J Simmons

Before you toss the old one, was there a 401k safe harbor notice provided for 2008 promising company contribution equal to 3%-of-pay for 2008? By processed, does that mean the plan documents with the 10/1/08 date were signed?

If an ER signs differing ISA from differing vendors, the ER would then have a mish-mash of info sharing obligations--the vary thing that motivates the vendors to reject an ISA proposed by the ER. From the ER's perspective, some of info sharing obligations that vary from vendor to vendor might/might not mesh with some of the provisions of the ER's 403b plan. For some ERs and vendors, it results in a stand-off--but one that if the ER made a "reasonable, good faith" effort to include the 403b contracts of the vendors in essence relieves those 403b contracts from the requirment that they be maintained pursuant to the ER's 403b plan. Then for those contracts, life goes on just as before the new regs except that no new contributions will be made into those 403b contracts. (Gratuitously, mosh pit and mush to get all the m_sh words into one post.)

I'm glad you're Happy. I hope you are after reading this and other expected posts in this thread. What percentages are owned by each of the 3 owners in each of the 2 S corps? For example, A owns 10% of S corp1 and 22% of S corp2, B owns ... . Without knowing that, it cannot be determined if the 2 S Corps are/are not a control group. If the two S corps are not a control group, you have an multiple employer welfare arrangement (MEWA) because they share one 125 plan. ERISA preempts certain state insurance laws from applying to a single employer welfare arrangement. The shared 125 plan would be a MEWA if the 2 S corps are not part of a control group (unlike the IRC, ERISA does not recognize an affiliated service group as a single employer). The significance of being a MEWA? You might have to register the 125 plan as a 'health insurance company' in each state where you have any EEs working. Whoever is administering it might have to register as a TPA, since it would be providing plan admin services regarding EEs of another ER. Those are the two implications in my state. The states where the EEs of the 2 S corps are might have other/more requirements where ERISA preemption does not apply because it is a MEWA. Barring some factor I don't see in the OP or assume, I would think one Form 5500 will do. However, you should know that if the 2 S corps are a control group and have fewer than 100 plan-eligible employees, there might be a small plan exemption from filing. That exemption would also likely apply if the 2 S corps each had their own 125 plan and less than 100-eligible employees each. For the exemption, you'd also need to not have voluntarily created a trust fund, even unwittingly--among other requirements.

Erisanubee, I assume from your question you are dealing with individual 403b contracts, not a group one to which the ER is a party. The ER can (and should), after 2008, refuse to withhold from paychecks/remit to a 403b vendor that does not sign an info sharing agreement. The ER likely does not have the contractual authority to require the vendor and EE to move such a 403b contract to another vendor, one that has signed an info sharing agreement with the ER. Consequently, that 403b contract could remain where it is, but a prudent ER would not allow new money to go into that 403b contract after 2008. The value in the 403b contract would remain with the vendor that issued it, unless the EE wants to move it. If the EE is under age 59 1/2 and yet an active EE of the ER, then the EE may only move it (exchange it) into a 403b contract with a vendor that has in fact signed an info sharing agreement with the ER. What about the requirement on 403b contracts to be part of a 403b plan of the ER? If the ER has made a reasonable, good faith effort to include the 403b contracts of that vendor that received contributions after 2004 for only the year the contract was issued, by writing to that vendor and asking for information about those 403b contracts and giving the name and contact info of the person at the ER responsible for 403b plan issues, then that is a reasonable, good faith effort. Section 8.01, Rev Proc 2007-71. Thus even if not included in the ER's plan, those 403b contracts are deemed to meet the requirement that they be part of the ER's plan although in reality they are not because, for example, the vendor would not sign an info sharing agreement proposed by the ER that includes a provisions that the 403b contracts would be subject to the ER's plan. Alternatively, the vendor that has not signed an info sharing agreement and subjected its 403b contracts to be included in the ER's 403b plan may make a reasonable, good faith attempt so that the part-of-a-documented-403b-plan requirement is deemed met by contacting the ER for relevant, verifying info before making a distribution or loan.

Check this prior thread and this one

Could you 'subdivide' the hedge fund investment into multiple IRAs at different financial institutions so that you have no more than $250k in anyone institution? Who is the IRA "admin" that is different from the custodian? What, if anything, does the IRA custodial agreement provide in the event the custodian is no longer able to function as such?

I'm saying that the 7th Circuit's pending decision will answer, at least in part, some of your questions.

Here is one source of info you might want to review. It explains that there is $250,000 of FDIC coverage.

