Randy Watson

Do the QJSA rules apply to a nonelecting church plan?

Right, the transition relief (contained in Notice 2005-1 and the preamble) is separate and apart from the anti-acceleration rules in the regulations.

Split dollar agreements are being offered to some participants in a NQDC plan. The plan is the owner of the life insurance policy and pays the entire premium. An endorsement is filed with the life insurance company giving the individual rights to 1/2 of the death benefit. The individual then recognizes the cost of the life insurance protection each year. When the death benefit is paid, 1/2 goes to the plan and 1/2 goes to the individual. That's it, just a death benefit is available. Is there some hidden benefit to doing this rather than having the company own the policy (other than using assets of the plan to purchase the policy)?

Has anyone ever hear of a split dollar life insurance agreement between a NQDC plan and a plan participant? This seems very odd to me. Is this even possible? I have practically no experience with split dollar arrangements.

Would it be a breach of fiduciary duty to "sacrifice" some plan participants for the benefit of the plan as a whole? For example, assume that in selecting funds to be made available under the plan, a plan administrator must choose one of two funds. One fund has revenue sharing and one does not. The fund without revenue sharing has a lower fee, but the fund with revenue sharing will reduce the adminstrative expenses of the plan as a whole. Would it be imprudent to select the revenue sharing fund even though the fees charged to those who invest in that fund will be higher than if the other fund was selected? Has the DOL commented on this issue in particular? I have seen the revenue sharing advisory opinions.

Are split dollar life insurance plans generally subect to ERISA? There does not seem to be much guidance on this issue. I came across a D.C. district court case from earlier this year that says that they are not subject to ERISA if there is no ongoing administrative scheme. Is it that simple?

I believe ERISA requires a 5500 filing since this is not exempt from the reporting requirements.

Okay, I have a very odd situation. For a number of reasons, which I would rather not get into, I have a nonqualified arrangement that does not meet the top hat exemption because it is considered to be a funded plan. Amounts contributed to the plan are directed to individual trusts (created for each participant) and those contributions are taxable to the plan participants in the year in which they are contributed (these are employee-grantor trusts). Those individual trusts operate under the terms of a general or master trust document. I believe that we only need one 5500 for this plan. Is that correct or does the fact that we have mulitple trusts change that? Assume that we only need to file one 5550 since it is one plan, what would happen if we added a second plan that used the same master trust...would we then be required to file a second 5500 for that plan? Told you it was odd.

Good information. Thanks.

Thank you, Belgarath. Can you please tell me what authority prevents us from converting to a PS? Also, assume that we terminate and set up the replacement plan under 2003-85 and contribute 100% of the excess from the DB to that plan. What happens if that amount exceeds the 415 limits for all the participants in the replacement plan...can we still make that contribution to the plan? I understand that there will be no deduction for that contribution, but is there something preventing us from making it to that plan? What issues should I be worried about? Thank you.

A very small DB plan is well overfunded. There are a handful of owners in the plan and no other employees. The plan is so overfunded that there will be a surplus in the plan even if maximum benefits permitted by 415 are provided. How can we get surplus to the participants? Termination and the payment of excise tax would be a last resort. Can this plan be converted to a profit sharing plan and, if so, would that get us around the DB 415 benefit limits and payout the surplus?

A buyer who currently maintains an ordinary 401(k) plan purchases a seller (stock deal) that maintains a SIMPLE 401(k). The buyer is not eligible to sponsor the SIMPE 401(k) (too many employees). Can (or must) the buyer termiante the SIMPLE 401(k)? The reason why I ask is because 401(k)(10) prohibits an employer from terminating a 401(k) if they maintain or adopt another 401(k) within 12 months.

Plan participants are not trustees in this case. Have you ever seen anything like this before?

I have a nonqualified retirement plan that does not meet the top hat exemption. Plan contributions are made to a secular trust and participants have the authority to direct investments. Since we are subject to Part 4 of title 1 of ERISA, we should make efforts to comply with 404© to avoid liability. Even though everything is telling me that we should comply with 404©, it seems very odd to me that we need to worry about 404© when the amounts are held in each employee's secular trust. Any comments?

I don't understand your question.

Heard that it was submitted to the Federal Register and will be out next week.

The sources are about as reliable as they get, but you may be right anyway.

I have heard from very reliable sources that the regulations will be out very soon and that we can expect an extension on the amendment deadline. You should continue to operate in good faith until the regs are issued. I was also informed that the December 31, 2005 termination deadline will not be extended.

Does anyone know of any 401(k) surveys that report common practices with respect certain plan provisions? For example, X% of employers use a 3 year cliff vesting schedule, or X% of employers permit catch up contributions etc.... Thank you.

Yes, the plan does have the forfeiture language and some language about the letter forwarding program etc... Unfortunately, it does not address distribution options. I was hoping that someone would tell me that the FAB provides a complete safe harbor. Thanks for your help.

I don't want to amend it if I don't have to.

My question is whether I need to add these options (IRA, state unclaimed property fund or interest bearing savings account) to the plan document prior to making the distribution.

FAB 2004-02 gives administrators some relief in getting a missing participant's benefits out of a terminated dc plan. My question is whether the plan document has to specifically permit these kinds of distributions, or can a fiduciary rely completely on the FAB?

An employer uses a VEBA as a funding vehicle for its health plan. The employer wants to keep the health plan in place but terminate the VEBA. Other than following the termination procedures in the VEBA trust document, using the remaining assets to pay health benefits and filing a final 5500, is there anything else that should be done?

Yes, different divisions....no CBA.