J Simmons

Kevin C, we're thinking alike. That's exactly the argument (more analogous to Indigo than to Violet) I made in an e-mail yesterday afternoon to the IRS auditor. She's running it up the flag pole to her manager and closing agreement coordinator. I'll keep you posted as to how this turns out.

If you adopted the plan, making the profit sharing portion retro effective to 1/1/2009 (a la Kevin C) and the safe harbor k portion prospective 7/15/2009 and the k safe harbor is the 3% of pay NEC, would that SH NEC 3% apply to pay earned 7/15-12/31/2009 or all of 2009?

I am advising a client in a similar situation--plan specifies it is a k safe harbor plan, but for some years no annual notice given. Tom Poje's direction to those pages of the IRS website, particularly Failure to Provide a 401k Safe Harbor Plan Notice, has been helpful. The example of Indigo of Rainbow Company, and no corrective contribution needed for Indigo under the circumstances, was a more lenient correction method than I expected from the Service. Thanks, Tom, for reminding us of those IRS web pages!

Larry, Even though EGTRRA pre-approved plans allow a 3-7 graded vesting, are you preparing graded vesting plans that want the max with 2-6 year vesting on those EGTRRA plans since it is post-2006?

Would state laws be applicable ? I thought one of the benefits of self-insuring was that the plan did not have to cover state mandated benefits. If (a) the plan is subject to ERISA, and (b) the plan is not a MEWA, then agreed. From the OP, neither proposition is evident.

Corbel, I understand, does.

Ahh, you did say employer contributions.

The cover letter and those items are it.

The federal Pregnancy Discrimination Act of 1979 only covers employee benefits for the employee and employee's spouse. Not for the employee's child who might be pregnant. However, you might check your state's laws.

The DFVC filer is the plan administrator, the one that is responsible for having prepared and filed timely f5500s. The tpa may mail off the f5500s and a DFVC application signed by the sponsor/administrator. If the tpa is to be the one that interacts with DFVC personnel, on behalf of the plan administrator, the tpa will need to be authorized in writing as the agent of the plan administrator for this purpose.

Yes. Since the Company B plan is no longer offered, but the Company A plan is, I would think you have to offer Company A plan to these COBRA continuees. The Company A plan is the only plan yet being offered by the 'ER' (i.e., the remnant of the controlled group). If Company A allows its EEs health flex accounts, then I would think you'd treate the health flex accounts of these individuals the same as you would any COBRA continuees where there is a continued flex account plan of the ER.

Since the 401k balance is the result of elective deferrals, at least in part, you should be concerned about the impact on the 401k plan's qualification of keying the number of shares off of those balances, and indirectly at least then off of the elective deferrals. See IRC § 1.401(k)-1(e)(6). Some exception might apply; I'm just not aware of it.

Is it a hardship distribution? Has the EE been called to active duty? Is the EE disabled? If not, how do you get around IRC § 403(b)(11) for an in-service distribution before age 59 1/2 years? If the EE has been called to active duty or is disabled under circumstances allowing an in-service, pre-age 59 1/2 years distribution, then the 10% penalty does not apply. IRC §§ 72(t)(2)(G) or 72(t)(2)(A)(iii). If the hardship withdrawal is for medical expenses, then look at IRC § 72(t)(2)(B) for exception to 10% early penalty.

It is not driven by the frequency of valuations. Rather it is by whether pooled or individual accounts, and if individual accounts, whether participant direction is allowed:For pooled account plans, within 30 days of writtent request from the participant or beneficiary-but only once in 12 months. ERISA § 502©(1), § 105(a)(1)(A)(iii), and § 105(b). For individual accounts with no participant direction, within 45 days of the end of each calendar year is good faith compliance. EBSA Field Assistance Bulletin 2006-03, December 20, 2006, and ERISA § 105(a)(1)(A)(ii). For individual account with participant direction, within 45 days of the end of each calendar quarter is good faith compliance. EBSA Field Assistance Bulletin 2006-03, December 20, 2006 and ERISA § 105(a)(1)(A)(i).

You might want to check the specific plan's language, but I would think that the attorney and subscriber (I assume is the employee in the ERISA plan) ought to suffice under the claims procedure regs. It might be different if the subscriber and spouse are divorced and the spouse has custody over the 17 year old, then adding the spouse and mailing to the spouse would make sense. It in part depends on whether the subscriber is the legal custodian of the 17 year old. Since your response to the appeal will likely have HIPAA protected health information, you might request a waiver and limitation on use/dissemination signed by all before providing the appeal response to them. Get the advice of counsel for the specific situation before proceeding--particularly since this is a contentious situation.

I would send to all 3 just to cover my bases, but at least to the subscriber and attorney. The 17 year old is likely not emancipated, and thus the subscriber acts for the 17 year old member.

