Since the combined limits for DB and DC plans under IRC 415(e) was repealed for years after 1999, was not example 4 of Reg 1.415-7(e), conversion of a DC plan to a DB plan, cited in the paper, no longer authority for contributions made in 2000 because IRC 415(e) had been repealed?

What's the PT if the ER paid the employee from corporate funds instead of plan assets? Participant's benefits are still in the plan and the plan is willing to pay participant her accrued benefit without asking for return of money paid by employer so it cant be an extension of credit.

I think understand what you are saying now-the plan wants to pay distribution to the participant from the plan but doesnt know the correct amount. It seems that the plan owes her the amount due at the time the participant requested a distribution regardless of the 40% decline because that was the value when the request was made - the plan cannot benefit from its own wrongdoing by paying 40% less than the amount due at the time the distribution was requested in 2008. Was the 2008 amount reported to the IRS and participant on a 1099R for 2008? or a W-2?

In order to have the LI removed from his estate the insured employee must give up all of the incidients of ownership in the LI including the right to designate the beneficiary, right to surrender or cancel the policy and the right to obtain a policy loan. What does the plan say about the ownership of these rights? Merely designating an irrevocable trust as the beneficiary of the LI does not serve to transfer the LI policy out of the employee's estate. In estate planning the LI policy is removed from the insured's estate by having the owner apply for a policy that is owned from inception by the ILIT which is controlled by an independent trustee who pays the premiums to the insurance co.

Distributions from NP 457b plans cannot be rolled over to an IRA. Participant needs to take distribution from IRA and pay taxes and penalty on it which leaves the Q of why he should pay plan back after he has been taxed on distribution.

Pardon my ignorance but is GTL Group term life?

I have been waiting 30 years for this train wreck to happen ever since ERISA required plans to file SSA. It will happen more frequently as boomers who apply for SS benefits will be informed that thay have deferred vested benefits due them from XYZ co that they worked for years ago and has long ago been sliced, diced and disposed of in several mergers. The problem is that no one keeps paper records of accrued benefits or cancelled checks from long ago distributions which were destroyed 6 years after payment under some vague records retention policy drafted by corporate lawyers ignorant of ERISA's long tail for deferred vested benefits and lack of a statute of limitations for requesting payment from a plan after termination of employment. (ERISA allows a plan to delay commencement of benefits until age 65 and many DB plans in the 70s and 80s did not allow cashouts upon termination.) I also dont think there is a presumption of payment due to a lack of records indicating that the accrued benefit has not been paid. Under that logic there would be no need to keep any record of payment or satisfaction of claims. As the SSA information of an accrued vested benefit is also required to be filed with the IRS under IRC 6057(a)(2)©, why isnt it proof of a valid claim for vested benefits due under ERISA, since the plan administrator was required to file the statement with the plan participant upon termination from employment under IRC 6057(e)? If, at the time of termination the plan provided that the payment of the benefit was deferred until some future early retirement date, say 55 or age 62, the plan has an obligation to produce records showing that the benefit was paid. If the deferred benefit could only be paid as an annuity I dont think there is any way the plan could prove that payment was made prior to the claim by the employee.

If you read the certificate of insurability you will discover that the benefeits are paid out in 10 installments.

Gary: Maybe the reason we are quite and did not immediately answer your question on this board after it was posted is that we have day jobs that allow us to pay the mortgage and post at night. To answer your question, most DB plans as well as as some DC plans have specific provisions that must be included in any QDRO. My recommendation is that you contact the plan administrator to find out if there is a model QDRO that contains sample language that should be included in order to be approved by the plan administrator.

What you may be thinking of is the requirement that all IRAs must be aggregated to determine ratio of the taxable amount transferred to a Roth where the IRA owner has made after tax contributions. For example if an IRA owner has made $10,000 in after tax contributions to IRA#1 with a value of $12,000 and the aggregate value of this IRA and all of his other IRAs is $200,000, a conversion of $100,000 from IRA #2 which holds no after tax funds will be deemed to consist of $5,000 in after tax funds and a $95,000 taxable distribution because the ratio of the after tax amount to the total amount converted is 10,000/200,000 or 1/20th of $100,000.

From the 2008 IRS Pub 560 P 5 column 1 "An HCE is an individual who for the preceeding year received compensation of more than $100,000 (if the preceeding year is 2007, $105,000 if the preceeding year is 2008 and $110,000 if the preceeding year is 2009)...

The PBGC's Comprehensive Premium Payment Instructions says "[h]owever, a deceased participant will continue to be counted as a participant if there are one or more beneficiaries or alternate payees who are receiving or have a right to receive benefits earned by the participant." It's at the top of page 12 of the booklet (page 14 of the .pdf). http://www.pbgc.gov/docs/2009_comprehensiv...let.pdf#page=13 well that answers the Q that PBGC premiums have to be paid as long as benefits are due from the plan. While not directly on point, I think it's helfpul to consider how a spouse can formally disclaim a benefit for purposes of the anti-alienantion and assignment of benefit and assignment of income rules. I am concerned about sending the spouse a check (who has been very adamant that he does not want it), him not cashing it, and then him having to pay taxes on the amount. Aside from sending the spouse a check, formally disclaiming the benefit may be best thing to do. Under the terms of your plan who is designated as the successor beneficiary if the spouse dies? Under the disclaimer provision of IRC 2518 the disclaimant cannot designate who will receive the funds. Of course, you are assuming that the spouse will cooperate and agree to pay for the cost of hiring counsel to properly prepare the disclaimer for the benefits he is disclaiming and will not pay for the legal fees out the funds he is disclaiming. Why are you concerned about sending a check to someone who is legally entitled to the money? What does taxes have to do with it? Q what do you say to a retiree who has reached age 70 1/2 refuses to commence MRDs?

The PBGC's Comprehensive Premium Payment Instructions says "[h]owever, a deceased participant will continue to be counted as a participant if there are one or more beneficiaries or alternate payees who are receiving or have a right to receive benefits earned by the participant." It's at the top of page 12 of the booklet (page 14 of the .pdf). http://www.pbgc.gov/docs/2009_comprehensiv...let.pdf#page=13 well that answers the Q that PBGC premiums have to be paid as long as benefits are due from the plan.

If the QDRO rules do not apply to plans exempt from part 2 of title I of ERISA, why is it that so many courts disagree with you? In Met life v. Wheaton, 42 F3 1080, which held that QDROs applied to welfare plans, Judge Posner stated "we cannot understand why if a QDRO can override the designation of beneficiary in a pension plan, as Congress decided it can, Congress would not have allowed such an order to override the designation of beneficiary in a welfare plan." See the following the cases concurring with the 7th circuit- 935 F2 1114, 206 Fsupp 191, 283 F3d 436, 164 F3d 857, 119 F3d 415, 82 FSupp 1346. Even courts which have held that QDROs do not apply to welfare plans have decided that ERISA does not preempt a state divorce decree that invalidated a beneficiary designation under a LI plan. 66 F3d 944. In the 8th circuit state divorce decrees are given full effect in a welfare plan whether or not they comply with QDRO requirements. The theory that QDRO rules only apply to pension plans subject to the non alienation provisions of ERISA appears to be a minority opinion. 661 Fsupp 365 (dicta), 934 F2d 1193. There is also one case applying QDRO rules to a top hat plan: Bass v. Midamerica, 1995 WL 622397, citing Wheaton.

I questioned the relevance of citing to a GCM on disclaimers as an alternative to paying benefits to a suviving spouse because of the high risk to the plan of not complying with the complex tax law provisions for disclaimers which will require the assistance of counsel when as I indicated in my previous post the simple non risky solution is to just pay the benefits to the spouse without asking for consent. assuming of course that the plan pays benefits to non spouses who have been designated under the plan. There are very few DB plans that will incur the unnecessary cost of paying benefits to non spouses as well as the gift tax consequences of such transfers. Under the IRC the benefits are taxed to the spouse when they are mailed regardless of whether the checks are cashed. Sooner or later the spouse will start cashing the checks to offset the tax liability on the 1099. Under PBGC reg 4006.6(b)(1)(iii) an individual ceases to be a participant for premium purposes at death.

