MoJo

Beyond the control of the plan sponsor as "settlor" is what is required. The assets may still be within the control of the plan sponsor as fiduciary, requiring that the assets, as ESOPGuy points out may be in a n account titled in the name of the trust. Keep in mind, there is no "one place" necessarily for a trust. There can be multiple accounts in multiple locations and still there is but one "trust." We have many plans that have many brokerage accounts at many wirehouses (some averaging 4 accounts per participant) and it is still all considered one trust. A checking account in the name of the trust controlled by the plan sponsor (as fiduciary) is sufficient to avoid the prohibited transaction. Keeping the money "uninvested" for very long is the fiduciary issue.

I think the PT occurs if the deferral funds are not segregated timely. Depositing them (and investing) is a fiduciary issue, not a prohibited transaction issue.

How about DOL Advisory Opinion 2012-04a. The bottom line is (from the DOL's perspective) OPEN MEPs NEVER WERE "single plans" - they ALWAYS WERE separate plans, with separate fiduciaries, with separate Form 5500s - and to the extent they didn't do it right, someone (everyone, actually) is a "delinquent filer." Rumor has it the DOL will be issuing further guidance on the issue, possibly providing a "safe harbor" corrective measure that will allow employers to file only the past two years worth Forms 5500 to correct - but that means separating out the data for testing purposes, etc. The corporate transaction that destroys an appropriate MEP (where some relationship justifies the common plan) acts to separate teh plans (from the DOLs perspective) EVEN THOUGH only one document exists, and one recordkeeping platform exists, and possibly the assets are commingled (although, that itself raises interesting fiduciary concerns - which the DOL has expressed anxiety over).

This may be splitting hairs (but I excel at that), but in what capacity does the employer hold the assets once they have been "segregated" and to what extent are the assets segregated? I know of no requirement that the employer-as-fiduciary cannot hold plana ssets, provided there is a clear delineation between those assets and other corporate assets. In some situations where a conversion is taking place and the former won't and the new can't accept current contributions, we recommend that a separate account be established at a bank titled "XYZ Plan, by XYZ, Inc. as fiduciary" so that assets could be "segregated" and tracked, and clearly denominated as plan assets. There is of course, a prudence issue with respect to how long the assets are held non-ivested, and to the extent in your situation it appears to be standard operating practice, I would questions it from a prudence perspective.

I agree with everything you say except the above. This wouldn't be "terminating only part of a plan." It would be terminating the whole of the plan sponsored by the entity "being kicked out of the open MEP arrangement." And this is where it gets interesting (to people with sick minds like mine). The DOL says it is two plans sharing a common document. The IRS doesn't necessarily see this as being that way. But, to the extent that the "employer" terminates "their plan" (and the IRS agrees it is a separate plan for qualification rules), then there are successor plan issues (which I don't think are avoidable in any event), but there is a distributeable event. *IF* the employer truly does not want a stand alone plan, I think the most prudent course of action is to "spin off and terminate" all at once. Then there is no doubt that the plan being terminated is a separate plan. I've done that in a one amendment package. Then don't start another 401(k) plan for the requisite time to forestall the successor plan issues.

No, I don't think so. You can't "retroactively" terminate a plan. Terminate it as of today or a date in the future, and then distribute the assets as appropriate, including the deferrals made post 5/1/2012. File a final form 5500 as of the date of the termination. I see no way to get the money out of the plan, save for a "distributeable event" - which would include plan termination. As far as I'm concerned, what the "other owner" wanted as of 5/1/2012 is totally irrelevant. What you have "today" are "two separate plans" sharing a common document. Yea, I've been trying to get others to smoke some stuff too, for my entire career - and consider myself fortunate when I get called in at the 11th hour. At least it's better than the 13th hour....

If they don't want an "open MEP" then 1) take that into consideration BEFORE the change in ownership occurs (due dilligence on benefit plans? - Yea, I know I'm smoking something), and 2) TERMINATE the "plan" (the separate plan sponsored by the company that is being "expelled" from the MEP AT THE TIME of hte change in ownership. Otherwise, you have an ongoing plan, and it must be compliant.

