Compliance October 23, 2006

Full IRA Income to be Used for Tax Calculation of NY Part-year Residents

October 23, 2006 (PLANSPONSOR.com) - New York's Division of Tax Appeals has recently decided that the full amount of an individual retirement account (IRA) distribution is to be used in the calculation of state income tax for part-year residents.
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The New York Law Journal reports that an administrative law judge (ALJ) upheld a 1992 state Court of Appeals decision allowing the use of non-state source pension income in calculating the tax rate on state source income. According to New York tax law, tax on income from New York sources for part-year residents is calculated by taking the tax for the full year minus credits and multiplied by a rate equal to the New York source income divided by the total adjusted gross income.

The case before the ALJ hinged on a challenge to the state’s calculation based on a 1996 federal statute which said, “[n]o State may impose tax on any retirement income of an individual who is not a resident or domiciliary of such State (as determined under the laws of such State),” according to the New York Law Journal. The couple bringing the case argued the state improperly calculated their taxes by using pension income received while they were non-residents.

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The 1992 appellate court decision rejected a similar argument, and the ALJ said that, even though that case was decided four years prior to the federal statute, it prevailed.

The couple moved to New York in 2000 and cashed in an IRA for money to pay for their new home. The couple claimed part of the distribution based on the date they moved to New York. However, the state recalculated their claim based on the entire distribution.

Compliance October 20, 2006

Allstate Rehire Policy Defies ADEA

October 20, 2006 (PLANSPONSOR.com) - The US District Court for the Eastern District of Missouri ruled in a summary judgment that Allstate Insurance Company's one-year moratorium on rehiring its former sales agents has a greater impact on those workers aged 40 and older.
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The ruling by US District Judge E. Richard Webber, in a suit filed by the Equal Employment Opportunity Commission (EEOC), found that Allstate’s policy violates the Age Discrimination in Employment Act (ADEA). But Allstate is still awaiting a jury decision on whether its rehire policy meets an exception to the act, which says any action based on a “reasonable factor other than age” is not unlawful.

The EEOC claimed in its lawsuit that Allstate fired its agents and then offered them jobs as independent contractors, but refused to hire them in other positions as employees for one year. Some 90% of the agents were 40 years old or older.  The workplace anti-discrimination agency says this violates the ADEA, because a disproportionate number were aged 40 or older.

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Weber agreed that the EEOC presented “sufficient evidence to show a disparate impact on the protected group” of workers 40 and over, making the decision one of the first instances putting into practice a Supreme Court ruling last year that ADEA does apply to “disparate impact” cases.

The Supreme Court turned away an appeal request by former Allstate agents in March to review the decision of the 7th US Circuit Court of Appeals (See Judge: Allstate Innocent of Age Discrimination Claims ) that said the insurance company’s decision to discharge 6,400 employee agents was legitimate and nondiscriminatory. The plan had called for Allstate to no longer sell insurance through employees, but instead through a network of independent contractors (See US Supreme Court Turns Away Allstate ADEA Case ).

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