ERISAatty

I don't usually work with Nonqualified deferred comp agreements funded by COLI, so am scrambling to get up to speed now that I have one in front of me. I'm trying to determine what, if anything must be amended for 409A (with which I'm familiar), but I'm not finding a lot of guidance out there. Since this is a nonelective plan that pays only on 409A-permitted specifed events, it seems we're OK as long as acceleration of payment is not permitted. But I have a sneaky feeling that I'm missing something. Is the general view that 409A does NOT apply to COLI? I can't find much about it. Any general insights welcome.

Hmmmm, that gets my attention. Thanks for sharing the tale of woe, J4FKBC.

Here's a new one to me. A Plan Sponsor/Employer has regular, permanent employees, as well as non-regular employees hired on from time to time to perform only a specific job. The non-regular employees work a full-time schedule for their duration, and are informed on hire that they will receive no benefits. They are also paid more per hour than the regular employees who receive benefits. I know that nothing under ERISA prevents an employer from excluding certain classes of employees (like, here, the non-regular employees) from benefit. The catch here is that the plan sponsor didn't make the plan CLEAR that such non-regular employees would be inelgible for retirement plan. The employer's goal is to fix this problem without having to include the non-regular employees as benefits-eligible. I'm thinking that the plan sponsor could amend the plan to document their actual intent. No need to tell the non-regular employees. The other option I see would be to go through EPCRS, actually include the employees, and make QNECs, as needed. The employer wants to get a waiver from the non-regulars stating that they waive benefits. I think that's like waiving a red flag in front of a bull. They'll start asking question, and claims could follow. Anyone with me that a quiet, retroactive amendment, together with documentation that the amendment reflects the employer's original intent, would be ok?

Anyone know when the Federal Register version of the final 409A regs will be published? (Or did I miss it already?)

I disagree that HIPAA would prevent the vendor from telling the employer which employees partricipated. HIPAA prevents the vendor from telling the employer anything about results, but participating info, particularly in this context, in which the exchange of info relates to a payment issue, should be exempt from HIPAA. HIPAA administrative simplification rules (including privacy rules) do not apply to information disclosed for purposes of treatment, payment, or operation.

FYI - here's how we're proceeding for now: we are rejecting the amended order because, as currently drafted, it requests a benefit not available under the plan (i.e. 100% or participant's benefit as of retirement date, but he has already entered pay status). If the Alternate Payee resubmits the order with a permissible benefit request (i.e. 100% of Participant's benefit going forward), then we'll approve it if it meets the IRC 414(p) requirements. In our approval letter, we will state that the Order is a QDRO, and that our determination was limited to the satisfaction of the Order of the Code and plan requirements, and that we presume that the state court and Alternate Payee's attorney have ensured that the Order satisfies state law and is not drafted in contravention of the requirements of Medicaid. That way, at least, Alternate Payee's attorney is on notice, and we've covered ourselves should there be any future dispute. If there is a DOL Opinion relating to QDROS and Medicaid, I'd be curious to know of it, too. Again, thanks all!

Thank you for the helpful replies! I appreciate it!

As an attorney, I assist a plan administrator in determing whether DROs are qualified. I'm about to 'reject' a proposed Order that purports to amend a QDRO accepted in 2000. In 2000, at the time of divorce, the ex-wife/Alternate Payee expressly waived (in the QDRO) any interest in the pension, but did take in interest in the 401(k) Plan. Now, 6 years, later, participant's Pension is in pay status already, and ex-wife has submitted a proposed amending order seeking a 100% INTEREST IN THE VALUE OF HIS PENSION AS OF THE DATE OF HIS RETIREMENT. Since he's already in pay status, I'm planning to reject on the basis of the Order requesting benefits not available under the plan. (Some of his pension has already been paid to him, so she can't get "100% at this point). This feels funny in other ways, though. He's now in a nursing home. His two kids' names are on the order as his "agent" (but her attorney drafted the amending order.). Plan is inclined not to accept any amending order, even if they refine it to a permissible benefit. This is under Pennsylvania state law. Any ideas on the kind of documentation, etc. Plan Administrator could say it would require before considering approving such a request? Thanks for any insights. In the meantime, sorry, Alternate Payee. This one's a no go.

Oops. Thanks all. No fee. So THAT's why I couldn't find the fee listed anywhere. Thank you!

