We have a client that is in the process of winding down a MEWA / VEBA and are trying to brainstorm a bit about how best to efficiently handle the remaining VEBA assets once all plan liabilities are satisfied.  It appears there may only be ~$250k left over for a VEBA that covered a number of different participating employers of varying sizes and who have now all gone in many different directions so it's not as if there is one or two employers that could easily orchestrate a premium holiday, etc.

While the trust can still get in touch with most all of the former participants, it seems trying to do anything along the lines of prepaying a portion of their new health or other benefits costs or trying to make distributions back to the former participants where possible will consume a lot of time and money and be an inefficient use of limited assets.  

Just curious if others have seen other VEBAs with limited surplus assets at termination find an acceptable and efficient way to address.

Thanks

Hi,

As always the insights are appreciated. Frozen plan with two owners. Their PVAB is in the 800k range. Next year with the 417(e) rates going up dramatically, the PVAB will be in the 600k range.  I understand only the AB cannot be reduced, however, the pvab can. However,  will clients be upset that their PVAB is decreasing? Thank you .

Hi there,

We are a TPA taking over a 401(k) plan that has a handful of self-directed brokerage accounts at Fidelity (the "F" word).  The existing Fidelity accounts are "non-prototype retirement accounts".  Has anyone had any luck in getting a hold of knowledgeable representatives at Fidelity in the correct department that can answer questions about these types of accounts, and if so, what phone number (and extension) have you been successful with?  I've tried different numbers and have had mixed luck with general questions.  My goal is to try and save the Plan Trustee some time on the phone by getting him connected with the correct department / representatives from the start.

800-544-5373

800-756-0128

800-835-5095

800-544-6666

800-343-3548

What about a fax number (years ago we used to use 800-347-2805 but this may no longer be valid according to a few people I've spoken with).

What about an e-mail address for the Service Support Group (SSG)?

Thank you!

I was asked the following (this is out of my realm):

Partner A in Plan Origin terminated and had assets that required some attorney's involvement for liquidation (do not know the details) and Plan Origin is located in State A.

Now ex-Partner A moves to State B and starts a PS plan - Plan Destination.

While in Plan Origin, with the help of the attorney, ex-Partner A was able to liquidate the assets within Plan Origin (1M dollars) and the attorney's fee was 20k i.e. 2% of the assets.

Once all settled with Plan Origin, 1M dollars were rolled over to Plan Destination.

This ex-Partner A now wants to pay the attorney's fees from the assets which are now in Plan Destination.

Can he do that and if yes, is there a cite for it?

My comment would be, no, as all events took place within Plan Origin and once rolled over to Plan Destination, it is no longer a Plan Destination related expense.

Curious what others have to say.

Thank you

Can a small group (1-49) offer Stand-alone Telehealth-Only Plan / Benefits After the End of the COVID-19 Public Health Emergency May 11, 2023, to Full-Time, Part-Time, Seasonal, 1099 Employees?

I understand that relief is allowed for large employers (ALE) to continue to provide (stand-alone) solely telehealth and other remote-care benefits to employees or dependents who are not eligible for coverage under any other group health plan offered by the employer to the end of the 2023 plan year, including those benefit opt-outs, per Q&A #14, FAQ FFCRA Part 43 https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-43.pdf , also written about by Thomson Reuters and Mercer more generally in https://www.mercer.com/en-us/insights/us-health-news/bipartisan-bill-seeks-stand-alone-telehealth-for-all-workers/.

Since telehealth only and other remote-care benefits are not listed as excepted benefits per https://www.law.cornell.edu/cfr/text/45/148.220, a stand-alone telehealth or remote service plan offer after the end of the COVID-19 Public Health Emergency would need to meet many rules applicable to group health plans under ERISA, COBRA, HIPAA and the Affordable Care Act (ACA) minimum essential coverage rule per Thomson Reuters and Q&A #14 above, even if offered by an small employer (1-49 FTEs), although a small employer (1-49 FTEs) is not required to offer ACA MEC or MVP coverage? Like restrictions of offering a stand-alone Health FSA without ACA MEC coverage by a small or large employer, of which the stand-alone Health FSA would not meet group health market reforms and ACA requirements for 100% preventive care benefits.

I am interested to know other's thoughts or research for small employers on this subject. 

We have a 401(k) that includes no pension source funds nor does it have any annuity distribution options.

The plan document in the past required spousal consent to take a loan or distribution.  I inquired about this when restating the document and was told the plan sponsor just liked the idea that the spouse would want to know when money was coming out.  This was pre-daily platform.  Now they are on a daily platform and they want things more automated and no longer want to require spousal consent.  I believe since this was something they administratively opted to include in the plan but was not required, it would be fine to remove this requirement.  I assume it is not be a protected benefit since it is not a required.

Would you agree?

Tom

Group:

I'm aware of the requirements for the appraiser to sign and declare certain statements on the valuation report annually for an esop. 

An esop adopted in 2007 is under audit and the appraiser has passed away. 

