Message Boards Digest

March 11, 2022

Here are the most recently added topics on the BenefitsLink Message Boards:

SSRRS created a topic in Defined Benefit Plans, Including Cash Balance

Lump Sum -- But When Is It Calculated?

"Participant age 67 retires and requests a lump sum (DB plan). The retirement and request was as of 1/1/22. If the lump sum is actually paid on March 14, 2022, does the plan calculate the lump sum as of 1/1/22 and also pay an amount of interest through 3/14/22?"

6 replies so far   |    Click Here to Add a Reply

JackS created a topic in Governmental Plans

What Statute Authorizes and Governs the Federal Thrift Savings Plan?

"What section of the code is the Federal Thrift Savings Plan under? Are there any published correction procedures that apply? I am working with errors made by the VA relating to eligibility and the correction of an ineligible participant (an entire group of them actually)."

No replies yet   |    Click Here to Add a Reply

BruceM created a topic in IRAs and Roth IRAs

Named Beneficiary of Inherited IRA Refuses to Take Payment

"Seems an elder widower died 3 years ago naming his son as 50% beneficiary of his TIRA. His inherited portion is small, under $5,000. Seems son and father were not talking and son said he'd take nothing from his father, including the IRA. So the IRA is sitting at the custodian, who has notified son but son has ignored them and said he'd burn any check he's sent for the IRA balance (his sister transferred her part out shortly after death). No RMDs have been taken. What will eventually happen to the son's portion of the IRA? Will it...

  • Be transferred to a taxable account in the son's name by the custodian and a 1099-R sent to the son for the year?
  • Eventually undergo the escheatment process and be transferred to the state with a 1099-R going to the son?
  • Escheatment and no 1099-R, it just goes away?
  • Eventually the IRS will require son pay 50% underwithdrawal penalties?"
2 replies so far   |    Click Here to Add a Reply

Peter Gulia created a topic in Retirement Plans in General

Does the IRS Ever Challenge a Shareholder-Employee's Compensation as Too High?

"Mary is the 100% shareholder of an S corporation she uses to provide her personal services to her clients. The corporation has no employee or other worker beyond Mary. Mary is a young 63.

Mary intends to sell her client list to a buyer. The buyer will do an assets purchase. Mary keeps her corporation.

The clients choose whether to get services from the buyer. Clients are free to leave any time, without cause, and without significant notice. Because of this, the deal terms obligate Mary to remain available and devote reasonable time and effort to help the buyer keep Mary's former clients. This obligation continues for 2022-2026. After the deal closes, Mary is considering doing no work except the light touches needed to meet her hand-holding obligation. Unless her tax lawyer (not me) tells her there is a better way, Mary anticipates receiving the buyer's payments in Mary's corporation. Each year, the corporation would receive enough money to pay Mary wages, perhaps up to the IRC Section 401(a)(17) limit, and pay pension funding and retirement contributions as generous as the actuary and third-party administrator I refer-in design and advise as proper.

In setting compensation for an S corporation's shareholder-employee, usually the worry is that the IRS might challenge the compensation as unreasonably below the value of that worker's services. But does the IRS ever challenge a salary as too high? Could the IRS argue that $305,000 is too big a paycheck for someone whose only work is a few calls to calm down a jittery former client and persuade them to stay with the buyer?

Or are there reasons why my question imagines more difficulty or risk than there really is? And what other issues should I be thinking about?"

3 replies so far   |    Click Here to Add a Reply

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