J Simmons

As you've outlined it, I think your document provider is correct. Its interpretation favors the more specific provision addressing bonuses, your interpretation favors the more general provision defining compensation. Usually, the specific trumps the general.

Check the plan document for what it provides for valuation dates. The last day of the prior plan year is a legally required valuation date. The plan might specify more frequent ones. If your pooled investment plan requires daily valuation, you'll need to determine what percent of the whole pool belongs to each of these pending distributees and then instruct the investment house to pay that percent out of the assets on the day checks are cut. If not daily valuation, you can base payment on the percentages applied to the most recent valuation date called for by the plan documents. Since March 2005, for distributable amounts over $1,000, you cannot force a distribution out (i.e. without the consent of the pending distributee) unless you pay it over into an IRA that the Plan Administrator sets up for that person, and notify the distributee of the IRA rollover and where the IRA is custodied. It must also be a "low cost" IRA. Alternatively, many plans simply reduced to $1,000 the threshhold at and below which auto payouts would be made in the absence of the former employee's consent, if he/she is younger than the older of age 62 years or normal retirement age. Yes and Yes. But before you assume that 'next year's contribution' is the one to which the forfeiture applies, check your plan document. That might be the correct time, but you should make sure what the plan document specifies as the time for re-allocating the forfeitures.

Having a substantial number of HCEs earning less than $40,000 is sometimes found in a new start up company's early years, but it is a concern to make sure does not exist in any situation with the bottom-loaded tier.

If the plan does not contain the failsafe language, would an -11g do the trick for specifying a method of gateway and to make it for that already ended plan year?

I thought an EBAR (i.e., x-testing) could be used to demonstrate non-discrimination even in a plan that does not specify such (i.e., the non-x-testing plan provisions are followed, but the plan would fail conventional testing and thus x-testing could yet be used to show non-discrimination). Has this use of x-testing been prohibited?

She could present the divorce decree to you for review to determine if it meets the statutory requirements (IRC § 414p and ERISA § 206d3) to be a QDRO. If so, then no separate order would be necessary. If not, then the plan may not act unless another order that does meet all those requirements is obtained from the divorce court and presented to you (and you so find it meets those requirements). IRC § 401a13.

Hi, Don, Take a look at the two cases cited. Those might answer your question.

I thought I'd report what appears to be a finer split of hair than I was expecting by a couple of court decisions. The notions pitted against one another are the preemption clause (ERISA § 514(a) that preempts state laws that relate to any employee benefit plan) and the savings clause (ERISA § 514(b)(2)(A) that saves from preemption those state laws which regulate insurance, banking, or securities). Is a state law directed at group policies preempted because the law relates to an employee benefit plan or saved because it regulates insurance? Which is the primary characteristic of such a state law? That's what I suspected courts would sort out, and the distinction that George drew (and Larry agreed with the result) would be the deciding factor. A couple of court decisions seized on a different distinction. If the state law puts the obligation to provide the notice of individual conversion right on the ER, then ERISA preempts that state law. The reason that ERISA preempts that state law is that "ERISA also contains elaborate provisions setting forth the content and timing of notice of such plan information to be given to plan participants". Aucoin v RSW Holdings LLC, 476 FSupp2d 608, 615 (MD La 2007), quoting Howard v. Gleason Corporation, 901 F2d 1145 (2d Cir 1990), and then continuing: A state law that purports to impose on an employer obligations of the same general type as those imposed by ERISA cannot be said to have only a "remote" or "tenuous" effect on the plan. The conversion option is a benefit of the Plan, and [state law] regulates the notice that must be provided to employers concerning the existence and exercise of that option. The state's notice requirement directly affects a primary administrative function of the benefit plan. The state statute I'm dealing with does not clearly require the notice be provided by the employer, but does put notice-related obligations on the employer: "Written notice presented to the individual or mailed by the policyholder to the last known address of the individual or mailed by the insurer to the last known address of the individual as furnished by the policyholder shall constitute notice for the purpose of this section."

Condition precedent is what I think is ERISA acceptable, not reversion or other condition subsequent. Not necessarily so. There is the preretirement survivor and joint and survivor annuity benefits to consider--the QDRO could be looked at as simply preserving those passed the divorce. I am no actuary, but I'd view that as a windfall to the plan. By reason of the QDRO and the AP's death, the plan now pays just $400 per month over the EE's life, not $500 as would have been the case without the QDRO ad AP's death. Agreed. But for the divorce in the first place, it took two deaths for the $100 to be forfeited. A QDRO with a condition precedent or subsequent (i.e. reversion) simply continued this, despite the the divorce.

I'll take that to mean you think that 514(a) preemption does not apply, but that the 514(b)(2)(A) savings clause does and that you think that this state law does apply to the ERISA plan.

Another consipiracy bubble burst! I agree with the IRS position as to standardized prototypes--they are to be 410(b) failure proof. However, in nonstandardized prototypes, 410(b) is yet an issue and can impose year end employment and up to 1,000 hours in the current plan year as benefit accrual requirements. So I don't quite see why non-standardized prototypes cannot have the opt-out feature, as they were permitted in TRA '86 era non-standardized prototypes (and Corbel's GUST era one).

A state law that applies to group life policy requires that individual's be given an individual conversion right when they become no longer eligible to be covered under the group life policy. The state law also requires that the individual be provided a notice at that time that explains the conversion rights and how to take advantage of those rights. The state law also includes extra provisions that by their terms apply only to group life policies of governmental employers (which would be exempt from ERISA) The plan that I'm dealing with is clearly an ERISA one; the employer is private, not governmental. Does anyone know off the top if the two provisions of state law that by their terms apply to all group life policies would be preempted by ERISA (ERISA § 514(a)) or exempt from preemption under ERISA § 514(b)(2)(A)?

