mbozek

The proper platform with the terms you have described is a discretonary PS plan which provides only a lump sum distributions or a 403(b) plan with a discretionary contribution provided the client is a 501©(3) entity. Both plans would permit the employee to self direct investments. The 403(b)(7) plan is a simplier program because no determination letter is required and 5500 filing is easier to complete. MP plan is not recommended because of the spousal consent requirement and the need to have an annuity as the normal form of benefit as well as a sked B, etc.

I dont know how this is technically accurate. The only change on 1/1/11 is that there will be no authorization to make Roth 401k deferrals for tax yrs beginning 1/1/11- it will not repeal the tax benefits for Roth accounts established prior to that date.

If the payment was reported on the 1099-R in 2002 then the employee would have been taxed on the distribution and the taxes withheld would have been credited in against those owed for that year even if the check was not cashed. I dont see how signing over the check to the er in 2004 changes the fact that the ee paid taxes on the distribution in 2002. The failure to give the check to the ee is a violation of ERISA which can be rectified by a distributon to the particpant with accumulated interest. The employee could argue that there was no distributon in 02 because the check was never received but the ee would have to file a refund request on account of the fact that there was no distribution. The plan admin should issue a corrected 1099 showing there was no distributon in 02. The employee needs to consult a tax advisor.

Congress does not retroactively repeal income tax benefits that have been permitted under existing law. e.g., 409A effects deferrals beginning 2005, any more than there would be retroactive repeal of the increase in benefit limits in DB plans under 415. As Tom noted any change would grandfather Roth deferrals made through 2010 as was done when Congress eliminated universal IRA deductions in 1986.

No. The account is now in the bene name since a bene can hold assets under the plan. There is no such thing as an inherited retirement plan. Plan can cash out bene interest without his consent regardless of amount.

There was a Supreme Ct decision involving Circuit City (532 US 105) which upheld a mandatory arbitration provision regarding employment matters in an employment agreement that all employees were required to sign on the grounds that arbitration was permitted under the Federal Arbitration Act. Since ERISA does not preempt any other fed law, an employer can impose arbitration under the federal arbitration act to employee benefits. The question is whether the employee has to agree to mandatory arbitration as a condition of employment when hired.

I thought that a K-1 includes the partner's earnings from the pship before deduction of the deferral to the 401k plan and the amount of the deferral. The partner enters the net earnings from SE on the 1040 and deducts the deferral on line 30 of the 1040. There is no place for a partner to deduct his contribution to a retirement plan on the NJ 1040.

A trustee can only be a fiduciary for a duty that the trustee has assumed, e.g, investing plan assets, because a fiduciary duty is a voluntary relationship. A trustee does not assume a fiduciary duty to collect contributions because the trustee has agreed to hold assets for a plan where the trustee has disclaimed any responsibily to collect contributions.

K- why is there a distinction between a recordkeeper and trustee? Institutonal trustees who hold plan assets disclaim any responsibility to collect contributions under the terms of the agreement with the plan sponsor. The trustee would be liable for the failure to collect contributions only if the plan or trust agreement requires that the trustee collect delinquent contributions.

What does plan document provide? IRS doesnt care who receives the RMD. As a practical matter beneficary suceeds to all rights of decedent and should apply for rollover and RMD payment.

Employee has three separate platforms for tax deferred contributions: Max contribution to 403(b) and SEP, 401(k) or HR-10 is 42k +4k catch up Employer can contribute up to 42k in 401(a) plan Employee can contribute 14k to NP 457(b) plan +457 catch up

The plan is still subject to the IRC. The plan is usually fixed to conform to the IRC after the violation is discovered without any consequences to employees. The NJ state pension fund got into trouble with the IRS because one year NJ removed plan assets to balance its budget. The IRS required that NJ add the exclusive benefit rule and promise not to do it again. NYC got caught for the same violation last year with the same result. A few years ago the RI state retirement plan got into trouble with the IRS because it permitted benefits in excess of the 415 limits.

The date that the contributions were made to the plan is not relevant- The issue is When were the contributions allocated to the participant's accounts under the plan? Once contributions are allocated to the account they cannot be removed under the cutback rule. While the IRS position is that the allocation formula cannot be changed after the close of the year, there is a ct case which holds that contributions are not subject to the cutback rule until they are allocated to participants accounts under the terms of the plan.

