Forgive my simplicity, but I am not trained in welfare plans so I just want to run a couple of novice level points by the link.

Say a small company with five employees (all in the same family), thus all HCEs and no other employees. So company only has HCEs.

The plan sponsor wants to funud for post retirement medical expenses and they want a simple formula.

1. Can a post retirement medical benefit be simply a target amount say 100k or 300k to be accumulated at normal retirement to pay post retirement health benefits for a participant?

2. And as a deduction to the plan (where plan assets are in a VEBA trust), the amount is the actuarial level funding to reach the targeted amount using an interest rate of 5% per annum to determine level funding.

Is the above fairly straight forward and acceptable or are there much more complex rules that need to be evaluated and accounted for?

The calculations are intneded to comply with the 419 annual addition limits requirement.

Thank you.

Is there such a thing as a statute of limitation on ADP/ACP testing? I remember hearing something about a 3 year period but am unsure if I'm inventing this.

Automatic enrollment feature is permissible in 403(b) plan

This was discussed briefly back when Rev. Ruling 2000-35 came out - does an automatic enrollment feature pull a 403(b) plan back under ERISA? Does it violate the "voluntary participation" requirement to keep out of Title I? I've been poking around wondering about this recently, and thought I'd toss it out here, see what you guys think.

My instinct is that this is a fine hair to split. It would depend on whether the IRS feels that having the opportunity to opt out is the same as having the voluntary decision to opt in; people who are slow to enroll would be slow to unenroll, but quere whether would that make their participation involuntary.

Hello,

Looking for advice and/or assistance with respect to MA Law Chapter 175: Section 134A. Conversion; right of certificate-holder; notice

Section 134A. If any individual insured under a group life insurance policy hereafter issued becomes entitled under the terms of such policy to convert to another type of life insurance within a specified time after the happening of an event, such certificate-holder shall be notified of such privilege and its duration within fifteen days after the happening of the event; provided, that if such notice be given more than fifteen days, but less than ninety days after the happening of such event, the time allowed for the exercise of such privilege of conversion shall be extended for fifteen days after the giving of such notice. If such notice be not given within ninety days after the happening of the event, the time allowed for the exercise of such conversion privilege shall expire at the end of such ninety days. Written notice by the employer given to the certificate-holder or mailed to the certificate-holder at his last known address, or written notice by the insurer mailed to the certificate-holder at the last address furnished to the insurer by the employer, shall be deemed full compliance with the provisions of this subdivision for the giving of notice.

A colleague's father worked for a bank for close to 5 years. Duing the last year of employment the father went out on FMLA due to illness. The father was a long time diabetic on dialysis that continued to work on dialysis. The father was on FMLA because the bank did not offer short term disability. While out on FMLA, the bank went through change of ownership/managment and the father was terminated while out on FMLA. According to my colleague no date was given to his father as to when FMLA would end. The father was sent a notice saying that since it appeared he was not able to go back to work, the bank would need to end employment. The father was in the process of applying for long -term disability under the company's LTD plan when he was terminated.

My colleague's father passed away shortly after he was terminated. Colleague has been overwhelmed with mounting medical expenses as well as funeral expenses. His father could only obtain a small term life insurance policy due to his health conditions. An HR rep at our company had asked our colleague if the father was covered under a GTL policy through the bank and if he had converted the policy to a whole life policy after his termination as most GTL plans allow this up to the amount the employee was covered for while employed.

Colleague stated neither he nor his father were not aware that the father could convert the GTL policy. Upon looking at the fatehr's W-2 he was covered under the GTL for the bank as there is an amount in box 12a of the W-2 labeled C for GTL taxable amount over 50K.

Colleague lives in MA and the HR rep found MA law chapter 175 above. Colleague has all paperwork from when his father was terminated and there is no notification provided with respect to the right to convert the GTL to a whole life. The only notification given to the father was regarding COBRA and the father's retirement plan. Upon further investigation, colleague has found plan summary documentation for the father's retirement plan but no plan summary documentation with respect to the GTL plan.

Colleague is wondering if he has legal cause as if the father was notified he could convert his GTL to a whole life, colleague knows without a doubt the father would have done this as the father would have been able to have a policy that was at least equal to what he was covered for when he was employed which colleague believes to be at least 2.5 times the father's salary. This wuld have helped with the over 50K in medicak expenses as well as the funeral expenses. Colleage paifd close to 6K out of pocket for father's funeral.

I have tried to assist colleague before going to an attorney but am confused because of all the ERISA issues that may arise. Am wondering if colleague has cause to take this to an attorney or will ERISa just make this all null and void. I personally don't understand what the point of the sate law is if ERISA is just going to preempt it.

Thank you in advance for any advice or information.

Some guidance please?

An ESPP is being terminated due to the company's acquisition. Distributions are being made. Employee contributions were taxed.

