mbozek

In an unfunded plan the benefits are deemed paid by the employer not the insurer. If the benefits are not exempt from income they are taxed as wages and reported on the w-2. Never rely on ins co for answers on self funded plans. Ins co are subject to state laws for escheat for payments made under insured plans and they dont understand that state laws are preempted from applying to self funded plans.

State laws are preempted from applying to a self funded plan subject to ERISA. There are DOL rulings on this issue. The uncashed checks should be cancelled by the carrier once they are stale. Who is the carrier that is giving this advice?

K I dont understand what you said. A partner's comp is based upon net earnings from self employment from the P ship, E.g. Net earnings of a partner is 200k and partner contributes 10k to plan. Comp is 200 because that amt appears on K-1 along with 10k contribution to the 401k plan. Partner includes 200k as income from employment on line 7 of the 1040 and deducts 10k on line 32 of the 1040 to net 190k AGI.

It depends. If the change affects nondiscrimination, participation or other qualificiation aspects of the plan then the amendment should be submitted for the year in which it occurs in order to make any changes required by the IRS. If the change does not affect the qualified status of the plan then there is no need for immediate review by the IRS.

See IRS publication 571, at P4 and 7 available at www.irs.gov. You must aggregate all of your salary reduction contributions to the 403b and 401k plan so as not to exceed 14k. You must also aggreate all contributions to the 403b plan with contributions to your 401k plan so as not to exceed 42k. Contributions to the employer 401a plan have a separate 42k limit. The amount of your deduction for contributions to the 401k plan will be limited to 20% of your net earnings from SE if less than the amount of your contribution. See IRS pub 560.

Does the client have a Gust document in its possession which is not signed or are you saying that the client cannot find the Gust amendment. Most clients can locate a signed document if they look hard enough. A client found a signed document in the files of the president where it was placed after he signed it.

This is not the payor's problem because the bank was never notified of the death of the owner. For tax purposes only payments received before the death of the owner will be taxed to the owner. Payments made after death should have been paid to the estate which would then pay the beneficiary of the IRA. The estate deducts the amount paid to the bene and the bene is taxed on the income. The tax preparer for the estate will correct the allocation of income.

There never were any deduction issues since the contribution met the requirements of 76-28 and cannot be changed even if the plan is not amended.

The only assets of an unincorporated business are the receivables or inventory which is the property of the owner. The IRA can purchase shares of a closely held business which is not controlled by the the IRA owner. An IRA can subscribe to purchase shares of an initial offering (IO) of the unincorporated business of the IRA owner when it is incorporated. The purchase of the shares in an IO is an exception to the PT rules that prohibit the sale or exchange of shares between the IRA owner and the IRA. The only reason for an IRA to purchase shares in an IO is if the business generates a large amount of cash which can be paid as a dividend and low operating expenses. Putting the shares in the plan converts capital assets to ordinary income.

Rev. rule 76-28 provides that once a contribution is claimed as a deduction on the er's tax return it is irrevocable and cannot be changed. Why not self correct instead of filing under VCP?

Employee dissatisfaction with the current plan is an acceptable reason but I dont think it is necessary to teminate the plan insted of adopting the new plan and transferring the assets to the new custodian. Some custodians prefer that the former plan be terminated because of admin issues in taking on assets from a former plan e.g., determining that is its qualified so they want the plan sponsor to incure the cost of termintion.

Warren Buffet has a favorte phrase "A fool and his money are soon parted." I dont know why any investor would loan money to finance the purchase of RE without having the documents reviewed by counsel. Lending IRA funds to invest in RE requires that all of the legal formalities for RE investments be observed including acquiring a secured interest in the RE since the loan is a contract between private parties which is not regulated by Govt entites like securities transactions. Organizations like trustetc provide administration, recordkeeping and trust services but do not prepare or review legal documents for clients.

RevRule 76-28 provides that a deduction may be claimed for a contributon if made not later than the due date (with extensions) and the employer claims the contribution as a deduction on the tax return. There is no requirement that the contribution must be made by the date the tax return is filed if such date preceeds the last date for filing the return. This rule is similar to the rule for IRAs which permits a deduction to be claimed on a tax return filed before April 15 even though the contribution is not made until April 15.

What does the plan document say about paying for these expenses?

