mbozek

This makes no sense. The IRS is not permitted to accept money belonging to participants except for tax withholding. Also how could the money be frozen and turned over to the IRS? What you need to do is find out who was the trustee appointed for the bankrupt company and ask him who is holding the plan assets. You should be able to find that information from the bankruptcy court and it may be available on line. When companies become bankrupt the pension plans become orphan plans because there is no fiduciary to administer the plan. Usually the bankruptcy trustee for the employer hires a TPA or bank to dispose of the assets or the DOL asks the court to appoint it to administer the plan.

Are the parties divorced? If the parties are still married why isnt the waiver of spousal rights valid under ERISA 205©? Also retirement benefits under ERISA are usually divided under a DRO issued after the parties are divorced, not a separation agreement. A property settlement agreement can be a valid DRO if it is approved by a judge as part of a divorce decree or order. You need to check with a divorce lawyer to see if the parties can transfer property property under a DRO prior to a divorce being issued. The separation agreement may provide that the marital property will be divided when incorporated as part of a divorce decree. If the parties are not divorced the question is whether the waiver of spousal rights is a forgery. You can: 1. ask the spouse come in and personally sign the wavier and a statement that the parties are not divorced in presence of the plan administrator and, 2. Ask for the attorney for the H to provide a letter stating that the parties are still legally married.

eeyore: I dont see how H's separate interest in a) can include an interest in the contingent survivor annuity paid to his spouse because H has no vested right to surviving spouse benefits which can only be paid to his surviving spouse after his death if she survivies him. Under Carmona v. Carmona, the surviving spouse benefit can only be paid to the spouse to whom the participant is married on the date the retirement benefits begin. Therefore the plan would reject a DRO that provides a separate interest to H that includes any portion of the the value of the surviving spouse annuity benefit because under IRC 414(p)(3)(A) it is not a benefit that can be provided to him by the plan. Given that H has no vested interest in the $5,000 contingent survivior annuity, W's separate interest in b), if allowed under the plan, will be 100% of the actuarial value of the $5,000 death benefit plus $2,500 of H's annuity. Finally I dont understand how the separate benefits of both H and W under a) and b) can both be larger because IRC 414(p)(3)(B) prohibits a QDRO from requiring the plan to provide increased benefits. If, under your scenario, H's benefits increase by 5-10% then W's benefits would have to decline by the same amount to comply with (p)(3)(B). Its all an accademic exercise anyway since H cannot have an interest in W's survivor annunity and his interest is limited to the value of the annuity paid to him during his life.

You are correct. The QDRO needs to define two separate benefits: 1. a shared interest in H's monthly annuity benefit equal to 50% of his annuity ($2,500) paid to the spouse during H's life. I dont think the plan would allow a separate interest benefit since the spouse's portion of H's beneift can only be paid while H is alive. If the ex spouse is receiving a shared benefit the QDRO could provide that the ex's $2500 monthly benefit will revert to H if the ex dies before H. 2. the $5,000 monthly surviving spouse's benefit to be paid to the spouse after H's death. I dont know what purpose would be served by designating this benefit as a separate interest since it will paid only to the spouse for her life under the plan if she survives H. I dont think the plan would want to spend any money creating a separate benefit for either 1 or 2. I dont know what the attorney means by "this provision shall have no effect after W has been paid the amount of benefits due her under this order." Is he attempting to preserve the surviving spouse benefit to H's sucessor spouse if the ex spouse dies before her surviving spouse benefit commences?

As was done twice when Congress taxed the portion of Social Security benefits that were not attributable to employee contributions - 50% in 1983 then 85% in 1993.

Isnt the plan fiduciary whoever that may be, individual or corporate entity, personally liable under ERISA 409 for the loss to the participant (See LaRue by the Supremes) which leads to the question why would any sane individual ever want to be a fiduciary under ERISA unless there is plenty of fiduciary insurance. It would not be advisable to reduce the account balances of other plan participants to make the loser whole since that would violate the nonalienation provision of ERISA 206(d) for all participants. Best option is for the employer to pony up the loss to make the participant whole to avoid paying the litigation fees of both sides.

Why do you want to devote time and $ to finding people that dont want to be found and didnt provide a forwarding address. Not everyone who is located by the IRS or SS will claim their benefits. The plan can adopt a provision that forfeits benefits of missing participants when they are available for distribution (to prevent violating the MRD requirement) subject to reinstatement if the participant reappears to claim the benefits.

