mbozek

Why should the OP even respond to the employer when the employer is attempting to negotiate with the OPs IRA custodian to have the funds returned which is not legally possible without the OP's consent? Employer cannot make an end run around the IRA owner. OP should not respond to employer and only send a written instructions to the IRA custodian that he will not consent to a return of funds in his IRA. One real glaring reason not even to consider returning the funds is that the employer wants the IRA custodian to send the check to the employer which would be a taxable distribution for the OP. The author of the letter to the custodian requests the check to be sent to him. How does the OP know this is not a scam being run by a rogue employee? There is something wrong with the entire process of this request to return the funds to the employer instead of the plan which is the legal owner of the plan assets in addition to the employer avoiding discussion of the return of an overpayment with the participant. If the employer will not give the IRA owner the curtsey of requesting the return of the excess distribution there is nothing for the OP to discuss with the employer who is not even the plan administrator. It seems to me by the way the employer is sending its messages that the employer representative wants to avoid discussing the specifics of how the overpayments occurred which is enough for me to turn on my search radar. I have been involved in cases where funds in one employee's account were mistakenly paid to another participant and situations where the plan could not determine who was overpaid. In the latter case the plan always eats the loss.

Joel: You posted your question under the govt plans topic which discusses plans that are exempt from ERISA fiduciary provisions that you referred to.There is nothing in IRC 403b that requires 403b plans to operate for the sole benefit of participants and there is nothing in the tax law that requires diversified investments to be available to participants in a 403b plan. I don't what you are trying to prove but you sure are not connecting the dots. Q- I accidently hit the tab to your response and then exited without many any changes. Sorry for the confusion.

The plaintiff who sues the state is the party who is required to state what provision of NJ law imposes a fiduciary duty on the state pension plan. If the complaint is not based on applicable law it will be dismissed. No brainer. If you want to know if there is a fiduciary law that governs the state pension plan contact the NJ Division of Pensions and Benefits of the NJ Treasury dept. PO Box 295, Trenton NJ 08625-0295.

IRS pub 590A P 35 simply lists an improper rollover as an excess contribution. Penalty for excess contribution is 6% tax each year until it is removed.

What is the NJ statute that requires exercise of fiduciary duty and how is the 403b plan covered under it? General fiduciary principles don't apply. And the state of NJ has sovereign immunity. If the NJ supreme court says that NJ does not have to fund the state pension at the amount that it promised to pay what NJ law requires the state to follow fiduciary rules to keep the plan funded? Final question: what law firm would litigate a case against a state government that has sovereign immunity for a contingency fee based on unknown damages at some unknown time in the future?

I don't know if its possible. QDROS are limited to spouses and dependents. Spouse is taxed on distribution which paid under a qdro. 666b is a separate law which mandates that the funds collected are remitted to the state child support agency, not the child. I don't believe the state agency could get a QDRO approved by a domestic relations court to have the participants benefits paid to the state agency because under the QDRO rules the benefits have to be paid for the benefit of the child.

In 1986 Congress amended 403b to specifically limit funding to annuity contract and mutual funds. However, under a 1967 IRS ruling 4 govt entities had established 403b plans that were held in trusts including NYC and NJ. The 1986 change grandfathered these plans just as Congress grandfathered 401k plans established by government employers prior to Jun 2, 1986 which is why NYC has a 401k plan for all city employees as well as a 457b plan and 403b.

There is not much of a distinction between trustee to trustee transfers and rollovers of 401k plans. Trustee to trustee transfers are only permitted between qualified plans. A rollover is made to a different kind of plan, e.g, from a Q plan to a 403b plan or IRA either directly or indirectly. Transfer from a Q plan to a Roth IRA is both a rollover and conversion. Both types of transfers are tax free except for rollover to a roth IRA. Only distinction that is significant is that participant in 401k plan can rollover an existing plan loan to a new 401k plan to avoid having the outstanding loan balance being taxed as a distribution.

I think pay status is interpreted to mean that the benefits can be paid under the plan, e.g., termination, age 59 1/2 or retirement age has occurred. I will see what I can find.

