Randy Watson

If a plan does not permit exchanges is there a need to enter into an information sharing agreement?

Does anyone agree/disagree with this? It seems like an off cycle submission to me and I believe that means you just go to the "back of the line". Correct?

According to the Treasury regulations, an auto-enrollment notice "must include the provisions found in 1.401(k)-3(d)(2)(ii) to the extent those provisions apply to the arrangement." I think that this could be interpreted to mean that you don't have to include any of the information contained in that section of the regs if you don't have a safe harbor plan. On the other hand, the use of the phrase "to the extent" can be mean that you need to include some of that information even if you don't have a safe harbor plan. For example, it could be argued that some of those provisions apply to a non-safe harbor plan, like the provisions of that section that require a notice to include the type and amount of compensation that may be deferred, the periods available for making deferral elections, withdrawal and vesting provisions etc. Am I reading too far into this? If so, why would they use the phrase "to the extent"?

The regs state that termination and distribution of participant accounts prior to the effective date of the regs is permissible if the contracts are updated to comply with the final regulations. The plan I'd like to terminate has a plan document. Other than adding a provision that allows for distributions upon termination, does that document have to comply with the final regs or can we terminate "as is"?

"For now". When won't it be interim...after the employer's cycle?

Is the VCP fee for failing to amend for the final 401(k) regulations based on the fee chart in Section 12 of EPCRS or is it considered an "interim amendment" and thus subject to a fee of $375?

Assume an entity purchases the assets of another and a number of employees come over to work for the purchaser. One of those employee's is actually hired as a consultant. As part of the asset deal, the purchaser agreed to assume the liability for paying that consultant's NQDC benefit. A new benefit agreement was entered into between the purchaser and the consultant where the purchaser agrees to pay the consultant a monthly benefit equal to that which he was entitled under the prior employer. Since this individual was an independent contractor and never an employee of the purchaser, is this arrangement covered by ERISA? The time to file a top hat statement has passed and I'm trying to figure out whether I need to correct this or let it go.

FAB 2006-3 essentially states that a Section 101(m) diversification notice is not required to be furnished if: (1) the plan provided diversification rights prior to 1/1/07 that were at least equal to those required under ERISA 204(j); and (2) the participants received quarterly benefit statements in 2007 that were PPA compliant. That first quarterly benefit statement would satisfy the diversification notice requirement. Please tell me if I'm wrong, but I don't read the FAB to provide relief from furnishing the diversificaiton notice to participants entering the plan during or after 2007. That simply wouldn't make sense. Anyone agree, or disagree?

The new insurer recovers the amount it advanced to the plan through amortization charges over a few years. It would also recover the amounts through a discontinuance fee if the plan moves out of the investment within that same period. From what I understand this is fairly common practice for some of the big insurance companies.

The new insurer who fronted the surrender fee would be the lender and the plan would be the borrower.

In PLR 200404050, the IRS concluded that "market value equalizer payments" (which are essentially payments to a plan by an insurer to make up for a surrender fee paid to a prior insurer) were not considered plan contributions for purposes of Sections 404, 401(k), 4979, etc.... Could someone familiar with these kinds of insurance arrangements comment on why this would not be a prohibited transaction (i.e., a loan between the plan and a party in interest)? Thanks.

Order matters if there isn't enough comp to cover all of the elections.

Can anyone point me to a good article or some commentary on the order of withholding with regard to benefits? For example, what comes out of a participant's compensation first: (1) 401(k) deferral; (2) Section 125; (3) income tax; (4) nonqualified deferrals etc.... Thanks.

A collective fund will often hold mutual funds that charge their own fees. Do the underlying fees charged by investments of a collective fund need to be disclosed to participants for 404© compliance? I thought this statement with regard to fee disclosure that appears in the preamble to the 404© regulations was interesting: "This requirement relates to the dislscure of fees and expenses directly assessed against the participant's or beneficiary's account, not expenses, fees or commissions incurred by the investment alternative attendant to the operation and management of the investment alternative."

Thanks!

1. We inherited this plan, so I'm not exactly sure why the original drafter would create the possibility for a payment after income tax inclusion. 2. Nope. No changes. 3. The 409A definition of SRF is narrower. I thought such continuances were always permitted for purposes of a 457(f) SRF.

We have a 457(f) plan that pays benefits in a lump sum within 2-1/2 months following the end of the plan year in which the participant completes 10 years of service. We meet the STD there. The problem is that the plan allows the participant to extend the distribution date for 5 years beyond the otherwise applicable distribution date. We still have a SRF for purposes of 457(f), so no income inclusion. My understanding is that the SRF would be shot for purposes of 409A and now we have to make this payment comply with 409A. Does that sound right? Need more info?

In the 7 years I've been doing benefits, I've never filed for a determination letter to satisfy the "administrative scrutiny" requirement under the QSLOB rules. How difficult is it to receive one of these letters? Am I looking at a long, tedious process, or is the level of interaction with the IRS similar to your typical determination letter application? Should I avoid submitting at all costs? Any insight would be appreciated. Thanks.

Yes, they would prefer to pay him out and be done with it.

An employee was promised continued medical coverage for life after retirement. This is going to be a taxable benefit and would not appear to meet any 409A exclusion after the COBRA exclusion period. This benefit will start in 2008. Does anyone see anything inherently wrong with modifying the agreement by 12/31/07 under the transition rules to permit a total cash out in 2008 equal to the actuarial equivalent of the cost of continued medical coverage?

Assume a participant fails to include the current cost of life insurance protection in income for a number of years. If the participant dies, would the life insurance proceeds that exceed the cash surrender value still be excluded from income of the beneficiary or does the failure to include the current cost somehow blow that exclusion?

Does anyone know of any instances where the IRS challenged a plan's use of the accrual method for determining whether a plan is top heavy (as opposed to the cash value method)?

This was an asset deal, so unlike a stock deal where there's no change in the service recipient we have a brand new party coming in agreeing to provide NQDC. Although the original plan was grandfathered, the purchaser, who had no previous connection or obligation with regard to the NQDC, comes in after the 12/31/04 and offers these benefits. Seems like a brand new NQDC plan to me.

Assume a participant has a grandfathered benefit under a NQDC plan. Another entity purchases the assets of the service recipient and agrees to assume sponsorship of the plan. The purchase takes place in 2005. The participant retired and began receiving payments in late 2006. Since we have a new service recipient this seems like a completely new NQDC to me, and since it is really a new plan it appears to be subject to 409A. Does anyone see a way to preserve this grandfathered status even though we have a new service recipient?

Here's a twist. What if termination without cause triggers 24 equal monthly payments, but a termination due to a disability (meaning the employer can terminate the individual if he becomes disabled) is paid in a lump sum within 30 days. We clearly have two different forms of payment, but the latter would meet the short term deferral rule. If it meets the short term deferral rule it's not subject to 409A and it's at least arguable that these two different forms of payment are acceptable as only one is subject to 409A. What do you think about that? It's late, maybe I'm losing my mind.