MoJo

True - but if it were an employer purchased asset, it has no business being in the plan. Either it is an employer asset *or* a plan assert, but not both. Companies do often purchase insurance on employees (e.g. Key Person insurance, insurance for purposes of liquidating an ownership interest on death, and for other reasons) - but those are corporate owned, and not plan/trust owned.

Just my 2 cents worth: If the policy was a plan asset, and the employer is the beneficiary, I think there are bigger problems regardless of who set it up.... Having an "employee" benefit plan "investment" pay off to the employer (with a surviving spouse) probably is a PT, a violation of provisions of REA, and I would argue a breach of fiduciary duties (specifically, teh "exclusive benefit rule."

FWIW: If that is the case, look for different IRA provider....

If the bene's are flush with cash (say, from an insurance policy on the life of the deceased), by paying off the loan, they effectively increase the value of the distribution from the plan that is then rolloverable into a tax sheltered vehicle (inherited IRA) obtaining the benefits of perhaps years of tax deferred growth. Money moving from one taxable pocket to a tax deferred pocket. If it were me, I'd certainly run the numbers.... The issue though is one of timing. There is a rather short window before hte loan will be defaulted, and it would to be paid off before that occured.

I'm not aware of any restrictions on in-kind contributions to a plan. In fact, I just had the same question arise concerning the use of gold (the actual physical commodity) as a contribution to a plan and found nothing to prohibit it. There are, however, potential valuation issues, deductibilty and income recognition issues on the part of the plan sponsor, and potential prohibited transaction issues (depending on the property, and a variety of other factors not relevant here). In addition, there is the question of whether it is prudent to continue to hold the asset once it becomes a part of the trust, but that is a separate issue.

Is it an in-kind "distribution" of the policy, or a "sale" of the policy to the insured? It makes a difference from a tax perspective.

Perhaps EtK is more knowledgeable in this area than I. Previously, I was told that a minor is a minor, without regard to age. Also told that a QP should (in general) pay a benefit due a minor by paying to the guardian of the estate FBO that minor, without regard to whether that person is guardian of the person. Am I off-base? I agree with you, David. If the person is a "minor" as defined by the state in which they reside, they are a minor for all purposes. The only exception would be the case of a minor who has been judicially "emancipated," in which case, they are considered capable of making "adult" decisions. One day under 18 is still a minor.... 18 or older - not a minor (but probably still too immature to make real decisions - IMHO). So, yes, the two can be treated differently if there ages are on opposite sides of 18. I also agree with you that there is a distinction between a guardian of the estate (one who tends to the property of the person under guardianship) and a guardian of the person (one who has custody and is charged with the care of the minor) - but in many cases, one guardian serves both roles. If no "guardian of the estate" exists, then a court needs to appoint one before a decision/distribution can be made (however, in some states, there are exceptions to the "formal" guardianship process for "small" amounts - which varies from state to state). Have counsel advise with respec to the pertinent facts and law in the jurisdiction you are in.

Pretty sure a multiple employer plan would not be two plans. It is a single plan. Just saying. Also, here there is a written rule - the special transition rule - it just is not clear how it applies to a multiple employer plan scenario. Thus, looking to the "default position" is not necessarily going to be the answer - hence my initial inquiry regarding whether there is any official guidance on this issue. It would appear that there isn't. Thanks to all for their comments. "Multiplpe employer plan" is a defined term in ERISA, and for it to be treated as a single plan, it must comply with what the DOL's interpretation of what a true MEP is. Recently they said what a MEP isn't - and when you have a situation where your MEP "isn't" - they have said each employer is the sponsor of it's own plan, requiring separate testing and Forms 5500. In my mind any, theis "isn't" a MEP as teh DOL sees it.

I could give you my bank information..... No SSN? ouch. Well, I've used "Intellius.com" with pretty good results, with little information as an input. Sometimes I've found relatives who may know about the lost participant. How about escheating the benefit to the state (not liked by the feds, but is there another choice?)?

Ah. Thanks. My bad. I skimmed it but did not re-read it completely - a danger i chastise my colleagues for constantly. Consider myself "self-chastized." Amazingly, I get asked the question (can we get reimbursement...) ALL THE TIME. I guess I'm jaded - as it is obvious that the request only comes when the sponsor is experiencing cash flow issues....

Yes, but that PTE isn't going to apply in cases where it isn't clear that the intent was for the plan to reimburse (repay) the employer (i.e. you can't, after the fact, claim it was an exempt loan under PTE 80-26, if it wasn't established as a loan in the first place). Structure it right in the first place, and you are OK. Don't, and I think you have a problem.

...my turn to "LIKE"

Good question, Austin. My standard advice is "not at all" unless there is clear evidence of intent that the plan reimburse - in which case, it should be almost immediate. Anything lengthy (and you decide what is "lengthy") to me is 1) evidence that there was no such intent) and/or 2) an extension of credit by the plan sponsor to pay a plan debt (which creates another can of worms to be opened). That second point still applies in cases where the reimbursement is quick - but.... Best bet - don't do it.