LOL. the IRA custodian cannot pay the plan because only you as the owner can request a distribution. What is the other investment account referred to in their letter? What earnings were not properly credited to which participants? The letter does not specifically state that your account was overpaid which implies that the plan cannot determine if earnings from another participants account was deposited in your account. The language of the letter is cleverly constructed to avoid misrepresenting the facts which would be a breach of fiduciary duty. When did this mistake occur? How did it occur? When were the excess earnings contributed? Are they saying that you were credited with another participants earnings? The letter is too vague to render any conclusions as to whether you were overpaid. The language of the letter indicates that plan admin/employer is desperate- even if the $6000 is not part of your distribution, only the $6000 is an excess contribution subject to a 6% penalty tax. The other assets in the IRA will not be taxed.

The state agency is acting under the authority of 42 USC 666(b)(8) which requires state child support agencies to collect back child support from a participants 401k plan account, IRA or other retirement benefits. It is not acting under the QDRO provisions of ERISA. The statute specifically states that ERISA preemption is waived. There are at least 2 DOL interpretative rulings that spell out how the plan is to comply with the order, e.g., they are to subject to the same rules for QDROs except that the payee is the state agency. You should ask counsel to review the request for the benefits. Only benefits in pay status can be paid out under 666(b)(8). Under the tax law the payment to the state agency is an assignment of interest and the distribution is taxed to the participant. I don't think withholding applies because the state agency as payee is exempt from taxation. I would not obstruct the state agency with arguments that the state agency is not an alternate payee or agent because they are acting as a collection agency under specific authority of both federal and state law and they collect child support from banks and pension plans every day and eat HR and plan administrators for lunch. 666b was enacted specifically to collect back child support from deadbeat parents because congress was tired of having to payout funds under Aid to families with dependent children because the ex spouse was not paying child support and made each state establish a Child support collection unit under penalty of having AFDC reduced for failure to collect the back child support.

What is the NJ statute that you would use to allege a breach of prudence? NJ is exempt from ERISA so only a NJ statute that applies to NJ state government could be used. And NJ has sovereign immunity.

Fact that employer contacted the IRA custodian is a sign that the plan/employer is playing a weak hand and is hoping that you will give up the 6k with no questions asked. Employer/plan administrators try to trick employee to return funds to avoid having to create a paper trail that can be audited by regulators. Plan should have sent you the letter explaining why the amount was overpaid before contacting the IRA custodian. Employer is behaving stupidly because custodian cannot transfer 6k back to plan without your consent. Best course of action as has been recommended is to do nothing and wait for the letter. As of now you received the distribution that you were entitled to under the plan and that amount was reported to IRS. Q can you document that the amount you received was part of your account balance when you terminated from the plan, e.g, quarterly or annual statements? As noted by another poster the employer may be going through the motions of trying to correct an operational error and will not take any further action to collect the excess if you don't return the 6k. Please report back to us when you get the letter as to how you received the excess 6k. One thing you should get an answer to is how long ago the mistake supposedly occurred and why it was not discovered until now.

I haven't researched IRC 402A but I thought that if the participant was 59 1/2 and participated in the Roth account for 5 tax years there was no income tax on any distributions from the Roth. This is how it works for Roth IRAs. Loan distributions from a roth are only taxable if there is a distribution of taxable earnings from the Roth. If all of the earnings in the Roth are non taxable because the participant meets the above rules for non taxable distributions I don't see how any portion of the loan distribution will be taxed.

So the IRS worksheet on how to calculate the max deduction to a DC plan by a self employer person is incorrect even though been in effect for over 50 years? Please explain the error. FYI- the calculation in pub 560 can only be used by a self employed person, not the 100% owner of an S corp where deduction is claimed by corp which reduces w-2 comp paid to owner. Deduction for contributions to 401k plan accounts of w-2 employees of a self employed person is made on Schedule C as a deduction to self employment income, not the pub 560 calculation. The compensation of a self employed person is reduced by 1/2 of the seca tax before the contribution deduction is calculated. Pub 560 has a table that gives the max deduction percent for the percent contributed to the owners 401k contributions. DB contributions are calculated differently determine the max deductible contribution. My explanation was simplified because the nuances are all described in detail in pub 560 or in a text on pension plans.