But, how are the earnings on the employee contributions to be taxed and/or reported?

Also, how are employer contributions to be taxed and/or reported?

Do we use a 1099? Do we use a W-2?

Thank you,

Participant has requested a hardship withdrawal for tuition and room & board. OK with tuition, but the room & board request is for an off-campus apartment. So far, I've not found anything that discusses whether room & board is restricted to campus housing. I can see one rationale for such a restriction - these expenses are charged up-front and are known in advance. On the other hand, apartment rent is also set up-front; but who knows how much a college student will eat over the next academic year.

Has anyone had to address this question?

I am curious if anyone who is running Oracle HR has a 415 excess plan ? My IT support tells me it is not standard functionality from Oracle and they can't find any customers who have a 415 Excess plan.

I find this hard to believe. I told them I would get them some examples of places that use Oracle and have 415 Excess plans in place.

Thanks,

Dan

Dan Forbes

Director, Total Rewards

Oregon Health and Science University

forbesd@ohsu.edu

Hoo, boy! Either I'm getting far too set in my ways - or this is really "out there"!

Client (a construction company) is pulling out of a union DB plan. The intitial collective bargaining agreement for this union provides that, in lieu of participating in the union DB plan, the employer will be required to sponsor a DC plan covering the members of this union, which provides for a fixed contribution amount "per hour worked" (i.e., a contributory DC Plan versus the DB plan).

All well and good - EXCEPT the collective bargaining agreement contains the following additional requirements:

(a) If an employee is absent because of illness or off the job injury and notifies the Employer of such absence, the Employer shall continue to make the required contributions for a period of two (2) weeks.

(b) If an employee is injured on the job, the Employer shall continue to pay the required contributions until such employee shall return to work, however, such contirbutions shall not be paid for a period of more tha six (6) months.

© If an employee is granted a leave of absence for any reason other than those set forth in (a) or (b) above, the Employer may collect from said employee, at the employee's option prior to the leave of absence being effective, sufficient monies to pay the required contributions into the Plan during the period of absence. If the employee chooses not to exercise this option, the Employer will not contribute to the Plan on the employee's behalf during the employee's leave of absence.

Am I missing something - or is this a totally ridiculous and unworkable crock of you know what?!

Absent whatever constructive feedback I may receive from my fellow BenefitsLink readers, I am inclined to advise my client to get the CBA revised to provide for a contribution equal to $x dollars per "Hour of Service", as defined by DOL Reg 2520.200b-2(a)(1), i.e. each hour for which an employee is paid or entitled to payment.

I might add that the section of the CBA refers to this as a "401K" plan - with no mention whatsoever of "employee" salary deferral contributions. No clue, or what?!

Thanks for any and all comments.

A one person profit sharing Plan has nothing left in it except real estate from a long time ago. The company was slowly shut down and has had no income for a few years now. The Participant (owner) paid a few thousand dollars in taxes and expenses.

I would rather not go into the reason the plan is still open. He actually has a pretty good reason.

1st question: Is it legal for him to have paid the taxes and fees for the property?

Second question: If it is legal, can he treat it as a loan and have tax basis in the plan equal to what he paid?

I have had a regular Roth IRA for over five years. I have just rolled over my 403(b) into a Rollover IRA (I was told I could even though I am still employed). I am planning to convert portion of this Rollover IRA into the Roth IRA.

My question: If I convert the Rollover IRA to the Roth (I will be over 59½ at the time of this partial conversion), do I still have to wait for five years before taking distributions from the converted Roth to avoid a 10% tax penalty?

Could someone help me figure this out?

If a plan's EIN ends in a 6, the initial submission period ended January 31, 2007. I am assuming that is the date they need to submit the document for review correct? If that assumption is correct, when does the EGTRRA document need to be restated?

Thanks in advance for your help. Most of the plans I work on are protype documents.

A participant who terminated in 1984 provided at least 3 different dates of birth while she was employed. The month and day were the same, but the years were 1921, 1928 and 1933. When she claimed benefits in 1998, the plan sponsor sent her a letter explaining that she needed to provide some kind of proof of her date of birth, so the correct distribution amounts could be calculated. She sent a birth certificate with the first name of the child whited out and her first name written over it. They called the county that issued the birth certificate and confirmed that it was not the participant’s birth certificate. They sent another letter explaining that the altered birth certificate was not sufficient unless she could show her name had been changed from the one listed on the birth certificate. If her name was not changed, they still needed some sort of proof of her date of birth. Participant’s grandchildren also called and were told the same thing. Nothing further has been heard from either the participant or her family.

We were discussing this person the other day. I did an internet search and found an obituary. I also looked her up on the social security death index. The date of birth listed with social security is the one from the altered birth certificate. Then, our client tells me they are suspicious that the person who contacted them in 1998 may not have been the same person who worked there. After 10 years, it seems very unlikely that anyone will ever provide verification of her date of birth. If the participant died, there is a death benefit payable, but we still have no way to determine how much it is.

