FPGuy

Most older TIAA contracts cannot be liquidated except over time, typically in no less than 9-10 annual installments. Associated CREF contracts do not have this restriction. To simplify recordkeeping and the like, willing participants might be able to do a direct transfer of their TIAA contract to an IRA, or not. Some TIAA contracts have transfer restrictions, in-service and otherwise.

Couple of thoughts: Exchanging a single life insurance policy for a survivorship policy (insuring H & W) does not qualify as a 1035 exchange regardless of consistency of ownership; If only the owner is considered an obligee, exchanging a life insurance policy or annuity on H as insured/annuitant to one with W as insured/annuitant would qualify as a 1035 exchange as long as the owner was the same in both cases. I don't believe it does.

Issue has become moot in the instant case, but I respectfully disagree that it pivots on the unique privilege that a spouse has in rolling over an inherited IRA into his/her name. Isn't the question whether the non-spouse in this case can establish an inherited IRA for stretch purposes? I am suggesting that the logic of the cited PLR which ignored the intermediating estate in favor of the individual beneficiary thereof could be extended to a situation such as that presented.

I think the theoretical issue here is whether you can look through the estate to its sole beneficiary (if that is the case ab initio or consequent of qualified disclaimers) as the designated beneficiary. In the referenced PLR201901005 various disclaimers resulted in an IRA left to the decedent's trust to instead flow to his estate, of which is spouse was sole beneficiary (also consequent of said disclaimers). That being the fact pattern, the ruling stated that "Taxpayer, as Decedent’s spouse, will be treated as having acquired IRA 1 directly from Decedent, and not from Decedent’s estate or Trust." Assuming a similar fact pattern can be established, the practical issue will be finding an IRA trustee or custodian who will accommodate, absent your own PLR.

As a practical matter, absent a PLR you may not find an IRA custodian or trustee willing to establish an inherited IRA per the fact pattern.

Re corporate creditor risk: - Leveraged companies that violate loan covenants, even if they are otherwise not in default ("non-performing performing loans") may not be permitted by their creditor(s) to pay out deferred comp; - As someone famously said, bankruptcies happen slowly then all at once. Who saw Lehman Brother's bankruptcy coming? However, in my experience, even before 409(A) limited creditor risk strategies, the fly in the ointment re NQDC plans was their symmetrical tax consequences: employer didn't get a deduction until employee had concomitant income recognition.

I didn't see anything in the question suggesting that the issue involved a de minimis contract problem, but that the participant would not sign the application. Why? Participant can't be located or is otherwise non-responsive? Participant does not want a J&S annuity (marital problems?) and spouse won't sign off an a non J&S equivalent? Are you trying to purchase the annuity without any informational cooperation (such as proof of age by participant and spouse) by participant? Something else?

"Mec'ing out" means that any withdrawals from the policy, including loans, come out earnings first. Issue for the policyowner, not the insurer. As "Mec'ing out" maximizes the premium relative to the death benefit, it gives the insurance company more money to invest with relatively little additional commission exposure, as commissions are heavily weighted toward a "target premium" that is a function of the death benefit. Note that once a MEC, always a MEC (although remediation possible if caught/addressed early). MEC status cannot be cured by 1035 exchange.

Let's start with the basic tax difference between qualified and non-qualified (outside of 457) plans: qualified plan contributions by the employer are deductible; non-qualified contributions are not except to the extent taxable to the participant (hence a "162 bonus"). Here, then, is how such a plan could work using a life insurance Policy (funded to the MEC threshold). A few comments on that term and Policy selection follow the sample outline of design. For every dollar the HCE contributes to Policy, Employer will provide a {insert percentage} match. - HCE contribution is non-deductible (think of it as a Roth contribution); - Match is fully deductible but taxable to HCE, so - Employer grosses up the match (also deductible). Depending on the tax bracket assumed for the gross up payment, and the extent to which local taxes or the employer's share of SS taxes are taken into consideration, the non-qualified match will cost the employer 30 - 60% more net after tax than a qualified plan match (ex: employer TB = 21%; HCE TB for gross-up purposes = 28%; no local tax or SS adjustment. Cost of $10K QP match NAT = 7,900; gross up for $10K NQ match = $3,889; NAT for NQ contribution + gross-up = $10,972; Difference 38.89%). However, eventually the employer will receive a deduction for NQ payout. Deferred benefit, deferred offsetting deduction. Vesting - what client wants it to be? If desired, design can include a forfeiture provision for some or all of the match (and earnings thereon?) to be pulled out of the Policy, but think it bad form (and never seen) forfeiture relative to the HCE contribution (and earnings thereon). "162 bonus plan" with forfeiture provisions often referred to as a "Restricted Employee Bonus Arrangement" (REBA). HCE Benefits - In addition to insurance protection, cash values will grow tax deferred; HCE will be able to recover cumulative premiums (including match) tax free, and may be able to access additional cash value tax free through Policy loans. Insurance Policy Considerations: - The MEC (Modified Endowment Contract) threshold separates the favorable tax treatment of life insurance proceeds and withdrawals from the less favorable tax treatment of annuities. Funding to MEC limits reduces internal Policy expenses and maximizes cash value build-up. - Variable Life allows the Policy owner to allocate cash values among a menu of 401(k) type sub-accounts (subject to any Employer mandated restrictions). No ceiling or floor on performance. - General Account Universal Life or Whole Life essentially passes on a return based on the performance of the insurer's reserves, which for a better rated company will be primarily investment grade bonds. Modest return expectations, with some performance guarantees. - Equity Indexed Life is a hybrid, with investment return based on the performance of a selected index (such as the S&P 500), generally exclusive of dividends. There are downside performance guarantees (such as 0% floor) and upside ceilings.

