I know this is a DB Board, but since it is such an active board I thought I would make this unrelated inquiry here.

I was asked to prepare a proposal for a VEBA and one of the questions is "How much can it discriminate in favor of HCEs"?

For pensions I look to 401a4 and 410.

For welfare plans, the place to go is 419 (or at least one of the places)

So where does one go to educate oneself about VEBAs? And non discrimination? To my knowledge 501c9 presents VEBA information, but does that section and its regs address non discrimination?

Thanks much.

This question will show you that I am very new to the area.

A small non-profit organization is going to become affiliated with a much larger non-profit organization. Currently both sponsor 403(b) plans. After the small non-profit becomes affiliated with the larger organization all of its employees will become employees of the larger organization. What should the small non-profit do with its 403(b) plan? Can it be merged into the larger organzation's plan or should it be terminated prior to the closing?

Any ideas?

Thank you!!

Employer plan sponsor makes available full spectrum of investment options, including employer stock. Employer does not allow participants voting rights w/r/t the employer stock. Does this cause plan sponsor to loose all 404© protection, or can the plan be 404© compliant with respect to all of the investment options excluding the employer stock?

My understanding is that the IRS was considering issuing transition guidance back in 2006 regarding adding a roth 401(k) feature mid-year to a safe harbor 401(k) plan. I've looked around but can't find it. Did it ever come out? Also, what is everyone's take on whether I can enhance a match mid-year in a safe harbor plan where the enhancement was not laid out in the annual notice. Thanks!

Plan Sponsor (PS) of a large DB plan (Plan) is in the process of dissolving--not in bankruptcy (so no PBGC trustee)--it's just going out of business. Upon dissolution, all PS's remaining assets will be transferred to charitable foundations. PS has terminated Plan and annuitized all benefits that it knows of. It was extremely careful, but Plan is huge and participants could have been missed.

Per PBGC Reg. § 4041.23(b)(9) and a 1991 PBGC opinion letter, PBGC's position is that it's not on the hook for an overlooked participant's benefit, PS is. [On the other hand, I've appended a snippet from the letter, which does appear to contemplate ultimate PBGC liability for "uncorrected" errors.] So, who's on the hook after PS dissolves? Officer, directors, and DB Plan fiduciaries want to know their exposure, as well as any exposure of the charitable foundations. My initial thoughts on potential claims against these individuals:

- Individual § 409 / §502(a)(2) fiduciary claims seem dead in the water because plaintiffs in such cases must be acting on behalf of the plan as a whole. Also, given the well-documented, extreme care with which the termination was handled, proving imprudence would be a challenge.

- § 502(a)(3) claims seem out, given the absence of an equitable remedy.

- § 502(a)(1)(B) claims seem out--even if Plan is deemed never to have terminated (because it failed to satisfy its benefit obligations), who will be forced to fund the benefit?

- ERISA § 4070 claims (civil suits re termiation of single-employer plans) seem the most likely avenue, but only equitable remedies are available, and I don't see paying a fixed sum of money flying as an equitable remedy post-Knudson & Sereboff.

Am I missing something? Thanks.

******************************************

Here's the snip from the 1991 PBGC Opinion Letter:

If a participant did not receive his or her full plan benefit, or was simply missed in the distribution of plan assets, the plan, and therefore the plan sponsor, would continue to be liable. And in the event the error remained uncorrected, the PBGC would ultimately be responsible. See ERISA S 4041(b)(4).

- May 3, 1991, Letter from Carol Connor Flowe, 18 Pens. Rep. (BNA) 850.

I set up a DB Plan in 2006 for an LLC involving 2 principals only, with one minimally benefiting only to satisfy participation requirements. I had the 3 involved entities (the LLC and each principal's corporation) adopt the Plan.

I was just informed "their partnership was terminated in November".

The one principal wants to maintain the Plan while the other doesn't.

Am I stuck with keeping the minimally benefiting principal's benefit in the plan?

This request is being posted under Cafeteria Plans, Health Plans and Welfare Plans in hope of getting a response.

We have a client with a health flexible spending account that is considering establishing a tobacco cessation program – those that certify that they do not/will not use tobacco products will receive an employer contribution to the health fsa. Following research and discussion with the client, we have the following questions –

1. Does a program that rewards its participants based on the criteria that they do not/will not smoke have to be considered a wellness program? Could it be a stand alone employer- sponsored plan/program/benefit that provides for employer contributions into an employee’s FSA account if the employee certifies that s/he does not/will not smoke? Can the employer use non-smoking as its criteria for the reward without concern of a discrimination issue? Is there a way around the discrimination issue? Would there need to be a reasonable alternative to the certification in order for smokers to qualify for the reward? If the employer did not offer a reasonable alternative to the certification, but offered a smoke cessation program through its health plan, would this suffice?

