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Brian, thanks for the practical information. I do believe they don't want a trust situation as well. And part of the problem is their using the terminology more generically, not in the more legal sense that's leading to some confusion. Hope to get a more details on the situation shortly, but this helps clear up my thinking.

Now that Brenda Wren resolved an inquiry, just an aside: Even when ERISA’s title I required a plan’s administrator to file a summary plan description and a summary of material modifications with the Labor department, many administrators did not. Congress ended those filing requirements, effective August 5, 1997. Yet: “If a plan participant or beneficiary wishes a more recent copy of the SPD or SMM, the [U.S. Labor department] will request a copy from the plan administrator.” That would return a request to the plan’s administrator, and it might no longer have (or might never have had) a requested summary plan description.

Got it. Well if they do not have a formal trust in place, they may have inadvertently created a trust requirement through the segregated accounting. However, if the separate account is in the employer's name (not the plan's name) there are still ways to avoid the trust requirement. I'm assuming here they do not want to have a trust with all the associated compliance requirements and potential liabilities. The DOL looks to "ordinary notions of property rights” via all the facts and circumstances to determine “whether a plan acquires a beneficial interest in definable assets depends, largely, on whether the plan sponsor expresses an intent to grant such a beneficial interest or has acted or made representations sufficient to lead participants and beneficiaries of the plan to reasonably believe that such funds separately secure the promised benefits or are otherwise plan assets.” Here's a quick shorthand: https://www.newfront.com/blog/j-and-j-case-practical-considerations-the-erisa-trust-rules-for-health-plans-part-2 Common Arrangements That Generally Meet the 92-01 Relief to Avoid the ERISA Trust Requirement No Trust Required: Premiums/benefits paid from the employer’s general assets checking account. Facts and Circumstances: Premiums/benefits paid from a separate account in the employer’s name where the employer expresses no intent and makes no representations to lead employees to believe the funds in the account are plan assets. In either case, the employer could provide the third-party administrator (TPA) with check-writing authority over the account to ameliorate administrative burdens. Arrangements That Often Do Not Qualify for the 92-01 Relief (Subject to the ERISA Trust Requirement) Trust Required: A separate checking account held in the name of the health plan (even if maintained with a zero-balance approach to immediately pay premiums/benefits upon receipt). Facts and Circumstances: Zero-balance account maintained in the name of the TPA whereby the TPA periodically has the employer transfer funds in the exact amount of aggregate adjudicated claims to the fund the account and release approved benefit distributions to participants and beneficiaries. With respect to the TPA account zero-balance approach, the DOL has cautioned that “drawing benefit checks on a TPA account, as opposed to an employer account, may suggest to participants that there is an independent source of funds securing payment of their benefits under the plan,” which could create ERISA plan assets that must be held in trust. The J&J Connection: Avoiding the inadvertent loss of the DOL’s trust enforcement policy could end up as a key liability consideration derived from the J&J case. The J&J plan’s trust-funded status may prove to be one of the primary reasons the plan was targeted as the test case in this area, as well as a potential factor in the court’s analysis of the class plaintiff’s breach of fiduciary duty allegations.

I think that the SPD might be available from the DoL EBSA Public Disclosure Room, at - https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/how-to-obtain-employee-benefit-documents.pdf and see attached. This problem comes up frequently when the parties were divorced 20 or so years ago and realized that no QDRO was ever submitted, and where the in-hours Plan Administrator doesn't have a copy, let alone the TPA. David how-to-obtain-employee-benefit-documents (1).pdf

Brian, thanks for the thorough response as always. The terms "trust" and "surplus" were the terms used by the client - which did surprise me - and got me going into more of the VEBA/ Trust direction, and they made no mention of a Sec 125 plan (but as you say, that likely exists). The client appears to "set aside" funds in a non-interest bearing account which is why they say they have a "surplus" at year end. I don't know if the account is in the name of the ER or the Plan yet, but I'd assume that could make a difference based on your notes above, as well as if they choose to "invest" those funds in some manner to create additional earnings. I see your point on the FSA issues and agree.

With a “self-funded” (really, unfunded) health plan, a period’s expenses can be less than or more than the employer budgeted. When there is an amount that looks like a “surplus”, it’s tempting to think an employer might use it to provide employees an increased benefit. But remember, when expenses for already promised benefits are more than budgeted, the employer is obligated to meet those expenses.

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Hey, for an International Man of Mystery, anything is possible!

