mbozek

Why would a fiduciary want to take on the risk of a lawsuit for poor investment results for managing a participants account under a plan which permits the participants to direct investments? Second, who will pay for the investment advisory services and how will the fids review the performance of the advisors? Will participants who select this option be informed of the costs? Why not just make lifestyle funds available to those participants who do not want to manage their own accounts without having the fids take the risk of managing their accounts?

I dont understand why a person would file under a state bankruptcy law (if such a law exists) because only fed bankruptcy law provides for a complete discharge of all debts. A person who files under fed bkcy law can elect to chose the greater of the protection of assets under state law or bankruptcy law., e.g, Tx and Fla provide for homestead exemptions which prevent the seizure of the residence of the debtor which is not available under bkcy law.

huh? I dont think there is a comparable definition under the US securities laws to foreign companies which are not traded on a US exchange or nasdq as publicly traded in foreign markets since US laws do not regulate such companies. If Congress wanted to require a delay in deferred comp issued under foreign companies it could have done so by adopting the controlled group definition of IRC 414(b) instead of the publicly traded company definition. The reason for exempting foreign companies from the 6 month provision is that they are not subject to US securities laws so there is no possibility that executives could receive payments from an insolvent corporation before the company's assets could be seized by US creditors under US laws.

The Securities Act of 1933 requires the registration of securities which are publically offered by a company. The Securities Exchange Act of 1934 requires registration of securities issued by any company prior to having its securities listed on a US exchange or the over the counter market (Nasdaq). Foreign co which are listed only on a foreign exchange, e.g. London, Frankfort are not publicy traded under US securities law. There are two ways in which publicly offered securities can be traded in the US. First through the 8 national securities exchanges: NYSE, AMEX, Boston, Phila, Pacific, Chicago, CBOE and Cincy. Second, through the Nasdaq (the over the counter market) which is an affiliation of dealers who agree to act as market makers with each other, by being willing to purchase or sell a security in a normal lot to other dealers at a quoted ask or bid price. According to the Conference Report the restriction on distributions is limited to key employees of publicly traded companies.

The IRS will issue guidelines on 409A by Dec 21, including effective date rules.

Look in IRS publication 590, P 57 available at irs.gov.

I dont disagree with blinky's comments if the sponsor is aware that the courts could require additional contributions if the interest credits are held to discriminate against older employees under ERISA. If the plan does not cover too many non owners and the owners understand that additional benefit accrual could be required then go ahead and adopt a CB plan. Congress could force the IRS to issue regs that could result in additional costs.

Because of the dangers of idenity theft there is movement to eliminate using the SS no as an identifer for customers. The IRS stopped putting ss no. on tax forms mailed to taxpayers years ago. Colleges no longer use SS no as a student Id. Creating a separate benefit id system for Cal ees is too inefficient for corporations which are headquartered in other states and providers will either use a unique id for all employees, eliminate the ss no in correspondence or ignore cal law on preemption grounds when it relates to plan admin matters.

Under IRC 1041 there is no taxable gift on a transfer of property between spouses or former spouses incident to divorce. The transferee gets the transferor's basis in the property. Also there is no taxation on gifts until the amount of lifetime transfers exceeds $1M.

Kirk: Are you saying that Microsoft is not a publicly traded company because it is listed on the NASD?

As a followup to pax's post, if the husband withdraws $50,000 and pays it to spouse then H will wind up paying 50,000 plus the income tax which will be at least 25% ($12,500) which will be more than the spouse is entitled to under the divorce.

There is uncertainty of whether the cafeteria plan rules are the exclusive means of providing pre tax welfare benefits since 125 refers to a plan under which the employee is given a choice between cash and benefits, e.g the constructive receipt issues which the IRS used against salary reduction in both cafeteria plans and retirement plans. Some IRS officials in the Carter administration claimed that salary reduction was tax avoidance which should be taxed. It was no coincidence that Congress enacted IRC 125, 401k and the moratorium on IRS issuing rulings on non qual deferred comp salary reduction in the 1978 Revenue Act. The unanswered question is whether an employer can have a pre tax health plan where the employee has no choice between cash and benefits, i.e., compensation is reduced as a condition of employment to pay for health care.

