mbozek

NJ imposes a 2% tax on S corp income. Maybe its different on the West Coast but commissions, fees, legal and professional fees and other business expenses for a self employed person who is not incorporated are deductible from gross compensation on the Schedule C (lines 10 and 17) to determine the net earnings from SE. In an S corp excessive deductions can be recharacterized as dividends by the IRS.

I dont know if there is a termination since the accounts are owned by the participants. Notice 98-4, B-3 states that an employer cannot make contributions to a SIMPLE IRA for any calander year if the employer maintains a qualified plan or SEP under which any of its employees receives an allocation of contributions or an increase in accrued benefits. Perhaps the better term is that the SIMPLE is suspended. It appears that the employer can maintain the SIMPLE without making any contributions after another retirement plan has been established.

Can some one quantify the difference in fees if the TPA processes contributions 2x a month instead of once a month?

Why do you think there is an advantage to being an S corp in establishing retirement plans. It seems that you are just paying an additional 1.5% in state tax since the max contribution to a DC retirement plan of an incorporated or unincorparted business is 42k. S Corp are used to protect the owners assets from law suits, not establish retirement plans. The 401k has advangages over a SEP in that loans of up to 50k are available and certain investments such as LI are available. However there is greater admin and paperwork requirements with a 401k plan, e.g. annual reports, IRS approval, etc. Also there may be different treatment of assets held by a 401k plan from IRAs in terms of creditors's claims under state law. You need to consult with a tax advisor on which plan is better for you.

Yes. Distributions of property will be taxed as taxable wages under IRC 83 to the extent that the FMV of the property exceeds the employee's basis. If employer distributes LI policy with a cash value of 100k, the employee will have 100k of taxable income less any employee contribuion s to the policy.

IRS determination letters only cover the form and not the operation of the plan. The deductibility of each employer's contribution is determined in accordance with compliance with IRS rules for that employer, e.g., benefits must not discriminate in favor of HCEs, etc. The employer needs to retain a tax advisor to determine the best course of action.

IRAs and retirement plan benefits are non probate assets which pass outside of the estate because the beneficaries are designated by the employee. Only exception is in community property states where each spouse is deemed to own 50% of IRA for generational transfers. Retirement plan benefits and IRAs would be divided under intestacy only if the employee's estate is the beneficiary. However, since the assets are owned by your parents, the bene designation can be changed by them at any time without your consent.

The funds are plan assets until cashed. However, the employees were taxed in the year the benefits were distributed, even if the checks were not cashed.

I thought only employees are covered under federal age discrimination laws, not retirees. Employers have discontinued retiree coverage without terminating coverage for active employees.

Max catch up from all plans is 3k. (Catch up is only avaialbe in SAR-SEP, not a SEP).

You need to retain a tax advisor to review the ownership of each IRA other than #3 which appears to be her own IRA. Spouse can roll Inherited IRAs to her own IRA to avoid MRD on her deceased husband's IRAs.

If the employer was not eligible to adopt a 401k plan then the contributions could never be deferred from taxable income and would be taxed in the year the contributions were made. If the taxpayer files a return, the s/l for collecting income tax is generally 3 yrs from the date the tax return is due, e.g., April 15, 2000 for contributions made in 1996.

The PT only applies to the extent the contribution is necessary to satisfy a funding obligation of the plan. A contribution of property in excess of amounts needed to meet the funding requirements is permissible if the general standards of fiduciary conduct are met. See Dol Interpretive Bulletin 94-3

Whose life are the benefits paid over? If the APs 50% is paid over the life of the ee the benefit will cease upon the ees death, unless the AP recieves the surviving spouse's annuity after the death of the ee.

Why not ask the broker to confirm that the govt maintains a 457 plan? 457 assets can be seized by creditors of the ee (but not creditors of the govt) if state law permits- need to retain counsel to review st. law.

There are two separate issues : 1) Your father'r rights to the stock under US law and 2) the heirs rights to 50% of the stock under the laws of country where your mother died. These are parallel worlds and you need legal advice on the laws of each jursidicton. The RI company will most likely ask a fed ct to decide who owns the stock if your father attempts to enforce his rights to sell the shares.