I think all those recitals you made at the start actually answer your question. The vast majority of self-insured health plans have benefits paid from the employer's general assets. That means on the employer side, there are no "plan assets." With respect to employee contributions, those also are almost always not held in a trust. This stems from relief in DOL Technical Release 92-01 that (in short form) does not require plan assets to be held in trust where the contributions are made through a Section 125 cafeteria (as is almost always the case). The DOL has made clear that “ERISA does not impose funding requirements or standards with respect to welfare plans.” It has further clarified that “an employer sponsor of a welfare plan may maintain such plan without identifiable plan assets by paying plan benefits exclusively from the general assets of the employer.” The end result is there are no surplus "assets" subject to the ERISA exclusive benefit rule in almost all self-insured health plans. The employer simply pays what it needs to out of general assets to address claims. More details: https://www.newfront.com/blog/j-and-j-case-practical-considerations-the-erisa-trust-rules-for-health-plans-part-1 https://www.newfront.com/blog/j-and-j-case-practical-considerations-the-erisa-trust-rules-for-health-plans-part-2 On your specific point, I disagree with the premise of the question. One of the rare situations where experience gains can arise that are subject to the ERISA exclusive benefit rule is with respect to health FSAs because Section 125 imposes specific rules on how to apply forfeitures. There is some debate as to how broadly to define "plan" for this purpose, but my position is that the employer can apply those gains only to benefit participants in the health FSA. I do not believe a broader cafeteria plan or wrap plan reading to shift the benefit to participants outside that specific benefit package is appropriate in the health FSA context or in the context of a major medical plan where there are plan assets to address (e.g., a plan funded by a trust). For example, MLR rebates are a common area where there are medical plan refunds subject to the ERISA exclusive benefit rule. I don't see a good argument that the portion of the rebate attributable to plan assets could be allocated to dental plan benefit enhancements just because the dental arrangement is housed under the same mega wrap umbrella plan 501. More details: https://www.newfront.com/blog/j-and-j-case-practical-considerations-the-core-four-erisa-fiduciary-duties-part-1 Exclusive Benefit Rule Common Application Example: Health FSA Forfeitures Another common area where employers directly confront limitations imposed by the Exclusive Benefit Rule is in the context of health FSA experience gains caused by employee forfeitures. In other words, where the total health FSA contributions exceed the total health FSA reimbursements for the plan year. This will occur where the health FSA forfeitures (employee failures to submit qualifying expenses sufficient to meet their contributions) are higher than the health FSA losses (employees terminating mid-year with an overspent account) for the plan year. In this situation, the Exclusive Benefit Rule likely prevents employers from allocating health FSA experience gains from forfeitures to fund the administrative expenses of another employee benefit such as the employer’s health plan, dependent care FSA, wellness program, lifestyle spending account, or commuter benefits. Applying the health FSA experience gains to other benefits would likely breach the Exclusive Benefit Rule because not all of the health FSA participants would be participants in those other benefits, and therefore the funds would not be used for the exclusive benefit of the health FSA participants. For more details: FSA Experience Gains from Forfeitures Slide summary: Newfront Office Hours Webinar: ERISA for Employers

Thank you Effen. Your quick response saved me from starting to self doubt.

Thank you very much, Bri, for the clear answer

fmsinc - Hugh? OP said NRD was 62 w/ NRD 3/1/25. Since he didn't receive his benefit as of 3/1/25, it must be actuarially adjusted to reflect the delayed payment. (This assumes he was not working in suspendable service after 3/1/25 and timely received a Suspension of Benefits Notice.) If he was terminated as of 3/1/25, or if he was active but didn't receive an SOBN, an actuarial increase is required. First you need to adjust the accrued benefit to reflect the delayed payments, then apply the lump sum factor at the age of distribution. This has nothing to do with a DC plan, no idea what you are referring to with those comments.

You have early retirement, usually age 55; normal retirement, usually age 65; and the actual date that the employee retires. Unless you want to terminate the employee at a certain age he/she will continue accrue pension benefits until he actually retires and enters pay status. In your case you need to toss your age 62 analysis and compute the lump sum when the employee actually retired in March, 2025, and then add interest equal to gains and losses at an interest rate you would have computed on a distribution from a defined contribution plan from the March, 2025, Valuation Date to the December, 2025 Distribution Date. How does actuarial equivalence apply to your situation. Presumable the lump sum is the present value of the employee's future stream of income had he elected an annuitized payout. The concept of actuarila equivalence applies to payment to a spouse or former spouse in the form of a QJSA or a QPSA. DSG

I know enough to be dangerous with regard to the subject matter.... so I understand that surplus assets in a self-funded plan my be used in various ways to cover/lower future costs for participants and cannot be used across different "welfare plans" that cover different employees. I understand that EE contributions will be ERISA "plan assets" and ER contributions may or may not be plan assets depending whether held in trust or general assets of the ER. I understand that ERISA plan assets are subject to the exclusive benefit rule and must be used to benefit participants. What I need clarity on is how it is determined that a single plan exists under ERISA for this purpose. Say you have MEC plan (or MEC + Plan) plus insured dental and vision plans that cover the same group of employees if they so elect. What makes it a single plan whereby any surplus plan assets can be used across all programs? Is is simply the terms of the plan document and the trust agreement that ties them together - just like a Wrap Plan that creates a single plan for 5500 purposes. Or am I am missing something?

