Disability Policy Option for 401(k) Plans
A plan participant in a 401(k) can protect the ability to make contribution when he or she become disabled without adverse tax consequences by purchasing a long-term disability insurance policy (LTDI) according to Ltr Rul 200031060.
To provide for the continuation of benefit accumulations that otherwise would not occur if an active participant in its 401(k) plan became unable to work due to disability, it intends to allow participants to direct the plan trustee to allocate a portion of their salary deferral contributions to purchase a LTDI policy through the plan with the premium deducted from the participants account. Then if the covered participant becomes disable, the plan trust will start to receive monthly under the policy after a 365-day waiting period, the sum of 1/12 of the elective deferrals, and the qualified nonelective contributions, and the qualified nonelective contributions made to the plan on behalf of the participant for the plan year immediately preceding the year in which the disability began.
The policy will continue to make payments until the earliest of a) recovery from the disability, b) death of the participant, c) plan termination, d) withdrawal of all or a portion of the participants account attributable to the policy proceeds, or e) the maximum payment period determined on the basis of the age category at the onset of the disability.
In this IRS ruling, it is represented that policy payments to the plan are plan investments earnings and such earnings can be used to continue accumulations under the plan. Furthermore, the IRS concludes that the purchase of coverage will not constitute a distribution to the participant, thereby avoiding current taxation. Also since the policy proceeds are neither employers contributions nor employees contributions nor forfeitures, and then the amounts paid to the plan are not annual additions subject to the contribution limits of Section 415(c). However, plan distributions to participants of amounts received from the policy, and any earnings on such amounts, will be fully taxed to participants.
Finally, the IRS ruling indicates that the purchase of a disability policy will not violate the "contingent benefit" prohibition of Section 401(k)(4)(A).
Lo-Jack for Notebooks
While the Lo-Jack wireless devise is used by police officers to help recover stolen cars; Ztrace company of Boston offers customers a similar product called zTraceT which lets police pinpoint the location of a stolen notebook the first time anyone uses it to connect to the Internet. The software is hidden on the notebooks hard drive with no menu reference to alert the thief.
Recovering Lost Palms, Laptops and Cell Phones
A new service from Returnme.com offers stickers at $ 9.95 for 11 tags that can be placed on any object that include the word REWARD (Increasing your chance of recovery). Tags include your personal code and a toll-free number as well as Web site that finders can use. The item is picked up by FEDEX at no cost to the finder, who is automatically entered into a sweepstakes. The reward is paid by the items owner with an additional payment to NYC Based ReturnMe.com, LLP for the FEDEX charge plus a handling fee of $ 14.95 per item.
Please contact our office or your advisor to discuss the specific merits and applications of any material presented herein. The information is intended to inform and alert the reader of tax and accounting items of interest, but since it is presented in abbreviated form and not all-inclusive, it should be implemented only upon in-depth consultation with your appropriable advisors. Also contact referenced venders for additional specific information and application.
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