J Simmons

Unless the governing provisions of the plan documents that address participant loan availability exclude this EE, he ought to yet be able to take a loan on the terms otherwise set forth in those plan provisions. Provisions that might exclude him would be include one that might require that the loan be taken at a time when the employee is an actively accruing or eligible to actively accrue benefits in the plan.

I think that EBSA would give the Advisory Opinion if the situation as described in the OP gives each EE the opportunity to make the paperless direction by phone as well as online. Hard to imagine in 2009 that an EE would not have reasonable access to a telephone as an alternative to paper.

As Borat might say, "What a country!" BTW, jpod, when I began reading your post, I first thought of Otter's speech near the end of Animal House, before the Greek Council on whether Delta House's charter would be revoked, and you were going to finish up with "I will not stand here while you bad mouth the United States of America!"

Me neither. But nor have I seen the Loch Ness monster, but hypothetically I guess its possible.

In practice, do you see such loan programs--exceeding the 72p limits and thus being deemed distributions (taxable), but not PTs--being used as a ruse to evade otherwise applicable prohibitions on in-service distributions? That is, are the plan trusts being repaid the excess? Are the plan administrators/trustees pursuing those that do not repay the excess, such as by foreclosing on the collateral?

The fun part is that the state probate court does not have jurisdiction over the issue. You apply the plan's terms in accord with federal law, irrespective of the court order. It gets real messy if you have to get a writ of habeas corpus in federal court to override the state court's order.

Below Ground, Unless a literal reading of the plan's language allows you to apply the default death beneficiary provisions to one who is a death beneficiary herself rather than a participant, you ought to (a) seek written agreement by the court-appointed personal representative waiving any claim by the estate before you pay directly to the children (or conservator of minor children), and (b) failing that, interplead the benefits in federal district court, naming both the children and the estate as defendants. If you do not and simply pay directly to the children, the personal representative could (either of his or her own volition or under court order obtained by the estate's creditors) pursue payment of the same benefits a second time from the plan, claiming that literal interpretation of the plan documents is that the default beneficiary provisions do not apply upon death of a death beneficiary, and that therefore the estate as the successor in interest of the deceased death beneficiary should have been paid the benefits rather than the children.

It's logical, but is not literal unless the provisions of the plan say that you are to treat a death beneficiary who dies as a participant. That's a matter of state law. For example, some say that one is a minor until the later of age 18 or graduating high school, but in any event at age 19--or earlier if court orders the child's emancipation. If the estate has creditors, the death benefits passing through the estate might have to be used to satisfy those creditors, leaving little or none of it for the children. On the other hand if the death benefits circumvent the estate and go directly to the children, the estate's creditors cannot get at it.

The debt forgiveness (sec 108) seems lto be more like a taxable retention bonus after the requisite time passes than truly a moving expense. The employee doesn't receive the debt forgiveness just because he moved to take the new job. He receives the debt forgiveness for staying on the job for so much time.

the greater of 1/2 of vested accrued benefit or $10,000. Here is the Code 72p2Aii and Reg 1.72p-1

The September payment probably solved the one due in June, the 2nd quarter. The other 3rd quarter payments--if any--would likely apply to those coming due, in order: July, then August and finally September. If by December 31, any of those payments had not been made, then yes the loan would be in default at the end of the 4th quarter. (Note, this explanation is what the regs require, the loan policy and promissory note might call for default sooner.) It should be reported as deemed distribution for the year when default occurs.

Interesting question about the impact of a one-time, irrevocable election on the universal availability requirement. Does the availability to all to have made that individual election out satisfy it? Does making that election upfront have a continuing effect so that universal availability is always satisfied with regards to the employee who elected out? Or, since he no longer has the option to make elective deferrals thereafter, is the universal availability defeated because the plan cannot at later times allow him to make elective deferrals? Given the mention in the 403b regs preamble, and not specifying that such are incompatible with the universal availability requirement, I would think that the IRS view is that the two are compatible. BTW, I've had a situation where we drummed it into the head of a new employee before he signed a one-time, irrevocable election that he could not thereafter change it. The election was titled: "One-Time, Irrevocable Election." He signed. Before the first year of employment was completed, he protested that he ought to be able to change that election despite being a highly educated individual with demonstrated proficiency in English, his native language.

The only way I've seen them handled is to credit them to the benefit of the employee off of whose account the gains were generated from the investment error.

The appraisal didn't factor in the complications you mention of land sale freezes and state project funding contingencies? It just took the clouded offer at its face value?

In an individual direction plan as you describe, I think the individual participant gets the benefit of the error (all of the gain from Fund B), but the fiduciaries would have to make up any loss. The individual gets the best of both worlds. I do not think that the Fund B gain can be used to relieve the fiduciaries of their liability to make other employees whole for losses due to other error situations.