No, I'm not saying that. I quoted the statute, which provides that no fiduciary shall be liable for any loss "which results from such participant's or beneficiary's exercise of control". If the fiduciary limits the 'menu' of investments from which the employees may choose, the fiduciary may be held liable for imprudence in what it includes, and what it excludes. It is only as to a loss that results from the employee's exercise of control that ERISA § 404© gives plan fiduciaries a defense, not losses that result from the fiduciary's choices in what investment options are included on the limited investment menu and what is excluded from that menu. That is the position taken by the employee class and the DoL per amicus in the Hecker v Deere appeal now pending before the 7th Circuit Court of Appeals. The employer (Deere) and the federal district court for the Western District of Wisconsin take a less paternalistic view, that the plan fiduciaries are not liable if the employee chooses an imprudent investment so long as the employee had prudent choices available to him under the plan. In that case, the federal district judge noted that employees had 2600+ investment options, some of which no doubt had lower fees than those 18 or 19 suggested by the fiduciaries for employee consideration. The appeal is pending, as yet no decision has been handed down.

ERISA § 404©(1)(B) provides a statutory defense: ERISA § 404© is not the only defense that fiduciaries may have to claims related to investment underperformance. DoL Reg § 1.404c-1(a)(2) explains that However, one of the requirements for the ERISA § 404© defense is that the 'identified fiduciary' provide participants and beneficiaries "an explanation that the plan is intended to constitute a plan described in section 404©". DoL Reg § 2550.404c-1(b)(2)(i)(B)(1)(i). Without the explanation of 404c plan intent provided, there would be no ERISA § 404© defense, just whatever other, nonstatutory defenses can be mustered.

404c compliance is a lofty, nearly unattainable goal. But indicating in the plan's governing documents that the plan is not INTENDED to be a 404c plan would present a high hurdle to even the best of litigators trying to defend the employee's case for investment under performance, while you are crying into something or another.

And the touchstones for that due diligence are what is solely in the best interests of the participants and beneficiaries, for the exclusive purpose of providing them benefits and

Also, in October 1992, candidate Bill Clinton appeared on Nightline with Ted Koppel and said if elected he would have the cross-testing regulations revoked, as they permitted abuse of defined contribution plans by business owners. It was a surprise hearing a presidential candidate talking about the subject. Years later towards the end of his administration, Treasury did revise those regs to require the gateway contributions. But cross-testing is yet alive and kicking.

Point of clarification, George. Are you suggesting that an abrupt withdrawal of troops from Iraq by an Obama administration would snatch defeat from the jaws of victory or that the Obama campaign might yet find a way to lose the presidential election?

I agree with QDROphile that the question is not a good one for inclusion in an adoption agreement. DoL Reg § 2550.404c-1(b)(2)(i)(B)(1)(i) requires that the identified fiduciary provide participants and beneficiaries . Seems to me that it would be very difficult for the identified fiduciary to meet this requirement if the plan documents, such as the adoption agreement, indicates that the plan is not intended to be a 404c plan. Particularly difficult given that a fiduciary is to operate the plan as written, to the extent consistent with ERISA. ERISA § 404(a)(1)(D.I don't know if not answering the question on the adoption agreement, or crossing it out, would jeopardize any prototype reliance otherwise allowed for tax-qualification purposes.

Matthew, I don't think George was getting uppity so much as he seems exasperated with this thread. For importance of properly signed documents for purposes of keeping the reimbursements out of the taxable income of the employees, take a look at the IRS' positions expressed in its Coordinated Issue Paper UIL No. 105.06-05 issued March 29, 1999. You might want to take note of the cases cited in the CIP by the IRS--yes, the IRS has litigated the lack of signed documents, and won in court. Sieve's instincts that is in my opinion required by ERISA. Even without the the tax angle, it seems that the practice of reimbursing health expenses is an 'employee welfare benefit plan', requiring systematic administration rather than being exempt as a mere payroll practice. DoL Reg § 2510.3-1; ERISA Reg § 402.You may also find that the US Supreme Court's musings on the subject of an ERISA written instrument within the context of who inside an organization has authority to change the ERISA written instrument interesting, Curtis-Wright Corp v Schoonejongen, 514 US 73, 115 S Ct 1223, 131 L Ed 2d 94 (1995).

Could an indication of "no" on the adoption agreement dispel 404c relief, assuming compliance otherwise, as an indication of the plan sponsor's intent that the plan not be a 404c plan, when challenged by an employee?

Thanks, Gary. Very, very useful. (You're welcome. --GL)

A sole proprietor does not have a board. A sole proprietorship is an individual that can act for himself or herself. So he or she signs for himself or herself. A corporation is a fictitious legal "person" that needs live bodies to act for the collection of shareholders. So the shareholders elect a Board that then has most--but not all powers that the shareholders have as the owners of the corporation. The delineation of powers retained by the shareholders and those that the Board has are primarily set forth in the state's corporate law and perhaps somewhat in the Articles of Incorporation. The Board in turn may delegate to officers certain authority. One way is through adopting By-laws, but other resolutions and written delegations are frequently given as well. Matthew, I wonder why you seem so averse to getting the Board's approval for the 105 plan? Has the CEO already exceeded his/her authority and attempted to adopt such for the corporation?