There should be a simple way to find out the answer to my question, but I haven't found it yet, so am turning to this board for help. I'm just trying to figure out the estimated cost of filing a Form 5500. I understand that the filing fee may vary, depending on which schedules are required. But I'm trying to help a client understand the cost ramifications of filing separate Forms 5500 or of doing a wrap plan. If anyone can point me in the right direction, or provide a ballpark estimate of the filing cost of a Form 5500, I'd be most grateful!!! Thank you.

A client's employee (the Partipant) will soon retire (and become eligible to commence receving pension benefits). A dozen years ago, a QDRO was entered that awarded his now former spouse 50% of his pension benefits, accrued through a date in 2000. Now, the Participant is remarried. He wants to make a QJSA election with respect to his new spouse. The client informed him that the plan is obligated to split payments with the former spouse. Participant is angry. I'm out of my depth here. Anyone have any thoughts. Since the Alternate Payee has a right to only 50% of the pension as accrued through [specific month and day], 2000, would it still be possible for the plan to pay the Alternate payee her portion, but ALSO to allow a QJSA election on behalf of the participant and new spouse, only with respect to HIS 50% accrued benefit through the 2000 date PLUS all accruals after that date? Thanks for any reality check anyone can provide.

Thanks to all for your input!

Question for all of you that work with QDRO's more frequently than I do: I am an associate attorney, and at a previous firm, I did a fair amount of QDRO review for employer - basically I advised whether the submitted DRO's (sometimes in draft form, sometimes already signed by the court) were "qualified." On occasion, I also assisted a divorce attorney in drafting DROs (or reviewing them) for divorcing clients. It is my memory that, when working for the divorcing party, I always reviewed the Marital Settlement Agreement (MSA) or divorce decree, to ensure that the QDRO reflected the correct division of retirement assets. However, I don't recall regularly seeing (or requesting) the MSA when doing QDRO review for the Plan Administrator/Employer. Now I'm at a new firm, and there is more QDRO work now coming my way from two Plan Administrator clients. My supervising attorney here says that it has always been his practice to request the MSA as part of the QDRO review for Plan Administrator clients. My thinking is that the divorcing party's attorney has the responsibility to ensure that the DRO, as drafted, comports with the MSA, and that the Plan Administrator's review is more properly limited to the extent that the QDRO satisfies the requirements of 414(p) and comports with permissible payment terms under the relevant plan. My boss, on the other hand, says that the Plan Administrator is responsible for administering the Plan, and that this INCLUDES being sure that the QDRO, as drafted, comports with the MSA. Seems to me that it may be tricky to always request an MSA copy, especially in the case of proposed versions of QDROs. Any thoughts out there? Is his preference to ALWAYS see a copy of the MSA quite usual and reasonable? It seems to me to go a little too far, but I'm willing to be corrected.

A Plan is not required to include "all of the change of control event." The 409A definition operates as a minimum standard. If an employer chooses to recognize only a stricter definition (i.e. say only ONE of the defined types of change of control) that's fine. What the employer can NOT do is to made MORE things constitute change of control than 409A allows. But recognizing FEWER change of control events is fine. From a policy basis, this makes sense. Why would the IRS worry about it being HARDER for an executive to get a payment? Indeed, 1.409A-3(g)(5) provides that "The arrangement may provide for a payment on any change in control event, and need not provide for a payment on all such events, provided that each event upon which a payment is provided qualifies as a change in control event."

My understanding is that a modest cost to participants would be considered "reasonable." Of course, if someone complained, you would have to defend the position that the amount employees pay is "reasonable." In what I personally have seen so far, employers are picking up all, or all but a token amount, of the cost for these programs. Your questions about whether a premium change (as a result of smoking) would trigger the right to make a cafeteria election change is governed by Treasury Regulation 1.125-4(f)(2). It is arguable that such an event might allow a change in status election, but remember that this regulation does not REQUIRE the plan to allow such election changes. The plan sponsor gets to choose whether they offer a change to change election. You should review that regulation and see how it applies to your specific facts. First, it requires the cost change to be "significant." I don't know how much the change would be, but you need to consider whether you could defend it as significant. Second, if someone starts smoking under your wellness plan in a way that affects health premiums, do you really want to make it easier for them to make an election under the cafeteria plan? Doesn't that take away some of the incentive to stick with the wellness plan? I would discuss these issues with either a local benefits attorney, or a third-party plan administrator, in order to reach the correct conclusion for your situation.

