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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).’’.

Apart from differences in how highly-compensated and other employees use one’s wages, an employee population might have a skew about which employees have a dependent who is an eligible individual.

About § 125’s nondiscrimination condition, the Treasury department has done no more than propose an interpretation. More than 18 years later, that interpretation remains merely proposed.

The DOL's missed filing rules are here: https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/correction-programs/dfvcp

Sounds like you should do the AE adjustment from March to December on the benefit, and then calculate the lump sum as of December based on the adjusted benefit.

According to the ERISA Outline Book, the IRS took the position at a conference that you count ADP/ACP, but had no opinion on 402g excess. (The book's discussion also suggested you wouldn't count 415 excess distributions, since those were never proper annual additions to begin with.)

That was my thought, too - you can do it but you have lots of other things to pass, the ADP not one of them.

Totally agree that this will be a meaningful benefit. Do we think nondiscrimination rules will apply? I imagine that highly compensated would be much more likely to take advantage of this.

Thanks again to responders! We decided to provide the former participant with a letter stating that as a former participant with no benefits in the plan now, she is not entitled to receive an SPD at this time. We provided a copy of the last statement she received which reflected the amount she was paid along with the check number and date of her benefit check which was rolled over to an IRA. We stated that we do not maintain historical copies of SPDs. We think she met with SSA in-person as she was never reported on Form SSA which would explain why her request was stated the way it was. We do have copies of historical plan documents but did not provide that to her.