mbozek

There are constitutional prohibitions on state laws which would impose requirements that violate fundimental tenants of a Church's teachings, e.g., state insurance law cannot require a Catholic hospital to perform abortions. A church which believes marriage between men and women to be the only form of realtionship it approves of cannot be required to offer equal benefits to domestic partners under state law because imposing such a law would violate the first amendment.

Termination of employment is not regulated by the by the IRS or plan because it is a matter of contract between the employer and employee as to when employment terminates. The agreement can be terminated immediately, e.g, when employee says I am quitting today. Some employees notify the employer of their last day of work and then take their vacation time before they terminate if the employer's policy permits. The determination of when employment terminates for retirement plan purposes is dependent upon the customs and practices of the employer regarding the termination of the relationship, e.g., when worker's comp coverage, health care, disability, etc. ends or when one party ends the realtionship, -"your fired".

PP- my post was a response to the facts of the original post where it was stated that the client could not afford 25k cost of contributions for the 3 employees which eliminates any means of fixing the problem under IRS rules. You dont seem to have the advocacy skills necessary to advise clients who have difficult situations and should not be critical of others who can understand the issues and give risk oriented advice. I think your reference to fradulent advice is inaccurate- giving a client an accurate analysis of the risk for non compliance and the limitations on liability is the essence of being a professional advisor. I did not suggest that you give such advice but the client is entitled to know what the options and risks are in order to make an informed decision. I will no longer respond to any of your posts.

That position is abolutely ridiculous for an HR-10 plan with only 1 participant who doesnt know until the tax return is filed how much he can afford as a contribution and has 9 1/2 months to determine the amount of the contribution. Have you advised a self employed person that they must have a definite allocation formula in their discretionary PS plan and cant change it after year end when they know how much their income is? The TAM prohibited a reducton of amounts to participant's accounts because of a change in the allocaton formula after year end which is different than making a contribution after year end which does not reduce any allocation that is required under the plan as of year end. In other words an HR-10 plan can have an allocation formula for its sole participant that will credit contributions made after year end as a allocation as of year end . The owner would have the discretion not to make such a contribution.

Why go though the trouble/cost of terminating the seller's 401k plan instead of merging the plan with the buyers 401k plan and then charging the terminated participants an admin fee for the cost maintaining their accounts on a cost neutral basis if the funds are not withdrawn? No termination expense, no 5500, etc. The forfeitures in the sellers plan can be allocated among all the participants in the buyers plan or used to reduce future contributions.

RR 76-28 " A payment made after the close of a taxable year.. shall be considered to be on account of the preceeding taxable year if... (b) either of the following conditions are satisfied ... (2) the employer claims such payment as a deduction on his tax return for such preceeding taxable year" Requiring an allocation formula in a discretionay HR-10 plan is silly because the Self Eemplyer Person is the only person covered by the plan, contributions are discretionary, there are no corporate formalities to be observed and the allocation is determined when the contribution is made. I know of several PS plans approved by the IRS with discretionary contributions which describe the formula as a nondiscriminatory allocation among the plan participants as determined by the plan sponsor. The requirement of an allocation formual in a discretionary PS plan can be met by the formality of having a contribution rate of 1% which can be changed at any time by amendment. The allocation is pre determined and can be changed by amendment.

If the plan permits adoption by a sucessor employer then you need to have the corp adopt the plan and change the sponsor to denote the name of the corp. Need to notify the trustee/custodian of the change.

There is a difference between what the regs require and what has been approved. There are many IRS approved PS plans including ptypes, that do not require any predetermined formulas, eg. HR10 plans where there is only an owner. It is also contradictory to RR 76-28 which allows a deduction without a written affirmation of how the contribution is allocated. It is oxmornic to require a predetermined formula for a plan where contributions are discretionary on a yearly basis other to have than a 0% contribution formula.

There is no required date for making contributions to a PS plan since the 412 rules dont apply. Contributon not made by 30 days after tax return is not counted under 415 limit in year allocated. Contribution not made be date for filing tax return with extension is deductible in year made. ER could make contribution in later year to claim deduction. Need to see when plan requires TH contribution to be made by er.

LD- there are many PS plans for self employed persons that do not require a definite predetermined formulas. The owner just writes a check for the contribution that is claimed as a deduction. Requiring a predetermined formulas in a PS plan is quite silly since an er can establish a plan with a formula of 0% and contribute a different amount.

I thought that the definitely determinable benefit rule was satisfied when the er determined/allocated the amount of the contribution e.g., 5% of covererd comp to 205k. For example, discretionary PS plans for for self employed persons dont require a formula and the owner makes a contribution to the plan by the date for filing the tax return which complies with RR 76-28.

If the owner cannot make the required contribution do to a lack of funds then the only course of action is to terminate the plan without making any contribution and take your chances that the IRS will not audit the plan before the s/l expires.

Star- you need to retain counsel for those questions. The determination of what assets are includible in divorce actions depends on state law. In most states an IRA that is not inherited is considered part of the assets of marital estate for divorce.