Just to add a bit of clarification. If the beneficiary hasn't received the benefit of the overpayments, then the beneficiary is owed the $1500 for the payments missed - without regard to whether the plan can recover the $3000 overpayment made to the participant/decedant (or whomever actually received the benefit of those post death payments). If (and that is a big if) the beneficiary is blameless, I think you have to treat the underpayment and overpayment as two totally unrelated issues. I agree; however, that if the beneficiary received the benefit of the overpayments, an offset is appropriate.

This has been the subject of debate among a few Attorneys in the industry. Some argue that in the event the employer decides not to fund, the existence of a forfeiture balance still gets treated as an employer contribution whose funding was reduced to zero through the use of the forfeiture account. The argument states that to otherwise would be a failure to operate the plan pursuant to a definite predetermined formula. This is based on the ascertion that the employer may not exercise discretion in the "operation" of the plan; only the "administration" of the plan. So, if the employer were to delay the use of the forfeiture balance to a future year would be an aribitrary and capricious act of discretion to allow forfeiture to accumulate over several years until they see benefit to allocate. Generally, the forfeiture use, whatever the provision, should be made absent of employer discretion. Obviously, others would argue that the use of forfeitures coincides with the employer's discretion on when to make a contribution. Without that discretion, then nothing is being contributed to reduce; so the forfeiture remain unallocated until there is. These are just a couple of arguments that have taken place over the past decade. Good Luck! Yea. I've had that debate many times myself (and have taken either side of it, depending on my opponent (I love to play devils advocate)). Truth is, somewhere (and I'm too lazy to look for it), there is authority that indicates it is not appropriate to maintain an "unallocated suspense account" beyond the end of the plan year (and of course, a forfeiture account is an unallocated suspense account) as that would be a violation of the definately determinable benefit rule(s). Artfully drafted plan documents provide for a fail-safe (usually, but not always) specifying the allocation of the unused forfeitures to participants. Some plan sponsors find "creative" ways to consume the forfeiture (like paying the auditor, when previously the corporation made that payment, or getting their counsel to separately bill for plan work from settlor work, or whatever). Not what I would necessarily call real "creative" but works to consume the forfeiture earlier rather than later. Bottom line, don't let the forfeitures build up. Make sure the plan spells out what the employer actually wants with respect to forfeitures. Prepay expenses that you can justify prudently (3 to 4 years is a bit much, IMHO). And if all else fails, allocate it per the plan document to participants.

No "written" rule = no rule. Hence, the default is, unless there is a rule that allows aggregation, you don't. Two employers. Two plans. One document. One trust. The latter two don't affect how you test the plans. The former two do....

Pardon my jumping in here, and maybe I'm confused - but, once the corporate transaction occurred that caused the two entities to become unrelated, why is it you wouldn't simply treat this as two employers sponsoring two separate plans (from the date of the corporate transaction) albeit using a single document (not a bright idea, and one that should be resolved sooner rather than later)). Per recent guidance on multiple employer plans from the DOL (granted, not the IRS), that is exactly the situation you have - and absent some "transition relief" (and I can't see the logic in the IRS providing any such relief, as they had with the transition relief under 410(b)), as of the date of the transaction, there are separate testing requirements for each of the separate plans for each of the separate employers (taking into consideration only their separate workforce). Up until the date of the transaction, testing would be combined - as if a spin-off occurred on the date of the transaction, and the "spun off" entity would start a new plan year (as if it were a spin off). Now the fact that they still use the same (commingled) trust to hold assets may be another problem, but I don't even see this as an issue. Interesting discussion though on the interrelation between the transition relief under 410(b) and ADP/ACP testing issues.

I agree with this, but have a different argument; it's just semantics. I would say are expenses "reasonable" to the extent they are prepaid beyond a certain level. It would not be reasonable for "me" to have a portion of my benefit used to pay expenses over the next five years when I am going to retire and take a distribution in the current year. I do agree that it easy to argue that it wouldn't be 'prudent' for me to do that Good Luck! I agree - but that of course depends on what the plan says forfeitures are to be used for beyond expenses. Offsetting future employer contributions would have no benefit to you beyond that which the employer *may* contribute in the future.

The other responses are all very much worthwhile, but I would add one thing: Is it truly "prudent" to prepay expenses as far out as you propose. I usually don't opine specifically, but in this case I think not. You may not stay with the same service provider that long. You may be able to negotiate lower fees in the interim (or reduce fees by changing service providers). There are many reasons not to do so - not the least of which is that the plan simply loses control over what is a plan assets by prepaying these fees. Now, if you can negotiate a substantial discount (more than the plan would otherwise earn on those assets) for prepaying, AND negotiate a deal where the assets are "escrowed" till earned (and recoverable by the plan in the event of a dispute with the TPA), maybe it would be a fiduciarialy prudent thing to do.

