Randy Watson

Would it be permissible to have different eligibility rules for different classes of employees as long as it did not discriminate in favor of HCEs? Based on the fact that you can completely exclude a particular class of employees from participating, it seems like you should be able to do this.

What about individuals who know they will take on a lesser role in the future (for example, a part time/consulting role)? If their regular comp would be under the 402(g) limit at that point, wouldn't it be beneficial to permit these individuals fund the 401(k) through NQDC?

Do you see any 409A issues?

There do not appear to be many restrictions on what type of compensation can be deferred into a 401(k) plan. Based on informal comments by the IRS (and prior to the new 415 regs), it seems as though the only significant restriction is that the compensation must be payable to an employee. So here is the question: can an individual elect to defer nonqualified deferred compensation distributions into a 401(k) plan and have those contributions made on a pre-tax basis? Assume: (1) that the elections to have those distributions contributed to the 401(k) plan are made prior to participating in the NQDC plan (no control over those assets at the time of election); (2) the 401(k) plan's definition of compensation for deferral purposes includes distributions from a NQDC plan; and (3) the individual is an employee when the distributions/contributions are made. Would this be okay under the 401(k) rules? Would this be considered a second deferral under 409A that could potentially trigger the penalty? Please help. Thanks.

Can a doctor release PHI of a deceased patient (who passed away while under the doctor's care) to that individual's adult daughter? The daughter is not the executor of the estate nor is she an authorized representative. However, it seems ridiculous that HIPAA would prevent the doctor from explaining to the daughter what happened to her mother.

I was wondering why everyone thought I was going to impose a "special fee" on terminated participants and then realized that it was most likely because I used the phrase "account maintenance fee." That was my bad...I had no intention of charging a special fee. Nevertheless, these were informative replies. Thank you.

Kirk, I was merely agreeing with Locust that an argument could be made that an individual in a 404© plan would not be considered a fiduciary for the PT rules. My guess is that the argument would be based on the fact that the PT rules and the 404© rules exist under the same part of ERISA (Part 4 "Fiduciary Responsibility") which perhaps suggests that this exception could be used in the PT rules. I honestly don't know the answer to that. Do you know if this argument has been made before?

How about using the plan assets to invest in a private company that is partially owned by the participant? It seems like that would constitute a PT unde 4975©(1)(D) or (E).

This should help with the withholding: http://benefitslink.com/boards/index.php?s...=0entry116149

The new bankruptcy law appears to exempt participant loans from the bankruptcy process. I read the changes to state that the filing of a bankruptcy petition should not stop an employer from withholding loan payments from an employee's compensation (exempt from automatic stay). I also read it to state that a bankruptcy plan cannot alter the terms of a loan from a 401(a) plan and that compensation used to pay such a loan cannot be considered disposable income. Ultimately, it appears as though an employer should not have to do anything (with respect to a participant loan) when an employee files for bankruptcy. An attorney recently drafted a new bankruptcy provision for a participant loan policy that says that the employer should cease withholding loan payments from an employee's compensation: (1) at the request of a participant in bankruptcy; or (2) on request by court order. Although I would not advise an employer to violate a court order, neither situation appears to warrant a stay under the new Act. Anyone care to comment?

I believe the Service came out with a Rev Ruling shortly after the DOL's FAB 2003-3, both of which permit this.

Thanks for the tips, but I was actually looking for comments on the operational side of things. Perhaps there is a TPA who could comment on how a typical arrangement works...do the amounts typically get placed into an escrow account, are they paid directly to the TPA, generally how often are amounts deducted from participant accounts etc...?

I'm looking for comments on charging terminated vested participants an account maintenance fee. Does anyone have any practical experience with this? Are the fees typically paid directly from the plan to the administrator? Would these amounts be placed in an escrow account or something? Could the fees be applied however the sponsor sees fit (for example, dividing the fees amongst a number of vendors)? Any advice/tips on this would be appreciated. Thanks.

One thought that comes to mind is participant loans. You want to make sure that there is enough compensation left over after a deferral to make loan payments. I'm sure there are other reasons as well.

You are correct, Locust. Section 404© does provide that a participant in a self directed plan is not a fiduciary by reason of his control over assets. Also, I don't believe the purchase of Corp A's stock would be a PT. That transaction took place prior to the participant becoming a director. There was no pre-arranged understanding or expectation that the participant would become a director after the purchase of the shares. Those shares were owned by the plan long before he became a director. My question relates to the sale of the property. Does a PT exist if Corp A, which is partially owned by the plan, purchases the participant's property?

A participant in a self directed plan invests in Corporation A. After the purchase, the participant's account will hold less than 10% of Corporation A's stock. The participant later becomes a director of Corporation A and Corporation A subsequently purchases property directly from the participant. This transaction seems fishy. In a rather indirect way, it seems like the plan is purchasing the participant's property. The only way I can see this being a PT would be if the Corporation was considered to be the Plan. Can anyone make that connection? Is there a point at which the Corporation would be considered to be the Plan? 100% ownership of Coporation A through the Plan? Am I missing something?

I hear you. Thanks.

I'm interested b/c this has happened more than once. Typically, a supervisor who knows nothing about the bona fide termination rule promises reemployment to an employee after retirement. The plan administrator who is totally unaware of the arrangement processes the distribution only to find the retiree back at work a soon after termination. What do you do to fix it? How do you prevent it?

Based on the performance of some individuals, I'd say that the death scam has been pulled off. The threads were helpful, but I was looking for a treatise, practice guide etc. Also, is there a reason why I'm having a tough time finding a discussion of this scam?

I'm looking for a discussion of the issues surrounding the sham where an employer has an "understanding" with a retiring employee to rehire that employee soon after the employee receives a distribution from the employer's qualified plan. Anyone know of any secondary sources that address this sham? How about a discussion of methods used to prevent this from occurring...such as a rehiring policy?

So you are saying that the only thing the taxpayer can do at this point is to avoid the 6% penalty by removing the excess contribution and earnings?

Thanks mbozek. A few more questions...is there anyway to avoid the tax on the distribution? Can this somehow be corrected by reversing the transaction (i.e. putting the $$ back into the 457)? Is there any recourse available to the participant against the plan for making the ineligible rollover? Any suggestions?

A direct rollover was made from a tax exempt 457(b) plan to a traditional IRA. This rollover was made within the last two months. At this point, I believe the transaction can merely be reversed without any consequences. Is that true? Does anything have to be filed with the IRS?

I appreciate your effort in looking for an answer as to why I am asking this question. It must be driving you crazy. Unfortunately, I am not at liberty to get into the details, so as ridiculous as it sounds, please assume for a moment that participants can bring an action against a government employer for a 411(d)(6) violation. With that in mind, if a plan did not meet the vesting requirements of 401(a)(7) on September 1, 1974, would that plan be subject to Section 411, including the anticutback rules? If so, when would that plan no longer be subject to the anitcutback rules...whenever they get around to preparing an amendment to comply with Section 411? Thank you for your patience.

In 1974 the plan did not contain a provision that provided full vesting upon plan termination. The plan was subsequently amended to include that provision (years later). Would I be wrong to conclude that during the period of time between September 1, 1974 and the effective date of the amendment that the qualified plan would have been subject to the anticutback rules?