Gary - the tax law has multiple examples how taxpayers can take deductions for amounts that are not deductible under another provision of the tax law- e.g, self employed person can take deduction for health ins premium payments to extent permited under 162(l). Excess health ins premiums that are not deductible under 162(l) are deductible to extent permitted under 213. If the employer is not eligible to establish a SIMPLE at inception then the amounts that are contributed under the SIMPLE are not deferred and will be taxed as wages for the year contributed and reported on the w-2. The only question is whether the employee can leave the assets in the IRA that was supposed to hold the SIMPLE plan contributions, deduct the max amt permitted for IRAs in 04 and withdraw the excess before 4/15 or whether the ee must withdraw the entire amount in the SIMPLE IRA account and open an IRA to claim a deduction for 04. A- I dont understand your reference to er being subject to 408p and not the ee because under 408(p) SIMPLE contributions are made to an IRA which are not inclcuded in the employees's income. If the contributions are not excluded from the employee's income under 408(p) then they are included as wages on the w-2 and the ee can claim a deduction for an IRA contribution under 408(a).

Protection of IRA assets are subject to two separate sets of laws: state laws which may protect the IRA from creditors (NY, NJ) and federal bankruptcy law. The US supreme ct will issue a decision later this year as to whether IRA assets are exempt from the claims of creditors under fed. bankruptcy law. IRA assets are subject to division under state divorce laws. Designating anther person as the bene does not effect whether the assets are subject to claim of creditors /wife because the assets are the property of the the IRA owner.

The contributions cant be made to a SIMPLE if the employer is ineligible to maintain a SIMPLE. Therefore the contributions are considered wages included in the employee's gross income which makes them eligible for a deductible IRA contribution if contributed to an IRA by 4/15. It is a principle of tax law that a taxpayer who is denied a deduction under one section of the IRC ( 408p) can take the deduction under another section for which he is eligible e.g., (408a).

The risk of not getting paid for coverage is the price of switching systems to payment at the end of the month. The simplest solution is to return to withholding payments at the beginning of the month. Whether your employer can recover the health care premiums from the employee's accrued vacation pay will be determined under state labor and wage laws. In some states (CA) employee accrued vacation pay is vested and must be paid upon termination. In other states the employer obligation's to pay accrued vacation upon termination is contractual and can be limited by the employer. You need to retain an attorney to review the applicable state law or set up a VEBA for vacation benefits which would make payments under terms of the plan.

The IRS has only approved about 230 custodians to hold IRA assets. A custodian must meet certain financial requirements set by the IRS. Individuals cannot be approved to act as an IRA custodian. The only thing you can do is find a IRA custodian who is willing to hold the ownership interest of a LLC (e.g.shares of stock) in the IRA account. Custodians who hold odd assets that are not publicly traded will charge a substantial premium to IRA owners as a custodial fee.

Whether IRA funds can be put into a simple IRA or not is irrevalent- Worst case is that the SIMPLE contributions must be withdrawn from from the simple and redeposited to an IRA by 4/15 to take the max IRA deducton. Rest can be allocated as IRA contribution for 05.

Since the er was ineligible to sponsor a SIMPLE plan why not treat the plan as a defacto IRA plan established by an employer for 2004 in which employees can defer the max permissible, e.g $3000 for under 50 employees. EE contributions would be included in ee's comp. The excess should be removed by the employees by 4/15 and taxed as income for 04 and then redeposited as a contribution for 05 eg. 4k for ee under 50. Dont know if the SIMPLE plan custodian will go along with the recharacterizaton and changes in w-2, etc. which are a lot of work.

Under the facts the plan was disqualified one year after termination for the failure to benefit any participants which could make the plan assets taxable in the year the plan was disqualified. Trust would be treated as taxable entity subject to income taxation.

Anyone can recommend a reduction of expense fees by finding funds with cheaper ratios e.g., go to Vanguard or TIAA/CREF. That doesn't mean that participants will benefit from the change, e.g., cost of changing funds. Before you even consider this proposal why not read the plan document for the provision that says that a fiduciary must act in a prudent manner. You dont need a consultant to tell you which funds have the lowest fees- anyone can do that by checking morningside- Its part of being a fiduciary. Remember Warren Buffets favorite saying " A fool and his money are soon parted"

Won't there be 50% excise tax if client takes the reversion? If plan was terminated several years ago why weren't all of the assets paid out after all benes were distributed? Amend plan for EGTRRA and distribute surplus after paying tax on reversion.

OK-It is highly unlikely that no services would be rendered to the employee before birth because medical ethics and malpractice issues would require periodic examination of the pregnancy prior to birth. Hospitals require that docs certify that a minimal level of care has been given in order for admission for a delivery. My own recollection is that monthly examinations are required in addition to various pre natal tests which are part of the overall fee for delivery.

Its also a qualfication issue since QDROs are an exception to the non alienation requirements of 401(a)(13). Approving a DRO that requires payment after more than 18 months would violate the nonalienation provisions.