mbozek

P 524 of theConference Report excludes all 457(b) plans from the HR 4520.

I thought the question was how to provide pre tax payments for health ins premiums now paid by employees on an after tax basis. If the er reimburses the employee for health care and the reimbursement is excluded from the employees' taxable income how is that different than the direct payment by the employer to the ins co of the premiums on a pre tax basis (which is also permitted under RR 61-146)? Employee has 0 taxable income on the cost of the ins premiums in both cases.

Under Rev. rule 61-146 an employer can reimburse an employee for premiums that the employee pays for individual health ins. and the reimbursement will be excluded from the employees gross income. The employer must require that the employee provide proof of the purchase of insurance.

I understand that but how did the clients tax liability result? If the IRS did not audit the DB plan how would this failure create tax liability to the client which could not be corrected in a less burdensome way than a VCR filing? For example if the client did nothing when it found out that the options were not offerred could the problem be solved by expiration of the s/l? The reason this is significant is that in law a Plaintiff has a duty to mitigate their loss and not attempt to fix the problem with the most expensive solution available.

Hearn was decided under ERISA 205©(6) which requires that the fid act prudently in determining that a participant is not married. If the plan admin acts prudently then the plan can reduce the survivor benefits by the amount of the excess payment made to the participant.

However the custodian may refuse to accept the employer's signing on behalf of the employee because of company rules or regulatory requirements.

Why did the clients attorney file for a VCR?

According to the Conference Report (P. 516) the bill is effective for amounts deferred after June 3, 2004. The law does not apply to amounts deferred after 6/3/04 and before 1/1/05 pursuant to an irrevocable election or binding arrangement made before 6/3/04. Earnings on amounts deferred before the effective date are subject to the provision to the extent that such amounts are subject to the provision. I thought that Sect 885 would only apply to deferrals made after 12/31/04 and earnings attributable to such deferrals unless there was an election to further defer such amounts under a subsequent election.

I thought that Sections 885 and 457 were limited to plans of deferred compensation, e.g., plans that paid taxable compensation. A health plan that only pays amounts excluded under IRC 105/106 is not a deferred comp plan because the payments are excluded from gross income.

The common law principle that a wrongdoer cannot profit from his wrong as established under case law in Riggs v. Palmer has been enacted by statute in many states. NY does not have a statute and thus relies on the holding in Riggs.

I question whether the Ohio state ct is the proper forum for resolving a dispute over benefits which in NY and LA were decided by fed cts applying federal common law principles after reviewing st law. It seems that all the OH ct has done is return the case to the plan admin for a determination of benefits under the plan which will then be appealed by the loser in fed ct as a denial of benefits.

403(b) plans were around long before the govt began regulating pension plans in 1942 and there are reputable 403(b) plan providers. Abolishing 403(b) plans and replacing them with qualified plans will only substitute a new set of evils since 401k plans have higher maintainance expenses for ADP testing, qualification and amendments, auditors opinions, 5500 filings, recordkeeping fees, etc which will be passed on to employees in place of commissions. As numerious posts on this message board have demonstrated establishing a 401k plan does not prevent high mutual fund charges and admin fees being imposed on employees. There are many mutual funds which have similar or higher costs than annuity products. Finally there is no impetus for structual change in 403(b) plan administration in public plans exempt from ERISA which would imposed administrative costs that would be passed on to either employees or taxpayers.

I think the issue is whether there can be a deduction for a SE person if the contribution is made after his death. SE persons are cash basis taxpayers who claim deductions on a 1040 for amounts contributed during the taxable year which ends on the date of death.

According to the instructions for the 1041 form the estate comes into existance at the time of death of the individual. It includes as income IRD and other payments due the deceased but not paid prior to death. There is no allocation of w-2 or 1099 items because it is up to the executor or personal representative to determine what income is included on the 1040 or 1041.

I think that a MP plan could avoid making contributions for the year of death by amending the plan to cease contributions and then terminating the plan. The IRS has taken the position in the past that a plan for a SE person terminates when the owner dies because the business ceases to exist and a plan cannot exist without an employer.

See Mendez-Bellido v. Board of Trustees, 709 F supp 329, citing Riggs v. Palmer, an 1889 NY case.

I dont know if there is a deduction for contributions made after the owner's death because his 1040 only includes amounts of income and deductions allocated up to the date of his death and deductions for retirement plans are claimed on the 1040. After death his estate files a 1041 return for all amounts of income and deductions incurred by the owner. You should check the instructions for the 1041 form to see what deductions may be claimed or check with a tax advisor.

