mbozek

Why does it matter when the regs will be released?

ERISA does not apply govt plans so there is no requirement to allow employees with 3 yrs of service to elect the prior vesting schedule.

IRC 408A©(5) cross references RMDS of IRAs under IRC 408(a)(6) and (b)(3). Under the revision to 408A©(3)©(i)(II) effective 1/1/05 the $100,000 AGI limit for a Roth conversion will not include RMDS from IRAs under 408(a)(6)and (b)(3) ("any amount included in gross income by reason of a required distribution under paragraph ©(5) shall not be taken into account for the purposes of sub para. (B)(i)"). There is no similar exclusion for RMDS from other retirement plans.

This fact pattern raises several complex issues under both IRC and trust and estates law that is best left to counsel for the estate, including the failure to take MRDs, proper bene under the trust documents and plan beneficary designations, disability which may require appointment of a guardian, etc.

I dont understand how the plan can effectuate a rollover on funds that were distributed and constructively received by the participant, other than as a recession of the distribution which must occur in the same yr. as the distribution. The plan must also reverse the 20% witholding on the distribution to be consistent. The plan cant contribute after tax money that was included in a participant's account as constructivley received to an IRA because the amount has previously been distributed.

The plan sponsor needs to talk to counsel. Under ERISA 4062(a) the sponsor, not the shareholders is liable for any underfunding. If the employer rolls up its operations and goes out of busienss the PBGC can terminate the plan but will have no one other than the sponsor to recover the contributions. (My recollection for research I did several yrs ago is that shareholders of a corporation were not liable for any underfunding of the corporation's plan). I dont know what happens if the sponsor ceases operation without terminating the plan. There may be special liability issues with an LLC under state law. Presumably the plan becomes an orphan.

Kirk:I dont see a trend that prevents a plan from recovering overpayments by reducing monthly pension benefits. See Ramsey v. Formica Corp, 398 F3d 421, Tynan v. American Airlines, 2005 WL 2203172, Bolone v. TRW Sterling Plan Pension Plan, 2005 WL 1027569, recent cases which have allowed a reduction in future benefits to recoup overpayments. I dont see the fidiciary breach in recovering overpayments by reducing benefits which the plan is entitled to recover under the equitable doctrine of unjust enrichment. In Tynan the court noted the obligation of the Plan admin to recover the overpayments for benefit of the trust and all of its beneficaries.

See IRC 408A©(3)©(i)(II) effective 1/1/05.

The advantage of offering the 403(b) plan is that the HCEs can contribute the max salary reduction of 14 k because there is no ADP testing. Employees of certain entities such as schools, churches, hospitals and home health care agencies can contribute an additional 3k for up to 5 years. In addition, there are separate 415 limits for the plans (although both plans are aggregated for the 402(g) limit).

Does any one know how redemption fees are applied to distributions from a plan, e,g. are they treated as a reduction of the account balance before distribution or is it taken as a reduction of the distribution of the proceeds to the employee so as to be included as part of the distribution on the 1099 even though it is not paid to the employee.

I dont understand your question. While the parties can agree on how the retirement benefits are to be divided, the plan does not have to perform complex calculations to determine the parties respective shares. Many plan admin refuse to do tracing or complex allocation of accounts/ investments gains and losses to determine the parties interest over the course of the marriage. The Plan admin can require that the qdro provide the amount of the current balance that will be divided. Alternatively the Plan Admin can charge a fee for determining the allocation of the interests.

Under ERISA 4041 a DB plan can be terminated only as a standard termination or distress termination. A standard termination requires that the plan assets are sufficient to pay benefit liabilities. If the plan does not have sufficient assets to pay accrued benefits then it must continue to be funded under ERISA unless it can be terminated as a distress termination because of bankruptcy of the sponsor.

