KED

Has anyone recently filed Form 5310 for a frozen defined benefit plan after formal action has been taken to terminate the plan but prior to the termination date? We have previously done so, but didn't know if there had been any recent concerns or questions raised by the IRS with this approach.

This process also may have been put in place as another protection against identity fraud, particularly since the Equifax breach. This way the check goes to the employer who sends it to the employee's address that the employer has on file, rather than an address that a fraudster may have requested.

Now I am curious -- what interim amendment is due by February 1, 2016?

Although there has been a disposition of the option, it seems the language in the definition refers to the "disposition of stock acquired under a qualified stock option." No stock was acquired -- so there was no disposition of stock and no basis to exclude the cash payment from the compensation definition?

HIPAA nondiscrimination rules

But don't forget with that even with after-tax contributions, such an arrangement works only if it fits under the special voluntary plans exception under ERISA. That also is in Notice 2013-54.

Employees at a location that is wholly excluded from the Plan.

I have seen this type of provision in various health plans. I think it technically is not a COBRA entitlement vs. eligibility issue or an exclusion under COBRA. Rather, the terms of the Plan provide that if someone on COBRA is eligible for Medicare, then the Plan will pay benefits as if the person has Medicare, regardless of whether or not they actually are enrolled. It may be discussed in another part of the SPD.

No, I don't think the IRS considers anything other than base salary a fringe benefit. For example, I don't think you can exclude a cash bonus under the "fringe benefit" exclusion.

I think you have issues. First, the plan definition of W-2 compensation does not include nonqualified deferred comp deferrals. In addition, as I recall, there are discrimination/401(a)(4)/discriminatory rate of match issues when you include deferred comp deferrals as part of comp since those deferrals generally are made only by HCEs.

Your legal department may be thinking about the nondiscrimination rules for fully insured plans. if you pay COBRA premiums for a highly compensated individual, but not for everyone else, then you could have a discrimination problem. The penalty falls on the Company and would be something like $100 per day per person discriminated against (so $100 times all of the other employees without the benefit times the number of days). We are awaiting regulations for the new rules and the IRS has indicated it will not enforce penalties yet, but many are changing their ways now. Also, it may be hard to change the promise later when the rules are finalized.

I don't think you can exclude the service as a leased employee -- see Code Section 414(n)(4)(B).

What is the COBRA qualifying event?

Don't get me started on this one . . . under the IRS interpretation, someone who is terminated for embezzling from the employer gets rewarded with full vesting. With a Form 5310 application some years back, partial termination issues arose. We argued that participants who were terminated for cause (e.g., failed drug testing, stealing, etc.) should not be considered or fully vested. We provided back-up for the terminations and the IRS did not make us fully vest.

If there will be correction under EPCRS (including Audit CAP), full correction is required, even for closed years. See Section 6.02 -- Correction Principles: "Generally, a failure is not corrected unless full correction is made with respect to all participants and beneficiaries, and for all taxable years (whether or not the taxable year is closed)."

A VCP with a retroactive amendment may be needed based on the IRS position. See Q&A 12: http://www.americanbar.org/content/dam/aba...uthcheckdam.pdf I also think that the IRS has covered this issue in its yearly teleconference on EPCRS in the discusson regarding common compensation issues. You can usually find the transcripts from these sessions using Google.

This appears to apply in the non-profit context only -- is that correct?

Looks like it only extends for limited changes -- doesn't extend for all amendments. .

Under EPCRS and the "Correction of Excess Amounts," it states that excess amounts should be placed in a separate account established for the purpose of holding excess allocations " to be used to reduce employer contributions (other than elective deferrals) in the current year or succeeding year(s)." This gives an indication of the IRS position on the subject.

Before getting to your question, the severance/retirement arrangement you are describing doesn't sound like it has a substantial risk of forfeiture under 457(f). The agreement promises her monthly benefits for life -- she is retiring now when the agreement is being made (so no requirement for future services), so what is the substantial risk of forfeiture that prevents her from being taxed now on this stream of payments?

Mike -- I think you may be confusing the Form 5300 with the Form 5310. Form 5310 specifically asks the date the NTIP was provided. Form 5300 just asks if the NTIP was timely provided and you check the "yes" or "no" box. It does not ask the date the NTIP was provided.

Has Sunguard published its amendment for terminating DB plans yet? I am about to terminate a DB plan and need to do an amendment to bring it up to date for 401(a)(9), Pension Funding Equity Act, etc. and am looking for a list of other amendments I should include -- for ex, PPA provisions regarding the 415 limit, etc. Does anyone have such a list?

The reference to state law issues may be to certain state laws that prohibit employers from discriminating against employees for certain lawful behaviors, such as smoking.

Is governmental plan status determined only by looking at the participating employers and employees under the plan? Unlike elsewhere in the Code and ERISA where the term "employer" is used and includes the employer's controlled group, the definition of governmental plan seems to focus on the employees for whom the plan was established and the entity that established and/or maintains the plan (the term employer is not used). If a governmental political subdivision or instrumentality maintains governmental plans but then operates a non-governmental for-profit subsdiary, does the mere fact of the subsidiary's existence jeopardize the governmental plan status even if the subsidiary's employees are not eligible for participation in the plans? Under the literal reading of the statutes, this does not seem to be the case (meaning that governmental plan status is determined just by looking at the employees and participating employers in the plan itself). Although there are a number of IRS rulings on governmental plans, I have not been able to find any on this particular point. There are some rulings that discuss how having a de minimis number of non-governmental employees in a governmental plan does not jeopardize the plan's status (at least for DOL and IRS purposes -- PBGC may have another take on this), but those facts are not totally aligned with the issue I am reviewing. Thanks in advance for any input.

I think he meant that the sentence should have ended with giving the prospectus information to the participant and that the participant could proceed from there.