A J & S simply provides for payments in some to continue for as long as one annuitant is living. Would it be an issue of participant had wanted payments to continue past her death to her descendants, as long as the spouse signed off on it?

If this is truly a joint ("their") trust), it is probably not the ideal vehicle to inherit a qualified retirement plan as the 100% basis step up at either spouse's death does not apply to IRD. But is less expensive to create and administer than two or more individual trusts. And could have been a DIY project using a template from a be-your-own-lawyer manual. That being said, is there a question as to whether any of the annuity options do not inherently satisfy DB RMD requirements? Would think not. And that being the case, why would naming the subject trust as beneficiary at either death be an issue if non-participant spouse signs off on it? Things could get complicated down the road for the survivor, tax-wise and perhaps otherwise, but don't see how that would implicate the Plan.

From the initial question, do not think there is an annuity liquidation issue (although the one referenced is anything but uncommon). "Individual Custodial Trust Accounts" are not, in my experience , annuity accounts but investment accounts. The issue is that these accounts are personal to the participant. The sponsoring employer has little authority over them. It would be a new one to me if all current account owners had to consent for any to roll their accounts to accounts provided by a new RK, but I would expect each individual account holder could elect (or not) to do so. As Ms. Jensen suggested, add the new RK and if individuals are not contractually prohibited (a contractual in-service distribution restriction?) from transferring from account #1 to #2, it becomes their option.

You might consider contacting Penchecks or Millinium Trust. Both firms specialize in this type of issue and will step into the Plan shoes to properly facilitate distribution. As a side note, both handy people to know when former participants go missing for normal or force-out distributions or the like.

Securities can be public or private e

Subject to in-service withdrawal restrictions and other considerations (e.g. ability to do a tax free "Roth Two-Step"), we periodically drain "SoloK's" into Rollover IRAs to keep them under the $250K limit and have never filed thereafter or had clients contacted by IRS about filing even if 5500's had been appropriately filed prior. FWIW.

If the rollover IRA was free of charges or the costs above what participants are charged, if anything, for a "normal" direct deposit distribution were paid by the employer, could it pass muster? By the way, as a general matter, what does one do with a distribution to a recipient who lacks a valid SS#?

Just wanted to add that the section 318 constructive ownership rules apply (see IRC 416(i)(1)(B)(i), i.e., your client may be a deemed 5% owner by virtue of stock owned, directly or indirectly, by or for his spouse, and his children, grandchildren and parents. Can be problematic for a business that wants to maintain family ownership.

I must be missing something. Aren't these elective salary deferrals and as such subject to FICA? Also, it is my understanding that a church can opt out of the SS system for religious reasons by filing Form 8274. Is this relevant to the client church? And ministers, if they are among the Plan participants, are always treated as self employed (again, my understanding) and never subject to FICA.

One of the responsibilities of a fiduciary is to monitor plan expenses. Revenue sharing is simply a breakdown of who is getting what from expenses (including, but not limited to, fund fees) paid by plan participants (whether they know it or not). Big three are recordkeeper, investment manager or broker, and TPA. There may be other mouths at the trough as well. In the aggregate these may be reasonable (by benchmark analysis) but perhaps the investment manager is being "overcompensated" at the expense of the "undercompensated" TPA (who is being paid by the sponsor, not the participants). In such a case plan costs could possibly be trimmed. Unless all plan fees are paid by the sponsor or no revenue (such as investment fees) are shared among or between plan service providers, the plan has revenue sharing, whether it is on a brokerage or RIA platform. What can't be measured cannot be managed.

Not sure I agree with Flyboyjohn. Wholly owned S-corp. pays employer half of SS tax of owner-employee comp. Owner-employee pays other half. Coming out of two different pockets, but both below to OE and in aggregate equals SECA tax OE pays as Sched. C filer. Does save on the 0.9% Medicare surtax, if it applies, as employer does not match. The employer portion of SS taxes is deductible; and a sole proprietor gets to deduct half of the SECA tax.

Sched. C income is QBI; W-2 wages are not. I know I am going off subject, but if the business is not an SSTB, is the conversion losing the owner a valuable tax benefit?

Your union is to you as a sports agent is to his/her player client. I have been involved in many similar situations and shame on the union that does not do its homework. And present its findings to the affected workers. Comparing 401(k) plans is relatively simple. The first question that should be asked is "why?" Why is the employer directing union employees into a separate plan? Bad reason: to be more generous with the non-union employees today or tomorrow. Possible good reason: the combined plan is over, or is close to over, the number of participants required for an audit, which is expensive; whereas dividing the population between plans solves that problem. In latter case, no reason the CBA could not call for the union plan to mirror the non-union plan, as the latter may from time to time be amended.

Not sure how much scrutiny of parentage is required, but even if Participant is "known" (however much that can be relied on) to have had two children, is the individual representing herself as D indeed the daughter?

S's attestation that D is indeed a d is to S's detriment. Suggest that S sign a statement to that effect that also acknowledges that by so doing D will be entitled to 50% of the account at S's expense. Who is going to challenge that?

Insufficient information. But as a threshold issue, where the IRA is payable to a master trust you will be hard-pressed to find a trustee/custodian who will recognize individual beneficiaries, or sub-trusts for same, for RMD stretch purposes if that is your goal. That being said, the possibility exists that the trust could stretch the IRA using the life of the oldest beneficiary. It is clearly not a conduit trust, as it does not provide for distributions of the RMD to the beneficiaries. Does it qualify as an accumulation trust? Possibly. Accumulation trusts have special issues. In determining the "oldest life" for RMD purposes contingent beneficiaries have to be considered as well as powers of appointment. A non-person contingent beneficiary can disqualify the stretch, as can the possibility that an interest cojld be appointed to a non-person. In all likelihood the IRAs will have to be cleaned out in 5 years.