Guest lsapc Posted November 21, 2011 Report Share Posted November 21, 2011 Dear All, DOL regulatuions and case law have held that owner-only retirement plans are unprotected by ERISA outside bankruptcy proceedings. Is this still the case? Many thanks! Link to comment Share on other sites More sharing options...
Belgarath Posted November 21, 2011 Report Share Posted November 21, 2011 As far as I know, yes. You'd have to then look to State law to see if thereis any protection from judgements in that State. Link to comment Share on other sites More sharing options...
Guest lsapc Posted November 21, 2011 Report Share Posted November 21, 2011 As far as I know, yes. You'd have to then look to State law to see if thereis any protection from judgements in that State. Thank you Belgarath! Further question, if I may. All contributions were made to th Plan during the time that the business had employees. After the owner retired, the business was wound down and there were no further employees. That is why the Plan is an owner-only plan now. Distributions were made from the Plan to the employees of their accrued benefits. Since the Plan in fact benefited persons other than the owner over the period that contributions were made to the Plan, shouldn't the Plan, even though "owner-only" now, continue to be protected by ERISA? Many thanks! lsapc Link to comment Share on other sites More sharing options...
Belgarath Posted November 25, 2011 Report Share Posted November 25, 2011 Interesting question, and I think you'd need one of the ERISA attorneys to chime in here. I don't know if there are court cases that set a precedent for this specific question. Bankruptcy Trustees are always looking for creative ways to reach plan assets, and I don't know which view would prevail here. Link to comment Share on other sites More sharing options...
Guest lsapc Posted November 30, 2011 Report Share Posted November 30, 2011 Interesting question, and I think you'd need one of the ERISA attorneys to chime in here. I don't know if there are court cases that set a precedent for this specific question. Bankruptcy Trustees are always looking for creative ways to reach plan assets, and I don't know which view would prevail here. Thank you Belgarath! Excellent suggestion! lsapc Link to comment Share on other sites More sharing options...
mbozek Posted December 5, 2011 Report Share Posted December 5, 2011 As far as I know, yes. You'd have to then look to State law to see if thereis any protection from judgements in that State. Thank you Belgarath! Further question, if I may. All contributions were made to th Plan during the time that the business had employees. After the owner retired, the business was wound down and there were no further employees. That is why the Plan is an owner-only plan now. Distributions were made from the Plan to the employees of their accrued benefits. Since the Plan in fact benefited persons other than the owner over the period that contributions were made to the Plan, shouldn't the Plan, even though "owner-only" now, continue to be protected by ERISA? Many thanks! interesting Q. 5500-EZ instructions P 2 state that an EZ form can only be filed by a plan that only covers owners and their spouses and does not provide benefits for anyone else. This statement is ambiguous in that it could mean that the plan is exempt from ERISA only if there are no benefits held under the plan for non owners in the year the 5500 EZ is filed or that the Plan is exempt from ERISA only if the plan terms do not provide for any benefits to non owners regardless of whether benefits were ever held/provided benfits for non owners in prior plan years. In any event the plan benefits may be protected from the owner's general creditors if the plan contains a spendthrift provision that prohibits payment of benefits to creditors of a participant. There is some state case law which has upheld the validity of state spendthrift provisions for owners who were not protected under the non alienation provisions of ERISA. Other states have laws that prohibit seizure of benefits held in IRAs or any qualified plans by a creditor. . mjb Link to comment Share on other sites More sharing options...
david rigby Posted May 24, 2012 Report Share Posted May 24, 2012 Since the Plan in fact benefited persons other than the owner over the period that contributions were made to the Plan, shouldn't the Plan, even though "owner-only" now, continue to be protected by ERISA? Non-attorney comment looking in from the outside: seems likely that the IRS and/or bankruptcy court has dealt with the Q before. I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice. Link to comment Share on other sites More sharing options...
mbozek Posted May 24, 2012 Report Share Posted May 24, 2012 Since the Plan in fact benefited persons other than the owner over the period that contributions were made to the Plan, shouldn't the Plan, even though "owner-only" now, continue to be protected by ERISA? Non-attorney comment looking in from the outside: seems likely that the IRS and/or bankruptcy court has dealt with the Q before. Is the plan filing 5500s with DOL and complying with other ERISA requirements? Reg 2510.3-3 states that a plan subject to ERISA does not include a plan in which no employees are participants covered under the plan as defined in subsection (d). Subsection (d)(3) states that an individual who has incurred a 1 year break in service after becoming a participant in a plan and who has not acquired a vested right to a benefit before incurring a break in service is not a participant covered under the plan until the individual completes a year of service after returning to employment with the employer. It appears that a plan that holds vested benefits for a non owner employee who has terminated employment continues to be subject to ERISA. But I cant determine (except by implication) that a plan that has paid out all benefits due non owner employees and does not have any employees participating in the plan is no longer subject to ERISA or required to file 5500s. I know that once an owner only plan is required to file a 5500 because assets exceed $250k it is required to file each future year even if assets decline below 250k. Does the plan hold benefits for non owners? mjb Link to comment Share on other sites More sharing options...
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