J Simmons

Would disproportion of the basis for ER stock be appropriate by the plan even if the QDRO specified a disproportion? The Senate Committee Report on Public Law 98-397 (the Requirement Equity Act of 1984) explained: Under the bill, net employee contributions (together with other amounts treated as the participant's investment in the contract) are apportioned between the participant and the alternate payee under regulations prescribed by the Secretary of the Treasury. The apportionment is to be made pro rata, on the basis of the present value of all benefits of the participant under the plan and the present value of all benefits of the alternate payee under the plan (as alternate payee with respect to the participant under a qualified domestic relations order).

Thanks again, George.

Thanks, George, for your post. The Crouse decision is pertinent due to the following passage, and its citation to Patelco: ER TPA ER YES-There is a policy from the stop-loss carrier, separate and apart from TPA

Thank you, Jacmo. The EE contributions, like the ER ones, are all within the context of a cafeteria plan. DoL Technical Release 92-01 specifies the DoL's nonenforcement policy with respect to the trust fund requirement in the cafeteria plan context. Only after the TPA has received a health claim and determined it valid does the TPA then report such to the ER. The next day, the TPA draws that amount from the ER's general bank account for payment to the third party health care providers. Until that draw occurs, there is no segregation of the ER's general assets. In addition, the TPA sends an invoice for the cost of the stop-loss coverage and the charges for the TPA administering the plan. Here is where the discrepancy creeped in. The line item for the stop-loss coverage on the TPA's invoices is greater than the amount the TPA has to pay over to the stop-loss carrier for premiums. Due to the TPA having unilateral discretion (unbeknownst to the ER) of what to do with the difference does a problem arise. Patelco Credit Union v Sahni, 262 F3d 897 (9th Cir 2001) and Chao v Crouse, 346 FSupp2d 975, 988 (SD Ind 2004). With these added details, your further thoughts and comments are sought.

But Larry, isn't "Security" what the S in ERISA stands for? Your question might better be phrased, how did an ERISA attorney get into defending a propane case? When with a firm, I supervised a young associate that went on to become general counsel for a company that owned truck stops. He thought my analytical skills would come in useful in defending a products liability/warning case and we both wanted the opportunity to work together again. The case took 8 years, and he had moved on before the trial. I convinced the federal magistrate and district judge to give all defendants summary judgment arguing that the man's testimony belied the possibility that a jury could reasonably find proximate cause. After all, he'd said he saw the warning stickers but chose not to read them--but if he had, he would have acted in a way that would have avoided the flash fire. I've already noted what the 9th Circuit did on appeal to my summary judgment. I will say this, after practicing ERISA law for years, researching product warnings law made a lot more sense than the week or two we spent on it in 1st year torts class. For trial, I brought in as co-counsel a propane litigator that had once been a securities lawyer preparing SEC filings. He had done securities filings and litigation for a petroleum company that offered him all its litigation defense work. He became a propane litigator. As for propane, I hadn't been in that case long before I decided to get rid of my propane barbecue grill. Natural gas is so much safer.

Larry, Years ago, I defended a truck stop against a product warning case. A man had refilled his 20-lb propane tank at the truck stop. Then he took it to a camp site, hooked it up to 28 year old, recently purchased propane space heater and left it running all night in the tent. Next morning, he awoke in the cold as the heater had stopped (apparently the catalytic heat plate had been flooded by cold propane, lowering it to a non-functioning temperature). Before going out of the tent, he lit a cigarette as well as a flash fire of the unburned propane in the tent interior. He sued everyone from Phillips Petroleum to the maker of the propane tank to Natural Gas Odorizer to the propane distributor to the maker of the space heater and, yes, to my client, the truck stop. Under oath, the man admitted he had seen but did not read warnings plastered on the tank and the heater. He further acknowledged that had he read the warnings he noticed, he would not have left the heater operating while he and his family slept in the tent. His claim was nevertheless that more warnings should have been provided him than had been. The 9th Circuit Court of Appeals forced the truck stop alone to stand trial. It was the only defendant that had not provided some warning. All the others were let out of the suit without having to go to trial. They had each provided some warning and that, according to the 9th Circuit, was enough despite the man claiming those warnings were inadequate and they all ought to be held liable. Two weeks of trial in the federal district court, the jury found for the truck stop. The jurors later each explained that the opening statements were enough. Two weeks of trial--expensive vindication. Your comment about providing some investor education, not advice, reminded me of how the appellate court reasoned in the propane warning case the my truck stop should stand trial, but not the others. Everyone involved with the investment of retirement funds, even the employer who merely provides the tax-savings vehicle, can buy themselves some peace of mind by providing some investment 'warning' even if it is not heeded.

Larry, Shying from the fluffy--"It's not dark yet, but it's getting there" Bob Dylan, Not Dark Yet, Time Out of Mind (1997).

Thanks, Larry, for your reply. The life insurance situation, was that litigated? If so, do you have a court, caption and case number?

