ERISAAPPLE

Was the contribution made in 2018 or 2019? I think the plan might be able to return the contribution to company A. I would argue it is a mistake a fact or maybe it is not deductible under 404 (though I admit I would want to research both in more depth). You might also argue the contribution is not a plan asset because the plan never had a right to that money. For example, if by mistake a bank erroneously sends $10 from my checking account to a qualified plan that is unrelated to me, and the trustee erroneously accept the $10, that doesn't make the $10 a plan asset. Similarly, if a mutual fund credits earnings to the wrong plan, those earnings are not a plan asset of the wrong plan. Its the same thing here. Company A made a mistake and sent a contribution to the plan that doesn't belong to the plan. The plan has no right to the money. I know a bank or a mutual fund is not an employer for purposes of 403, and arguably Company A is here. I just think this is different than returning money to a sponsoring employer. But again, I would want to look at that more closely.

Is anybody aware of a publication that has a good discussion of the difference in taxation between annuities in general and the simplified method of taxing annuity payments from a qualified plan under IRC Section 72(d)?

I don't understand what you mean when you say the company has "PTO purchase via 125 plan." Do you give them a choice to take PTO in cash or elect a pre-tax benefit?

OK, I am having one of those moments where I think I am going crazy. I didn't know where to post this, so I selected this board. Section 1 taxes "taxable income." Section 63 defines "taxable income" by reference to gross income in Section 61 minus deductions. I know the deductions for AGI are not taxable, but I can't find that connection in the IRC. Where does the definition of AGI in Section 62 fit into all this? I know it is an above-the-line deduction, and I know this is very simple on the 1040, but where is the missing-link code section?

What new rules allow participants a longer period to repay their loans? I honestly am not aware of that rule. Are you talking about the new rules that allow for a longer rollover period for loan offsets?

Don't get me wrong. I think the plaintiff would have a good chance of success, which is why I mentioned it in the first place. I'm just saying it is not necessarily going to be easy. In a legal malpractice lawsuit you have to try "a case within a case": that's why there are two cases. It may be that both cases here would be relatively simple to win. But no litigation should be pursued lightly. As in almost all cases, you start with a demand letter and hope the attorney would just pay.

I was My intent was to reflect that any malpractice suit is going to be difficult. In a malpractice case, most states require you to hire an expert witness. You also generally have to prove two cases. The first case you have to prove is you are entitled in the first place. The second case you have to prove the reason you lost that entitlement, when you would otherwise have won, is because of the attorney's malpractice. On top of that you have to deal with the usual costs, time, and delays that inevitably comes with any litigation. I agree that the OP has a good case assuming the facts as presented and assuming there is no SOL problem, but nonetheless prosecuting any case to completion and collection can be quite burdensome and and expensive.

You might have a malpractice claim against your attorney, but that is going to be a tough row to hoe. For starters you could have statute of limitation issues, and the amount involved may not be worth the cost and effort of pursuing the claim.

These arrangements are rarely subject to 409A because they always get paid when vested. If they are, and its not reported correctly, you've got a mess on your hands.

If it is reported as taxable when vested, it is a short-term deferral. Report it in Box 7 of the 1099-MISC as payment for services to a non-employee. If it is not a short-term deferral period and there is a 409A violation, that also is reported in Box 7 of the 1099-MISC as well as Box 15b. If it is not a short-term deferral and there is no 409A violation, no reporting is required. See the instructions to Box 15a of the Form 1099-MISC.

I would run this one by an attorney. If your client is the buyer, I don't see how they can withhold if they never have the money in the first place (I take your statement that the bonus will be "paid by the Seller" very literally and narrowly). What do they care if the withholding is done or not? Sure they might want to make sure the employees get paid, but there are other ways to verify the payment. As far as the IRS is concerned, I'll doubt they will care as long as somebody does the withholding and deposits, the payment is reported, and the taxes are paid. This is kind of like a staff leasing company situation. The services are performed for somebody else, but the staff leasing company pays and does the tax withholding.

Agreed. The instructions to the Form 5500 EZ says an incorporated sponsor must be owned entirely by the participant or the participant and spouse for the plan to be a one-participant plan.