Even if the QDRO rules do not apply to top hat plans not subject to the non alienation provisions of ERISA (I thought the issue was settled years ago when Met Llife won a number of cases in different circuits (1,2,4,6,7,10,11th) holding that QDROs applied to group life insurance plans which are not subject to ERISA 206(d)), what benefit is to be gained from such obstructionist behavior of refusing to process the DRO if the participant consents to releasing the information? Under Rev Ruls 2002-22 and 2004-60 non Q benefits can be divided up without the participant incurring taxation on the portion of the benefits transferred to the AP. There is also case law holding that ERISA does not preempt a state court DRO for welfare (LI) benefits and that such order could be enforced against the plan even though the DRO did not meet the requirements for a QDRO, because QDROs only apply to pension benefits subject to 206(d) and DROs for non pension plans do not have to comply with the QDRO requirements. Rudolph v. Public Service, 847 F Supp 152; Equitable v Crysler 66 F3d 944. Therefore it may not be possible to reject a DRO for top hat benefits on preemption grounds because the exception to preemption of state laws for valid QDRO meeting the requirements of ERISA only applies to plan subject to ERISA 206(d) non alienation.

What benefit would be gained by imposing the cumbersome procedures of QDROs on a plan where there is no fiduciary, in place of the procedures in IRC 408(d)(6) which permits the IRA owner to authorize a transfer of IRA funds to the spouse on a non taxable basis? The custodian of the IRA as a non fiduciary merely follows the direction of the IRA owner and the divorce decree and a records the transfer as non taxable event creating an IRA interest in the spouse. The custodian would never agree act as a fiduciary to determine the validity of the DRO unless it received a substantial fee for the work involved which would be paid from the IRA.

How is this information useful- it is about electing to disclaim benefits? Disclaiming benefits under IRC 2518 is very tricky and offering this as an option could create a liability issue for the plan if the disclaimer is done incorrectly which will result in the spouse being taxed (assuming that the spouse would even consider it). Also why do you even think it would be possible? All DB plans I have ever seen only provide a survivor benefit to a surving spouse. Under the IRS rules for disclaimers the surving spouse is deemed to have predeceased the employee and the benefits must be paid the next surviving beneficiary. Since a DB plan does not provide for any contingent beneficary in the event of the spouse's death the surving spouse's benefit would most likely be forfeited. I have never heard of a disclaimer where the benefits were not paid to a successor beneficiary. If the plan permits, the death benefit can be sent to surviving spouse since there is no requirement under IRS regs that the spouse's consent be obtained before paying the benefit out. For tax purposes the surviving spouse will be deemed to have received the benefits, even if the check is not cashed.

1. Why wouldn't it result in a waiver since the spouse is waiving all rights to a distribution of benefits due the employee on the date the waiver is executed? 2. Where do you see the IRA being paid to the estate of the employee? I read the OP's statement to mean the plan sent out the check payable to the employee c/o the custodian FBO the employee's IRA, which is the conventional way making a direct rollover of a lump sum payment to an IRA since the plan would not have any authority to change the payee designated by the employee after her death. Perhaps the OP can enlighten us as to who the payee actually is. In any event if the payee of the distibution check is either the employee or the custodian of the employee's IRA FBO of the employee, the executor can roll over the distribution to the employee's IRA.

Where is the plan prohibiterd from cashing out an AP without consent? Reg. 1.411(a)-11©(6) provides that the consent requirements of IRC 411(a)(11) do not apply to an AP except as provided in a QDRO. Under Kennedy v. Dupont the terms of the plan control how benefits will be provided to an AP, not a DRO. Also I dont see what the confilct is. If the plan allows immedate distribution by the AP, all the DRO apears to require is that the AP must request a distribution from the plan before benefits will be distributed. I dont see why a plan has to provide a loan for an AP if the plan requires that all loans be repaid by payroll deduction.

How long have the overpayments been made? There is a question of whether the plan will be prevented from recouping any portion of the overpayments under the doctrine of latches especially where the total amount of the overpayments exceeds the value of future benefits.