2. If such a program does not have to be considered a wellness program, what would it be and pursuant to which regulations would it be established?

3. If such a program could not stand alone, would it have to be linked to the employer’s group health plan? Could it be linked to the FSA? If this program had to be considered a wellness program and HIPAA applied, and the program was linked to the FSA, what could we use as the cost of coverage to satisfy the requirement that the reward not exceed 20 percent of the cost of coverage?

4. If we wanted to offer the program to all employees, not just those participating in the health plan/FSA, and if we did not make the certification a condition of employment, how could we open the program up to all employees?

5. If the program sponsor were to make a determination that an employee who received the reward falsified the certification, can the employer cease additional contributions to such employee? Request and demand that such employee repay the prior contributions? Can the money be withheld from the employee’s pay? Can the employer cease the employee’s participation in the FSA plan? In the health plan?

6. What types of safeguards do wellness program sponsors have in place to determine/monitor that participants are being honest? Is there an appeals process when an employee’s honesty has been challenged?

7. How does the requirement to provide a terminated participant with a certificate of creditable coverage if s/he received employer contributions in excess of $500 negatively impact the program?

These are the remaining questions we have after reading the final HIPAA regulations. If you are aware of any research material or if you have any experience in this area, your assistance is greatly appreciated.

Thanks!

This request is being posted under Cafeteria Plans, Health Plans and Welfare Plans in hope of getting a response.

We have a client with a health flexible spending account that is considering establishing a tobacco cessation program – those that certify that they do not/will not use tobacco products will receive an employer contribution to the health fsa. Following research and discussion with the client, we have the following questions –

1. Does a program that rewards its participants based on the criteria that they do not/will not smoke have to be considered a wellness program? Could it be a stand alone employer- sponsored plan/program/benefit that provides for employer contributions into an employee’s FSA account if the employee certifies that s/he does not/will not smoke? Can the employer use non-smoking as its criteria for the reward without concern of a discrimination issue? Is there a way around the discrimination issue? Would there need to be a reasonable alternative to the certification in order for smokers to qualify for the reward? If the employer did not offer a reasonable alternative to the certification, but offered a smoke cessation program through its health plan, would this suffice?

2. If such a program does not have to be considered a wellness program, what would it be and pursuant to which regulations would it be established?

3. If such a program could not stand alone, would it have to be linked to the employer’s group health plan? Could it be linked to the FSA? If this program had to be considered a wellness program and HIPAA applied, and the program was linked to the FSA, what could we use as the cost of coverage to satisfy the requirement that the reward not exceed 20 percent of the cost of coverage?

4. If we wanted to offer the program to all employees, not just those participating in the health plan/FSA, and if we did not make the certification a condition of employment, how could we open the program up to all employees?

5. If the program sponsor were to make a determination that an employee who received the reward falsified the certification, can the employer cease additional contributions to such employee? Request and demand that such employee repay the prior contributions? Can the money be withheld from the employee’s pay? Can the employer cease the employee’s participation in the FSA plan? In the health plan?

6. What types of safeguards do wellness program sponsors have in place to determine/monitor that participants are being honest? Is there an appeals process when an employee’s honesty has been challenged?

7. How does the requirement to provide a terminated participant with a certificate of creditable coverage if s/he received employer contributions in excess of $500 negatively impact the program?

These are the remaining questions we have after reading the final HIPAA regulations. If you are aware of any research material or if you have any experience in this area, your assistance is greatly appreciated.

Thanks!

This request is being posted under Cafeteria Plans, Health Plans and Welfare Plans in hope of getting a response.

We have a client with a health flexible spending account that is considering establishing a tobacco cessation program – those that certify that they do not/will not use tobacco products will receive an employer contribution to the health fsa. Following research and discussion with the client, we have the following questions –

1. Does a program that rewards its participants based on the criteria that they do not/will not smoke have to be considered a wellness program? Could it be a stand alone employer- sponsored plan/program/benefit that provides for employer contributions into an employee’s FSA account if the employee certifies that s/he does not/will not smoke? Can the employer use non-smoking as its criteria for the reward without concern of a discrimination issue? Is there a way around the discrimination issue? Would there need to be a reasonable alternative to the certification in order for smokers to qualify for the reward? If the employer did not offer a reasonable alternative to the certification, but offered a smoke cessation program through its health plan, would this suffice?

2. If such a program does not have to be considered a wellness program, what would it be and pursuant to which regulations would it be established?