Certainly Sandy created havoc - and being in NE Ohio, we got the western edge of the storm, which has caused power outages (several of my peeps are, and will be without power through the weekend), flooding and other "distress." Considering we got 10% (or less) of the brunt of it, I can't even imagine what it's like east of here. But, on a practical note, does anyone have any good insights on what documentation would be appropriate for casualty loss hardship distributions? We're starting to get requests, and want to be responsive, but remain compliant. As I read the regs/code/secondary information (of which most simply parrots the first two), a condition is "not reimburseable by insurance" - which is a determination that may take weeks, months, or even years. Is there a "best practice" people follow or believe may be appropriate? Additionally, despite the fact that there is an election in 5 days (you may have heards something about it, and being in Ohio, we've heard little of anything else), is anyone aware of any legislative or regulatory action to provide additional relief for distributions from plans for hurricane relief?

Well, whether he wants to or not, as I read the DOL's pronouncement on the subject, an "Open MEP" is really a bunch of SEPARATE plans using a common document, so, according to the DOL, he already is sponsoring a separate plan. That being the case, what justification would exist for any kind of "refund" of otherwise valid deferrals/contributions into the plan?

Yea, but can you tell which ones are good wizards and which ones are bad wizards? You can learn from the good wizards, but confering with the bad wizards is decidely more fun....

What is your relationship to the plan/plan sponsor? Where are the remaining assets and who is the trustee/custodian? The DOL program is certainly an option, but a "qualified termination administrator" would have to be appointed, and there are specific requirements as to who/what can be one. Have you searched for the participant/have any information about the participant?

Logging out and back in doesn't help. But closing the browser and re-opening gets the list back. Any ideas. I'm having the same problem. It actually WON'T let me log out, and closing reopening the browser has no impact at all. This seems intermittant (some days it works, some days it doesn't) and I'm going through "message borad withdrawal!!!!"

Rumor has it (I heard about it from an attorney with Groom Law Group - usually pretty well informed) that the DOL is going to come out "yet this year" with additional guidance on MEPs - specifically 1) what lever of "relationship" is required for the MEP to not be an impermissable "Open" MEP (i.e. is some cross ownership sufficient even though a controlled group level of cross ownership doesn't exist, and what that level is (I've heard as low as 20%)); and 2) How do correct an impermissable Open MEP that hasn't filed separate Forms 5500 for years (I've heard a "safe harbor" correction method of going back 2 years and filing as separate plans maybe sufficient). Of course, there are IRS issues as well. Anyone have any further information?

Yes, if this is implemented, the amount of salary deferal will change, literally constantly. If in month one, you spend $500, generating a $50 rebate, then savernation will access your salary deferral change mechanism, and increase your deferals by $50 for that month only. If during the next month, you spend ZIP, the deferal will be reset to ZIP. If in month 3 you spend $250 generating a rebate of $27.50, your deferal will be increased for that month by $27.50. I assume, that these changes are over and above your "normal" salary deferal amounts - so if you are contributing $300 per month regularly, in month 1, that would go to $350, in month 2, it would be $300, and in month 3 it would be $327.50. I also assume that the whole thing only works with "flat dollar" salary deferals, as adding a flat dollar on top of a percentage deferal would confuse even the most sophisticated payroll provider. Keep in mind, what goes in the plan comes out of pay (regular salary deferals) and the rebate simply goes into your checking account, theoretuically so that you net "take home" (salary after deferals PLUS rebates) is the same as if you didn't participate in savernation. Theoretically.... There are more complex tax calculations involved here.

The money *does* go through the normal payroll channels. Only wages/salaries are deferred into the plan. The ONLY thing Savernation does is to alter the deferral rate/amount. The rebates NEVER enter the plan - but are simply deposited into the participant's account (presumably the same one their salary is deposited into) so that it "offsets" at the participant's checking account level the additional amount that is deferred into the plan.

While I agree with your concerns (and your assessment), keep in mind three things. First, the plan *is* required to adopt the "savernation" amendment which resolves (in their mind) the plan design issue. Second, what savernation does is wholly independent of the plan, except for having access to the salary deferral change mechanism to increase a participant's deferral by the amount of expected rebates. The rebate mechanism, the ability to get a rebate, etc. is "outside" of ERISA, so whether or not HCEs use the feature or not is irrelevant - except that it may impact the ADP results (which could happen in any event). Finally, the employer's recommendation of any particular on-line retailer is different than the plan making the recommendation - which it doesn't. As indicated in my "second" point, the plan has *nothing* to do with the arrangement, except to accept the salary deferral change request from savernation as agent of the participant. My employer already recommends certain vendors through the selection of health and welfare plans, supplemental insurance programs and employee discounts. Just playing devil's advocate, along with throwing in another two cents worth.

