mbozek

In RD Weeldreyer, 86 TCM 622 and R. Schmidt, 86 TCM 631 (2003) Tax ct held that reimbursement of employee medical expenses was excluded from employee's income under IRC 105/106 and deductible by employer under IRC 162. No mention was made of application of 105(h) to reimbursements. See also RW Tschetter 86 TCM 639 and Waterfall Farms, 68 TCM 648.

230 does not apply to materials that state tax benefits permitted under the tax law, e.g., max deferral under 401k is $14,000. Second 230 only applies to opinions by persons authorized to practice before the IRS, e.g., attorneys, CPAs, actuaries and enrolled agents.

Why do you think that the benefits would be taxable? There are recent cases where shareholders of personal corps have been permitted to exclude medical expenses paid by their employers under a written plan approved by the corporation.

While I agree that notice should be provided, I disagree that it will deter lawsuits against trustees. Participants who bring such lawsuits are usually tax protesters or persons who believe that the income tax cannot be enforced if a person declines to pay it, so they are going to sue the fiduciary regardless of whether notice is provided. In any event the IRS will provide the participant with advance notice that the assets will be seized to pay taxes.

As someone once said this is getting curiouser and curiouser. Since govt plans are exempt from ERISA there can be no claim for benefits by employees under the cutaback rules. So the issue is whether the plan was disqualified because it failed to have the termination provision required by IRC 401(a)(7). I dont know the anwser to that question but I question why it needs to be answered if the s/l for collecting taxes on the ees in the year the plan was disqualfied has expired. If the plan was corrected in a later yr then why is there an issue now other than whether the employees have non taxable benefits under the plan. Please explain who would have a viable claim to such a latent violation of the tax law. Do you think that a participant would have a claim under state law for a violation of the IRC cutback rule by a goverment plan?

It is highly unusual to have a 403(b) plan combined with a 401(a) plan in the same document. I thought the IRS discouraged such a practice. Which makes me ask -Does this plan have a favorable determination letter? The better practice is to separate the two plans into separate documents with separate funds. I dont know of any providers that would administer a combined plan Q2- are the same funding vehicles (mutual funds or annuity contracts) used to receive contributions for both the qualfied plan and the 403(b) plan? I dont understand the reference to universal eligiblity. A 403(b) plan can be administered for all eligible employees in a separate document from the qualfied plan. Your cleint needs to get processonal tax advice.

There are three ways to provide additional comp in lieu of health benefits: 1. pay additional cash to a person who is eligible for a 125 plan and declines to contribute. 2. Pay additional cash to an employee who is not eligible to participate in the 125 plan ,e,g, because he is covered by other ins. 3. If the plan does not have a 125 plan but the er pays 100% for health ins, the employer can pay additonal cash to a new employee who agrees not to participate in the health plan as a condition of employment. The employer could also reimburse the employee for the premium the employee pays for the health ins. on a non taxable basis under Rev. Rul 61-146 instead of increasing the ee's taxable compensation.

Is your issue that a govt plan does not contain a provision that requires 100% vesting on termination? Under many state laws, e.g., NY, benefits under a govt plan cannot be reduced by future amendments to the plan. Did the IRS issue a determination letter after 9/1/74? There has been little enforcement of the qualfied plan rules by the IRS on govt plans (RI being the exception beccause of its failure to limita benfits under 415). If the plan received a determination letter without the 401(a)(7) rule I dont see how the IRS could enforce the 411 rules against the plan.

411(e) exempted govt plans from the application of the ERISA amendments to the IRC. Dont know what you mean by remedial amenment period since govt plans are exempt from ERISA and under IRC 401(a)(5)(G) are exempt from nondiscrimination and participation requirements for Q plans. Pre ERISA the only forfeiture rules were the requirement that benefits had to be 100% vested when plan terminated, reg. 1.401-6 and that forfeitures must be used to reduce er contributions under the plan, 1.401-7.

On what part of the gift program would there be constructive receipt? Most gift programs give employees gifts for reaching a certain goal at which point the gift becomes taxable unless exempt under the fringe benefit rules. Awarding points toward a gift certificate would not be taxable because it has no economic value. A few years ago the IRS issued a ruling that taxed employees on frequent flyer miles from employer paid tickets which were eligible for an upgrade or a free flight. The ruling was revoked a day after an article on the ruling appeared in the WSJ.

What is Execucare's opinon, after all its their product?

Brokerages are not banks and legally cannot provide banking services for clients. Even banks do not want checking accounts for occasional use customers, for example irrevocable trusts which hold life insurance policies and write one check a year to the ins co. cannot find a bank that will open a checking account in the name of the trust. If you are paying $5-10 a trade dont expect to get ancillary services.

Stretch IRA is a marketing concept used by fund families and brokerages to gather assets for inherited IRAs. It doesnt exist as an IRS rule. Under the regs the distribution period depends on whether the IRA owner dies before or after 70 1/2 and whether contingent benficaries were designated.