I've never heard of this. This is fascinating. So Carol, if you have two plans - one for employees only and one for ICs, then you have two non-ERISA plans, but if you put both in one plan, do you have an ERISA plan that violates the exclusive benefit rule?

Why would the committee, who is responsible for millions of dollars of other people's money, want to interview the people who will actually manage that money? That's a rhetorical question. Please don't answer. Whoever is telling this to your client is one of the few who actually cares. The reason you have never heard it is because so few care.

I have negotiated many. I admit though that the clients who get that are large enough to negotiate for that clause. They contracts should have it. The vendors hold themselves out as professionals who can operate plans in compliance. That is the very reason clients hire them. In fact, they hold themselves out as professionals who can tell the clients how to be compliant. If they make a mistake that is totally their fault and no fault of the client, they should be held to what they promise.

Notify the participant with a copy to the vendor of the requirement to take RMDs or suffer a 50% tax. Check your vendor agreement. It may have an indemnification clause that makes the vendor liable for plan disqualification resulting from the vendor's acts or failure to act, not at the direction of the employer.

We're tough because from day 1 we have learned, and the case law is clear, a plan simply can't return plan assets to the employer except in permitted circumstances. This isn't one of those circumstances.

Yes.

I agree you report the gross in box 1 and the taxable in box 2 (I think it is box 2). Maybe I asked the wrong question. I was thinking what happens if the distribution exceeds the RMD or the RMD exceeds the housing allowance. That also raises withholding issues. But this is a hypothetical, so I don't need an answer. I was just curious.

How do you report it?

Thinking about it some more. Can ministers take a deduction for charitable contributions of taxable income to their own church? If that answer to that is yes, you might consider reporting the distribution with a 1099R, the minister makes a contribution to the church and gets the deduction, and then the church uses that money to pay for his housing.

I agree with Larry. The distribution is taxable. The plan doesn't pay a housing allowance for a minister. Why would it? The minister is not performing services for the plan. If anything, if the distribution is not reported as taxable, this could be considered a PT as a transfer to the church and then payment by the church for the housing allowance. I have not researched the issue specifically, but it doesn't pass the smell test.

Are the plans aggregated to pass 410(b) or does each pass separately?

The Sponsor is required to follow the plan, as amended by the window amendment. If the participant claims there was a fiduciary breach, the sponsor (or other fiduciary) can settle the claim, but that is something altogether different. As an attorney, I have advised clients to amend a window program to pay a late payment (the client wanted to pay it), but made it clear that was done as part of the settlement of the alleged fiduciary claim, and I had the participant sign a release. The participant said they never received the packet and that the sponsor breached its duty by sending the packet to the wrong address. I believe it was a bogus claim, but the client wanted to be nice.

It has been a while since I looked at this. On the 401(k) side, this is clearly a violation of the contingent benefit rule. I seem to recall that if the nonqualified plan contribution is contingent on the executive deferring the 402(g) max, that is one exception available for the contingent benefit rule. I don't remember a cite for that. As for the 409A regs, the preamble states the following: Commentators raised issues concerning other types of plans under which a service provider must participate in a qualified plan to receive nonqualified deferred compensation. Specifically, commentators asked whether a plan could comply with section 409A if it provided that an employee must defer the maximum amount permissible under a qualified plan in order to defer any amount under a nonqualified deferred compensation plan. Where the service provider can change the service provider’s election to defer the maximum amount permissible under the qualified plan during the taxable year, and thereby change or discontinue deferrals under a nonqualified deferred compensation plan, the service provider can effectively make a late election to defer (or not defer) amounts under the nonqualified plan. The final regulations generally do not provide any additional relief with respect to this type of plan. However, where the additional amounts deferred under the nonqualified deferred compensation plan reflect only matching contributions that would be available under the qualified plan absent the restrictions in the qualified plan intended to reflect limits on qualified plan contributions under sections 401(m) and 401(a)(17), the final regulations provide relief but solely with respect to the matching amount that could have been contributed to the qualified plan absent such limits. I added the emphasis. If I recall the issue, if the match is not a perfect match, and if the arrangement is subject to 409A, this also raises 409A issues because the participant can be said to have made a late election on the nonqualified deferral by changing the elective deferrals in the qualified plan.