NO- My post distinguished between the IRS position on the scope of authority for a personal rep and the language of the tax law as interpretated by the courts regarding rollovers. A taxpayer who disagrees with an IRS position can always bring an action in fed ct or tax court rule in his favor. My own view is that a personal rep who signs the taxpayers tax return for the year of death should be able to claim the tax deduction for the IRA. The problem is how the personal rep can make a contribution to the IRA since the funds would come from assets of the estate, not the decedent. I dont know if the surviving spouse could write a check from her own checking account to the decedent's IRA. One possible solution would be for the surviving spouse who is not a participant in a retirement plan to contribute to her own IRA and have the deduction claimed on the joint return (assuming that AGI does not exceed 150k).

The IRS publishes a list of approved custodians. You can also ask the custodian for a copy of its approval as custodian from the IRS.

In order to receive a w-2 a person must perform services as an employee and the comp paid must be reasonable. How do you determine that some services performed by a partner are the services of an employee and the comp is reasonable? Is there a written employment agreement? Partnerships usually have written agrements which may prevent a partner from performing services in any capacity other than as an owner. I thought there has ben previous discussion that the IRS does not allow a partner to receive a W-2 and K-1 from the same entity except where there is a change of employment status in a tax year. I dont understand how a practice that is against everything ever written would be accepted by the IRS because it has become a common practice.

A 403(a) plan is a qualified plan funded by annuity contracts and the IRS will issue a favorable determination letter. Did the cleint recieve such a letter? 403(b) annuities are only available to employees of organizations exempt from tax under IRC 501©(3) or public schools. Is this client such an entity? While a 403(b) plan can be terminated, the annuities are not cashed out. Sounds like your client needs to retain tax counsel to figure out what happened.

Why not skip the contribution for 05 which will make it even without violating the cutaback rule. ( Cant reduce the account of a participant by plan amendment after contribution has been allocated to account)

? the deferred comp is taken into account in the taxable year in which deferred. In other words the deferral must be taken from compensation by Dec 31st to count for the taxable yr. Its no different than deferrals to a 401k plan.

457(b) limt for 05 is 14k which is in addition to amts contributed under a 401k plan (18k if ee over 50). Contribution to 457b for 04 had to be made by 12/31/04.

The downsides to a Roth are: 1. Lack of liquidity because earnings in excess of contributions are subject to a 10%penalty for early withdrawal. Funds invested in a regular investment account are subject to ordinary income tax or cap gains at a 5/15% rate when sold. 2. Loss of tax deduction on the contribution increases the cost. E.g., taxpayer in 20% fed/state bracket will have an incremential cost of 25% on roth contribution because of lack of tax deduction. eg. need $125 in wages to contribute $100 to roth after taxes are paid. 3. Roth investments are limited to permissible investments for IRAs and exclude life insurance, options, futures, leveraged Limited partnerships and odd securities that are not publicaly traded. While Congress can change the taxation of Roth accounts it highly unlikely that it would tax roth account balances attributable to contributions which had been taxed at inception because Congress is not inclined to upset the expectations of taxpayers who have been promised a tax benefit. E.g., when the universal IRA was repealed in 1986, Congress allowed all amounts deferred before the change to remain tax deferred. The recent changes in taxation of NQDC only applies to amounts deferred after 12/31/04.

Paying claims for medicial or health benefits of an employee would be the doing of an insurance business under most state laws regulating insurance unless exempted. ERISA preempts state insurance laws from regulating a self funded single employer health or disability plan as an insurance company. There is no similar protection from regulation under state insurance laws for non ERISA plans.

EF This case will be determined by a federal court, not a CA state ct interpretating the First amendment to the US constitution. If the gvt cant impose a requirement on a church which violates its fundimental beliefs (e.g., require a hospital operated by the Catholic church to perform abortions), I dont think a state law could require that a church provide equal benefits to domestic partners.

The IRS takes the positon that no contribution can be made after the IRA owners death because the contribution is personal to the owner and the owner's right to contribute ceases at death. However, under case law and the IRC a personal representative of a taxpayer has authority to take any action that a taxpayer could take under the IRC, e.g., rollover a lump sum distribution paid to decedent within 60 days of the date of the distribution (Gunther v. U.S.).

The determination of when termination occurs for benefit purposes is dependent upon the customs and practices of the employer which in turn will be influenced by termination of other benefits rights, e.g., wc, health care etc, because the employer is not going to publish a definition of when termination occurs. If an employee resigns effective Dec 30th, the employment realtionship ends on that date and the employee will not be employed on Dec 31 or be eligible for holiday pay for Jan 1 even if there is accumulated vacation pay due the employee. If the employee turns in a resignation on Dec 30th to be effective in two weeks after taking vacation the individual will be considered employed until Jan 13th. A plan can count a period during which an employee receives severance pay for benefits purposes but is not required to do so.