Why not have the partner sign off on his interpretation of 414(p) since he is so sure of his opinion. I am sure that client woud accept his opinion.

The IRS proposal to require 403(b) eligibilty for members of religious orders who have taken the vow of of poverty applies to the universal availability requirement for salary reduction. There is no requirement that a member of religious order make or accept salary reduction contributions which would conflict with their vows. Religious members who are HCEs can be excluded from employer contributions since there is no prohibiton of discrimination against an HCE.

What are the allegations other than the National production workers union is an independent union not affiliated with the Afl-CIO. Producton workers is another name for manufacturing workers who have seen their jobs leave the country because of high labor and benefits cost. Why cant a union bargain for wages and benefits which keep jobs in the US?

Under the IRS rules a plan must be in operational compliance with a31(B) for all distributions after 3/28- either limit involuntary cashouts to no more than 1k or make involutary cashouts of 1-5k to IRAs. In other words the plan has to decide by 3/28 how it will comply and then act accordingly for all distributions after 3/28. The plan does not have to adopt an amendment until 12/31/05. A plan that impliments the procedures for involuntary IRA cashouts after 3/28 it cannot make any transfers until the plan is in compliance with all necessary documentation requirements other than an amendment, e.g., the plan has an agreement with an IRA custodian, the SMM and 402(f) notices have been issued, etc. The IRS plans to issue a separate notice for sponsors of M & P and VS plans that must be amended by the M & P ot VS sponsor. Plans with a plan yr ending 3/31 have an immediate problem of having to adopt amendments and impliment procedures if the plan will provide for involuntary cashouts.

Te- have you seen the seen schedue at trustetc? The annual fee starts at $185 for accounts with a FMV of less the 15k and goes up to $1850 for accounts with 1m. The fee for a 100k account is $425 a year. There is also a $50 set up fee. Any custodian who allows investment in unconventional assets such as RE and non public securities will charge a large annual fee to pay for the cost of insurance to protect the trustee in the event of law suits for negligence, environmental liability (RE) or other claims.

The question is where are the indicia of ownership held (e.g. fund certs)? General rule is that the indicia of ownership must be held in a bank or trust located within the jurisdiction of US courts- US or US territories. This has nothing to do with prudence of the investment or whether a foreign investment is permitted under US securities laws.

To do this right you will need more than one advisor. You will need a lawyer to set up the LLC and prepare documents and also to advise you on the Prohibited Transactions aspects of using RE in an IRA since very few CPAs give such advice. There are complex tax questions on using your own IRA funds to set up a corp since an IRA owner is generaly prohibited from purchasing an interest from her own IRA. You will need a tax preparer/cpa to prepare the necessary tax forms for the LLC and if necessary the IRA. Unless you use borrowed money to finance the deals you wont need much tax advice on investing RE in the IRA since the transactions will be tax free (Of course if you use a Roth IRA you will have tax issues once you withdraw an amount in exccss of you contributions). All distributions from a deductible IRA are taxed as ordinary income. Some expenses may be paid by the IRA sponsor and deducted on your 1040. The advisors will charge on an hourly basis because they do not know how much work will be involved in advising you on your investments. The cost of getting advice may be a significant expense which will offset gains from the sales.

IRS permits non particpant to rollover distribution to plan before becoming eligible to participate since rollover considered a segregated account under plan.

Rev.rul 61-146 permits an employer to make a tax free reimbursment to an employee who purchases individual health ins. Dont know if it can be extended to disability ins. which is also excluded from taxable income under 105/106. This would not work for S corp. owner.

What is the refund that will be received by each doc and where is coming from? In an individual account plan each participant has a vested right to the funds in their account.

V- How do you transfer funds from an IRA to an LLC without a taxable distribution from the IRA? Dont you mean that the IRA will own 100% of initial offer of stock of the LLC in return for investing IRA funds in the LLC which will own the RE? The income from the RE will be held by the LLC to pay expenses. Most IRA custodians will not allow investments in RE or privately held corps so you will have to pay high annual fees to those few custodians that will allow investment in an LLC. Investing IRA funds in RE results in the loss of many tax breaks that are available to taxpayers including depreciaton, cap gainsand deduction of operating expenses. Finally how will you pay the expenses of the RE if there is not enough cash in the LLC?