mbozek

I dont think the constructive ownership rules automatically requires aggregation of each parent's business interest if there is a child under 21. See Reg. 1.414©-4(b)(6)(iv)©. I would like some one to explain how the rule of 1.414©-4(b(6)(ii) works.

What do they want to do with dad's LI? If they want to keep the policy in force and not pay tax on the CSV then convert the PS plan to a 0% money purchase plan. No er contributions are required to a 0% mp plan. If they dont care about the LI policy, cancel the policy, rollover the 71k to an IRA and terminate the plan.

I can't believe that after 40 years of marketing 403(b) plans plans by insurance companies that there is a hospital eligible for a 403(b) annuity plan that does not allow salary reduction. Is it possible that the employees at the hospital with the MP plan are eligible to participate in a 457b plan? The simplest solution is to extend the salary reduction option to the employees of the entity that sponsors the MP plan.

IRC 414(i) defines a DC plan as a plan in which each participant has an individual account based solely on the amount contributed to the plan as adjusted for income, expenses, gains, losses or forfeitures. There is no similar authorization for deducting expenses from accrued benefits in DB plans under IRC 414(j). Reducing plan benefits for the cost of distribution expenses could disqualify the plan. Is the lawyer going to request a determination letter from the IRS? That said, I think that some DB expenses such as loan processing fees can be paid by the participant since a plan is not required to provide loans.

What is the participant being charged for that is not a plan or settlor expense? I would think this is an alienation of benefits that is prohibted under ERISA as well as a cut back in accrued benefits if payments are not recieved. What was the legal rationale for this reduction in benefits. Vested benefits cannot be forefeited.

Every IRA agreement I have ever seen places all rights under the IRA with the IRA owner, because the custodian only performs ministerial tasks.

If the plan sponsor is incorporated and the owners want to wind up operations the corporate shell can be sold with the pension surplus to a financial intermediary, e.g., investment bank, who will pay a discounted % of the pension plan surplus to the owners e.g. 70%. Sale proceeds are usually considered capital gain. IRS dislikes such sales but PBGC favors them because the intermediary sells the corporate shell with pension plan surplus to a NP employer with an underfunded DB plan at a higher discounted value, e,g, 80% of fmv of assets. Plan then books assets at 100% of FMV for liability purposes to reduce underfunding. This technique is not for risk adverse clients.

There are two potential taxes: income tax and estate tax that may apply. Fed estate tax only due if the taxable estate of a decedent who died in 04 exceeds 1,500,000. There may be state estate or inheritance due in the 18 states that have such tax. Need to check with state tax authority. Fed income tax is normally due when an inherited capital asset is sold at a profit by the heir, e.g., the increase over the cost basis. However capital assets owned by a decedent receive a stepped up basis to the FMV of the asset on the date of death. Only the increase in the FMV in excess of the fmv on the date of death value is subject to capital gains tax payable by the heirs. If grandmother only owned 1/3 of the house then her interest for estate tax was 1/3 of the fmv at her death. The stepped up Fmv is subtracted from her $43,000 interest to determine the amount of captil gains tax due by whoever inherited her interest. If the two sisters share the mother's interst equally then each will have to pay 50% of the cap gains tax on the deceased's share in addition to the cap gains on their separate shares. You should consult a tax advisor to determine if tax is due.

Yes.

Under IRC 404(a)(6) employer can take a deduction for the tax year in which a contribution is made to the plan or to the prior tax yr if the contribution is claimed on the er's tax return for such yr. See Rev. rul 76-28. 04 Contribution made in Jan 05 can be deducted on 05 tax return along with 05 contribution subject to the deduction limit of 25% on covered comp paid in 05.

The beneficary should be paid in accordance with plan procedures. Under IRC 3405 the distribution is subject to voluntary 10% withholding which the hospital will opt out of.

Under IRC 6501 the s/l for the employer's deduction commences by filing the tax return for the er, e.g, 1120 for corporation, 1040 for self employed persons. The Sked P is only for the trust as a taxpayer.