Short anwser- The plan itself as an entity that can be sued under ERISA is liable to the participant for the amount of the loss because a plan representative (or administrator) authorized the payment of the participant's benefits to the wrong person which is no different than if a bank cashes a forged instrument, it is liable to its customer for the loss. In ERISA 101 terms the participant's benefits are nonalienable and nonassignable until paid to the participant or a beneficiary, not until paid to someone who is impersonating the participant. The plan could pursue the thief for any amounts it has to pay to the participant under a claim of unjust enrichment or other equitable remedy. I would not automatically assume that the plan's trustee and/or its bank are liable for the loss because they will have indemnification provisions in their agreement with the plan to protect them if they rely on instructions received from an authorized representative of the plan. Otherwise they would be liable for every embezzlement of plan funds authorized by the plan. The plan should check its agreement with its financial institutions. I would expect that this liability would be covered under a fiduciary insurance policy if the plan has one, subject to a deductible.

What if the plan is funded only with mutual funds and the employer only makes discretionary contributions at the end of each year as authorized by a board resolution? What is the defintion of a money purchase plan under ERISA that requires a J & S annuity as the normal form of benefit?

I dont understand what you mean by "was used for a non hardship purpose". The question is whether he was eligible to receive the distribution because a valid hardship event was incurred. The money itself is fungible and can be used for any purpose after it is paid because it will be deposited in the employee's checking account.

It is unlikely that the Supremes will hear an appeal because they only decide matters of law not fact and the supplemental opinion clarifies that the claim brought by the employees was dismissed because the facts in this case as pleaded by these plaintiffs were not sufficient to demonstrate a probability that there was a remedy under applicable law, i.e., merely alleging that fees paid were excecssive because the plan used retail funds instead of cheaper institutional funds is insufficent to survive a motion for summary judgment in the absence of further facts such as showing that the participants failed to receive additonal services not available to retail customers such as investment education and retirement planning which would justify paying higher fees. Also use of retail fees may be permissible if use of cheaper investment options would require require the plan to spend additional funds on services that are provided at the retail level, e.g. recordkeeping. There are two imporatant takeaways from this case. 1. Benefits practitoners will have to become knowledgeable of the rules for pleading a meritorious case under the Bell Atlantic v. Twombly and Aschroft v. Iqbal decisions because the federal courts are becoming amenable to dismissing claims of violations of ERISA that do not state facts sufficient to demonstrate a reasonable probability (not just the mere possibility) of a violation for which there is a remedy under federal law. 2. The 7th Circuit has joined the 5th Circuit in rejecting the authority of the footnote to the preamble of the 404c regs to require a fiduciary duty to make sure that each individual investment in the plan is prudent. Under the Mead/Chevron doctrine the footnote is not considered by those circuits to be an authorative interpretation of the regulation for which judicial deference will be granted. The Deere court stated in its denial for rerhearing that it would review such language if the Secretary of Labor amended the 404c regs to include the footnote. Next term the Supremes will hear a similar case decided by the 7th circuit (Jones v. Harris trust) that there is no fiduciary responsibility for directors of a mutual fund to negotiate the lowest possible fee with an investment manager for the fund and that a reasonable fee is one that is mutually agreed to by the directors and the investment manager. Neither Judge Esterbrook who wrote the opinion in Harris or Judge Posner who wrote the dissent in the 7th circuit's decision to deny an en banc review of Harris showed any interest in an en banc review of Deere.

That was then. I dont think that authority exists under the current 2848 to allow a CPA to sign a 5330 form because it requires the payment of a tax for which the s/l begins to run under IRC 6501. In addition the s/l for schedule P only begins to run if the 5500 form is properly fied with the DOL. Form 2848 also applies to IRS returns and forms that do not require payment of tax such as information returns and submission of plans for a favorable determination letter. See instructions to line 3. In addition the 5500 instructions state that the return must be siged by the plan administrator to comply with the provisions for submitting a return under Titles I and IV of ERISA.

Why not look at this arrangement as an election between health benefits and cash with the cash being contributed to the 403(b) annuity as salary reduction and revise the plan documents and salary reduction agreement to clarify this arrangement? Are the flex contributions that go into the 403b account subject to FICA tax?