I think it is unlikely now that the US Supreme Court would hear an appeal in this matter. Not one of the 7th Circuit judges voted for en banc review. Given these little clippings off of the sharper edges that the 6/24/2009 explanation by the 7th Circuit made to its February opinion, and the prospect of being swatted substantively by the current US Supreme Court, it seems that the DoL would not want further review. Save its powder for another day, another court. If the DoL pushes for an appeal and the current US Supreme Court takes it, it will in my view be a bit of an OK Corral scenario.

It would probably take an actuary (which I am not) to calculate the number of such actuaries, but I suppose it would be a big number if you stood them in a line 'all along the Wats Tower'. OB Bob Dylan and Jimmi Hendrix.

In refusing to re-hear the appeal by the employee class in Hecker v Deere, the 7th Circuit addressed some of the DoL's concerns expressed in its amicus briefing. For context, this is one of the Schlicter employee class action suits against large employers alleging that 401k benefits have been depressed by improper revenue sharing and excessive fees. Unlike the other Schlicter situations where a limited number of investments for an investment menus had been set for employees to choose from, the Deere plan allowed employees to choose from 2600+ funds available through Fidelity--highlighting about 19 'for your consideration'. Judge Shabaz of the Wisconsin Western District dismissed in favor of Deere, finding that among the 2600+ there had to be some lower cost funds than the higher fees associated with some of the 19 highlighted investment choices. The 7th Circuit in February affirmed. The DoL has all along amicus briefed the case, and a re-hearing en banc was sought. To this request, the 7th Circuit denied re-hearing, en banc or otherwise, but explained in deference to DoL: 1-the Deere decision by the 7th Circuit was not a "definitive pronouncement on 'whether the safe harbor applies to the selection of investment options for a plan.'" 2-the DoL admitted the 7th Circuit's primary holding, i.e. that a. there was no fiduciary duty to scour the market to find the fund with the lowest imaginable fees, and b. it is not imprudent to have offered funds with 'retail fees' charged to the general public (rather than Deere having used its large negotiating strength to secure lower 'wholesale fees') 3-the February decision of the 7th Circuit does not stand for the proposition that ERISA 404c shields a plan fiduciary from imprudently "selecting an overpriced portfolio of funds". 4-the 2600+ Fidelity funds at play in the Deere plan provided too much variety and too much variation in associated fees for allegations of imprudent selection of funds to stand. The 7th Circuit muddied its February ruling a bit, but the essence remains.

Whether the EE is reimbursed for having previously made payment to the health care provider, or the EE submits invoices for that health care and the ER pays the provider directly, really doesn't matter. Nor does the fact that you pay amounts that are substantiated, treating such payments as wages, obviate the potential ERISA and claims procedure applicability. If amounts that are not adequately substantiated are nevertheless paid--as taxable wages--that would perhaps make the payments of properly substantiated amounts also taxable income to the employees.

I agree with jpod. Get a legal opinion on the pt question before proceeding.

In essence, the EE has made a claim for benefits and the ER (I assume acting as the plan administrator) has denied it, because not adequately substantiated. If ERISA applies (and likely would unless this is a governmental ER), the EE should have the opportunity for a full and fair review by someone that is not subordinate to the person who made the initial claims denial. The regs on ERISA claims processing would apply to this situation. If the initial denial is confirmed by the reviewer, then the EE would have a right to have a federal court review the matter. That might invoke a semi-deferential review if the plan document gives the plan administrator unfettered discretion--I say semi-deferential because post-Glenn v MetLife the fact that the ER is deciding the claim and the one that would pay it is to be taken into account by the judge because of the inherent conflict of interest in making a claims decision under those circumstances.

Circumreferencing with logical deduction on a Friday afternoon? Impressive, Larry, impressive!

In part it depends on how the bank account is titled. If it is merely in the name of the employer, then the funds in the account remain part of the employer's general assets, subject to claims of its general creditors (including the employees for unpaid benefits). In such a situation, unless there is some account agreement or other legal reason that the funds in the bank account may only be applied to benefits claims of employees, there should be no separate trust. This is so whether the TPA has unilateral drawing authority on the account, or not. On the other hand, if a bank account is set up that specifies as part of its title or in account agreements that it is for the plan or payment of benefits under it, then you have a trust. This is true whether the bank account is set up by a TPA or the employer itself. The key is whether the funds in the bank account are yet part of the employer's general assets, subject to the claims of the employer's general creditors. If so, then most likely no trust. On the other hand, if ear marked for the plan or payment of its benefits, then the employees might have greater, preferential rights over general creditors of the employer to having those funds applied to the payment of accrued benefits. If there is any such legal preference, then you have a trust. Of course, if the account is in the name of a trust, or someone with whom the employer or plan has a trust arrangement, then you also have a trust.

Thanks, Larry. I'm glad to see someone is trying to fill the gap.