Qualified plans are taxpayers who are exempt from taxaton under IRC 501(a). Filing the sked p commences the running of the S/l for back taxes that may be collected from the trust for violations of the IRC, e.g. loss of tax exmpt status. Once the sked p is filed the s/l for taxes is limited to 3 or 6 yrs.

EREAD: Do you have any authority for your statement the the plan is "on the hook"? What investment advice are you refering to? See examples under the 404c regs specificaly example 5. Reg 2550. 404c-1(d) states that no other person who is a fiduciary will be liable for any loss to participant's account which results from the exercise of control by a participant over his account. A participant cannot be a fiduciary.

See instructions for box 12 on W-2. Codes Y and Z will be used for payments from NQDC. 20% tax is not reported on w-2 because it is paid on ee tax return for 05.

The exemption from UBIT for debt financed RE is subject to several qualfications in subsection (B). A small plan sponsor is unlikely to seek tax advice as to the qualifications for purchasing leveraged RE which is why I would never recommend it as an investment technique. In addition the RE is subject to seizure by the lender if the loan goes into default leaving the plan fid subject to a claim of breach of fiducary duty under ERISA.

Rev. Rul 80-155

I have never heard of adjuncts being compensated for prep time. Every place I have taught as an adjunct professor pays a lump sum for teaching a course of x hours for y weeks, e.g., 3 hours a week for 12 weeks = 36 hours. You need to check the adjunct's contract to see what the terms of employment are. Adjuncts are not eligible for participation in the plan if they are treated as ICs.

What is interesting about a case where the plan defined the eligible group to exclude persons who were not paid by the employer as permitted under ERISA? There is also a recent case in Fed Ct in Mass., Walsh v. Gillette, 9/13/05 where eligibility for the retirement plan required that the employee report wages on a W-2 form which excluded independent contractors.

Check plan language to see if there was a violation of the old distribution rules. Many plans do not provide for a specified time for making distributions but use terms as when administratively feasible or when determined by Plan admin, etc. Second, plan may not be out of compliance if amendment applies to all distributions after 3/28/05 and these distributions are made after such date.

You have two options which you need to review with counsel: 1. notify the employee that the extension perod was made in error and that correct period is 18 months. 2. do nothing and cover the employee for 29 months. Why not try the path of least resistance and select option 1 to see what the employee does. If ther is no objection then its the end of story. If the employee objects then back down and allow the coverage to continue for 29 months.

Q -who is going to pay for the policy? the plan? Who will own it? will it be a plan asset? Under IRS rules all plan assets must be allocated to participants' account balances (except for suspense accounts). I dont know if LI policy could be asset of owner's account naming plan as beneficary.

How about the instructions for the 5300 form line 3a- enter 9/9/9999 for date plan was signed if plan is submitted in proposed form. The agent may be of the opinion that a plan is not in effect until it is adopted; therfore a proposed plan cannot be submitted for approval. See Rev Rul 81-114. I agree with RB- All of my plans are adopted by the employer subject to receipt of a favorable determination. If the IRS refuses to approve the plan it is never established. I have a Q- What if the IRS does not approve the plan by the end of the employer's tax year? Is the plan adopted for that yr if signed in a later yr?

Isnt the issues resolved as follows: 409A merley added another layer of rules over the existing rules for NQDC under other sections of the code, e.g. IRC 83, 61, 457(f), etc. If the plan is terminated without any vested benefit being due to the participant under those sections then there can be no taxation under 409A. If the amount due the participant under the plan at termination is 0 then there is no tax under 409A. Under section 457(f) amounts deferred are not taxed until the employee ceases to perform substantial service for the employer. One implicit risk of participating in a 457(f) plan is is that the benefit can be cancelled before the employee acquires a vested right. If the benefit is forfeited there is no taxation under IRC 457(f) and no taxation under 409A because nothing is paid to the participant. I think Q-20 was premised on the assumption that a benefit would be paid upon termination of the plan. If no benefit is paid there is no tax consequence under 409A.

Have you read the proposed 409A regs to see if there is an answer to this question in the 238 pages there?