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Top Ten Tax Traps for Your Fund
Two pension benefit specialists delivered an overview of how pension plan administrators can protect their qualified status and provide the best tax treatment for their members' benefits.
Terry Mumford and Eric Swank, with the law firm Ice Miller, listed the top ten tax traps. However, as they explained, many of these same ten areas are also tax opportunities.
The top ten tax traps are as follows:
- DROP Benefit Taxation
- Non-Taxable Disability Benefits
- Non-Taxable Death Benefits
- Required Minimum Distributions
- Retiree Health Care Options
- Automatic Rollovers of Involuntary Distributions
- 415(b) Limits
- Phased Retirement
- 457(b) Plan Amendment
- Abusive Tax Avoidance Transactions
In reviewing these issues, the presenters offered background on each, followed by a discussion of strategies available to either avoid the tax trap or to take advantage of the opportunity for avoiding tax on the issue.
Mumford and Swank stressed that trustees and plan administrators can perform a valuable service to their members by identifying what is taxable and what is not. They explained how retirees, in particular, may pay taxes twice if they fail to understand the tax obligations for their benefits.
Eric Swank, Esq., from the law firm Ice Miller, has as his primary area of concentration employee benefits, concentrating on local and state governmental plans. He works with governmental employers and retirement plans across the country and consults on a variety of pension and health benefit matters. On behalf of statewide pension systems, he has drafted and negotiated investment services contracts and assisted with the RFP process.
Terry Mumford, Esq., from the law firm Ice Miller, works with governmental pension plans across the country, and consults with public sector employers and associations on a variety of benefit matters. Her assignments have included seeking IRS determination letters for governmental qualified retirement systems. These plans have included innovative features such as 401(h) accounts, lump sum distributions, 13th checks, and DROPs. She has also pursued IRS private letter rulings on behalf of retirement systems on a wide range of topics.
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