One issue the IRS had brought up is that the appraisal didn't have a statement indicating they hold themselves out to the public and conduct appraisals for other plans. And that the appraisers identifying number which I believe would have included it's EIN were not provided as well. 

I've had other audits where these issues were not relevant. And the IRS didn't disqualify the plan. 

Since this Taxpayer can't call the appraiser to testify what is the solution to prevent disqualificstion of plan? 

Seems odd the Govt would disqualify a plan merely because an EIN wasn't stated on summary or appraisal itself. 

And that a court would disqualify a plan, depriving participants of their benefits, for such a minor error. 

If the irs does disqualify the plan my thoughts were to have taxpayer testify that the trustees were provided the appraisers' identifying number when they hired the company. 

Thoughts and comments appreciated. 

Group:

I may not state this properly.

The facts as I know them.

* ESOP owned by an S Corporation was adopted and set up in 2013 by clients ESOP advisor. (no longer

working with TP)

* The original sale of stock was 100% of corporate stock sold for $20k to the ESOP.  (I'm not concerned about this $20k value, fyi)

Promissory note, loan agreement, security agreement prepared and signed

by Plan trustee.

* Terms state the note will be paid off over 10 years in a balloon payment.

* Client audited for 2013 and 2014 years.  IRS issues no-change letter accepting all filed returns. (final notice issued early 2015.) 

The IRS during that audit didn't address or bring up as an issue the non-payment of the note.  

* A 2nd audit ensued in 2018.  The TP had not paid the ESOP note.

The most recent revenue agent report states part of the rationale for disqualifying the

plan was because the $20k note was not paid.

* TP is not in Court for this plan.  There's a few other IRS issues that are defensible.

* The disqualification of the plan may result in a large tax for a number of reasons not germane

to this inquiry.

Related to the $20k note, my initial argument (I haven't began much research just yet) is that since the TP was

still under audit and the TP asked to pay off the $20k note as a corrective action, the IRS should have allowed the TP the ability

to pay off said note.

Even if the IRS didn't allow the payoff, the TP was still within the terms of the note.

The IRS did not allow TP to pay off the loan. 

Q:  Are there no defenses available to a TP who (for one reason or another) did not pay the

original ESOP note?  even though the terms hadn't come due yet.

Q:  Are having the terms of a 10 year balloon payment in violation of ERISA 4975?

What's odd is I've represented other ESOP's where - during an audit -the TP was afforded the ability make

catch up payments for the original note on the sale of stock. 

Seems like the Govt - which may have the right - can be selective depending on what day of the week it is.

There's no rhyme or reason to which TP's are afforded the right to make catch up payments.

Thoughts and comments are appreciated. Or cases on point or any other regulations that

may assist TP would be much appreciated.

I shouldn't have to ask this question for as long as I've been doing this but here goes.  We have a plan sponsor - an S Corp with 2 owners covered by a new plan.  There are no other covered participants.  I assume they are exempt from the ERISA bond coverage? 

Most things I read indicate plans covering only a single-owner (and potentially a spouse) or a plan covering only partners of a partnership (and spouses) are exempt.  

The longer I do this, the more I question myself.  🤔

Thank you,

Tom

Has anyone applied for or engaged in a pre-submission conference with the IRS before filing a correction under VCP? If so, what was your experience like? We are considering applying for a pre-submission conference on behalf of a client and are looking for any and all insights and suggestions about application strategy, likelihood that the IRS will approve a request for a pre-submission conference, how the conference is conducted, etc.

Thanks!

We submitted a VCP correction back in February, 2023 for a 401k plan that had about 60 missed deferral opportunities.  We followed the recommended calculations to determine the MDO amount, the corresponding match and then the lost earnings.  We deposited these amounts into individual participant accounts where the plan account balances are held.

Its been 4 months and we have not heard back from the IRS.  These affected participants are getting antsy, some of whom are terminated and want to take their money out now.  We'd prefer to wait until the IRS says everything looks good.  

Checking whether everyone would wait until that final OK or would anyone move ahead with allowing distributions from these deposits (for terminees) since we feel we did an accurate job with the calculations.

Thanks

I am not an expert in Form 5500 but I am very curious about one question here: I thought all large groups (>50 enrollees) are experience-rated to some extent (premiums depending on their past claims). But why most Form 5500 Schedule A filings are nonexperience-rated? Is this an option that employers can choose? If yes, what kind of employers are more likely to file as nonexperience-rated? Thanks!

Maximum participant loan (residential) was granted at the end of 2021.  Due to turnover at the plan sponsor repayment was not set up.  Error was detected during 2022 plan audit.    Recordkeeper is proposing correction by amortizing the loan over the remaining term using the original $50,000 loan as the loan balance with interest only payments until the accrued interest is repaid (entire amount of loan payment applied to interest for the next 13 months).  Is this permissible or should the current accrued interest be repaid to the plan now?   With accrued interest the balance is about $53,000.  if this loan was not already at the maximum limit, I believe their correction would be appropriate.   However, I am not sure it is OK when the loan plus accrued interest is over $50,000.   Any guidance would be appreciated, I can't seem to find anything that is on point.   

