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Please be sure to distinguish the quality of the debt for someone overreaching to buy a house that they cannot afford from the quality of the debt for someone who needed more medical care than they could afford. If someone wants a house but doesn't have the resources to afford it, active malfeasance on the part of the lending company is required (since they know full well that the mortgage would be unsupportable). If the person looking for a house is made to understand their financial limitations, they can choose to not try to buy the house. If someone needs an operation, there is no alternative to getting that operation. With the possible exception of the operation being needed due to extremely poor choices adversely affecting the person's health (and even then, it is inhumane to use that as an excuse to not provide them the care that is now needed), there is nothing the person could have done to avoid the necessity of obtaining the operation. In the original post, if the employee did not cause the accident, the financial bind is not her fault, and destitution (or even decimation of her retirement savings) is not appropriate.

So if someone owes $75,000 because of a 2 week hospital stay, and the sorry excuse for a human being buys it for $300, if they can squeeze $500 out of the debtor or the debtor's family, that's a 66% gain on the investment. If they can get the person to settle for an entire cent on the dollar ($750), then the profit is 150%. And if the debtor agrees to pay 10%... That this even exists tells us something about humanity.

A SH plan termination in connection with a 410(b)(6)© transaction is one of the exceptions allowed a final short SH plan year. See §1.401(k)-3(e)(4)(ii) cited above. If you don't meet that exception, you are under (i), which requires 30 day advanced notice and ADP/ACP testing, i.e not SH.

Is this a fair statement of the question:Is it illegal for an employer to punish/discriminate against an employee who refuses to enroll in and make a contribution towards the premium for a "benefit" that the employee doesn't want? I believe it is. What if the employee has a sincerely held religious objection to health insurance in general or contraception coverage specifically? What if the employee would prefer to have Medicare as their primary coverage? In states I'm familiar with it's illegal to withhold $$ from an employee's pay involuntarily except under legal compulsion. Since "minimum participation" requirements are no longer legal and in the small group environment the insurer's age banded, community rated premiums are available to all comers I also don't understand how the insurer is saying your client isn't meeting underwriting requirements. IMHO bad idea, don't do it.

This is addressed in Treas. Reg §1.401(k)-3(e)(4)(ii). Since the plan is terminating due to a merger, it does not have to provide the employees with the Supplemental Notice. However, the plan sponsor is required to fund the accrued benefits through the date of termination, and the plan must satisfy ADP/ACP and top-heavy testing for the year. Did the liability for funding the accrued benefits remain with the seller under the purchase agreement? In any event, the legally responsible party must fund the accrued benefits. Failure to do so could disqualify the plan, and bring legal action by participants and the DOL to recover the liabilities.

My 2 cents, I was generally agreeing with your observations in post #9. That a factor can buy a receivable so cheaply might suggest that it ought never to have been regarded as an obligation, much less a debt. I know many people who have the good sense to ignore the collection efforts. You're right that it's a shame that anyone should have to deal with the circumstances you describe.

That a factor can buy these receivables at a price of four-tenths of one penny on the dollar might teach us something about the quality of the ostensible "debt".

Granted that this is only indirectly related to the original post, but have you seen the news story today about John Oliver? After investigating the "industry" that buys and sells medical debts, his show bought $15 million worth of outstanding medical debts (accumulated by 9,000 Texans) for $60,000 (i.e., for $60,000, they bought the right to harass thousands of people and work to collect on outstanding medical debts that totaled $15 million). And then the show forgave the debts (in a way that did not create a big tax liability for the 9,000 Texans whose debt had been purchased). 9,000 rescued people. Sticking people who need medical care with the responsibility for paying for it, without regard to their ability to pay, is morally unacceptable. One does not choose to go into deep debt for medical care that is not necessary. And those people who buy, at a deep discount, the debts generated when other people need medical care they cannot afford, in order to reap enormous profits from them, are truly evil. Virtually every other developed country on earth has a better way of financing medical care than we do. How much of the portion of the GNP going for medical care is wasted on billing, let alone diverted into profits? Whether our medical care system is better at causing misery than it is at alleviating it is a question that needs to be seriously considered.

See question 15 on page 8 here: http://www.americanbar.org/content/dam/aba/migrated/2011_build/employee_benefits/2006_qa_irs.authcheckdam.pdf For anyone having trouble finding them to read: Rev Rul 72-275: http://www.charitableplanning.com/document/678257 Rev Rul 74-55: http://www.charitableplanning.com/document/676524 Rev Rul 74-56: http://www.charitableplanning.com/document/674376