Two things: First, do you have a source for the use of the green card test? The best I have been able to find is that it *may* be a a two part test, where "resident" means EITHER a green card holder, OR an individual with a "substantial presence" in the country - defined as (among other conditions) being in country 31 days this year, and 183 days within the last three years (current year included). *BUT* I've not found anything that actually imposes this definition on qualified retirement plans, through the 410(b) exclududible employees section. Second, the non-citizen college kid working in the school cafeteria would have U.S. source income, and wouldn't be excludible under 410(b)....

It simply factors into the calculation for determining the amount of the loan that a participatant can take. While the "lienable" money will cound for determining the 50% of the vested balance borrowable amount, not being loanable means that the participant must have the amount they want in other sources/accounts. I've seen sponsors say employer contributed monies (match, profit sharing, etc.) are "lienable" but not lonable, meaning that you apply the limit to the whole account balance, but the participant is further limited only to the balances in the loanable buckets.

The citation applies to coverage testing. Non-resident aliens are people who live in the US but have not established legal residency, work at the location of a US company, but receive no earned income from US sources because they are being paid by their foreign employer. "Non-resident" means just that - not residing in the U.S. Aliens means non-citizens. Together, it means non-citizens not living in the U.S. i.e., Candadians living and working in Canda, but employed by a U.S. plan sponsor (considering all the controlled group rules, etc.). You can include them in a plan if you like - but you need to be cognizant of 1) the tax implications to them (slaray deferals may not be tax deferred, employer contributions may be immediately taxed to them); 2) the effect it may have on their participation in a Canadian based retirement plan (including their version of Social Security); and 3) such other wage and labor or tax laws as may apply to them as residents of Canada. Interestingly enough, U.S. citizens living abroad (ex-pat's) are not excludeable, and must be included for certain testing purposes even if they have no U.S. source income. Same issues apply if you allow them to participate in a U.S. based plan.

Retirement benefits can be attached pursuant to a St court order of restitution under a generally applicable St. criminal law which is not preempted by ERISA. State v. Pulasty, 612 A2d 952 (NJ App 1992). Also there are numerous federal laws which permit attachment of retirement benefits as seizure or restitution since ERISA does not preempt any other federal law, e.g., income tax IRC 6334; collection by the US as a judgment or fine under Federal Debt Collection Procedures Act, 28 USC 3001 or Mandatory Victims Restitution act, 18 USC 3613(a) and ©, US v. Novak 476 F3d 1041 (2007); property resulting from illegal drug acts 21 USC 853; payment of outstanding child support, 42 USC 666(b)(8). However the Fed gov. right to collect the benefits is no greater than the participant's right to receive benefits under the plan. US v. Novak, 1061. Benefits can be seized when participant requests a distribution. US v. Tenzer, 986 FSupp 361 (1997). Also ERISA benefits can be seized after payment if employee is in prison. Wright v. Rivland, 219 F3d 905. While what you cite certainly is accurate, we must keep in mind that ERISA does, in fact, preempt state laws to the extent that affect participant rights, and impose new burdens on plans. Criminal courts cannot force a payment from the plan. Criminal courts can force criminal defendants to request distributions (too the extent a distributable event has occurred), as a condition for leniency, or to approve a bargained plea - BUT, the participant could always refuse. Yes, certain provisions of the tax code allow for attachment of benefits - but only to the extent distributable under the terms of the plan. Draft a plan that restricts distributions to age 65 regardless of employment status (and I've seen them) and the money will sit until the participant (former employee) turns age 65 - at which time it may be attachable. Your cases may, in fact be correct (and I haven't read then YET) but keep in mind, district court cases and state court case are of limited precendential value - and apply only in the territory over which they have jurisdiction, and only to the extent not appealed, or otherwise overturned by a higher court in a case coming from some other jurisdiction. To date the definitive case on the anti-alienation provisions of ERISA is Shumate v. Patterson, a Supreme Court case from the around 1990 - which pretty much held the anti-alienation provision almost absolute - as against even federal bankruptcy law (i.e., in that case, ERISA DID pre-empt another federal statute). Bankruptcy law has changed since then, and frankly I'm not sure if Congress included provisions in the bankruptcy law that would change the Shumate result. With respect to the murdering spouse issue - don't assume that all jurisdictions have adopted the equitable principle that a wrongdoer cannot benefit from their crime. There have been some cases in some jurisdictions that have ruled ERISA's anti-alienation provisions pre-empt. Best to research the specific jurisdiction when the issue comes up.

I'd buy an espresso machine if I were you....

The regs spell out base information to provide (if there are any opening, maintenance or other transaction fees). We're not concerned with underlying investments (at this point), and have all other covered service providers that may tap the accounts (though we haven't found any, actually) provide an appropriate disclosure. Tie a ribbon around it, and send it out (although we haven't that many to deal with).