The CEO's authority to act on behalf of the corporation is as delegated by state law or the shareholders, acting through the Board. The By-laws are a key document that delegates what actions for the corporation require Board action and which actions for the corporation the CEO might take without the necessity of Board approval. I certainly don't have authority to act on behalf of and bind the corporation if I were to sign the 105 plan for the corporation. The CEO only has the authority to do so for the corporation that is set forth in the state's corporate law and as may be delegated to the CEO from the shareholders, via the Board. Merely by the title CEO he is not imbued with anything more than what powers he is given by corporate law and delegation. The IRS might "void" the 105 plan if the CEO signed it but did not have authority to make it binding, legally, on the corporation because then the 105 plan is elusive, giving the corporation the opportunity if it ever wanted (e.g., the Board perhaps later wanted) to wriggle out of the benefits promised by the 105 plan. What the IRS would be doing is denying the tax free aspect of 105 plan benefits, and taxing those as additional income to the employees. That is what the IRS does, collect taxes.

Take a look a Prop Treas Reg 1.125-2(b) and (d). They are just proposed regs, but they address both auto elections and 30 day for new hires.

Mr. Ed, You call the ASPCA and report 'Wilbur' for this. You might contact a local bank in your area and find out if you could transfer your IRA from FISERV (aka Wilbur) to the local bank as your new IRA custodian, and avoid FISERV trying to report what you paid for the worthless stock on a Form 1099-R. Then see if the company will pay anything to the IRA for the stock.

A 403b contract needs to be part of an employer's 403b plan only in order to exclude from taxable income of the employee contributions made after 12/31/2008. That is due to Treas Reg 1.403(b)-3(a) and (b)(3), and Treas Reg 1.403(b)-11(a) making the regs applicable after 2008. Rev Proc 2007-71, section 8, however, suggests that a 403b contract issued in 2005-2008 and only receiving contributions in the year the contract was issued is relieved of the part-of-a-plan requirement of Treas Reg 1.403(b)-3(b)(3) if the employer made a reasonable, good faith effort to include the 403b contract as part of the ER's plan. In light of these conflicting provisions, it would be prudent to take action that satisfies Rev Proc 2007-71. That reasonable, good faith effort by the ER is satisfied if the ER collects available info from the 403b contract's vendor and notifies the vendor of the name and contact info for the person in charge of administering the ER's 403b plan, so that there may be a coordination of info to satisfy 403b. Alternatively if your ER does not do that, your 403b vendor, before making any loan or distribution from your 403b contract, may contact the ER and exchange info that may be needed by the ER's 403b person in charge of administering the ER's 403b plan. So there are three ways that your existing 403b contract could satisfy the part-of-a-plan requirement of Treas Reg 1.403(b)-3(b)(3). One, your 403b contract is subjugated to your ER's 403b plan, becoming part of it. Two, your ER collects available info from the 403b contract's vendor and notifies the vendor of the name and contact info for the person in charge of administering the ER's 403b plan. Or three, before making any loan or other distribution from your 403b contract, your 403b vendor contacts the ER's 403b person in charge of administering the ER's 403b plan to exchange whatever info that person needs for purposes of administering the ER's 403b plan. What your ER is suggesting--that you must subordinate your existing 403b contract to the ER's 403b plan in order to avoid income taxation of it--is not correct. You do not have to do so. A prudent ER would establish a 403b plan that meets Treas Reg 1.403(b)-3(b)(3) and make a reasonable, good faith effort to include all those 2005-2008 403b contracts, so that they do not become taxable for want of being part of a 403b plan that is documented in accordance with Treas Reg 1.403(b)-3(b)(3). But if your 403b contract does not become part of the ER's 403b plan, your 403b contract does not become taxable so long as the ER or the vendor made the reasonable, good faith effort, respectively. You are however correct that the ER as a practical matter may require you to have a (different) 403b contract under the ER's 403b plan in order to continue contributing, particularly after 12/31/08.

Matthew, What the IRA and DoL are interested in is the ER being legally bound, however within the ER's legal sphere that occurs. Those agencies would not want the Board to be able to deny benefits promised under signature of the corporate president. Stepping back for a moment, since you have a "hands-off" Board, perhaps a general, comprehensive authorizing resolution ought to be considered for the Board to give the corporate president all sorts of authority above and beyond what would lie under the state's corporate statute, those things that the Board doesn't want to be "hands-on" concerning. That might include adopting employee benefit plans, amending them, etc. In such an exercise, you might learn that the Board wants to be hands-on regarding employee benefit plans, like the HRA, that would otherwise commit the corporation to what could mount up to large sums of money depending on the HRA design.

What do the corporate documents (bylaws, for example) provide about who has that authority? The Board or the corporate president? Has the Board delegated authority to do so to the corporate president?