How long would you continue to carry a liability for this person’s benefit?

Participant terminated July 1994. Participant made a benefit election in November 1994 to receive a J&S benefit with her spouse as beneficiary, starting April 2008. The plan provisions in effect in 1994 reduce the accrued benefit for terminated vested participants by the value of the QPSA unless they elect to waive the pre-retirement death benefit. Participant elected to waive death benefit coverage. Spouse signed the form, but his signature was not properly witnessed.

Participant died in 1997 about the time we took over the plan. Based on the information provided at the time, we advised that the attempted QPSA waiver was invalid and prepared distribution paperwork for the surviving spouse. Our client could not locate him.

Now fast forward to today. Our client was going through old personel records looking for information that might help them locate the surviving spouse. They found a beneficiary designation form dated February 1992 where the spouse waived the QPSA and consented to participant naming her grandkids as beneficiaries. Spouse's signature on this form was witnessed by a notary.

The plan provision allowing a waiver of the pre-retirement death benefit does not mention a witness requirement for the consent.

Does anyone have an opinion about whether the 1992 beneficiary designation affects the need to have the spouse's signature properly witnessed on the 1994 election?

My client has an employee who took a loan in April then terminated and moved away. He never made any payments on the loan. He took a distribution and his distribution was offset by the loan. He has now moved back and been reemployed. What are his options on repaying the loan now? If he repays his distribution, could he have the loan restored and resume payments? Would he have to repay the distribution in order to resume the loan? I can't find any information about this in the plan's document.

Say a one participant plan sponsor contributes a total of $1,000,000 to a pension plan over a 5 year period.

Then the IRS disqualifies the plan retroactive to its inception.

While it is clear that the participant must pay taxes on his pension and the trust is taxed on its earnings, should there be a 10% 4972 excise tax for non deductible contributions (i.e. all $1,000,000 of contributions)?

Thanks.

Here's a strange one - at least seems strange to me.

Participants in a Defined Benefit plan have an insured death benefit. Plan sponsor decides to reduce plan formula, so the life insurance must be surrendered or purchased from the plan for its Fair Market Value. There has been NO distributable event under the plan, so no participants are eligible for any current distribution.

Pursuant to Prohibited Transaction Exemption 92-6, the plan may sell the policy to a participant for its Cash Surrender Value. Note that this may be less than the FMV, but isn't germane to this question.

Here's where the rot sets in. The plan assigns the ownership of the policies to the participants. However, the participants HAVE NOT paid the plan anything whatsoever. This apparently took place a few months ago. So, the participants have received an impermissible distribution from the plan in the amount of the FMV of the policies.

ERISA 406(a)(1)(D) prohibits a fiduciary from transferring plan assets to any party in interest. Party in interest is defined under ERISA 3(14)(H) to include an employee. However, each of these common law employees, while a "party in interest" under ERISA, is not a "disqualified person" under IRC 4975(e)(2).

So, it appears that there has been a Prohibited Transaction. But, what penalty is payable in this specific situation? It would appear that the IRC 4975(a) tax isn't payable, as it isn't imposed on a fiduciary who is acting only in that capacity? And if that's correct, what is paid, and to whom? Since the DOL gets the 5500 forms that will presumably show that a PT has taken place, do they send the information to the IRS under their "coordination" clause in ERISA 3003, and then the IRS imposes a penalty? Would the DOL have to bring an action under ERISA 502(a)(2) for a Fiduciary breach? Basically, we're looking at something on the order of a $3,000 distribution, so the recovery plus interest will be peanuts, but I'm trying to see if any other penalty is automatically imposed.

Thanks in advance for any insight!

A client is stating that they would like to offer a Defined Benefit 403(b) and 457 plan. I have told them that this is not possible since they are mixing two very different plan types together, however, I would look and see if this option is a possibility. Thus far, my internet searches have not come up with anything substantial to state definitively if this "hybrid" plan is allowed. My personal out reach to other retirement professionals has yielded laughter.

Can someone please let me know if this plan type is allowed under the code and what would be a good resource to review the rules? Thanks.

When both a defined benefit plan and defined contribution plan exist, how does that affect contribution limtis?

How does that affect the limit on what one person can get?

How does the initial eligibility computation period work with someone who is something of a transient worker? Say he or she first ever performed work for an employer in 1989, leaves eight months later in 1990, returns off and on again over the years. Does this mean that his or her initial eligibility computation period still remains the year from when he or she first ever worked for the employer?

I have a few very small 501C3 organizations ( not schools ) that have a couple of 403B accounts in each ( salary deferrals only ) - very simple.

I understand that they will need a plan document by Jan 1. Are there documents available from the fund companies or the IRS ?

If not are there TPA's that could provide a basic document for a low cost ?

THanks