But that language in the plan you quote only mentions the Participant's death for which the plan specifies default beneficiaries in the absence of an affirmative designation. When the Participant died, the daughter became the death beneficiary per the default plan terms. She then became entitled to receive the benefits in question, even though the actual payout did not occur before her own death two weeks later. Unless the plan's provisions say that the default beneficiaries spelled out in the plan also apply on a beneficiary's death, then the daughter's estate wins out over her children. If the plan's provisions say that the default beneficiaries spelled out in the plan also apply on a beneficiary's death, then the children win out over the daughter's estate. By the way, it would be odd language but possible that the plan specifies that a participant or beneficiary could name a death beneficiary through that participant's or beneficiary's last will and testament. If so, then the children would win out over the daughter's estate.

The regulations do not specify a methodology for determining 'customary weekly employment'. Treas Reg §1.105-11©(2)(iii)©. If the plan document does, then the administrator would have to apply that methodology. If the plan document does not, then the plan administrator would have to develop a methodology and apply it uniformly. 24 hours is an acceptable hours threshold between part- and full-time. In fact, it is in the regulatory safe harbor for such, whereas 30 is not. I do not know of anything in ERISA or the IRC that would prevent a plan amendment from dropping that hours requirement from 30 to 24, and then back up to 30, except that if the net uptake is to benefit HCEs disproportionately, it would probably be unwise even though there is not a series of amendments favoring HCEs corollary to the prohibition in 1.401a4-5.

If they were trying to sell for 7 years and did not, they were likely asking more than the fair market value for the land. Very admirable that they did not want to 'leave money on the table' and under sell it. However, the 'old college try' does not exempt one from liability for fiduciary breach. Only acting prudently under the circumstances at the time does. It isn't fun being a trustee. Peter's suggestion about now getting an independent fiduciary to manage and find a solution to the current quagmire is a sage one.

Do the plan's default death beneficiary provisions read in a way that they apply when either a participant or beneficiary dies? or just when the participant dies? If by its terms it reads as only applying to when the participant dies, I'm with jpod. If the default death beneficiary provisions specify that they apply on the death of a beneficiary as well as a participant, then the children would prevail. The plan terms are determinative. End of story. See U.S. Supreme Court's 1/26/2009 decision in Kennedy v Plan Administrator for DuPont Sav. and Investment Plan, Docket # 07-636

Even if bought for 5 cents, to be so heavily invested in one asset and not diversified is a problem, as the OP illustrates. Also, the fiduciaries' performance is not tested merely against disposition proceeds versus purchase price, but also whether it was prudent at each given point in time along the way to dispose of it.

Right, but it would be acts by the ERISA fiduciaries in that moment that put the plan participants into those positions with their benefits after the LLC ownership interests are then distributed out of the plan. For example, if I am an EE and receive 10% interest, I'd rather have it as a 10% undivided interest in the land than 10% ownership in an LLC. The reason is that if I think the others are about to sell the land for too little, I can stop the sale with a 10% undivided interest (unless the buyer is willing to buy just the other 90%). However, if I'm then holding 10% LLC units, the other 90% could out vote me and sell the land for what I think is too little. This dynamic would be foisted upon me by reason of steps taken by ERISA fiduciaries.

Who made the decision to put so much of the plan's assets into the land? If it is the trustee rather than the employer, it may behoove the employer to replace the trustee that did not diversify the investments in the plan. Those that made the decision to invest so heavily in a single tract of land might want to get the advice of ERISA counsel about what liabilities they may have.

April 1, 2010 All of the IRA may be converted to a Roth IRA if you do it before reaching age 70 1/2 (before 1/16/2010). After that, you'll only be able to convert so much of the IRA to a Roth IRA to the extent that the benefits are not required to be distributed that year. For example, if you wait until after 1/16/2010, but do the conversion later in 2010, then you'd be able to convert all of the benefits except the amount of the required minimum distribution amount for 2010. For 2010, the RMD will be the balance in the IRA as of 12/31/2009 divided by the applicable factor from the tables at Treas Reg 1.401(a)(9)-9, such as 16.3 (Single Life Factor).

The context I am familiar with those two terms and the difference is that 'welfare benefit plan' is an ERISA Title I term. If the EB plan is subject to ERISA Title I (and is not a pension plan), then it is a welfare benefit plan that needs to comply with ERISA Title I. On the other hand, a fringe benefit plan is a tax filing term. As I recall, all welfare benefit plans would also be 'fringe benefit plans' for tax filing purposes, but an EB plan that is not subject to ERISA Title I (and thus not a welfare benefit plan) might nevertheless be a fringe benefit plan for tax filing purposes. Until about 7 years ago, a small EB plan exempted from the ERISA Title I annual reports filings because it had under 100 employees and no trust fund, but would nevertheless have to make a tax annual report filing. I think it was April of 2002 when the IRS decided not to require such any longer.

In structuring the control of the LLC, what would the ERISA fiduciary duties be on the Plan Administrator/Trustees? Plan beneficiaries would be going from having a right to a benefit under a plan controlled by those under ERISA fiduciary duties, to having a minority interest in an LLC where the majority interests can cause a sale? Would the fact that the minority interest would be worth less than its proportionate share of the entire LLC (due to minority interest discounts) be problematic? Maybe Peter will have some special insight.