PaulS, From your message, it is difficult to know exactly what happened, in terms of who is legally responsible for what, but I recommend that you telephone the Employee Benefits Security Administration (EBSA) at this toll-free number: 1.866.444.3272. If your policy was cancelled, and won't be reinstated, you should be reimbursed for the excess premiums. If the Employer's ENTIRE health plan was cancelled, you will not be able to continue with COBRA, but may have other state rights to get an individual policy. The EBSA should be able to provide some helpful information. Another option, if the situation is not promptly resolved, and if you feel that the employer has mishandeled your payments, is to hire an Employee Benefits attorney in your area. The attorney can review all the facts, and can send a letter to your employer and or the insurer demanding that they rectify the situation. Good luck.

Well, I think that the way these spousal carve-outs often work (from what I've seen) is that the working spouse's HI becomes a mandated primary coverage source. Period. The working spouse is not eligible for the employee's coverage. Therefore, there is no secondary, or COB, coverage issue. The economic impact of this policy will vary by spousal couple, and will depend upon the affordability to each couple of the insurance offered by the spouse's employer. Under spousal carve-out rules, each spouse, to be covered, will need to pay HI premiums to his/her employer. This may or may not be more expensive than obtaning full family coverage from only one spouse's employer. Therefore, I am highly skeptical that, given the broad array of cost variables, and the lack of uniform impact by gender, anyone could ever prove gender-based discrimination based upon a carve-out policy. And, as GBurns point out, there is no intent to discriminate on an impermissible ground. The policy applies equally to all employees, where it is used. Having said that, just today, one of these came across my desk. A more humane version this time: instead of making a working spouse completely ineligible under the employer's plan, the employer just charges a "working spouse surcharge" for working spouses who are [/i]eligible for coverage under their own employer, but who decline to be covered under that other plan. So the employee can elect to pay a bit more to keep the working spouse (who has access to other coverage) on his/her employer's plan. Again, this applies equally to all. I'm not unsympathetic to recognizing the existance of policies that disparately impact by gender. I just don't see a gender discrimination case here, let alone one ever getting off the ground on this issue (says the female attorney, whose husband is covered under her employer's plan).

I am not aware of any litigation concerning these carve-out provisions to date. Nonetheless, my thinking is that it would be difficult, at best, to prove that such a provision had a disparate impact based upon gender, as the pool of covered employees (and therefore their spouses) contains such a mix of women and men. As long as the plan applies the policy equally to all employees, it's hard to see a discrimination challenge holding water, since employers are not required under ERISA to provide benefits at all. And a Title VII action, in particular, would have relevance only to public/govt. employer-sponsored plans. I think these provisions are here to stay. The tough cases will be those in which the spouse is eligible for his/her own employers' insurance, but where such insurance is offered only at very expensive rates. Employees will likely balk at the fact that, in order for all family members to be covered, they are being required to pay much higher total health premiums under these carve-out policies. So there are HR issues to consider in implementing such a policy. Also, some state laws may contain applicable provisions. In Wisconsin, for example, if a plan is fully insured, the employer may NOT "carve out" the spouse. The only option is for the spouse to be charged a higher premium; but they can't be ejected. (Self-insured plans in Wisconsin can still carve-out at will).

Just a general inquiry: I enjoy Sal Tripodi's Erisa Outline Book, and also the only RIA Checkpoint Service for most of my Retirement (and, in the case of RIA, some health/welfare plan) research needs. I'm curious, though, about what resources some of you may find especially helpful in the health/welfare area. I know the EBIA books (at least the ones I've seen) are good. Any other tips on comprehensive Health/Welfare resources out there? Thanks in advance for any shared insights.

