TaxLawyer1978

Luke Bailey, what do you mean by adopt a plan? What kind of a plan do you have in mind? When I think of a plan, I'm thinking the 403b/DC plan.

Much appreciated ESOP guy.

ESOP guy, this is a very large account, not a 401k plan, but DC and TDA plans. Current trustee/recordkeeper is MetLife. Moving over to Prudential, with Prudential Bank & Trust Company being the new record keepr and FSB being the new Trustee. I assume that will require resolutions, based on what you're saying. That appears to be what Prudential said to the client but I haven't spoken to them yet. Where would I find info on the appropriate notices that need to go out to the participants? Thanks

Thanks. This is even though we're moving funds from one trust to another?

My client is replacing their current plan Recordkeeper and Trustee (MetLIfe) and switching to another company. What documents do I need to prepare to effectuate that? Is it just resolutions regarding the plan? Do all participants have to approve this reconversion? Never done this before. Thanks

DOL has issued guidance that 2 or more plans of the same plan sponsor are not a party in interest; therefore not a 406(a)(1) issue. It's a fiduciary issue under 406(b)(2), and since there is no provision parallel to 406(b)(2) in 4975, the incline is no excise tax.

I have a 406(b)(2) transaction (payment of plan expenses out of the wrong plan). Instructions for filing the VFCP indicate that you can be exempt from the excise tax if you fall under the PTE 2002-51, which we don't (2002-51 says exemption applies for payment of settlor expenses; our expenses are administrative non-settlor expenses). We will file the 5500 Schedule G. Do we need to file the 5330 and are we subject to excise tax under 4975? 4975 does not list a provision parallel to 406(b)(2) as a prohibited transaction subject to the excise tax. Is it possible to file the VFCP and report the transaction on the 5500 but not be subject to the excise tax and not have to file the 5330? Note instructions for the 5330 under prohibited transactions do not list the transaction listed under 406(b)(2). Any help appreciated. Thanks.

The 403(b) plan is a non-ERISA plan. The question is whether signing a form advising if the employee has any loans in the plan invalidates the safe harbor for non-ERISA plans

Invoices were for legal fees related to the plans (tax qualification issues). Paid out of the DC plan but approximately half of the legal fees related to the DB and TDA plans. All plans covered same employers (multiple entities) of which employees can be participants in the plans. Prohibited transactions include: use of assets by or for the benefit of a disqualified person. And "disqualified person" includes "an employer, any of those employees are covered by the plan."

Client had a non-ERISA TDA (403(b)) plan. The plan did not/does not offer loans. The client converted the plan to an ERISA plan in 2009. An employee who is a participant in the plan applied for a loan with MetLife. MetLife sent the client a form to sign as the plan administrator. The form relates to the private loan (outside the plan), which MetLife says it will not approve for the employee if she has a loan in a current plan with the client because she is still employed with them. Can client sign the form as the plan administrator of the current TDA plan and say the employee does not have loans? OR will this invalidate the MOA non-ERISA status?

Client has 3 plans - a DC plan, DB plan and a TDA plan. They paid out legal invoices related to all three plans out of one of the plans' unallocated account. All plans cover same employees. Is this a prohibited transaction?

Thank you both.

An employer currently charges its employees 25% of the health premiums, and pays the other 75%. Going forward, the employer wants to charge any new incoming employees 50% for health premiums, but have the existing employees continue paying the 25%. That would result in the existing employees getting 75% of premiums as employer contribution, while new employees would only be getting 50%. Is this permissible? Or is it discrimination?

Are there any restrictions on what types of investments can a money purchase plan invest in? Can you loan money out of the plan if it's for investment purposes and not for extraordinary circumstances? Thanks

What if the partner is simply "on the books" but getting no compensation? Do we err on the cautious side and consider him "retired"? I'd say yes but getting push back

Thanks everyone. Can someone tell me what this Gray Book 2004-42 is exactly? This may be all I have to show the plan's trustee that is actually written about this (outside a very vague paragraph in the BNAs)

Thanks, I know. We don't have any 5% owners. Appreciate the help. Thanks again.

Reg. 1.409(a)(9)-2 provides that minimum required distributions out of a qualified plan (e.g. 401(k)) must begin April 1 of the calendar year following the later of the calendar year in which the employee turns 70 1/2 or the calendar year in which the employee retires from employment with the employer. The term "retirement" is not defined for purposes of 401(a)(9). If a law firm partner is still technically a partner in a firm, but doing hardly any work, is he considered "retired"? Or does retirement mean actual total termination of employment?

Thanks. Would your answer change if this guy is a partner in a partnership (lawfirm) and the partnership agreement requires him to turn over any money earned outside the lawfirm? He pays the commissions over to the firm and gets a subsequent distribution out of the partnership. What if the trust doesn't issue him a 1099? I believe they're not required to do that (although they may want to to take a deduction). Thanks

Not sure if anyone has come across this issue, but I have a client who is a professional at a professional service firm. He serves as trustee to a trust and earns commission for his services as trustee. By contract, he is required to turn over any commission earned to the professional service firm for which he works. The trust will issue him a 1099-MISC and the commission is earned by him; however, due to being required to turn over the money, he doesn't get any benefit of the commission. Does he have to pay taxes on the commissions and report it on his tax return, or can the tax somehow be picked up by his employer? Does the assignment of income doctrine require that he report the income and pay the tax because he is the one that earned it?

That is correct. I believe that's what it was meant to say. Thanks.

Yes XTitan. All three - death, disability and termination for cause - are addressed in subsections (b) through (d) of Article 14. Also you're misreading the 3rd sentence (which is very confusing because of this typo) -- it reads: if employee terminates for any reason other than termination other than for Cause. To me that means - if employee terminates for any reason other than no-cause termination (i.e, if employee terminates for cause? which is addressed separately in the subsequent paragraph). I think what this should say consistent with the title of this paragraph is this: "if employee terminates for reason other than death, disability, or termination for cause, option shall immediately terminate" Let me know your thoughts. Thanks.

A client maintains an employee stock option plan which reads in relevant part as follows: Regular Termination. If an Optionee ceases to be employed by the Corporation, or by a corporation (or a parent or subsidiary of any such corporation) issuing or assuming a stock option in a transaction to which Section 424(a) of the Code applies, for any reason other than death, disability or termination of his employment by the Corporation other than for Cause, his option shall immediately terminate; provided, however, that the Committee may, in its discretion, allow such option to be exercised (to the extent otherwise exercisable on the date of termination of employment) at any time within three months after the date of termination of employment, unless the option terminates by its original terms (or the Plan otherwise provides for earlier termination) prior to such exercise. NOTE: the error above. It should read "other than death, disability or termination for Cause" (not "other than for Cause"). Essentially the language excepts regular termination, but is meant to address regular termination so it doesn't say what happens on regular termination. Company wants to amend the plan to correct this typo but afraid employee will take position his option doesn't terminate and doesn't have to exercise within 3 months. Agreement with employee says option is a non-statutory stock option, not an ISO so presumably even if Company allows him to exercise, he may not want to for he would have to pay tax on the spread. Suggestions on how to handle? Can the company allow this employee to hold on to his options post-termination? Per terms of the Plan, option terminates upon the earlier of 10 yrs from grant date or the last date for exercising the option following termination of employment (presumably not addressed by the paragraph above due to the typo).

Thanks Luke Bailey.

the first payment is March 31 but the second is Dec 31