3. If such a program could not stand alone, would it have to be linked to the employer’s group health plan? Could it be linked to the FSA? If this program had to be considered a wellness program and HIPAA applied, and the program was linked to the FSA, what could we use as the cost of coverage to satisfy the requirement that the reward not exceed 20 percent of the cost of coverage?

4. If we wanted to offer the program to all employees, not just those participating in the health plan/FSA, and if we did not make the certification a condition of employment, how could we open the program up to all employees?

5. If the program sponsor were to make a determination that an employee who received the reward falsified the certification, can the employer cease additional contributions to such employee? Request and demand that such employee repay the prior contributions? Can the money be withheld from the employee’s pay? Can the employer cease the employee’s participation in the FSA plan? In the health plan?

6. What types of safeguards do wellness program sponsors have in place to determine/monitor that participants are being honest? Is there an appeals process when an employee’s honesty has been challenged?

7. How does the requirement to provide a terminated participant with a certificate of creditable coverage if s/he received employer contributions in excess of $500 negatively impact the program?

These are the remaining questions we have after reading the final HIPAA regulations. If you are aware of any research material or if you have any experience in this area, your assistance is greatly appreciated.

Thanks!

if an employer purchases annuities for all participants ( i.e. irrevocable committments) but doesn't go through a formal termination with PBGC, are actuarial valuations for subsequent years still required ?

I would think so but what say you ????

Child is beneficiary of parent's Trad IRA. Parent was mid-70's at time of death, so RMDs were being taken. Child wants to move funds to an inherited (or "beneficial") IRA with another custodian. Since RMDs were being taken by Parent, RMD rules say:

"If distribution of the employee's interest had already begun under the RMD rules at the time of his death, then the remaining portion of his interest must be distributed at least as rapidly as under the distribution method being used as of the date of his death."

Does this mean that Child continues to use Parent's RMD for each subsequent year? e.g., Parent was 78 in 2006, so RMD factor of 20.3 was used; does child use factor of 19.5 for 79 year old in 2007 for the RMD she has to take from the inherited IRA?

I think Child could only use her own lifetime if Parent had been younger than 70.5?

Under COBRA each qualified beneficiary has a separate right to elect continuation coverage. For example, an employee's spouse may elect COBRA coverage even if the terminated employee does not. COBRA can be elected for only one, several, or for all dependent children who qualify. However, can a terminated employee elect COBRA for a minor child, and not cover themselves? I have searched the COBRA Handbook, notices on the DoL site, and even called the DoL - but have not received a satisfactory answer.

Two employers (located in US) are each owned by the same parent company (located overseas). Controlled group situation. One of the employers has a 401k plan in which no HCEs currently participate. They want to establish a Plan for the other Employer. The other employer has 3 hces and 3 nhces. The new plan would not pass 410(b) coverage including all the employees from both groups. If each plan could pass coverage considering employees of all employers, then we could test each plan separately for other nondiscrim testing, right?

Any suggestions on ways to separate these employers for testing purposes? I've thought of QSLOB but one employer only has 6 employees.

I have a plan where the company is closing or actually it is closed, all of the employees are terminated. The client doesn't have the money to pay for the annual fees out of the business. Can the owners/trustee's take the money out of their accounts in the retirement plan to pay these fees?

Kim

What filings, tests etc are required for a 401k under safe harbor?

I have a client that uses a discretionary match. Client started matching per the specified formula January 2006. They stopped matching end of February 2006 for financial reasons. They did not notify us so there is no amendment in place relating to any of this. What are the requirements for amending a discretionary match as far as timing of a board resolution? Does this client have to match for the year?

participant died with a designated beneficiary. plan says that the benefit must be paid out by the end of the plan year following the date the participant died. my question is as a practical matter how do you facilitate this distruibution? how do you force the participant to complete distribution paperwork?

I'm working with a company starting a 401(k) plan. The company was formed as a result of the merger of Spin-off A and Spin-off B.

Spin-off A had company stock in the 401(k) Plan -- closed to new money. However, as a result of this transaction, 10% of the Spin-off A shares will become Company C shares. Within the new Company C 401(k) plan, there will be two separate stock accounts: Spin-off A balances and Company C balances (both will be closed to new money - and all stock money can be traded out to core funds immediately).

What admin/compliance issues do I need to consider to implement this change?

if a calendar year plan is top heavy for 2007, does the ER have until 12.31.2007 to make 3% match?

Specifically, how does a top heavy ER make contributions to satisfy the 3% DC minimum?

1.416-1 says that all participants as of the last day of the plan year are entitled to receive the top-heavy contribution. so can one interpret that to mean that the top-heavy contribution doesn't have to be made until the last day of the plan year?

thanks in advance for your help.

Does an auto enrollment plan make sense when there is immediate eligibility to participate?