Luke Bailey

One data point, waid10, is that when the buyer's new employees continue to be covered under the seller's plan (which is common, assuming the seller sold only part of its business and continues to have a plan) you technically create a MEWA, but the DOL Form M-1 instructions say you don't have to report if does not extend beyond the end of the plan year following the plan year of the acquisition.

EBECatty, I have never run into this but I will point out that the Tax Adviser article I linked to in my prior post indicates that while a grantor trust is usually required to file a 1041, there are apparently alternatives explained in regs or 1041 instructions. I did not read in depth but you may want to review.

I think the right answer is 73. A person born in 1959 would attain age 73 in 2032, so there you are. It's 73. Even though the same person will attain age 74 after December 31, 2032, you don't skip 2032 because what is being determined is the "required beginning date" for a continuous stream of distributions.

Note that IRC section 4972 imposes a 10% excise tax on nondeductible contributions.

If a J-1 visa holder working in U.S. has his or her service covered by a tax treaty between the U.S. and their country of residence covering temporary employment as a trainee or apprentice or the like, then they can File IRS Form 8223 and the payments they receive from their employer in the U.S. is not subject to U.S. Federal income tax. You have to check whether the individual is covered by a treaty and then also check the treaty's wording, because the language is not uniform for all treaties and requires interpretation in many cases. The detailed and lengthy instructions for Form 8223 do a pretty good job of explaining the principles involved. In most cases, this will mean that they have no "compensation" under the employer's 401(k), 403(b), or 457(b) plan document, making their participation in the plan impossible, even if they are not excluded by the standard "nonresident alien with no U.S.-source income" exclusion.

FWIW, in this specific instance, it seems to me that the language of the statute has always been much broader than the old regulation, and would fully support the new.

Did this involve a VEBA benefit trust?

I think you'd have to know the nature of the complaint and the basis for the settlement. If (as seems unlikely) the settlement said, "Yeah, you were employed for X period and we should have been paying you all that time," then there would be a basis for saying the plaintiff was an employee entitled to plan benefits. But if it said, "We disagree with your allegation that you were wrongfully terminated, but we're going to throw $20k at you anyway to get you and your lawyer to go away, and because of the IRS rules we'll put it on a W-2," then I would question whether you wouldn't just follow the specific agreement of the parties that there should be no plan contribution.

VeryOldMan, yes, I think you should talk to a lawyer and do it quickly.

fmsinc, as a point of information, in my experience most lawyers (both with firms and in-house with plans) working with governmental plans call state law orders dealing with divisions of retirement benefits in divorce "QDROs" even though not governed by ERISA.

As you note, Albany Consultant, it is the business, whether a partnership or corporation, that must be the plan sponsor. If the purpose of the business's adoptiong two plans is so that each brother can decide on his own contribution rate beyond the 402(g) max, then the IRS could look at this as a way of evading the nonqualified CODA prohibition. Would depend on the facts.

Mark Va, it seems to me that both CuseFan and Carol V. Calhoun are right in the abstract. The actual answer for your son will probably hinge on the plan provisions and the wording of the election. They are irrevocable, but usually only apply to the mandatory employer contribution.

pwitt, Peter Gulia's analysis of the issues is excellent. From a practical standpoint, I would want to know (a) whether the person who would take the money through the estate is different from the person who would be the contingent beneficiary and (2) whether the amount of money at stake is significant. If the takers are different and there's enough at stake for the one who would not get the money under the plan administrator's interpretation to hire a lawyer and sue, the plan might want to hire it's own lawyer to interplead the benefit into court.

Berto, what you explain that they explained to you could well be right, but of course it depends on the actual facts and on what the plans say, as pointed out by ratherbereading.

Plan Doc, because Section 415 does not apply, the unfunded benefit, at least for tax purposes (i.e., I am not addressing tax-exempt org reasonable compensation issues) the benefit can be whatever you want. Just must be unfunded and not vested.

That is my understanding. Or any formula, really, that has only one solution once earned income has been calculated.

I agree with both CuseFan and Bri. Depends on the timing, i.e. was the individual rehired before or after the distribution.

Most plan documents have a provision stating that if money is to go to a minor or infirm person the plan administrator will determine who should receive the amount and is protected for having acted in accordance with the plan's provisions. I have never had to utilize such a provision, but it seems to me that such a provision would place a fiduciary obligation on the plan administrator to act with loyalty and prudence to the potential distributee. I would search the document for the term "facility of payment" to see if this plan has such a provision.

52626, your question seems to be premised on a situation where the plan's provisions for what can be deferred and what is matched use different definitions of compensation. This would be unusual. Obviously, if it's the same definition, then they should be treated the same for deferral and match purposes. Note that whether the imputed income from group term life premiums for coverage over $50k is an excluded "fringe benefit" or not (assuming the applicable definition of compensation excludes "fringe benefits"), there is no IRS or DOL rule, or general industry agreement, on what is a "fringe benefit." If there is no specific plan provision that defines "fringe benefit," you would need to look at consistent plan administrator interpretation of the term. The taxable portion of GTL premiums is generally comp for 415 purposes and would be included in a safe harbor comp definition.

LadyjaneM10, your lawyer has to handle this. Your lawyer may want to co-counsel an ERISA attorney who can help with this, or seek the aid of an actuary for expert assistance.

Belgarath, a lot of opinions in the tax area just say that there is enough basis for the position that the taxpayer who takes the position would not be subject to penalties other than interest if challenged by the IRS and taxpayer loses. But the point here is that the client is willing to take their chances and just wants a back-up in case of an audit to try to avoid IRS penalties, opprobrium within company or profession, etc. It's legal CYA. 50% would be way above what is necessary for an opinion that the taxpayer can file the return and likely not be subject to penalties (there is never any certainty in life). My guess is it's largely the same in areas other than tax as well, e.g. is anyone going to give a 50+% opinion to an AI company that it can use a voice just like some famous person without permission and not be subject to damages? Probably not, but the AI company would want to be able to say that they had checked with their lawyers and been advised it might be OK before doing it. I'm pretty sure that outside a few areas like muni bonds and secured transactions, maybe some securities law provisions, opinions are rarely something where a law firm is effectively saying,"Yeah, go ahead and do X. We're sure you can and if we're wrong we're good for all of your damages." I've written some plan asset reg opinions (VCOC and REOC) where we were able to give nearly complete assurance on the legal issues, but that is the only area I have experience with where it's been near certainty. The rest were around 50% but really impossible to quantify. And that's another issue, i.e. although people do put percentages on tax opinion levels of certainty, it's ultimately more of a subjective art than a mathematical science.

Over 20 years ago, I think, I heard someone with more experience than me (then) say that they had received a DL letting a deceased sole proprietor's spouse (who had the sole remaining account as beneficiary) maintain the plan indefinitely as a frozen plan as long as the spouse kept the plan amended for law changes.

This will be decided under state law and procedure. You need to find an experienced Illinois attorney. It probably will help that was discussed in detail in divorce decree.

Tom, bankruptcy is Federal. That's right in the constitution. The Federal Bankruptcy Code was amended in 2005 to make clear that a debtor's interest in a qualified retirement plan (401, 403, etc.) is excluded from the debtor's bankruptcy estate, and also rollovers from those plans that are in IRAs. Non-rollover IRAs are exempt up to $1.5 million, indexed annually, so a little more now.

I think the IRS still takes the position that you have to have an employer in existence to maintain a plan.