Randy Watson

Assume Company A and Company B plan on entering into a purchase agreement where A will purchase some of the assets of Company B. Some employees of Company B will become the employees of Company A. Company B has a VEBA to cover the health benefits of its employees. Is it possible to spinoff a portion of the VEBA assets to the new company to fund the health benefits of the newly "acquired" employees of Company B similar to a pension plan spinoff? If so, would those assets have to go into another VEBA?

Many rollovers were made from a plan that was later found to have a qualification failure. These rollovers were not eligible rollover distributions since the plan did not meet the qualification requirements at the time of the rollovers. Assume the failure is corrected under EPCRS. I'd like to be able to point to some authority that states that IRAs will maintain their favorable tax treatment with the retroactive correction of the plan. I know it makes complete sense that a retroactive correction will cure any rollover issues with the IRA, I'd just like be able to point to something. Please help.

As long as nothing happened after TRA '86 I should be up to speed by tomorrow.

When exactly did the HCE/nondiscrimination rules become effective under TRA 86? I believe those rules became effective for plan years after December 31, 1988. Does that sound right?

Do the Code or the Treasury Regs contain any qualified plan retention provisions? I know ERISA 107 and 209 address record retention, but this is not an ERISA issue.

Any idea what kind of facts and circumstances would be enough to overcome the presumption?

The IRS requires assets of a plan to be distributed as soon as administratively feasible after a terminating amendment is adopted. As I undertand things, the IRS will give an employer one year to distribute assets that are more difficult to liquidate (e.g., real estate, partnerships etc...). Is this an unspoken rule or is there actually legal authority out there?

Contributions to a qualified plan by a sole proprietor are excluded from gross income but subject to self employment taxes. If that sole proprietor sets up an LLC and elects to be taxed as a corporation, can they avoid the self employment tax? What if they are the only member?

I should clarify that I got that quote ("unless circumstances require a different approach") from the Technical Explanation for PPA prepared by the Joint Committee on Taxation. I read that to mean something other than securities law compliance (which is an exception). Think I'm reading into things too much?

Under the new diversification rules (ignore the transition rules please) an employer can limit the times when divestment and reinvestment in employer securities occur, as long as reasonable opportunities occur at least quarterly. The catch is that employers can’t impose restrictions on employer securities that are not imposed on other investments “unless circumstances require different treatment.” What kind of circumstances do you suppose they're talking about? I don't think we'll know for sure until additional guidance is issued, but I'd like to here comments. Thanks.

Interesting. Thanks. By the way, if the employer withdraws and makes the installment payments for withdrawal liability, would that employer be required to participate in any PPA "rehabilitation plan" or "funding improvement plan"?

Do any of you have any experience with having the trustees execute a release of some sort if, for example, the employer agrees to pay withdrawal liability in a lump sum (assuming that you could get the trustees to sign it)? Would that release have any legal effect?

MJB, don't you ever rest? You're correct that amounts excluded under 105 are not subject to 409A. However, we have discrimination issues, so the amounts I'm referring to are taxable to the former employee and not excluded from 105. Assuming that's the case, I believe that we can avoid 409A during the COBRA period, but must conform with 409A thereafter.

Someone please tell me if I have this wrong, but continued medical coverage that is taxable to the participant is excluded from 409A during the COBRA period, but subject to 409A afterwards. Once you're out of the COBRA period, you comply with 409A by following the rules on fixed payments under1.409A-3(i)(1)(iv). Yes? No? Help!

That's right. Not missing.

1. The employer was the plan administrator and they're still around. Not good enough? If not, what would happen if the plan terminated and all assets were paid to a single participant. Would the other participants not have a claim because the plan was terminated and the assets were paid out? I'm not trying to be a smart @ss, just trying to understand. 2. The only thing I know about the $5K is that it didn't go to him.

1. Is it really that easy, no plan so no claim? Are there other factors to consider or is that it? 2. It's a participant who's data was simply lost in the administration of the plan. Don't ask me how because I don't know. 3. Not a DB. 4. About $5,000.

Nothing I could find. If you're interested and have time check out PLR 200213032 (settlement amounts held in an escrow account are not eligible for rollover).

Good answers. Thanks. I obviously need to attend an ERISA litigation seminar or two because I thought that equitable relief was the only kind of relief permitted under ERISA. Anyway, your assumptions about the facts are correct and I was referring to the fact that the payment can't be rolled over to an IRA. How about that? Would a court award any kind of payment for the loss of tax deferred growth?

Assume a plan has terminated a few years back and all assets have been distributed. A former participant them comes around and asks for his benefit. If the participant filed suit, would a court award amounts in excess of the participant's benefit to compensate him for the loss of tax deferred nature of the benefit?

The provision in PPA is limited to DC plans. I'm wondering whether there was something else out there that I missed.

Someone is telling me that PPA eliminated the need to rely on 95-1 for purposes of terminating a defined benefit plan. I've read that section of the act and the new rule is clearly limited to defined contribution plans. Has anyone heard anything suggesting that 95-1 no longer applies for terminating DBs?

I'm not sure I follow.

It's possible that there would be very little cash on the last day of the plan year. It doesn't seem appropriate to focus on that day alone when significant amounts of cash flow in and out during the course of the year.

How exactly do you calculate the bonding requirements for welfare plans when the assets are quickly eaten up to pay benefits?