What happens when an employer that contributes to a multiple employer (NOT multiemployer) plan goes bankrupt? Are the other contributing employers forced to take up the slack?

ERISA provides that when a "substantial employer" withdraws from a multiple employer plan, the employer is liable to PBGC. I presume that if a substantial employer goes bankrupt and ceases contributions to the plan, that is a withdrawal, and the PBGC has a claim that it must pursue through bankruptcy. If the PBGC cannot recover the entire amount, are the remaining employers stuck with the liability?

ERISA is silent as to what happens when a "non-substantial" employer goes bankrupt and ceases contributions. Apparently the PBGC doesn't get involved. That leads me to believe that the plan has a claim against the employer for a share of any underfunding and that, if the plan cannot ultimately recover from the employer, the remaining employers are left holding the bag.

Is that correct?

Has anyone heard of a requirement that self administered medical reimbursement plans have a bond? ERISA Section 412 requires a bond of "every fiduciary of an employee benefit plan and every person who handles funds or other property of such a plan" EXCEPT "where such plan is one under which the only assets from which benefits are paid are the general assets of ... an employer," All the plans I see are paid out of general assets and I don't know any that have a bond. ALso, I have never seen the DOL comment on this. Have I missed something? Thought,comments, as always, greatly appreciated.

I have been looking at a VEBA document that was prepared in 1996. I noticed that there's no mention of COBRA, FMLA or HIPAA in the document. Should this document have been updated to include this stuff?

If John was terminated in 2003 and his employer agreed to pay him severance for

a year can he take a distribution before the end of his severance?

A husband and wife are both participants in a qualified plan and both timely signed 242(b) elections. The husband dies. Can the wife rollover her deceased spouse's distribution into her account under the Plan and defer receipt of benefits pursuant to the 242(b) election?

Participant dies in 2003, and the beneficiary is his brother, who receives the death benefit payment in 2003, as a rollover. However, when does he have to pay the taxes on that amount he inherited? Does it have to be in the year he received the benefit? What's the deal with the 5-year rule??? What are the beneficiaries options on paying the taxes from the benefit?

Thanks.

What recourse does an employee have upon discovering that her 401k account is being charged significant fees that were not explained or disclosed by her employer when the employer implemented the 401k plan 6 years ago. She formally requested that the employer (Plan Administrator) furnish a complete disclosure and explanation of all employee-paid fees over 3 months ago, however the Plan Administrator has failed to respond to her request.

About 6 years ago, my friend's employer abolished its pension plan and established a 401k plan. She decided to participate in the new plan, however recently discovered that she is being charged numerous and significant fees that were not disclosed by her employer before she decided to participate in the 401k plan. In fact, to date the employer has failed to fully disclose or explain all employee-paid fees. She is 56 years old, strongly feels that her employer provided incomplete and misleading fee information when the plan was established, and would like to withdraw all her assets from the 401k plan and "roll them over" into an IRA. Two questions: 1) Can she do this without incurring an IRS tax penalty? 2) If so, how??

Sole proprietor will claim SEP deduction on 1040 to be filed before 4/15, but will need the refund and additional time to raise the money to fund the SEP. Second extension at 8/15 will need a reason. How does the following sound?

"Additional time needed to fund SEP under IRC 404(h)(1)(B) and Rev. Rul. 84-18"

Does the IRS even read these things?

Thank you.

Assume an employee worked during 2001, 2002 and 2003. Does the 3-year qualification requirement mean that they do not participate in a SEP until 2004 (i.e. they had to work 3 out of 5 "preceding" years), or do they participate in 2003--the 3rd year of employment? Thanks!

The SPD regs say that the SPD must accurately reflect the provisions of the plan as of a date not earlier than 120 days prior to the date the SPD is disclosed. As long as there are no intervening plan amendments, is it acceptable to put an "effective date" in the SPD that's more than 120 days prior to distribution?

