mbozek

Where does it exclude all section 83 arrangements? I thought there is an exemption for NQSO with an exercise price that is not less than the FMV of the underlying stock on the date of the grant. Deeply discounted options are not exempt from 409A.

Why not think outside the box and increase the salary of the persons who you want to receive the partial er subsidy? In other words if the cost is $200 per week and the employer wants to subsidize coverage for some employees at 100 a week just increase their salary by 100 and have all employees pay 100% of the premiums so there is no discrimination under 125 and all employees can be covered under the same plan.

Bob: You need to have counsel review the plan documents to determine the following: Who was required to make contributions to the plan? how were the contributions determined and from what source were they taken? How is the accrued benefit defined? IRC 414(h)(1) forbids the deduction by the employer of amounts designated as an employee contribution. If the contributions are made by the employees then the rules of IRC 411(b)(2) will apply to determine the accrued benefit attributable to employee contributions. I am assuming that the plan has received a favorable determination letter from the IRS and is subject to ERISA. Is this correct? If it is a qualifed plan then there will be an annual report form 5500 which you should get a copy of and look for schedule B to determine the funding method. The employee cant be liable for taxes on wages that were never paid by the employer.

B: I thought that the 10 year phase in for max $ benefit in a DB plan could only be applied for years of participation, not years of service.

The merger eliminates the provisions of the MP plan other than the J & S annuity requirement for the amounts accrued under the MP plan and continuation of the MP vesting schedule. See Rev Rul 2002-42. There is no requirement that the surplus be restricted to participants in the MP plan. The surplus becomes an asset of the PS plan and can be allocated in accordance with the PS plan provisions.

two things: Death does not affect permanency, e.g. people with cancer frequently live beyound the estimates given by drs. Two: If business is incorp it can be continued by children. Note : the owners vested benefits will be subject to estate tax unless they are payble to his wife. Now for the interesting Q: How does he intend to shelter the income from the deal by establishing a DB plan in 04 and deducting the contributions since he needs to earn salary in order generate an accrued benefit and the max accrued benefit of 165k is phased in 10% a year for new plans, e.g., max accrued benfit for 04 is 16,500?

How would a section 83b election apply to nonvested property subject to taxation under 409A?

403b, 401k and simple elective contributions are aggregated for the 13k/16 limit under 402g. 457 elective contributions have a separate 13k limit. 403b contributions including elective deferrals can total 41k and employee who is not > 50% owner of a business can have separate 415 limits for a 403b plan and qual plan. >50%owner must aggregate contributions to qual plan with 403b plan contributions (but not 457 plan) for 415 limits.

Not everyone can be located because people die, change their names or are deported and the plan should not be required to pay for the locater services. Many people who are located do not respond because they have ex-spouses, the IRS or creditors who are after them or because they have assumed a new identity. It is very rare for missing participants to return and request payment of benefits and the employer can get better use of the funds by forfeiture than keeping them in an account for which an admin charge is owed.

What does the PS plan say should be done with forfeitures since they are assets of the PS plan?

is life insurance used to provide benefits?

Since he can deduct up to $16,000 in salary reduction contributions to the 401k plan from his net earnings from SE under IRC 404(n), you dont need to worry about a 3% employer contribution. His max deductible contribution to the 401k plan is 9291 (10,000- fica tax of 709)

I think there is a distinction in the facts of the two cases that results in a different answer. In Gunther the executor, as fid, was held to have the power under the IRC that the decedent would have to open an IRA account and rollover the funds to the IRA. However in the plr the decedent died after receiving the distribution from the IRA. Under most custodial IRAs the rights of the owner are transferred to the IRA beneficiary at the death of the owner so the executor, as the personal rep of the owner has no rights under the IRA to transfer the distribution back to the IRA custodian after the owner's death. Hence this language in the PLR: "... taxpayer A who was the individual on whose behalf IRA X was maintained, died prior to the date of the action of Executor E referenced above".

Benefit claims must filed with the plan fid who will make a decision based upon the plan document, and assuming the fid has discretion to make decisions on paying benefits, can base his decision on the last bene form filed prior to death or any other reasonable interpretation of the intent of deceased. Only recourse for losing claimants is to commence a lawsuit which is unlikely given the amount of money involved.

Default only occurs if the participant does not make payments to repay loan. The employer has engaged in a prohibited transaction by not remiting the payments to the plan. The employer must remit the payments to the plan and correct its procedures for remitting the loan payments.

It would be helpful if you would describe what you mean by earning the income of the opton in the year in which it beocmes vested.

The Conference Committee report does not exclude conditional payments from taxation under 409A to prevent NQDC from being characterized as an excludible payment. A taxpayer can claim a misc deduction for NCA amounts taxed under 409A which are returned in a later year.

I thought the penalites for abusive transactions are only applicable for transactions entered into after the date the tax law was signed. The idea behind penalites for mateial advisors is to deter bogus tax opinions and advice which under prior law prevented the IRS from imposing penalites of up to 75% for substantial understatment of taxes because the taxpayer received an opinion stating that there was substantial authority under the tax law for the deduction or tax strategy.

IRC 409A applies to any plan that provides for a deferral of compensation other than the plans specfically exempted and includes arrangements or agreements for one person. The law intentionally applies to employment contracts which defer comp of executives to raise the maximum amount of revenue. However vested amounts deferred prior to 1/1/05 are exempted. The fact that payment of deferred comp is subject to a non compete clause which provides for forfeiture of future payments or liquidated damages if the employee goes to work for a competitor does not take the payments out of 409A. The conference committee report (P 525) specifically notes that a substantial risk of forfeiture cannot be used to manipulate the timing of income inclusion.

Why cant he withdraw the mrd for 04 on 4/1/05 and then rollover the remaining balance to an IRA on 12/31/05 after taking the 05 mrd on that date?

Name them as the beneficaries of your retirement benefits. All charitable contributions are exempt from estate taxation. There is no income tax on a transfer after death.

The conference committe report (P. 524) defines a NQDC as any plan that provides for the deferral of comp other than a qualified plan, vacation, sick leave, comp time, disability pay or death benefit plan which appears to cover any plan that defers comp until employment ends. I dont think an employer can disguise a NQDC plan by calling it a program to pay money for not competing with a former employer after terminaton instead of deferred comp since 409A does not exclude severance payments to prevent employers from disguising NQDC as a payment for not working after termination.

Moving the mrd to 05 would put the employee in a lower tax bracket (by distributing the payment by 4/1) than he would be in if the mrd was received in 04. The 04 mrd cannot be rolled over an IRA if received in 05 instead of 04. The balance of the distribution can be rolled over to an IRA and the 05 mrd must be taken by 12/31/05.

you can email the agreement to me. Can you tell me why these administrators are obsessing over the mrd requirement? The custodian can agree to any terms if it is adequately compensated and the cost passed to participants in the plan.

Incorporation involves time and expense and could subject you to additional taxation by both fed and states and require that you hire an accountant to do your taxes. NJ, for example taxes S Corp owners at 2% higher rate than individuals. You can set up an HR-10 plan or SEP as a self employed person and contribute 20% of your net earnings without incorporating. Or you can establish a SIMPLE plan and contribute up to 9k. From the facts presented you will be a independent contractor if you can work for more than one co, dont have regular hours and get paid only for articles that are accepted. You will receive a 1099 misc for your payments and you will be required to pay FICA and income tax on the amounts. You should be concerned with whether you will retain the copyright to the materials that are accepted for publication.