mbozek

The IRS has issued PLR 200453015 which permits a participant who is a 5% owner to rollover his account balance to a Q plan of a separate employer where he is an employee but not a 5% owner and defer commencement of MRD until he retires. The only requirement is that the owner must take his MRD for the year of the rollover from the transferring plan. This ruling should be applicable to similar situations such as a rollover from an IRA to a qual plan or 403b annuity after 70 1/2 or rollover from a Q plan to a 403(b) annuity.

If the plan document gives the plan admin the discretion to interpret the plan then the PA can make a decision on how to interpret an ambigious term.

This is an accounting question. I thought that if a consolidated return is filed then the deduction can be based on the maximum contribution for the controlled group.

Tell him he needs to consult a tax advisor regarding taxation of the loan. He can ignore your advice and look for relief from taxation via the s/l after 6 yrs.

Payments can be suspended for 1 yr if the participant is on a leave of absence.

See RR 96-47.

Its been discussed before on the distributions board, that if participant dies after 4/1 following age 70 1/2 then there must be a MRD to some beneficiary for year in which participant dies. See rules for requesting removal of penalty on 5329 form.

Why not try IRS.gov and search under retirement plans?

What kind of fees are to be paid by the er? If the fees are the annual admin fees to maintain the account and the er pays similar fees for other participants then there should be no problem in deducting the payments. Reg.1.404(a)-3(d). If the payments are for brokerage costs and loads then the payments will be included as contributions to the plan under 415. RR 86-142. Investment mgt fees are deductible by the employer and are not considered part of the contribution to the plan. PLR 9252029

I dont understand your Q. The plan can only provide benefits that are permitted under the plan document. If the deferrals were accepted in error then the plan's only option is to return the deferrals to the participant.

I dont see what claims the agents have prior years if there is no change in tax reporting for past years and/or the S/l for back taxes (generally 3 yrs) has expired because they will not have any damages for the incorrect reporting. I dont think the agents have a responsibility to report the payments as SECA income if the payor does not issue a revised 1099 for such years. The only issue is whether there is liability of the payor for years after reclassification of the payments.

According the US Master Tax guide its a misc deduction. However, like many misc deductions it is not subject to the 2% threshold and the amount of the deduction is subject to modifications under IRC 1341 which is why you need to see a tax advisor.

The IC could be considered to have made an investment decision to invest the defer the comp in return for paying taxes on the distribution. I dont see any claim for loss for the SECA taxes and wouldnt take this case on a contingency.

Since the plan is not subject to ERISA you will have to review the applicable state law to determine if such a claim can be made. What will your claim for damages be if the investment income from the deferred amounts was not taxed until paid?

Some plans will accept letters agreed to by both spouses that clarify unclear provisions or ambigious language in QDROs to avoid the need to revise the QDRO.

See RR 71-419 -Def comp for directors is agreement with corp to to defer fees.

Under RR 76-28 once the amount of the deduction is claimed on the tax return it cannot be changed. Under the RR the 10k can be claimed on the tax return for the year contributed to the plan, subject to the condition mentioned by Blinky.

Actually it is pretty reasonable compared to the recently enacted IRC 409A for NQDC plans of for profit companies which requires a deferral election before the beginning of the tax year. It seems like the new law of 409A is more restrictive than the old law of 457.

I am not sure of the value of conversions to Roth IRAs because of the opportunity cost of the amount of the taxes paid when componded for all years to withdrawal of funds from the Roth. In otherwords the investor has to reduce the projected gains from the roth by the amount of the taxes paid compounded by an interest factor of say 6% after taxes for a future period. Example $5000 in taxes at 6% after tax investment return for 30 years = $28,117 in lost investment income. The IRS likes Roth conversions because it increases taxes.

I thought the 27M was part of the 99M settlement which was pocket change for a co that had 50B in cash reserves. My point is that from a litigaton standpoint nothing was resolved by the courts regarding the exclusion of the ICs under the terms of the plan.

KIrk: I am not a divorce lawyer but I thought that the issue of a final divorce decree and property settlement was a judgment which closed the divorce proceedings except for matters which the court retained jurisdiction, e.g., change in child support or custody. After the divorce is issued a party cant go back to the court and ask for a change because of some matter ( pension benefits ) that was overlooked in the course of the divorce proceedings. If both parties were willing to spend the money they could petition for a rehearing. But it depends on the laws of each state as to whether the divorce can be reopened. An alternate course of action would be for the parties to sign an agreement stipulating to the terms of the pension benefits and give it to the PA.

I thought at the end of all the litigation the courts sent the question of whether the IC were eligible for benefits back to MSFT plan admin for review under the ERISA claim procedures. MSFT then settled the case for 99M w/out admitting liability (because it was cheaper than continuing the litigation).

Where did you get the idea that msft lost?

This is why IC should never enter into NQDC agreements unless the rate of return on the deferrals is greater than the SECA tax rate (15.3%)

Why would a qual plan want to make automatic cashouts over 5k when it could retain the funds and charge a fee for plan adin and avoid the fees for setting up rollover IRAs? If it is a DB plan it can invest the funds.