Doesnt the plan state when the when the value is determined, e.g, as of the date of distribution? Using a valuation date that is not marked to market on the date of distribution creates problems in DC plans.

The last place to get advice on whether to take out a plan loan are financial columnists who act like they are experts on all things which they are not. While a plan loan should be used only when other sources of credit are unavailable (e.g., home equity loan) it is not a bad idea if : You cut the rate of interest you are paying on a loan since most plan loans charge 7% for a max of 5 years compared to 18%+ for credit card loans. The risk of losing your job is minimal or you can activate a line of credit if you have to pay off the plan loan. Paying off a plan loan even for a few years is better than paying exhorbant cc interest rates and if you have go to back to the cc card loan you will have a lower balance. Paying back the loan with AT dollars is no different than paying off any other loan e.g., home mortgage. The principal will always be repaid with AT dollars if you have to use taxable income to pay it off (only exception is if you use municipal bond income to repay the loan). Since you did not pay tax on the principal you are not paying income tax on the repayment. The interest is AT under the tax law which is why it is preferable to borrow from a home equity account first but this is small distavantage since rates are low and most taxpayers are in the 15% bracket which results in only a 1% tax benefit (.15x 7) on tax deductible interest. The loan interest is paid back to your account which guarantees a 7% return. Historically equity markets have averaged 8-10% over long terms of 10 years or more. 7% compares favorably with a fixed rate of return on bonds which every diversified portfolio should invest in. If you take out a loan from your 401k plan you should rebalance your investments to reduce fixed income and cash and reallocate a larger % to equities since the loan is performing the role of a bond fund. Dont be deceived by the roth IRA because you paying your taxes up front on the contribution and losing the opportunity cost to invest on the amount of taxes paid, eg. $1000 in tax @8% for 20 years is $4661 in lost investment return.

Dollar cost averaging is a technique to average the purchase price of investments over a time period to aviod buying at a peak price since no one can predict the top or the bottom of the market. Dollar cost averaging implies purchasing assets over a period of time and involves diversifing investments into different asset classes, such as large cap equities, small caps, equity index funds, stable value funds, bond funds, international funds, RE, etc. so as to avoid buying a single class of assets at a peak price. The alternatives to dollar cost averaging are market timing and stock picking which according to studies of investment returns account for only a small portion of the gains on investments.

Plan admin should tell both parties that no benefits will be paid out until this issue is resolved and they agree in writing to the division of the benefits. This will require that they agree or pay attorney's fees that will arise out of a lawsuit.

Two comments-1. Under ERISA the plan is a separate legal entity from the employer for benfit purposes. 2. State laws are preempted as they apply to an ERISA plan.

Ok try IRC 401(k)(3)(A). Or I could prepare a tax opinion for you.

Rev. Rul 80-155 requires annual valuation of assets in a DC plan on a consistent basis order to determine the value of participants accounts. The only exceptions are LI policies and mutual funds.

See IRS Publication 560 available @ irs.gov P 11-15 for description of employers who can establish a qualified plan such as a self employed person (P11). A qualified plan must be available to a non discriminatory group of employees. If the SE person is the only employee of the business, then the plan cover a nondiscriminatory group. Why do you need legislation?

Isnt there a question of whether the plan has minimum contacts in a state which would require compliance with state income tax withholding laws? If a Plan is administered in NY and assets are held in a NY trust why would the plan have to withhold state tax for a participant who lives in MA? The retiree would be required to file estimated taxes with MA.

Taxation of distributions from a taxable trust are governed by complex rules for trust taxation since the trust is a conduit for income paid out. Payments from the trust are taxed in 4 categories, ordinary income, capital gains, tax exempt income and principal. However there are complex accounting rules which govern which bucket a payment is allocted to. You need a tax accountant to determine the classification of payments from a taxable trust.

How much do you want to contribute? EE 403(b) salary reduction is 14k (18K for over 50) plus 14k for 457b plan. 457(f) can provide for additional deferred comp which is subject to substantial risk of forfeiture. However total benefits must not be subject to excess benefits tax under IRC 4958. Only members of the top hat group can participate in the 457 plans. You need to retain competent tax counsel to advise you. Substantial risk of forfeiture will be defined under IRS regs to be issued later this year.

Isnt the unstated intent of the DOL position to allow plans to avoid having to use the cumbersome claim procedures for resolving issues pertaining to division of benefit in divorce since the plan is not disputing whether a benefit is to be paid but only how it is to be divided. Requiring that plans use the claim procedures and the formalistic notification requirements under ERISA 503 to resolve a proposed DRO is like using a shot gun to kill an ant. There may be appropriate reasons to use the claims procedures in a divorce situation such as when there are no benefits payable to the employee under the plan to which DRO has been issued. The plan Admin could treat the AP as a beneficary with a colorable claim for benefits and issue a denial as an alternative to rejecting the DRO.