mbozek

If the plan does not match catchups then the employee has no right to the match on the catch up and the catchup match should be removed from his account.

The accepted definiton for distribution is when the payor gives up dominion and control of the check, e.g. drops it in the mail. This definition worked well when checks were were written by hand, noted in a ledger and manually postmarked by the PO. Today checks are printed and dated by a computer, inserted into envelopes by machines, delivered to the PO by outside vendors after 5pm and mailed without postmarks which makes the distribution date difficult to determine. Many businesses pre date checks for the approximate date they will be mailed out, the date the funds will be available for payment or the date the checks were approved. While the distribution date has not changed the interpretation of when this event occurs has become more complex because of technology.

If you convert from a 401k to a Roth you should use other funds to pay your fed taxes and not use the 401k amounts. The amount of taxes is a lost opportunity cost over your life expectancy since you will lose the ability to invest the amounts used to pay taxes. The primary advantage of a Roth account is its ability to generate tax free income until you die. At your age this could be 20-25 years or longer if your spouse is your beneficiary. If you plan on using the Roth for your retirement it will not be a good idea to convert to a Roth because of the amount of taxes that will be paid on the conversion. You need to consult with a tax professional or financial planner to see it makes sense to convert to a roth and not take any distribution during your life time.

Boards can delegate authority to sign instruments to corporate officers or one member of the board. Alternatively a corporate officer can sign on behalf of the corporation subject to ratification by the board at a later date. Plan amendment is not required where state law permits delegation of authority to act.

I thought that under the tax law the distribution date is the date the check is mailed to the participant. Under a risk/reward analysis the issue is whether the client should issue the check with a current date and gross up the ee for the 10% penalty tax versus backdating the check. Paying the penalty tax is less risky than paying for advice on how to avoid it.

I thought IRC 401k(8) and reg 401(k)-1(f)(4) permit distribution for up to 12 months after the close of the plan yr. Q-what does the plan say about return of excess contributions? Shouldnt that control?

Maybe but under IRC 1366 doesnt comp in excess of S corps owners K-1 income becomes a loss which is not deductible once it exceeds the owners basis in the S-Corp? Otherwise an S-Corp becomes an unlimited tax shelter for S-Corp owners who maintain a DB plan where deductible contributions exceed K-1 income and the lossses are deductible against taxable income of the owner on the 1040.

In a 403b anuity there is no ownership of plan assets by a trust. The Ins co holds the assets for the employee under the terms of the contract. Under state ins law each employee receives a certificate of insurabily under the contract which provides their rights to benefits under the contract. The employer does not own the assets in the contract. The Employer has a fiduciary duty to select invesmtents but cant force the employee to transfer funds to the new insurer if the contract reserves such right to the employee. If plan fids cannot move assets w/out participant's consent I dont see how they have investment descretion over assets under ERISA any more than they would be liable for investment results under 404©.

B: I dont understand your reponse. I will defer to the accountants but dont think that an S-Corp can pass through deductions for contributions to a retirement plan that exceed the amount of W-2 income paid by the S Corp and secondly under IRC 1366 the deduction for losses is limited to the amount of the S Corp owner's basis in the business. If The S corp owner contributed 1k in cash in return for 100% of the stock and the loss is 3k, the max loss passed through to the owner's 1040 is 1k.

Most employers delegate authority to sign welfare plan contracts/amendments to corporate officers without any oversight by the board because board members dont consider employee benefit plans to be important enough to review in the limited amount of time allowed for board meetings. Pension plan matters are delegated to corp officers unless there is a material effect on employer's financial condition.

The estate should write a check to the spouse as the bene and deduct the payment from the income of the estate. Only other option is to return the payment to the plan and have the plan issue a revised 1099.

I was responding to Wmyers post which took the position that a S-corp owner could contribute 23k to a retirement plan on 20k of income. My comment was focused on what tax benefit would the owner recieve if the deductible contributions exceed the max wages paid. I know Scorp owners with 20k or more in income who have SEPs because the Scorp is not their day job.