Elfman- Most vendors charge a set up fee for involuntary rollovers as well as a transfer fee to open the account. This deters direct rollovers for small amounts. The plan can retain the account and charge the admin fee against the balance. I dont see how forfeitures deters searching for lost participants because the benefits can only be forfeited if the participant cannot be found, which requires that an attempt be made to locate the participant. The plan is not required to conduct an exhaustive search to find someone who has left no forwarding address.

Can an employee defer a bonus which is earned in 2005 under a plan that is not established until 1/1/06. A Q plan must be adopted by the end of the tax yr in order to make deductible contributions for that yr. Is there a similar requirement for NQDC under 409A? Or is the employee a cash basis taxpayer who can defer any comp paid in 06 rgardless of when earned?

The participant can name the US government, a state or municipal govt as a bene.

E: Under IRS regs, benefits of terminated participants who cannot be located can be forfeited and allocated to other participants, subject to reinstating their benefits if they claim the funds at a later date. Lost participants who can not be located after attempting contact through IRS or SSA rarely return to claim benefits. Why not amend the plan to forefit the benefits?

Q was 1099 issued to the decedent for the 2004 checks that were issued before Doe's death? Under constructive receipt rules the checks will be taxed to Doe even if not cashed before his death so there will not be any tax penalities. (Note make sure RMD for 05 is distributed by 12/31/05). However, the checks will be deposited to his estate as after tax funds to be distributed under his will. New checks may need to be issued if the bank will not honor the old checks. Checks issued after his death may be taxed/paid to his estate. (You need to review state law to see if checks issued after owner's death can be distributed to IRA beneficary.) I dont know if a trustee will reissue uncashed checks issued after his death to the designated beneficiary. Trustees usually take the position that they pay the owner until notified of his death.

The regs may be delayed until 2006 because of Katrina tax relief legislation which will permit withdrawlas from pension plans w/out penalties and provide other tax benefits and will be enacted within the next 30 days. IRS will give priority to issuing guidance on this legislation.

It appears to be a matter of plan interpretation where the plan admin can go either way. Why not do the right thing and allow the ss to elect the spousal death benefit on all benefit accruals on the theory that reemployment required that the spouse give a new consent to waive the spousal annuity rights.

HIPPA does not change the employers right to request medical information from the employee on account of an absence from employment because the employer is not a covered entity under Hippa and there is no health plan. The employee can either supply the requested information or be dissciplined for not suppling the information. I would be interested in any state law that prevents an employer from requesting medical information from an employee to verify absence from employment.

I am not aware of any DOL ruling. Isnt the DOL position a distinction without a difference since most plans permit the employer to use suspense money for either additional contributions or offset future contributions. In other words if the employer cannot use the amounts in the suspense account to repay the 12k overpayment then the employer will contribute 12k to cover the overpayment, reduce the next contribution by 12k and apply 12k in the suspense account as part of the contribution. I thought there were some PLRS that allowed employers to deduct contributions made to remedy a fiduciary breach for plan losses.

The tax under IRC 4972 and 79 is imposed on the employer, not the plan.

Prisoners are not incapacated persons who cannot handle their own affairs and there are several cases where pension benfefits paid to prisoners have been seized to pay fines or taxes imposed under federal law. The pension plan forms can be sent to the participant at his prison address.

Plan Admin can reject if it is inconsisent with the terms of the plan e.g., spouse beneficary has right to rollover a distrbution to an IRA. Dont see a downside in rejecting DRO because participant has no recourse.Alternatively, plan can pay lump sum to participant which can be distributed to IRA.

Q: Can u get the trustee to make the plan whole for its negligence? Financial insitutions usually have funds for fixing errors to customer's accounts (try customer relations). If the trustees determine that it is in the interest of the plan to make up the payment instead of hiring a lawyer (because it would cost 12k to sue the participant, then they could make a decision to take the funds from a suspense account or have the employer make a contribution to the plan. Need to see whether this amount would be deductible. Nonalienation rules prevent making the payment from their own accounts.