An ER sponsors a group LTD policy for its EEs, premiums for which are paid in part by the EEs electing to be covered. The first LTD policy used offsets benefits payable by SSDI payments to the EE and to the spouse and any dependent residing with the EE. The ER replaces that first LTD policy on 1/1/2006 with a second LTD policy, from a different insurance company. The second LTD policy offsets benefits payable by SSDI payments to EE, to spouse, or to any dependent regardless of where the dependent resides. An EE that elected coverage (and payroll reduction to cover that part of the premium not paid by the ER) dating back to 2001 becomes disabled on 8/20/2006. EE divorces. Spouse gets custody of EE's dependent child. The dependent child receives SSDI payments. Insurance company offsets the LTD benefits by the SSDI received by EE's dependent child that does not reside with EE, as permitted by the second LTD policy but not the first. Neither the ER nor the second insurer distributed an SMM to EEs until well after the 8/20/2006 disability of this EE (in fact, no SMM was provided EEs until after 7/29/2007--the 210th day after 2006 when the second LTD policy took effect). EE learned about the change only after the 8/20/2006 onsent of disability, when the second insurance company first learned of the dependent child's receipt of SSDI and sought a repayment from EE. May the ER validly enforce the change in the offset against EE given that no SMM was timely distributed?

Hi, George, I wholeheartedly agree with you if the employer chooses to set an investment menu. To a lesser extent, I agree that the employer that decides to limit what brokerage window(s) will be open to the employee should be held to account for making prudent decisions in what brokerages are made available (and which are not). If only high fee brokerages are allowed, the employer should be responsible for the adverse impact vis-a-vis lower fee brokerages. If the brokerages chosen do not, for one reason or another, allow certain investments otherwise available to private investors, I think the employer ought to be responsible if the investments allowable through the selected brokerage window(s) are substandard vis-a-vis those not allowable. In those two contexts, the employer is filtering and making decisions that the employee may not him/herself go beyond. The employer should be the responsible party to the extent it has so filtered and limited matters. But when an employer chooses open architecture, the employer is opening the world of investments up to the employees. The employer is stepping back and allowing the employees to make their own choices, just as they would if the investments were held in IRAs. The employees are not limited by actions (or inactions) of the employer. I agree with you that someone needs to be responsible. But I do not think it should be the employer that chooses to respect the employees by allowing them to make the same investment decisions they could with their savings outside of a qualified plan. In the open architecture context, the responsible party should be the employee--who could file suit against a salesman of questionable merit for losses or bad advice. The DoL takes the position that the employer should take a paternalistic view and limit the investments to only those that are in the best interests of the unsophisticated employees. But I think the helpless could be helped much more by the DoL identifying more clearly and distinctly which types of investment options ought not be allowed to unsophisticated employees and which types should not. For example, risky margin trading in a qualified plan is discouraged by UBTI. There are statutory limits on the amount of employer stock. Both are helpful. But those and a handful of others do not amount to much help to an employer that is, per the DoL, stuck between a rock and a hard place for trying to help its employees use the company's payroll to get greater tax relief than an employee could do on his/her own with just an IRA, and/or company contributions eartagged for retirement savings. Not all employers are themselves in the financial industry, as you pointed out by describing those who company's select to make these types of decisions for plans. Just because a company has more resources than an employee does that justify obligating the company. That same employee had the choice between an adjustable rate mortgage (ARM) and a fixed-rate one when buying a home. The employee was in essence committing his future earnings from the employer to pay whichever mortgage. Should his/her employer's accounting department be obligated if the employee chose wrong? I certainly understand and have respect for the paternalistic sentiment that you and the DoL have expressed, but I think that the federal judge in Wisconsin got it right. Where the choice lies is where the responsibility lies as well. I hope the 7th Circuit agrees.

... or there are loan provisions.

mjb, I agree. I think the 7th Circuit should reject the appeal and the DoL's amicus position. DoL's amicus brief in Hecker

Hi, Gary, Expanding on ERISAnut's first "yes" answer, there are levels of employer control depending on how the self-directed plan is set up. If the employer selects an investment menu of several options from which the employees choose, the employer is controlling what is on the investment menu. An employer may instead just identify one or more acceptable brokerage houses through which the employees may choose any investments that may be effected by that brokerage. Ergo, the term brokerage window(s). Here, the employer controls what brokerages may be selected. Third, the self-direction can be even broader, open architecture, where the employees may pick any brokerage where the plan will then set up an investment account for the employee's plan benefits. To the extent the employer controls the matter, it may be held responsible for not acting prudently. The DoL believes that the employer has an affirmative decision to control matters and thus may be liable for an employee's choosing an investment not appropriate for that employee, through open architecture or brokerage windows. This DoL notion is currently being litigated in the 7th Circuit Court of Appeals in a case called Hecker v Deere.