VCP would restore the pre tax nature of the amounts deferred before the s/l expired (2002) which are now deemed a/t. Since the IRS doesnt know if a govt has adopted a 401k plan and assuming that the plan is corrected in 2005, is VCP necessary if the plan treats all distributions under the plan as pre tax? The only benefit to VCP appears to be that it avoids audit cap penalities. The interesting Q is whether the plan could distribute all the deferrals and earnings on the 401k deferrals prior to 05 as after tax amounts after the s/l has expired. Final Q- Are you sure this is a govt entity and not a NP.

I dont know if reduction due to participation in a CB plan would be deemed employer action which triggers a partial termination, since the er did not initiate the elimination of the employees under the terms of the CB agreement. Under fed labor law union can bargain for benefits for its members with employer, including right to have benefits provided in separate plan.

max deduction to SEP is 2.4k (13.4 -1.3)= 12.1 x.20.SEP can be established up to date for filing tax return, including extensions. Max deduction to SIMPLE is 10k. Dont think she can set up a simple for 04. They can contribute to deductible IRAs for 04 with CDs if their AGI is less than 70k. Assuming their gross income in 05 is 100k (80+13.4 + 6.6 in investment income) they could contribute 14k to 401k, 10k to SIMPLE and 3k each to IRAs which would come from the taxable investments reducing the AGI to 70k. For 04 They could make Roth IRA contributions instead of deductible IRA with the CDS or savings since these amounts already are after tax $ and shelter the income from taxes. The Roths could be invested in dividend paying stocks paying 4-5%.

Convert it to a PS plan and designate ee contributions as employer pick up under 414(h). Then wait 3 yrs for statute of limitations to expire for taxation of employee contributions under 401k. There is no way to fix the 401k contributions retroactivey.

A married taxpayer can deduct contributions to both a 401K plan and IRA if the AGI does not exceed 65k (04) or 70K (05). Can he afford 16k in contributons in 04? A married employee with 100k in salary and no other taxable income can reduce taxable income for 13k in 401k, 8k for 125/129 plan, 3k each for cap losses, IRA and college tuition.

There is no simple answer. If he declares bkcy he can exclude non ERISA retirement assets under the fed bkcy law (522) or use the exemptions permitted under state law if state law permits opting out of the fed exemptions. 522 permits exemption for pension assets and IRAs reasonably necessary for his support. While State law may protect all retirement plan assets from creditors, his interest in other assets may not be protected. If his pension plan is subject to ERISA because he has CL employees then all of his benefits are exempt from creditors in bkcy regardles of whether he elects the fed or state exemptions. If the DR is liable for malpractice but does not declare bkcy then most state laws protect retirement benefits and IRAs from creditors claims.

I dont know why a competent attorney would need to make an argument on disparate impact (which is subject to the defense that the discrimination is based on reasonable factors other than age) when the CB formula itself demonstrates disparate treatment of every employee over 21 because the accrued benefit at NRA is reduced on account of an increase in age. Counsel can include disparate impact as separate claim in the event that disparate treatement is denied but the claim can be rejected by demonstrating non age factors (e.g., the need to reduce costs for the plan). Also I dont know whther a claim of age discrimination in a pension plan can be brought under the ADEA. The CB claims of older workers in Onan and IBM have been made under ERISA.

The best protection for any professional who owns a business is to have all retirement plan assets in a qualified plan subject to ERISA, e.g., one or more common law employees, because no assets can be seized by any creditor. The next option is to live a state which protects retirement plan assets and IRAs from all creditors claims (NJ). In some states (NY) assets held in an annuity contract are exempt from creditors claims against the owner. There are ct decisions which have protected retirement plan assets of owners in non ERISA plans where the trust contains a spendthrift provision which under state law protects the assets from creditors claims. However the owner cannot be the sole trustee of the trust. The final option is to rely on the Fed Bankruptcy exemption under Sect. 522 reviewed in the Rousey decision which protects only those retirement assets necessary for the reasonable support of the debtor. The proposed Fed bkcy revisions would increase protection of retirement plan assets. The above is only general advice and employers need to consult with counsel to review the applicable state law if the plan is not subject to ERISA.

Kirk: I agree about the kid- but there may be some state/local gov. child protection agency that wants to make life difficult for the plan admin.