The concerns I raised (and this was just brainstorming) were: 1) what liability/issues/responsibility is there in turning over authority to a third party to effect changes in salary deferral amounts (i.e. someone else has control over a payroll function affecting deferral amounts????); 2) what controls are in place to ensure that the amounts deferred did not exceed plan limits (and my understanding is that there is an "amendment" required to your plan that authorizes everything - which as well raises concerns), or regulatory limits (402(g), deductibility limits, etc.), and 3) does the use of this type of service in any way shape or form limit the service providers that a fiduciary may select from (i.e., well, there are a limited number of payroll providers - but that isn't necessarily a fiduciary decisions - but I could argue it is..., but other service providers may be impacted as well - see below). It also has some practical issues that I haven't gotten answers to either. Since the "savernation deferral" is as "flat dollar" deferral, does it require that the participant participating have only flat dollar deferrals (that is, if someone is currently deferring 5%, do they have to change that to $250 so that the rebate amounts can be an increase to that amount, or can someone still defer 5% and have another $50 or whatever added to that amount? If the former, then might that not actually reduce deferrals when bonuses, pay raises, etc. come around?). What are the timing standards for deposits of rebates (i.e. does it match or precede the deferral payroll date? Anything after the payroll date means a "shortfall" to the participant, albeit temporary (but try to explain that to a typical participant)). Finally, the whole concept ENCOURAGES spending as a way to increase savings. Long term, that would be counter-productive, and contrary to what we've been preaching about "budgeting" for the long haul.... Just my two cents worth....

Gotta love "marketing" language.... We looked into it to see if there was any traction. So far, we"re "waiting".

The cash back is *not* turned into pre-tax contributions. What happens is, when you make a purchase that qualifies you for a rebate, savernaton accesses your 401(k) deferral "system" to increase your deferral by the amount of the rebate. The rebate is deposited into your checking account - and that deposit "offsets" the increase in your deferral amount. It's a simple (or not so simple) way to increase your deferrals in an amount that should be painless because it is offset by the rebate. Of course, you have to spend money to generate the rebate to begin with.

Nope. The law allows you to exclude certain non-citizens (non-resident aliens with no U.S. source income....) but doesn't prevent you from including them. I've actually seen plans cover foreign nations in their home country, although.... The only cautions I have (and I'm sure there are others) are 1) what tax consequences participation in the plan has for foreign nationals (especially those who have a tax liability in their home country) - i.e. do they have income tax consequences in their home country as the result of employer contributions to a U.S. based plan, or as a result of earnings within the trust?; 2) what are the tax consequences upon retirement/distribution; and 3) does participation in a U.S. based plan have any effect on their ability to receive or the amount they may receive under their home country's version of "social security," if any?

That deserve a definate "LIKE" :-)

I have a huge problem with the "beyond 5 year" payment plan - but my problem is one addressed by QDROphile - in that absent a current cure for that problem, is there not a fiduciary breach (i.e. taking a "wait and see" approach doesn't seem like a prudent position to take - especially when the loan is never "cured" - but, if the rolling cure is in effect, is constantly in a state of delinquency.

Most plans I see (and write) require the 1000 hours to be completed "within" a specified 12 month eligibility period. That is, if you don't satisfy BOTH requirements within one period, BOTH requirements are reset and start anew. With the flip from anniversary date to calendar year, that would mean that regardless of when you get the 1000, you still do not enter the plan until the first entry date AFTER the end of the current 12 month period (i.e., the first of the next year).

Sure but that's the environment we're in. I'm not trying to be argumentative or anything, but to me it seems black and white. I guess I could get slapped down on an audit; I'll be the first to let everyone know if I'm wrong. No doubt. And I see it happen (and have allowed it to happen) - *BUT* there is no justification to allow it to happen other than administrative convenience and to be "kind" to a participant. The "commercially reasonable" requirement *IS*, in fact, justification to look OUTSIDE of our universe to make that determination, and that would dictate a different result.

I'm 100% ok with the "rolling cure" and never heard it questioned - virtually every "late" loan is going to be in this position. And am (still) 100% ok with payments being made after the 5 year period, as long as they are within the cure period. FWIW The problem with a "rolling cure" is 1) it most certainly does not comport with the comercially reasonable test (no bank would allow it to continue for a "signature" loan, or even for an auto loan or the like indefinately); and 2) for you to truly be effective in allowing it, one would have to accrue and charge interest on each of the "late" payments (i.e., every payment becomes four weeks late) and tack that on to the loan, ever compounding the problem. In other words, in no other universe but for the retirement sphere would anyone ever talk about a rolling cure as being even remotely appropriate.