Under the mrd rules bene would be required to pay a 50% excise tax if the MRD is not taken by Dec 31, 2015. the mrd is required under the terms of the plan.Dont see how the MRD can be deferred.

Short answer to this question is what do the agreements between pru, the plan and schwab provide regarding redemptions of securities held in a directed brokerage account? Is the directed brokerage agreement solely between the participant and Schwab or does the participant agree that his account balance can only be distributed by the plan administrator. Plan admin is responsible for making sure that distribution complies with all IRS rules to make sure it qualifies for rollover status and to make sure that there is proper reporting of the distribution to the IRS. Therefore Plan Admin will control the distribution process. Participant will not like it but that's the rule.

Since the plan informed participants that amounts contributed to the fund will be mapped on July 14 why not transfer the contributions made after June 12th to the new fund since that's what they expect will happen? The other option to consider is what would the plan have done with the contributions if it was aware that no new contributions could be contributed after June 12? Would the contributions have been put into the default option or held for the new fund? Real question is what is the fiduciary risk if the contributions after june 12 are put into new fund and it declines. would this be an impudent act? If the funds are placed in default investment option there is no risk of loss.

Is this what the participant wants to do? Assuming that the participant can get a DRO to transfer the amount of the final alimony payment to the ex spouse, the plan will establish a beneficiary account under the plan in the spouse's name. The transfer will be non taxable under IRC 1041 and the spouse will have all of the rights of beneficiary under the plan, which includes the right to take a distribution. The spouse can then elect to either receive the distribution or roll it over to her own IRA. If the distribution is received the spouse will pay ordinary income tax at her rate but there will be no 10% tax under 72t which is no different taxwise than if spouse received the payment as alimony. However by electing to transfer the funds by a DRO the employee loses the opportunity to deduct the alimony payment made to the spouse because once the funds are transferred to the spouse's account under the plan they become the spouse's property in a non taxable event. The employee will also have to pay for the cost of the QDRO. There is one big tax question for the participant. In order for the transfer of the pension funds to be non taxable to the spouse, under IRC 1041c the transfer must be made within 1 year after the marriage ceases or is related to the cessation of the marriage. If 1041c does not apply then the employee will have to pay income tax on the transfer. Need to consult a tax adviser to see if the transfer is non taxable.

The net profit is multiplied by .2 because 20% is max deduction for employer contributions to a 401k plan while the employee contributions are 100% deductible. Its complicated. to see how the IRS calculates the deduction go to IRS pub 560 P 25-26 for the calculation worksheet. Pub is found at irs.gov If you are self employed your income for 401k contributions is your net income from self employment which is determined on Schedule C of the 1040. Sked C income is your income from fees after taking all business expenses.

Didn't we just discuss the question of a QDRO requiring rollover of a spousal distribution to an IRA which was raised by Austin on June 2- See Weird QDRO question.

why not? Many IRA owners and plan participants name charities as their beneficiary as a charitable contribution to reduce estate tax although with the fed estate tax exemption of $5.4 M only .2% of taxpayers are subject to fed estate tax. Taxpayers who live in states with low estate exemptions such as NJ (675K) can benefit from charitable contributions. Although there is no estate tax deduction for death transfers to Non profits that are not charities, receipt of a distribution from a retirement plan or IRA is not taxable income to the non profit.

Issuing paper certificates is passe. Few public co issue paper certs. All my stocks are held in book entry form at the broker. Book entry is legal form of indicia of stock ownership. I have employer stock in a 401k plan that will be distributed in a taxable transaction via book entry to my brokerage account.

I may be old school but my understanding is that in order to terminate a plan, benefits of all participants must be distributed to them. period. Benefits of missing participants can be forefited under IRS regs, rolled over to an IRA or send to a state abandoned property fund. Participants assets can only be transferred to a qualified plan if there is a merger. Problem I have is if some participants assets are involuntary transferred to new plan will IRS say transferor plan was never terminated.

the 10% limitation on assignment and revocable third party designation are separate provisions.