Under the US Sup ct decision in Eglehoff v. Egelhoff which followed the 9th circuit decisions you refer to, Cal joinder would be preempted by ERISA. A judge cannot cant apply state law to a PA if state law does not give the court jurisdiction over the PA. Under ERISA a PA cant withhold payment of benefits to a participant if the divorce decree does not award any retirement benefits to the spouse.

IRC 408(e)(6) provides for a tax free transfer of an interest in an IRA on account of divorce to ex spouse's IRA which will be owned by the ex-spouse. See IRS Pub 590, P 25. This is not a rollover but a transfer by the custodian of the IRA assets to an IRA owned by the ex-spouse pursuant to a divorce decree and/or property settlement. A transfer of IRA assets by the owner to the ex-spouse's IRA is a taxable distribution to the owner.

Benefits attributable to participant's contributions cannot be forefeited upon death. There is a weird issue because while Q plans are not subject to constructive receipt, the benefits must be distributed no later than 5 yrs after the death of the ee. If no one claims the benefits the plan doesnt know that the ee is dead. Best case is to distribute the benefits to the bene in a lump sum and report it as an 04 distribution on the grounds that the plan is obligated to pay the benefits to the designated bene and the payment is taxable in the year received. If this is a return of contribution then most of the payment will not be taxable.

What does the contract with the govt require? Most govt contracts requrie that all of vendor's employees must be eligible for DP coverage not just those who work on the govt contract.

Q: In for the court to issue a restraining order against a PA the ct must make the Plan a party to the divorce action which would require that the ct have jurisdicton. (Its called due process). The restraining order will have to state the basis for jurisdicton over a Plan which is not available in most states (Cal joinder being the exception and it is prempted under ERISA). If there is no division of benefits under the divorce decress then there is no basis for any jurisdicton over the Plan Admin.

If the divorce decree provides no benefits to spouse how can a QDRO be issued? ERISA 514(a)(7) exempts QDROs (not DROs) from the general premption of state laws relating to the plan. I think your client needs to retain counsel to see if an order has been issued or whether this is a copy of an proposed order prepared by counsel for the spouse which has been sent to the plan. What does counsel for the employee have to say about this- its his client who is affected?

As noted in other posts, the restictions on distributions may be limited to salary reduction accumulations but not to SERPS and other forms of employer payments.

Why not ask the auditor for a written statement of what regs are being violated, not just her opinion? The IRS is required to inform a taxpayer in writing of the specific statute, law, etc that is being violated if the taxpayer requests it. Chances are the agent will not send a letter based on her opinions because it must be reviewed by an IRS attorney. Last time I looked a plan met the 410b coverage test if it covers the requisite number of non HCEs on a % basis, regardless of what classes of NHCEs are excluded from the plan. Any letter from the IRS will have to cite the 410b regs. You should check to see what the DL status is.

Allowing distribution upon terminaton of the plan wont affect backend load fees that participants will owe if they switch out of a VA or mutual fund. I think you need to ask the IRS for the authority to make a change without a statutory provision.

Stop your drooling. There are no punitative, consequential or compensatory damages permitted under ERISA because it is a statute in Equity. 510 liability is difficult to prove.

The answer depends on how closely the state tax law tracks the IRC. If the state tax law permits the same deductions as fed law then the deduction will be allowed. However some states limit deductions to specific items (e.g., NJ allows deduction of employee 401k contributions but not IRA , 403b or 125 while NY follows the IRC for deductions from comp).

403b plan assets cannot be merged with another type of plan because there are no assets held by a trustee. The employees own the annuity contract or custodial account.

If the plan is subject to ERISA (e.g, has at least one Common law employee other than a spouse) then the assets are exempt from the participant's creditors. In non ERISA plans state law (e.g., NY NJ) can protect the assets. Vested Plan assets are generally exempt from employer's creditors.