billfgrady

Is it possible then for a 401(k) plan participant to roll after-tax contributions to a Roth IRA and pre-tax contributions to a traditional IRA?

Are SEP-IRAs covered under ERISA?

Thanks, I checked the attached rollover chart this morning before I posted, but SIMPLE 401(k) is not included. Is a SIMPLE 401(k) a qualified plan, a SIMPLE IRA or something else for rollover purposes?

Can funds from a SIMPLE 401(k) be rolled over into a SIMPLE IRA?

SEP-IRAs are treated the same as traditional IRAs for required minimum distribution purposes, right? In other words, the required beginning date is April 1 of the year following the year in which the participant turns 70 1/2. I presume that it does not matter if the participant is still employed by the employer that sponsors the SEP-IRA (and is not a five-percent owner), as it would if dealing with a participant in a qualified plan under Treas. Reg. 1.401(a)(9)-2, Q&A-2(a).

For a 401(k) plan that permits non-owners to postpone RMDs beyond the traditional RBD of age 70 1/2, can employees who continue to work make 401(k) elective deferrals? What if the plan forces distributions at the traditional RBD? Can employees who continue to work continue to make contributions? I would assume not. Cites? Thanks

Looking at Sections 1372 and 318, is an ESOP plan participant considered to be an owner of an S corporation if they don't own stock outside of the ESOP? The definition of 2% owner under Section 1372 incorporates the attribution rules under Section 318. Generally, under Section 318, you don't have attribution of ownership from a qualified plan to a qualified plan participant. However, I've found PLRs out there (albeit not directly on point) that suggest that the participant is the owner of the stock that the ESOP owns simply because he or she is the "beneficial" owner or because 318 applies. Any thoughts?

Thanks for the help.

A participant in a DB plan wants to know whether he and/or his wife are eligible to make deductible contributions to traditional IRAs for 2007. The DB plan was frozen in 2005. However, the employer was apparently required to make additional contributions to the plan--what they are claiming are "actuarial adjustments"--before terminating the plan in August 2007. The question here is whether there was active participation in the plan in 2007. Normally, relying on Notice 87-16, I would say there is no active participation in a frozen DB plan. However, does the fact that some sort of actuarial adjustment was made change this? I'm guessing that it does.

Does a contribution to a 529 Plan constitute a "qualified benefit" for purposes of Section 125(f)? I'm pretty sure that employees may elect to have money deducted from their checks, post-tax, for contributions to 529 Plans. However, I'm not finding anything to clarify whether this benefit may be offered through a cafeteria plan.

What law was it (and when was it enacted) that allowed for portions of qualified plan accounts to count as eligible rollover distributions? I could be wrong, but wasn't it sometime in the eighties?

An accountant that we are working on an issue involving excess contributions to qualified plans and the 10% excise tax is referencing Committee Report 5102. The accountant is referencing an exception that says that excess contributions, while they are not deductible, are not subject to the 10% excise tax if they are an "employer matching contribution." I am familiar with Joint Committee Reports, but cannot find one with this number or citation format. Can anyone point me in the right direction?

Why wasn't this effective as of August 17, 2006 (effective date of PPA) as opposed to January 1, 2007? Wouldn't that have prevented all of these transitional issues?

Thanks for the response. You are correct: Mom is a participant in the QP, not the owner of the business. I think we do know that Daughter CANNOT take a lump sum distribution and roll it over to an IRA in 2007. My understanding of the rule is that the money must be transferred via trustee-to-trustee transfer. The 60-day rollover option as we know it doesn't exist under this rule. Once distributed, it's taxable. So, as I see it, Daughter can argue for an RMD based on the lifetime expectancy method in 2006 and then transfer the remainder of the QP assets to the IRA in 2007. If she can't get such an RMD, I guess the answer is to try and postpone any distributions (or at least minimize them) until 2007.

Mom dies in 2005 as the owner of a Qualified Plan. Adult daughter is designated beneficiary of the QP. No RMD has been made to Daughter for 2006 yet. QP Admin. is telling Daughter she must take a lump sum distribution or take distributions over 5 years. What are people doing to get the most benefit out of the new non-spousal rollover provisions in cases like these? After all, the new rules aren't effective for distributions made until after December 31, 2006.

Employer currently sponsors group health care for its employees. Employer would like to drop the coverage and proposes to contribute, say $500, to a cafeteria plan account or a health FSA for each employee. The Employer's idea is that the employee would then be free to take the cash and purchase health insurance on his or her own. Does this work? What are the potential pitfalls? I'm not sure a health FSA will work here since a health FSA may not treat participants' premium payments for other health coverage as reimbursable expenses. And that's what the employer appears to be proposing here.

Thank you both.

Treas. Reg. 1.401(a)-20, Q&A 27 is clear that no consent is necessary if there is no spouse. Does this cover it?

Participant is unmarried and fills out a beneficiary designation naming his sister as the beneficiary of his qualified plan account. Participant subsequently marries, doesn't change the beneficiary designation and then dies shortly thereafter. Assuming that the qualified plan is subject to the annuity rules, was wife required to consent to the designation of the sister upon marriage or is wife out of luck because the designation was completed prior to her marriage to participant? I don't see anything in 1.401(a)-20 addressing these facts. What if the plan isn't subject to the annuity rules?

What books/publications are out there that are recommended for a broad discussion of ESOPs? I'm thinking of ordering The ESOP Handbook by Steven Etkind. Thanks.

ESOP owns a modified endowment contract ("MEC") on the life of insured/participant. ESOP also has unrelated taxable income ("UBTI"). Q: If the ESOP withdraws money from the MEC, what type of taxes and penalties apply to the ESOP and to what extent? A: If the ESOP becomes taxable while it owns the MEC (say, the ESOP receives unrelated business taxable income "UBTI") and then withdraws money from the MEC, those withdrawals would be taxable as ordinary income, at least to (i) the extent of the gain in the MEC and to (ii) the extent that the ESOP is a taxpayer (that is, has UBTI). As for the 10% penalty for early withdrawal, that penalty depends on the age of the policyowner, not the insured/participant. The ESOP itself has no age, so my read is that there would be no 10% penalty applied. Any thoughts, particularly as to the (ii) part of the above analysis?

Client is the sole shareholder (and sole employee) of an S corporation. S corporation is going to set up a Cafeteria Plan and a profit sharing plan. Client's accountant suggested that the entity covert from S to C status before doing so to gain tax advantages. From the side of Section 125, I can see the advantage since a more than 2% shareholder of an S corporation would not be permitted to participate in a Cafeteria Plan. But from the side of a profit sharing plan, what advantages would there be to convert from S to C status?

Also, any authority for this? Thanks.

Thank you, Tom.

Is the defined contribution dollar limit for spouses $84,000 in 2005 (i.e., $42,000 x 2) or are they limited to $42,000? Thanks.