A reminder that a service provider might have purposes and interests not perfectly aligned with a plan’s sponsor’s or administrator’s purposes and interests.

Sure, explore that process. But get review by the plan's ERISA attorney. Also, consider whether you need review by your own attorney also.

Thank you, David. The only reason the J&S rules are in the plan is because the old MPP was merged back in 2002. They did not limit it to only old MPP in the previous restatements because they just thought it would be easier! Well, it's not easier now that we are terminating! The recordkeeping has separated the money types so it's very clear who has old MPP money and who doesn't. I'm thinking that we can amend the plan to remove the J&S rules at least to the extent of non-MPP money. That may reduce and will certainly limit the problem. As I recall, we are permitted to do that without notice. Thoughts on that idea?

I;ve already done all of the above, LOL . But it did occur to me that someone would put something out there.

1. Review the document to determine if it helps with your question. 2. Hire a pension actuary to assist you, especially one that has done several plan terminations. That actuary has probably seen similar situations and might recommend some solutions. One solution might include "creative" communication to encourage the participant and/or spouse to sign. For example, many years ago, I had an unresponsive participant with a LS of around $4000 (the LS limit at the time was $3500). We advised the participant that, if there was no response by X date, the plan would be required to purchase an immediate J&S annuity (because we already knew that no insurer was willing to sell a deferred J&S), and the approximate benefit would be about $20 per month. BTW, it worked and the participant completed the form for LS payout.

I don't do DB/CB work and don't normally have to deal with J & S rules. However, I have a terminating DC plan with J & S in it. If a participant is unresponsive or the spouse refuses to sign, it appears that we have no other choice other than go to the marketplace and buy an annuity for them. Is there any other option? Penchecks says they will handle funds over $7,000 for terminating plans but if the participant doesn't respond, they don't buy the annuity....they move them to an IRA and thereby ultimately are bypassing the spousal consent rules. Since the plan isn't covered by the PBGC, we can't move the funds there. Any other options?

Is it feasible for austin3515 to write the self-certification form? Could you do that task in an hour or less? Would your client pay your fee? For an IRS explanation of what a certification must state, see Q&A B-2 in Notice 2024-63. https://www.irs.gov/pub/irs-drop/n-24-63.pdf This is not advice to anyone.

Doesn't the discretionary match formula, to be covered under ACP safe harbor, have to preclude any HCE from getting a higher rate of match than any NHCE contributing the same rate? If any HCE has >5 YOS and any NHCE <5 YOS that won't hold. Or am I confusing this with something else?

Is the § 129(d)(8) condition measured on the whole of employees of all business organizations that together are one § 414(b)-(c)-(m)-(n)-(o) employer. In counting who is a highly-compensated employee (for § 129 or § 128), does one count a worker who is not an employee (because she is a partner or other self-employed individual)? In counting “employees who are not highly compensated”, does one count a worker who is not an employee (because she is a partner or other self-employed individual)?

Well the issue here is that my clients are too small to pay the exorbitant fees for that kind of a service. I think those services (which are awesome and well worth the fees charged) are really only available to the larger plans (say $50MM or more). As an example I have a plan with 15 people who wanted to add it!

Regardless of the status of the proposed cafeteria plan nondiscrimination regulations, the §125 nondiscrim rules are easy to pass. That's not a concern. The hard part will be that the new §128 for tax-free Trump Account contributions through and employer includes a requirement to apply rules "similar to" the §129 dependent care FSA nondiscrimination rules. That means the dreaded 55% average benefits test will likely apply. That wasn't so much of a concern when it initially looked like Trump Accounts were only going to permit employer tax-free contributions, but now that employees may be able to contribute pre-tax it is very likely that HCEs will contribute disproportionately. That will presumably cause routine failures of that 55% average benefits test in the same vein as with dependent care FSAs. https://www.congress.gov/119/plaws/publ21/PLAW-119publ21.pdf ‘‘(c) TRUMP ACCOUNT CONTRIBUTION PROGRAM.—For purposes of this section, a Trump account contribution program is a separate written plan of an employer for the exclusive benefit of his employees to provide contributions to the Trump accounts of such employees or dependents of such employees which meets requirements similar to the requirements of paragraphs (2), (3), (6), (7), and (8) of section 129(d).’’.