The instructions for the 5500 form state that the form must be signed and dated by the plan administrator of a plan subject to ERISA. Whether or not the 5500 is tax form is irrevalent if the PA must sign for ERISA purposes.

I dont understand your question. The Pship deducts contributions to CL employees pensions on line 18 as a reduction of Pship taxable income. The Pship reduces its taxable income by the amount of Net Earnings from SE (including pension contributions) allocated to each partner as income from the pship. Either way the contributions for pension contributions are allocated to the partners as either NE from SE (partners contributions) or a reduction of NE from SE (pship contributions for CL employees). Each partner deducts the amount of the Pship contribution to their pension benefits from taxable income on their 1040.

Janet: I dont understand you post. The sections you cited relate to representation of a plan before the IRS by an agent regarding an IRS form or submisson for qualification or receive information from the IRS, not whether the agent who holds a POA can sign the form on behalf of the plan administrator. I thought the instructions for the 2848 form clearly state the limited conditions under which the agent can sign a tax return for a taxpayer.

I have seen it used in a different context, i.e., combining a SH 401k plan with an age weighted PS plan as a means to max out contributions to owners.

I didnt know the DOL interpretated the IRC.

The Pship deducts the contributions for both employees and partners on its return without regard to what can be deducted by each partner. The Pship contributions for the Partners are reported on each partner's K-1 along with the partners net earnings from Self employment from the pship without reduction for pship contribution to the 401k plan. The net earnings from SE appear as taxable income on the partners 1040 and the pship contribution is deducted on line 32 of the 1040 to the extent permitted under IRC 404. A self employed person's deduction is limited to 20% of net earnings from SE (less 1/2 of FICA tax paid). I believe that salary reduction contributions to the 401k plan are not counted for the 20% limit. If the partner's net earning from the pship are $110,000 the max deduction for a DC plan will be: $110,000 -$7185 (1/2 FICA tax) = $102,815 x .20= 20,563+14,000 (401k)= $34,563. See IRS Pub 560, P 14. If the $41,000 contribution is for the partner's accrued benefit under a DB plan then the amount of the contribution in excess of 20% of net earnings is deductible to the extent necessary to meet the minimum funding standard under IRC 412.

What is a super comparability plan?

I dont see any 125 issue if ee has not been paid wages. Er payments of health ins from the er's own funds are not included in tax income of ee under IRC 106. In other words the ee is not contributing to the 125 plan and the er is paying 100% of ees premium which is not subject to any discrimintion requirements.

How did overpayment occur? Was it a clerical error or an error by the plan admin in determining the value of an investment? How long ago was the distribution paid? Was the participant given statements showing that the excess was included in his account? How much is the excess? Legally, overpaying a particpant is regarded as unjust enrichment for which the plan can sue the participant for recovery in civil ct.

You need to get advice from the Pship's accountant as to whether the net loss affects "net earnings from SE" on the K-1 which determines how much a partner can contribute to a qual plan for deduction purposes on the 1040. In partnerships net losses can be classified differently depending on the traunche in which the loss is placed by the employer's accountant, e.g. capital account vs income account.

A PS plan exempt from the J & S annuity rules can pay a lump sum w/out the participant's consent upon termination of the plan, Reg. 1.411(d)-4(b)(2)(vi), if there is no other DC plan. You need to check the IRS guidelines to see if the funds must be rolled to an IRA. I don't understand why the divorce will affect his thinking. The PS assets will show up in his financial statements for divorce regardless of whether it is held in a PS plan or an IRA. You need to check the plan to see if spousal consent is required.

The problem with the 9th circuit's holding that Cal voluntary income tax witholding was permitted on pension benefits is that the Supreme Court has subsequently adopted the position in the Egelhoff case that state laws relating to distributions are preempted if they prevent uniform administration of pension plans. Clearly the various state withholding laws are not uniform. The cal. laborer's case is somewhat unique because the fund and most participants were located in the same state that was trying to attach benefits. The issue that you overlooked is what is the risk to an out of state plan that has no presence in a state that requires income tax withholding of benefits paid to a state resident. Under the minimum contact doctrine a state cannot enforce its tax laws against a non resident plan which does not maintain a presence within the state. Under applicable federal law a state cannot enforce its income tax laws on pension distributions paid to a non resident who earned the benefits while a resident of the state.