You need to sit down with an advisor to determine what are all the issues that can impact your plans after the spin off and prepare a chek list and action plan. One basic question - will your employer clone the existing qualified plans as the model which it will adopt with the spin off date as the effective date? Will your employer no longer be part of the conglomorate's controlled group.

If a SH plan can exclude union employees as a group then it can exclude leased employees as a group since the rules of 410b apply. There is no special eligibility requirement for a SH plan similar to a SEP that requires that all employees be covered, e.g., part timers, who would otherwise be excludible. Let her find a citation that says that the 410b rules do not apply to a SH plan.

See IRS notice 84-11 Q-14, 15. Leased employess can be excluded as a class.

Cant the restrictions on getting access to plan benefits on termination/hardship be avoided by creating bridge loans for key employee plan participants who are not subject to Sarbanes-Oxley loan restrictions which will be repaid when payments commence from the NQDC plans?

Employee would have imputed income to the extent the interest rate on loan is below AFR but ee will have access to funds.

While the plan can cover Canadian employees, the benefits will be paid in US dollars and they would be subject to US taxation if no exemption applies under US-Canada tax treaty because retirement plan benefits are US source income. See IRS publications for list of tax treaties. Paying benefits in US dollars to Canadian citizens who work in Canada will probably violate Canadian Labor and currency laws. I would also check out the payment of wages to Canadian citizens in US dollars. It would be more efficient to make contributions to a Canadian Registered reftirement plan or a non qualified plan solely for foreign nationals with no us source income than spend money on lawyers to review the above issues.

Why not ask counsel to prepare a rep for the plan admin to sign stating that the plan is welfare benefit plan subject to ERISA under 29 USC 1001, et seq. and enclose the last 5500.

It isnt a question of whether medicare eligible employees can be excluded from HSAs. The question is whether a lower level of employer contributions for medicare eligible employees in health benefits than the contributions for younger employees in the HSA violates the ADEA regs. I dont know the answer but I think the question needs to be pursued with the EEOC.

The issue may be whether employers are required to provide for equivalent contributions under the ADEA requirements that benefits for employees protected under the ADEA must meet the equal benefit/contribution rule of 29 CFR 1625.10(a). A benefit plan will be in compliance with the ADEA where the actual amount of payment or cost incurred for an older worker is equal to that made or incurred for a younger worker even if the older worker receives a lower amount of benefit than the younger worker. Check the EEOCs website for any rulings. This is not related to compliance with the requirments of IRC 4980D.

IRS determination letters do not review whether an investment under a plan would be a prohibited transaction under IRC 4975.

A prohibited transaction under 4975©(1) includes the sale, exchange or loan of property between a plan and the owner of >50% of the interest of the employer who sponsors the plan.

4975(d)(13) exempts from the PT rules any acquisition, sale or lease of employer securities between the plan and a >50% owner of the employer for adequate consideration under ERISA 408(e). In order to qualify for this exemption a plan must have at least 1 common law employee and secure an appraisal from an independent third party of the fmv of non publicly traded securites it acquires. The plan cannot purchase stock for an arbitrary amount asked by the owner. If the IRS declares ERSOPS to be a listed transaction as an abusive tax shelter it will get the names of all employers who adopted the plan from the prototype sponsor and will audit the plans to assess the 15%/100% PT tax on the owner for violation of the PT rules if there is no appraisal or if the plan is not subject to ERISA.

A better way to attain investment objectives is to rollover the distribution from the qualified plan to an IRA. Under the Swanson decision, the owner of the IRA can direct the custodian to purchase an initial issue of stock from a C corp in which the owner is the sole director and the purchase price will be the initial capital of the Corp in a tax free transaction in which the IRA owns the corp and will receive all dividends tax free. No appraisal is required because the IRA is not subject to ERISA. The IRA can invest in other businesses subject to the PT rules of IRC 4975. This transaction is recognized by the courts and the IRS and doesnt require a fee to the sponsor to receive a determination letter. However you have to find a custodian who will hold assets of non publicly traded corporations.

MRDs are based on account balance at end of prior year. If account balance in 403(b) annuity account of a former employer at the end of year is 0 then no mrd is required. However, 403(b) account balance must be rolled over to a 403(b) annuity account under current employer's plan.

The law only prohibits using more than 205k in determining the amount of the contributions that can be made to the plan. However some systems can only enter contributions based on the first 205k earned which would require manual entry of the match. Need to check the plan to see how it is worded. Plan can limit contributions to first 205k earned in year.