Case Studies & Testimonials

Business Succession & MaxProtect Plan® Testimonial: Doug Starr, ECCA

Doug Starr discusses working through a business succession plan and using the MaxProtect Plan® and trusts for his business, ECCA. He discusses how while he was initially overwhelmed, working with Tom Hoffman and Knox Law was beneficial and effective.

"The estate plan worked out exactly how it was mapped out. So, there was a very seamless transition with respect to the transfer of the stock and the ownership of the company when my father did pass. We were very pleased with how that whole process worked out... it has worked extremely well for our family."

He also discusses working through estate administration (probate) for both of his parents’ estates with Knox Law in Pennsylvania – another easy and seamless process.

"We had to go through probate down at the courthouse and the whole process probably could not have been easier. The assistance from the folks at the Knox Firm was first class. Literally, we went down to the courthouse with one of their associates and probably spent not even five minutes, signed a piece of paper or two and that was it and we were done. So, it was an extremely simple fast process to have to go through."

Case Studies

The case studies below illustrate a particular legal issue faced by a client and the outcome achieved as a result of our representation.

Health Insurance, Qualified and Non-Qualified Plans

Issue: A company received a Medical Loss Ratio rebate check from a health insurance company for group insurance payments made in 2019. The company’s plan is silent as to how to apply the rebate amount.

Outcome: Nadia Havard and David Mosier conducted research and worked with the company to create a plan of action that ensured compliance and avoided unnecessary expenses.

Details: Based on DOL Tech. Release No. 2011-04 guidance and IRS Q&A information, the company calculated the portion of the rebate which is attributed to the payments made by the employees and the portion of the rebate which is attributed to the payments of the employer. The company has a high turnover of the employees and it would have been administratively cost prohibitive to locate former employees in comparison to the amounts each of them would receive from the rebate. Based on DOL Tech. Release No. 2011-04 guidance and IRS Q&A, the company decided to issue checks only to current employees enrolled in the group health plan, gross-up the wages, and treat the payments as taxable fringe benefits. Since the payments to the participants are made within 3 months of receipt of the rebate, the company did not need to keep the rebate in trust and incur additional compliance costs.

Borrowing Off 401(k) to Purchase a House

Issue: A taxpayer took money out of his 401(k) in December 2019 to buy a house. Soon after the closing, he borrowed funds to put back into his 401(k), equal to 80% of what he took out, but he was still $40,000 short. Unfortunately, none of the permissible distribution requirements applied to the withdrawal. Also, it was not documented as a loan.

When the taxpayer filed his income tax return for 2019, he reported the $40,000 401(k) distribution as income. The IRS issued a notice of deficiency in October 2020 for taxes due for such distribution, plus interest and penalties. The taxpayer also owes state income tax on the distribution that was not rolled back. The taxpayer has been unemployed since March of 2020.

Outcome: The taxpayer needs to enter into a payment plan with the IRS and file for abatement of penalties (thus allowing the IRS to take levy on his property).

Details: The taxpayer could have tried to apply for a waiver of 60 day roll over requirement due to his current circumstances, but the taxpayer does not have $40,000 to roll back in the 401(k) plan. Alternatively, he could have gone through the IRS Employee Plans Compliance Resolution System (EPCRS), but he needs to fix the situation first, i.e. pay income tax and interest.

Inherited IRA Mistaken for Taxpayer-Owned IRA

Issue: A taxpayer’s parent passed away a couple of years ago. The 401(k) custodian was directed to transfer the funds of the decedent to another institutional custodian for the benefit of the taxpayer. Somehow, the funds received on behalf of the taxpayer were put in the taxpayer’s own IRA account rather than an inherited IRA account. The taxpayer just discovered that the mistake and wondered how to remedy it.

Outcome: We suggest the taxpayer (1) confirm and if necessary, take required minimum distribution (RMD) for the year the parent passed away, (2) take RMD for all subsequent years, (3) immediately correct the title on the account to be listed as an inherited IRA, (5) submit Form 5329 to the IRS regarding improper rollover and (6) request that the IRS waive penalties, via the voluntary compliance system.

Contact any of our Estate Planning & Administration attorneys to learn more.

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