For deduction purposes the funds must be contaributed by the date for filing the tax return with extensions. Otherwides it is deductible in the year contributed. For 415 purposes the funds must be contributed no later than 30 days after the latest date for filing the return with extensions.

What advantage does an employee get by making contributions which exceed 100% of pay? An ee who has 20k in taxable income and contributes 23K to retirement plans loses 3k in deductible tax benefits. Most employees in the 15% tax bracket would be better off contributing 3k to a roth than to a deductible retirement plan. the 15% tax bracket is available to a married couple with 2 dependents with up to 80k in taxable income.

IRC 403(b)(1)© provides that amounts contributed under 403(b) must be nonforfeitable. Need to look at contract to see who has the right to invest amounts that are not vested, if there are such amounts.

A 403(b) plan has no assets held in trust- all of the assets held in the group annuity are owned by the paarticipants. The annuity contract is a binding contract between the employer and the insurance company. If the participants refuse to approve transfer their funds I dont see how there is any liability under the prudent investor rule since the employer has no investment discretion over the funds owned by the employee.

Contributions to a SIMPLE are included in the 402(g) limit of 13k with a 1500 catch up if over 50. SEE IRS Pub 560 P10.

There are two possible outcomes if the plan is terminated: a) it is a SH plan for the short plan yr if the plan is terminated in accordance with the rules for terminating a SH plan b) is not a SH plan in the yr of termination but can qualify under the general rules for 401k plans if the plan passes the ADP test for the short plan yr. Under 401(k)(12)(A) the only consequence of not meeting the SH provisions is that the plan does not automaticially pass the ADP test, not that the plan is disqualfied under 401(k). There is a separate Q of whether the ees have an enforcable right to the SH contributions for the rest of the yr which would be subject to the right of the ER to terminate or amend the terms of the plan.

The IRS issued a PLR last year staing that a Fed Charter CU cannot adopt a 457 plan because it is a fed instrumentality (even though the national CU association had previously received advice that Fed CUs could establish 457 plans). The IRS is working on a response to this issue. However, under the IRC a fed Credit Union could adopt a non qual DC plan which has the characteristics of a 457(b) plan, (e.g. 14K limit on deferrals) and IRC 409A or could establish a NQDC plan adopted by profit making employers subject to IRC 409A but not 457.

A keogh is a qualified plan. A participant in a keogh plan can rollover assets from to the 403(b) plan if the payment period is less than 10 yrs.

Under Dol regs the plan can charge the accounts of terminated participants for plan admin costs to offset the cost of keeping particpants in the plan. The installation of rollover accounts is not free -there is set up charge of 250-1000 to establish the program and a charge for each particpant's account that is transferred to a rollover account. In most states the account will escheat to the state in 3-5 years if there is no activity by the participant which is a big reason why major providers like fidelity do not want rollover accounts. If the participant in a qual plan cannot be located the account can be forfeited and used for plan purposes subject to restoration if the missing participant makes a claim for benefits.

403(b) plans have many advantages over a 401k plan including simplifed 5500 filing (only answering Q 1-5, & 8) no irs determination letter or ADP testing. I dont understand how reporting can be the same for a 403(b) plans and 401k plans. Under current law 403(b) assets cannot be transferred to a 401k plan nor can a 403b be restated into a 40lk plan because a 403(b) plan is not a qualfie dplan.

See IRS publication 575, P 28 available at irs.gov.

Issuing determination letters began with the 1942 tax act which added the predecessor provisions to IRC 401(a)(2)-(6) as requirements for qualified plans.

There is a 30% withholding tax on the taxable portion of the IRA sent to a recipeint who resides outside of the US, even if the recipient is a US citizen. See IRS publication 590 P 39, available at irs.gov. You need to check with the IRA custodian for the requirements for tax withholding.