I would put brokerage firm A on notice that employer intends to hold A liable if there are consequences. It is conceivable that if the employee does not pay taxes on the distribution and the IRS cannot recover against employee that the IRS would turn and look to the plan that failed to withhold.

Looks like no concensus, George. Some posters hold it is viable, others not.

1. Was the 403b plan subject to ERISA, i.e, did the employer make contributions to the plan from its own funds? If the answer is no then a 5500 form was never required. 2. Are you asking if the 5500 needed to be filed for plan years after the assets were tranferred to the 401k plan? If the answer is yes there is no requirement to file a 5500 if the 403b plan had no other assets. 3. Who are the people who are telling you that you need to file a 5500? Thanks mjb.... 1. Yes the plan is/was subject to ERISA. 2. Yes I guess I am asking, when the assets were transferred to the 401(K) do you still need to file a 5500 for the 403(b) plan...what would be the point? 3. Corp lawyer (which investment law is not a speciality of thiers) and a used-to-be Retirment Plan Administrator.....(my 2 cents - our old vendor did not have the best information and knowledge in Retirement Funds Field - Sorry - I won't say who it was to protect those who can't defend themselves) Thanks for any information......appreciated. I share the concern Sieve expressed about 'merging' or other en masse transfer, 403b plan to 401k plan. But the reason for a FINAL form 5500 as rcline46 correctly pointed out is so that the DoL has some record of what happened to those assets if at some point the DoL needs to assist an employee pursuing a claim for benefits not paid.

RTK, I agree with your analysis about reversion of a separate interest. I do think, however, that if the awarded benefits are contingent upon the AP electing to take and beginning payment of benefits but dies first, then the award attempted by the QDRO lapses--leaving the employee with all his/her benefits intact.

For tax free treatment of the dollars run through the health flex account, you'd want to limit it to the definition of dependent "as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof). Any child to whom section 152(e) applies shall be treated as a dependent of both parents for purposes of this subsection." IRC § 105(b). Also, see Prop Treas Reg § 1.125-1(a)(4) for definition of dependent for cafeteria plan purposes. If you go beyond that definition in order to pick up domestic partners, you might run afoul of the requirement that the cafeteria plan be for employees.

Viable for a year, after that I think one demographic or another will likely doom it. And an amendment after that first year to require an eligibility year of all (or eliminate it as to all) would likely face 1.401a4-5 scrutiny. Final analysis: Not viable.

Its never too late for "The Departed" to make up a "Bucket List" for "A few Good Men" because thats "As Good as it Gets" in "Chinatown" if "One flew Over the Cuckoo's Nest" on an "Easy Rider" looking for "5 Easy Pieces" while "Mars Attacks". Thanks, mjb, you reminded me how many good (and a few bad) movies Jack has made.

Oh, I was thinking the Doc, now an HCE in year 2 due to year 1 earnings, would be eligible in the plan for year 2 (as well has for year 1) despite never having had a 1,000 hour year. The NHCE hired the same day as the Doc and working the same number of hours would not be eligible in either year 1 or year 2 because the NHCE had not yet earned an eligibility year of service as required of non-Docs. It is very dark on this side!

Suppose a Doc comes into such a plan on day 1 of hire, but works only 900 hours that first year, earning $120,000. For year 2, she's now an HCE and eligible for the plan, while NHCEs hired at the same time and that have worked 900 hours their first year are not eligible. That looks to me like a discrimination problem in such a year 2.

Hi, jpod, Take a look at PLR 200549008. If the spouse is an 'employee', then HRA accruals could be contributed to a VEBA, deducted by the LLC, excluded from the income of the spouse/employee and when paid out as benefits in retirement, excluded from the income of the retired employee, spouse and dependents. Where the OP specified that the owner and spouse are the only two service providers to the LLC, this HRA rate could be set quite high--just as long as the entire compensation package meets section 162 deductibility. This might be the angle that EMM118 is looking at.

Hey, Ed, You might be able to fit the spouse of an LLC owner in as an 'employee' for IRC 105 and 106 purposes, and the LLC owner as him/herself the spouse of the 'employee'. The IRS issued two Coordinated Issue Papers on when a spouse of an owner might be treated as an employee, one on March 29, 1999 and the other on January 25, 2001. If you have difficulty locating these, contact me off board and I'll send you copies. Of course, you'd want to analyze to see if you could fit in as an 'employee' that way per the definitions under IRC sections 501(a)(9) and 505, and the regs under them.

I'm with your provider on this one. IRC § 129(d)(9)(A) allows exclusion from the IRC § 129(d)(8)(A) 55% testing consideration, "subject to rules similar to the rules of section 410(b)(4), employees who have not attained the age of 21 and completed 1 year of service (as defined in section 410(a)(3))". The IRC § 410 testing methods are not incorporated into IRC § 129(d) by reference, just the rules as to which employees may be excluded from the 55% testing of IRC § 129(d)(8)(A).