a "Working Spouse" rule or policy is the nice name for these. They are also referred to (often when not communicating with employees,) as "Spousal Carve-Outs." This kind of provision is becoming increasingly popular as plans try to cuts expenses in the face of rising health care costs. The thing to note is that, should the non-employee spouse LOSE their other coverage (i.e. by loss of job), then the non-employee spouse must have special enrollment rights (per HIPAA) in the plan that carved them out in the first place. Another thing I've seen, which is a little dirty, is a plan of Employer A "deciding" that a certain employee's spouse is no longer eliglbe for plan A coverage, because the spouse "has" employer-provided coverage available under spouse's plan B. This is an agressive move, as it could be that, under the terms of Plan B, that employed-spouse is not, in fact, "eligible" for health insurance, for a variety of reasons, one of which, possibily, being that he/she is covered by Plan A. Then, Spouse may need to enroll under special enrollment rights under Plan B. Plan B is not always happy to cooperate. You can get into the sitaution that each plan is fighting to throw the spouses at the other one. Kind of a mess, but likely to become more common. Just requires a careful case by case review or plan terms and applicable HIPAA principals.

A few cases have held that either the COBRA 60-day election period, or the 30-day payment periods have been tolled by incapacity, respectively. See, e.g. Sirkin v. Phillips Colleges, 779 F. Supp. 751 (N. J. D. 1991); Branch v. G. Bernd Co., 955 F.2d 1574 (11th Cir. 1991). Hope this is helpful.

I respectfully beg to differ about the statements, above, to the effect that the 45-day grace period applies NO MATTER WHAT. I wrestled with this very issue, recently, and am now convinced that after the INITIAL premium is paid, the payments are due on the first of the month, with a 30 day grace period each month. I now believe that it is best to advise those who elect COBRA NOT to make their first payment until almost 45 days after electing. Because if the first payment is made early in the process, the next payment will be due soon thereafter. I have a client right now whose terminated employee is losing coverage because they didn't make their second payment early enough. The citations for these rules (along with some of my analysis that I prepared recently) are as follows: After the initial COBRA election, Treas. Reg. § 54.4980(b)-8, Q&A5(a) requires that the COBRA participant has 45-days to make a first payment. Once the initial premium payment was made in early February, however, the mandatory 45-day grace period with respect to the initial payments no longer applies. Instead, each payment after the initial payment is due on the first day of each monthly coverage period. Federal law requires that a 30-day grace period apply to each payment due on the first day of the monthly coverage period. So long as a monthly premium is paid within each month’s 30-day grace period, coverage will not be terminated for failure to make a timely payment. Internal Revenue Code § 4980B(f)(2)(B)(iii). Some employers rely on the alternative language option in the COBRA election notice, and provide that if a monthly payment is made later than the first day of the month to which it applies, but before the end of the applicable 30-day grace period, coverage under the health plan will be suspended as of the first day of the month and then retroactively reinstated (going back to the first day of the month) when the monthly payment is received. This means that any claim submitted for benefits while the coverage is suspended may be denied and may have to be resubmitted once the coverage is reinstated. Since the model COBRA notice provides for this suspension, it seems to be OK with the DOL. The EBIA book, COBRA: The Developing Law, also states that after the first payment is made, the premiums are generally due on the first day of the month.

Aha! WDIK - I did not realize, until you pointed it out, that the underlines were links. I just hadn't understood the reference to the stirring, and to which pot. But now I see the vast extent of your effort and assistance in pointing me in the right directions. In answer to your hypothectical, eponymous question, I would say that you know a lot. Accordingly, I extend to you, to, WDIK, my lasting, humble gratitude! Thank you.

Thank you, b2kates and rocnrols2, for your much appreciated assistance!

Help - I am aware that the full amount to be deferred over a year under a Flexible Spending Arrangement (FSA) "must be available to the employee at all times." Treas. Reg. section 1.125-3, Q&A 6(b)(1). Great. But what I need to know is: When an employee is on track to make payroll deductions to the FSA for $2,000 over a one-year period (from January to December), withdraws $1,000 of the amount by March, and then terminates in March, 1. Does the employer have any right to collect the difference between the payroll deductions as of March and the excess, withdrawn amount? 2. Are there income tax implications to the terminated employee, such that the employer would be required, e.g. to issue a form 1099? A contact at a plan administrator company tells me that the answers are: 1. No employer right to collect (but the employer may gently ask); and 2. None of the withdrawn amount is taxable to the terminated employee, and no tax reporting is required. Can anyone verify the correctness of these answers, AND, BETTER YET - earn my eternal gratitute and trust by providing citation to authority on these issues? Thank you very much!!!!!!