I'm not sure why Corbel (or others) may get special treatment. In both instances--and I had different reviewers both times--I was assured that no prototypes were being allowed to have the opt-out feature. This latest go-around for EGTRRA, when I pointed out to the first assigned reviewer that such was what I had been told in the GUST round but then it turned out Corbel's prototype had it, the reviewer said he could not speak for what happened in the GUST era but assured me that no EGTRRA prototypes would be allowed the feature. Before my EGTRRA opinion letter was issued, there was a switch in reviewers and I ran it by him too. Same response. Maybe for the small prototypes the reviewers are told one thing, but for large prototypes the reviewers' instructions are different.

In many states, the payroll laws require that the EE that has made a deferral election be allowed to stop the previously elected deferrals at any time, to apply on a prospective basis. That is, some states' payroll laws require that the election for nonpayment at regular payday intervals be revocable on a prospective basis.

In obtaining opinion letters for my own drafted prototype, both in the GUST and EGTRAA rounds, the IRS reviewers claimed that no prototypes would be allowed to have the opt-out language and that if I didn't remove it, they would not issue a favorable opinion letter. Both times, the IRS has allowed Corbel to keep the opt-out in its prototype and VS. At least the IRS is consistently advancing its inconsistency.

Take a look at IRS Notice 89-52, Rev Proc 90-49, Rev Rul 91-4, and PLRs 9107033 and 9144041

Larry, If I understand what you are saying, the EE and spouse might have reasonably relied upon the HEALTH insurance rep of the ER re that the LTD plan pays premiums for continuing life insurance coverage on the disabled EE, but not re a waiver of premium in the life insurance policy for disabled EEs. Is this because LTD and health benefits are more commonly handled by the same HR reps of an ER than are health and life benefits?

ER pays for group life insurance coverage for EEs. ERISA applies. EE goes on LTD. No waiver of premium. LTD plan does not call for ER to continue the group life insurance coverage for former EE even if on LTD. Group policy does give terminating EEs a right to convert to and pay for individual life coverage. Strong evidence that ER's health insurance rep erroneously told EE (and EE's spouse) that there was a waiver of premium on the life insurance for those on LTD. Neither insurance company nor ER can produce any notice or letter to EE or spouse about individual conversion option. EE dies. ER and insurance company deny coverage. Spouse is claiming equitable estoppel argument that the EE and spouse detrimentally relied upon the misinformation given by the ER's health insurance rep. How strong of a factor in the ER's defense of the case do you think it is that the EE and spouse relied on a HEALTH insurance rep of the ER on an issue about LIFE insurance? Was it reasonable for the EE and spouse to have relied on a HEALTH insurance rep about LIFE insurance issues?

I'm not Master, but you might try taking a look at www.403bwise.com/participants/index.html

The shortest plan duration I've been asked by an ER to prepare and file a F5310 for was 4 years--2 years as a traditional 401k and then 2 as a SIMPLE 401k. The IRS did not question the termination at the time, after 4 years in existence, but I was concerned enough to discuss at length with the employer the permanency issue before the employer decided to go ahead with the F5310 application. Does anyone have positive experience of the IRS approving termination of a plan with shorter than 4 year duration? Anyone had the IRS reject an F5310 due to the permanency requirement regarding an application for a plan that had existed longer than 4 years? Treas Reg § 1.401-1(b)(2)

Well said. With ERISA you have years of interpretative guidance. With 409A, it's 'a brave, new world'.

Larry, do you read that example that allows a mid-year addition to also permit a mid-year drop?

In your scenario, would the EE's right to the salary reduction be subjected to performing substantial future services? That would seem to yet be the test until the IRS in fact might infuse into 457f the 409A standard. Even after that, are you saying that the promise of matching contributions would be sufficient to entice a rational EE to subject his immediate right to part of his salary to a substantial risk of non-payment in the future so that tax deferral is not the only motive and belying that the EE thinks there is a real risk of forfeiture? What would be the risk you are thinking of imposing?

Hi, Just Wondering, So with this added info, your daughter has not been part of the 'family' coverage elected through your employment that took effect 8/1/08. Just you and your husband are. Thus, the question is simply whether you may drop him (and down to 'single' coverage) if he elects during his open enrollment (September) for single coverage for himself taking effect 10/1/08? Mary C's response is that you may (and she may yet be able to cite to some legal authority for that proposition). I'm unaware of any legal authority that would allow a cafeteria plan to do so. Even if there is any, your employer's plan does not have to be written to take advantage of that type of mid-year change. If there is legal authority allowing and your employer's plan is written to take advantage of it, then the plan administrator is legally bound to operate the plan as written. However, it is quite possible that the plan terms are written, in this regard, in a way that does not specify one way or the other. Then it is a matter of the plan administrator's interpretation. If that's the case, you already know what the Section 125 Administrator says. So, to succeed, you'd need some legal authority that permits such a mid-year change in a cafeteria plan (Mary C might be able to supply), the plan would have to include a provision clearly permitting you to drop your husband's coverage under these circumstances.

As I understand it, for 457f to apply, the employee's rights to the compensation must be conditioned on the future performance of substantial services by the employee. IRC § 457(f)(3)(A). Under state payroll laws, once compensation is earned and becomes payable, then it must be paid and not be so conditioned. Ergo, you cannot have salary reductions under 457f. However, matching contributions made by the employer could be conditioned on the future performance of substantial services by the employee if that condition is imposed before the salary reductions are elected.