E as in ERISA

You're disagreeing with my explanation of the rationale for the rule -- but not with my statement of the rule, correct?

Loans repayments are not contributions. They are a change in investments. When the participant takes out the loan, the money is taken out of a mutual fund or something and "invested" in a loan from the participant; and as the participant repays it the loan investment is reduced and it is re-invested in a mutual fund or something. Thus, while contributions may be pre-tax, loan repayments are not.

Under 318(a)(1)(A)(ii), a person is considering owning stock owned by his children, grandchildren and parents (but not by grandparents). I guess that they presume that the grandparent might exercise some control over the grandchild's interest, but the grandchild is unlikely to be exercising any control over the grandparent's interest, so ownership is not attributed?

You can delete from the plan "break in service" provisions that ignore prior service of nonvested participants.

A don't think that the fact that the bank is the general partner means that the client's share of the assets are "held by the bank" unless there are additional facts present. The interests of bank customers and insurance policy holders show up as liabilities and equity interests on the books of a bank or insurance company, and the bank, insurance and other regulators perform routine examinations of the banks and insurance companies to make sure that the clients are protected. The examinations are probably more extensive than that performed by an auditor during an examination of a plan. That is why auditors can accept certification of assets held by banks and insurance companies -- and why small plans don't have to be audited if they have assets held by them. But in general only the bank's general partnership interest will be on its books subject to examination. And it won't owe any liabilities to the other partners. The general partnership interest will be held for the benefit of the bank's customers. So unless there is some other legal relationship present that indicates that the bank is holding all the assets of the partnership, then I don't think that the exemption would typically apply.

Nothing technically wrong with any of your statements, Archimage -- based on the fact that the poster said the "assets...are held by a bank." That's what the regulation says. I'm just worried that the poster's statement might not be completely accurate.... And your advice that the poster should go back to the accountant is still good.

In doing the 401(k) testing for the for-profit entity, you have to consider the nonprofit employees . In the cases I have seen, the nonprofits are large hospitals, etc. with a few small for-profit subs. Most of the HCEs are employed at the nonprofit, so its typically not a problem passing testing. In doing the 403(B) testing for the nonprofit to determine whether the elective deferral feature is discriminatory, you can typically exclude the employees who are given an opportunity to defer under a 401(k) . See 403(B)(12). Are there employer contributions?

You are correct that three Form 5330s are required (but I will tell you that in my experience clients typically just file the most recent one).

I think that it depends on what the bank's exact legal relationship with the partnership is. Just because the bank is the general partner and it is taking care of the partnership on a day to day basis that doesn't mean that "100% percent of the assets...are held by a bank" from a legal perspective. I'm guessing that for these purposes "held by a bank" will usually mean that the bank is the trustee over 100% of the assets (and the assets are therefore part of the regulators examinations of the bank).

Yes. But now you have to report the problems in both years.

I would have said the same thing as mbozek -- because there is a difference between the taxation of the benefits under (a) a NQDC plan which the employer is "funding" with insurance and (B) a standalone insurance arrangement which is more directly affected by the COLI and/or split dollar rules.

I think that this case may be distinguishable from the revenue ruling (see www.taxlinks.com/rulings/1961/revrul61-146.htm ). I''m assuming that in the Rev Rul, the employer was paying the premiums in addition to the employees' full salaries (This was pre-125 and the employer paid part of the premiums for those who were in its health plan and part of the premiums for outside insurance for those who didn't qualify for the employer plan). In this case, they want to use "salary reduction" to pay the premiums. For example, if the employee is making $40,000 and is paying $4,000 to premiums out of that salary, they want the employee's salary to be reduced to $36,000 and then have the $4,000 of premiums paid by the employer. With the employee making that election to have a benefit instead of cash, the employee will be taxed on $40,000 unless this qualifies under 125 as premium conversion type feature. Since there aren't many discrimination issues with insured plans, you can probably find a way to do this. But I'd think that you'd want to make sure its a formalized program of some sort.

Under IRC Section 106, only "employer-provided coverage" in a health plan is excludable from income. So it has to be an employer program.

See the instructions for Form 990 and/or Form 990-EZ at www.irs.gov/pub/irs-pdf/i990-ez.pdf Note that the receipts of contributions are "income" and disbursements for claims are "expenses."

For loans issued after the applicable date of 72(p) regs, under Q. 4 the entire loan might be taxable at the time of issuance: "If the terms of the loan do not require repayments that satisfy the repayment term requirement of section 72(p)(2)(B)..., the entire amount of the loan is a deemed distribution under section 72(p) at the time the loan is made."

I never heard of an SEC audit of a benefit plan before (is there any significance in the fact that you are in Houston, TX?!) Do you have any info to share about what they are asking for?

A Form 990 is filed for a VEBA.

What if the vison plan is for the entire family and the new spouse wears glasses? Wouldn't that then be consistent with the status change?

I think that you have a problem. Your case is most similar to the salary reduction premium conversion type arrangement (under a 125 program there is a choice between cash and a nontaxable benefit -- and the IRS has said that includes choice between salary reduction and a nontaxable benefit). This was the IRS' text from 1998 that it was using to train payroll examiners to audit 125 plans: http://www.irs.gov/pub/irs-tege/lesson4.pdf

Why do you say that you don't need a plan document for a premium only plan? Section 125(d) requires a written plan. It's also my understanding that "lack of plan document" is one of the main defects found by the IRS payroll tax auditors who are auditing 125 plans.

A number of years ago, I had heard of the idea of contributing the forfeitures to charity. If a plan publicizes that any excesses would go to charity, then it might be a good way to encourage employees to contribute in the first place since they might not worry as much about over-contributing. The excess is effectively a deductible charitible contribution for the employee. This might work particularly well if a company has designated charities that it regularly supports (especially ones that the employees are involved with through races, bowl-a-thons, building houses, etc.). I don't see this idea discussed anymore. Was there something that shut it down?

If the participant doesn't meet the conditions of the 457(f) plan (e.g., continuing to be employed by the company for a specific time period), then the the participant gets nothing. And once the conditions of the 457(f) plan are met, the money is taxable. So even though less money can be deferred under a 457(B) plan, the taxation is more like a 401(k) plan (no extra conditions and no taxation until distributed). And the 457(B) plans are better now that the amount deferred doesn't have to be offset by deferrals to a 403(B) plan, etc.

Maybe the person is confused with the 404 deduction rules -- elective deferrals aren't counted in the limit.

They will not be out of compliance with the blackout rules -- the 30 day rule doesn't start until blackouts starting about February 25 or 26. (However, that doesn't mean that the prudence standard is met -- it might be prudent to send it out more than 15 days in advance).

Are you asking whether they should send out a blackout notice and then push the blackout start date back to 30 days after the notice is mailed? SOx only requires that notices be sent out "as soon as possible" for blackouts between January 26 and February 25. If you're going to start the blackout between those dates, then the contents of the notice will have to meet the SOx requirements. However, unless you're going to push it past February 25, then SOx' strict 30-day requirement doesn't apply. Regardless of when you start it, the prudence requirements of ERISA still apply and you need to consider what is the appropriate content and timing of any notices based on those rules.