katieinny

An employer has decided to terminate their VEBA. If any assets remain after the outstanding claims are paid, can that money revert to the employer? If so, would the employer be subject to an excise tax?

There is no health plan attached to the VEBA. It was set up strictly to reimburse participants for out-of-pocket medical expenses, no matter what the source (e.g., eyeglasses, prescriptions, dental, co-pays, etc.). So, I'm thinking that FMLA, COBRA and the other acts mentioned don't apply to this reimbursement plan. I will tell the employer that it must be amended for HIPAA -- today! But, just in case, I would like your thoughts on whether the other acts might also apply to this plan.

An employer has a medical expense reimbursement VEBA that is funded with only employer dollars pursuant to a collective bargaining agreement. It is not the actual health plan, but only a funding vehicle so that participants can be reimbursed for any out-of-pocket medical expenses. I'm wondering if this plan must be updated for the HIPAA privacy regulations since claims and medical receipts are submitted that probably include personal information. Also, since this is only a funding arrangement, does it need to have any language included that addresses COBRA or FMLA?

It is my understanding that the plans need to be amended, not restated.

This VEBA is a medical expense reimbursement plan that is funded by the employer. There are no employee contributions. I agree that it is just a funding mechanism, not an actual medical plan. All it does is provide a pool of money from which a participant can be reimbursed for out-of-pocket medical expenses. The fact that medical receipts containing personal information are submitted to the plan for payment leads me to believe that the HIPAA privacy regulations probably apply. Do you agree? But since it's not an actual medical plan, can they avoid having to include any reference to COBRA and FMLA? I've seen other medical expense reimbursement plans (cafeterial plans) that do include a small blurb about COBRA and FMLA.

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?

I'm surprised that it's very rare to meet the exception to the HIPAA regs. Aren't there thousands of small businesses out there with fewer than 50 employees that set up these kinds of plans? And because they're so small, they're easily self-administered.

Okay, that makes sense. But, at the very least, they still need to do the amendment, even if there's only a handful of participants?

I understand that the privacy notice is not required for self administered plans with fewer than 50 participants. But doesn't the plan document still need to be amended, which means that a summary of material modifications must be prepared and distributed?

Since "deferral only" 403(b) plans are not ERISA plans, can they be offered to only certain groups of employees in a fashion that would normally be considered discriminatory in a qualified plan? Perhaps only to a HCE group, for example?

More questions about the terminating DC plan. The participants in the terminating plan will become participants in the new employer's plan as soon as they can get things converted over for payroll purposes, which could take a few weeks. So there will be a few weeks when no deferrals take place. And since the terminating plan is doing a 5310 submission, distributions won't be made until the determination letter is issued. Loan payments must continue to be made during this interim period, which could be several months, but no new loans or distributions will be processed. Does that mean that a blackout notice is required?

That's exactly what I was looking for. Thank you.

An employer is planning on terminating his DC plan prior to the sale of his business to another company. He's concerned that many of the participants have outstanding plan loans that they would not be able to repay on short notice. The purchasing company offers a similar type of DC plan. If the purchaser's plan permits, can the employees roll their loans over to the purchaser's plan to avoid having taxable distributions?

It's been my experience that the money purchase money is merged with the PS money as long as the QJ&S continues to apply. You said that the PS also had the QJ&S feature, so I'm not seeing any reason to keep the assets separate.

I thought about that, but this plan doesn't permit hardship withdrawals or any in-service withdrawals before normal retirement age (65). I suppose they might decide to amend the plan at some point to permit hardships, and then there would be a problem figuring out what money is available if the safe harbor contributions have been commingled. But other than that, there's no reason to be able to track the safe harbor money separately?

Participants in a plan are permitted to invest only their vested account balances. The employer invests the non-vested dollars. Now the employer is adding a safe harbor contribution to the mix, which must be 100% vested. Must the employer set up a separate account for the safe harbor dollars (so they can be tracked), or can they be commingled with the account that holds the vested dollars as long as the employer adds another line item to the employee statements showing the safe harbor deposit?

A beneficiary is being paid the proceeds of a life insurance policy that was held in the spouse's qualified plan. The taxable amount on the 1099R will be different that the amount of the total distribution since only the cash surrender amount is taxable. I'm wondering if there needs to be an explanation about why the 2 amounts are different, such as a code indicating a distribution of life insurance proceeds. I'm not seeing anything in the 1099R instructions that mentions a code for life insurance.

I started looking into the Pregnancy Discrimination Act. It says that the employer must hold the job open for a pregnancy related absence the same length of time jobs are held open for employees on sick or disability leave. So now I'm thinking that the employer must hire her back.

An employee has not met the 1250 hours of service requirement to be eligible to take leave under the FMLA. She will be going on maternity leave shortly. Is it safe to assume that since she is not eligible for FMLA, the employer is not obligated to hire her back?

MikeP: Thanks for that information. I think we need to at least use someone in a consulting capacity while we do the leg work. Now if I can only get the boss to agree.....

Kirk, you are exactly right. We've checked with several pension attorneys and actuaries in our area, and NONE have any experience with a distress termination.

Jerry2575 -- Did you file the Form 600 and then make your call to the PBGC, or did you call them for information first? I'm wondering how to begin the negotiation process.

Sorry, MikeP. What's an FOIA request?

MikeP -- Am I understanding you correctly? You seem to be saying that a termination under numbers 3 or 4 (see above) do not qualify as reasons for a distress termination, but would qualify as reasons for a standard termination only. Yet the PBGC material lists all four tests under their distress termination criteria. Based on what I'm hearing in this discussion, it seems that what the PBGC says and what it actually does are two different things, and bankruptcy is the key for a distress termination.

Several sources (including the PBGC) indicate that an employer must meet one of 4 tests in order for the termination to qualify as a distress termination. 1) Liquidation (involves bankruptcy) 2) Reorganization (involves bankruptcy) 3) Business continuation (does not necessarily involve bankruptcy, but the employer is unable to pay debts when due and will be unable to stay in business) 4) Pension costs (does not necessarily involve bankruptcy, but the employer has to prove that the costs of providing pension coverage have become unreasonably burdensom due to the decline of its workforce) So, I'm wondering if a bankruptcy court still gets involved if the employer is applying for a distress termination under numbers 3 and/or 4. Perhaps the client has to prove to a bankruptcy court rather than to the PBGC that it's financial distress is critical, even if it's not in bankruptcy?