I think I'm getting confused with how this works and tracking all the moving parts...

Calendar year 401k, SHNEC, PS plan for a partnership that we took over this year.  As we're reconciling it, we notice that the 2021 employer contributions were not deposited in 2022 - presumably they were deducted.

We've always taken the position that the SH has to be corrected so that has to be deposited ASAP with corrective earnings.  Fine, that's easy.

On PS... since the deposit was not made by 9/15/22, the deposit is subject to be counted in both the 2021 and 2022 annual addition limits.  But it wasn't deposited in 2022 at all... so there's no effect on 2022?  I assume this now becomes a SCP issue (it's small enough overall in the plan - we'll get to that in a minute)... and so even when they make the deposit now in 2023, it's under SCP and I don't see where that affects their annual additions limit (I just assumed it should, but most corrections don't).  So I must be missing something.  It must be somewhere that this would count towards the limit, otherwise any plan that missed the deposit deadline would just wait it out a couple of months and correct via SCP.

[Yes, the SH would also be in the same 'count towards annual additions' as the PS.  And, in fact, some of the partners' deferrals are in the same boat, too, so they've got late deferrals to add on top of this.]

So... I think it should be that all the missing 2021 deposits have to be made now, and they will offset either the 2022 or 2023 annual additions limit (their choice) by participant.  That feels right.  Nice to see that in black & white, though... or to have the actual right answer, either way.

Thanks.

Company A acquired Company B through a stock acquisition 12/1/2021.  Company B has a 401(k) plan with a 3% safe harbor non-elective and immediate eligibility - Company A does not have a 401(k) plan.  Company B continued to operate as a wholly owned subsidiary, but it will formally merge into Company A on July 3, 2023.  410(b)(6)(C) for 2021 and 2022 is good - nothing has occurred that would eliminate the transition period relief.

It is now June 30, 2023, and your friendly local TPA was just hired to takeover from a bundled provider who has done nothing to address the acquisition.  The plan documents were never amended to have Company A adopt the plan as a participating control group member.  The Company A employees, who were never employed by Company B, have not been given the opportunity to participate.  If they tried to exclude these Company A employees, the plan would fail coverage in spectacular fashion.

Assuming we restate the plan documents effective 7/3/2023 to list Company A as the plan sponsor (since Company B will no longer exist), and all employees are given the opportunity to participate 7/3/2023:

1. Is there a missed deferral opportunity for those Company A employees who were never employed by Company B dating back to January 1, 2023, when the transition relief ended?

2. For Company A employees who never worked for Company B and terminated prior to 7/3/2023, will they need to be included in the 3% safe harbor non-elective in 2023?

3. I know this is open-ended, but are there any other issues that I should be considering?

I think I know the answer but in case I'm wrong I thought I'd ask. For the exception to the 10% penalty, when does the distribution have to occur? That is does the distribution have to happen 6 months after the participant turns age 59 or is it anytime in the year in which they turn 59 1/2? This participant will reach 59 1/2 anniversary in October 2023.

Normally I'd just tell them to wait but the participant is going on leave due to medical issue that may be terminal so waiting until October may not be an issue.

If it is after age 59 1/2 is there a hardship exemption to the 10% penalty that would allow the distribution now without penalty?

I realize there is a work around where the client could deem him terminated and thus the withdrawal would be after separation of service after attainment of age 55 and not subject to the 10% penalty but there might be reasons like health insurance that they would want to classify him on leave instead of terminated.

Any thought would be appreciated.

Hi,

Does any know how many years after the 401k Plan terminates can a participant bring a claim against the Fiduciary and Plan Sponsor. One of my client has insurance policy for this type of claim, and they will need to purchase “tail coverage” for the policy for it to stay in effect in case anyone brings a claim. Is the statute of limitations for a 401k plan usually 3 years, or is it longer?

One of today's items in the Benefits Link newsletter had a write-up on hardship distribution self-certification. The following is an excerpt. I don't read Section 312 of SECURE 2.0 as containing any such restriction. What am I missing, if anything?

Employers may now rely on an employee self-certification that they have experienced a hardship and that the employee has no other funds available to satisfy the hardship. Self-certification is only available for the first hardship request during a plan year.  If the participant requests more than two hardship distributions in one year then the employer is required to have physical proof of the hardship. 

Can an employer cover portions of dependent premiums at different levels?  For example:

Employee Only Coverage:  Covered at 100%

Spouse Coverage: Covered at 0%

Child(ren) Coverage: Covered at 50%

Have a client that had their fiscal year end and plan year end 9/30. They changed fiscal year end to 12/31 but didn't change the plans year-end yet. They have a Safe Harbor 3% due for the 9/30/22 plan year end. When does it have to be funded by now that their fiscal year is 12/31?