Example: Healthcare plan last amended effective January 1, 2004. Revised SPD in progress, to be distributed July 2004. Language on front page says, "This booklet reflects plan provisions as of ____." Can blank be completed as "January 1, 2004" or does it have to be a date within 4 months of July?

I have a 401(k) Safe Harbor Match (Basic) with non-standardized integrated profit sharing (1000 hour/employed requirement) plan. There are 7 ees, all have been participants for at least 2 years. Two Key/HCEs (owner-spouse) and 5 NHCEs. All 7 deferred more than 4% of salary, hence match >4%.

However, only owner worked 1000 hours, rest over 500.

Owner wants to "max-out" in Profit Sharing. Since the PS contrib negates the use of the SHMatch towards Top Heavy, I must 1st allocate 3% to the Non-keys, then the rest towards the PS (in this case, the owner only).

Does the top heavy PS contrib qualify as "benefitting" in the 410(b) test for the Non-Keys, or must they receive the regular PS allocation formula to be considered "benefitting"?

Thank you,

Dana Regan

I see within a very short time you will hit 90,000 posts on the website! Wow! Who'd of ever thunk it!

Except for problems with attaching files, the site has certainly helped increase my knowledge, and made some friends (even if one of them is a 3-eyed fish).

keep up the good work!

I am preparing forms of model DROs to give to my state bar to use as a form for family law attorneys. Since you all are the experts and since you may have to deal with these, I was wondering if anyone would like to provide any input.

Does anyone else think the Service totally ignored the last part of Code Section 223©(1)(A), reading "and which provides coverage for any benefit which is covered under the high deductible health plan", in the revenue ruling concerning prescription drug coverage with HSAs?

I could buy the description of the legislative history, but the plain language of the statute would allow prescription drugs to be reimbursed in a non High Deductible Health Plan as long as the eligible individual's HDHP didn't cover prescription drugs.

Am I missing something?

If not, any suggestions for responding to the revenue ruling? (At least we've got transitional relief until Jan 2006.)

A sole proprietor wants to establish a qualifed plan, one which he can eventually takes loans from (for daughter's education). While he will fund the plan regularly, the more pressing objective is to roll his (pre-tax) IRA money into this plan and eventually takes loan(s) from this money, as well as from the funded assets as well. Do you see any problems with this gameplan? Thanks

In a 401(k) plan, I have the following situation:

Mother owns 4% (works at the company).

Father owns 4% (does not work at the company).

Son works for the company.

Is the son considered a 5% owner due to the stock attribution of both his parents (4% + 4%)?

I am changing jobs in the near future and I was wanting to know if I can transfer my 401k into a roth ira. Also, if I was going to purchase my 1st home down the road if I could use money from the roth ira and if i did how much of a penalty would I receive. Any advise would be appreciated. THANKS

The subject plan provides that forfeitures of profit sharing contributions shall be allocated to eligible participants as of the last day of the plan year.

Participant A, who is partially vested in his profit sharing account, separates from service, receives a cash out distribution and forfeits the unvested portion of his account. Prior to his separation, participant A had satisfied the requirements for allocation of the company profit sharing contribution.

At plan year end, participant A is allocated his pro rata share of of the company profit sharing contribution. However, since he is only partially vested, he immediately forfeits the unvested portion of this contribution. This forfeiture, in turn, increases the amount available for allocation to ALL participants, including (presumably) participant A.

We are now in a "chicken and egg" loop. We can't determine the total company contribution until we determine the total forfeitures which we can't determine until we know the total company contribution etc., etc. etc. Is there a way (short of differential calculus) to resolve this issue? May we simply decline to allocate any portion of participant A's forfiture to him? May we carry over this forfeiture to the following plan year?

All suggestions will be gratefully received.

What is everyone telling their clients as it relates to the pending (but anticipated) deferred compensation rule changes? I am doing a chat next week to give my views. You can sign up at www.retirementcapital.com.