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Topic 81: Distribution Rules, Alternatives, and Taxation - 283 (4) Individual trusts cannot split into separate accounts, but if the IRA is payable to multiple trusts, then the rules for separate accounts can be used if divided prior to December 31 (5) A bene ciary can be disregarded in determining the oldest bene ciary if the individual is a successor to the interest of another bene ciary (6) Clients should review documents to ensure designated bene ciaries are correct, especially if multiple IRAs exist or multiple bene ciaries have been designated 5 Quali ed domestic relations order (QDRO) A A domestic relations order is a judgment, decree, or order (including the approval of a property settlement) that is made pursuant to state domestic relations law (community property law) and that relates to the provision of child support, alimony payments, or marital property rights for the bene t of the spouse, former spouse, child, or other dependent of a participant B A QDRO is a domestic relations order that creates or recognizes the existence of an alternate payee s right to, or assigns to an alternate payee the right to, receive all or a portion of the bene ts payable with respect to the participant under a quali ed retirement plan and that complies with certain special requirements: (1) Name and address of participant and alternate payee covered by the order, (2) Amount or percentage of the participant s bene t to be paid by the QRP to each alternate payee or the manner in which such amount or percentage is to be determined, (3) Number of payments or period to which the order applies, and (4) The QRP to which the order applies C A state authority, usually a court or state agency or instrumentality, must issue the judgment, order, or decree or approve the property settlement before it can be a domestic relations order under ERISA D Applies to all quali ed retirement plans, 403(b) plans, and 457 plans E QDRO rules do not apply to IRAs, but the transfer of an individual s interest in an IRA to his or her spouse or former spouse under a divorce or separation agreement is not considered a taxable transfer made by the individual; and thereafter the IRA is treated as maintained for the bene t of the spouse or former spouse F IRAs can be used to implement a QDRO if a direct transfer of the participant s interest in a retirement plan to the spouse is otherwise prohibited G QDRO rules do not apply to nonquali ed plans However, there have been rulings that life insurance bene ts under an employer-sponsored nonquali ed plan, are subject to QDRO rules if a divorce decree speci es how the life insurance bene ts must be distributed 6 Taxation of distributions A Waiver (discussed earlier in regard to this topic but worth considering again) Consent of nonparticipant spouse to waiver (or electing out) of QPSA and QJSA in favor of an optional bene t form selected by the participant must (1) Be in writing, (2) Acknowledge the effect of the waiver, and (3) Be witnessed, either by a plan representative or by a notary public B Cost basis recovery (see also, taxation of annuity basis in Topic 81) (1) No tax is paid on contributions until a distribution is made Tax is paid on net distribution, where the cost basis is recovered tax-free (2) Cost basis consists of the following:.

Strategic-level analysis (top-down approach)

284 - Retirement Planning (a) All employee contributions that have not been treated as deductions for federal income tax purposes (b) Any loans that were included in the employee s income (c) Any employee contributions that were included in the employee s income (d) Any life insurance (PS-58) costs that were included in the employee s income Note: Self-employed cannot include insurance cost in cost basis (3) Capital gains treatment Lump sum distributions may be eligible for capital gains treatment (a) Only pre-1974 employer contributions are eligible (b) Only participants in a QRP who have attained age 50 by January 1, 1986 are eligible (c) Long-term capital gains tax rate is 20 percent (4) Net unrealized appreciation (NUA) (a) If a lump sum distribution includes employer securities, the NUA in the value of the securities will not be taxed to the employee at the time of distribution (b) The amount of appreciation will be taxed when the employee sells the securities at long-term capital gains tax rates (c) Employee may elect to pay the tax on the amount of appreciation at the time the securities are distributed by including the amount in income

class CIdle : public CActive { public: IMPORT_C static CIdle* New(TInt aPriority); IMPORT_C static CIdle* NewL(TInt aPriority); IMPORT_C CIdle(); IMPORT_C void Start(TCallBack aCallBack); protected: IMPORT_C CIdle(TInt aPriority); IMPORT_C void RunL(); IMPORT_C void DoCancel(); protected: TCallBack iCallBack; };

Tactical-level analysis (bottom-up approach)

7

The CIdle object should be created with a low or idle priority and the long-running task initiated by a call to Start(), passing a callback function to perform an increment of the task The TCallback object encapsulates a pointer to a callback function which takes an argument of type TAny* and returns an integer The callback function manages the task increments and can be a local or a static member function It should keep track of the task progress, returning ETrue if further steps are

SOCKET Implementation Team Periodic reaudit Implement BPR Reconfigure existing technology Ongoing tactical audit Buy new technology Train people

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Which locations or business units should be included Consider: