J Simmons

All 401k plans depend on federal tax law for the favorable tax treatment, and DOMA applies to all federal laws. 401k is a reference to a section in the Internal Revenue Code, which is the codification of federal tax statutes enacted by Congress. Some 'renegade' employers will nevertheless recognize for their 401k plans domestic relations orders for same-gender partners. (I would not advise an employer to do so, but some reportedly have.) So it may be worth a shot in your case. You should seek competent ERISA counsel to draft an order (putative QDRO) for you to present to the divorce court. Even without the calculation your ex was to do, the order could be drafted with specifics about the time period 1/31/05-7/16/08, and that you are to be awarded that part of the current 401k balance that is due to contributions made during that era. If the divorce court signs the order, it is presented to the 401k's plan administrator, and the plan administrator 'bites off' on it, then you ought to quickly withdraw the money before the plan administrator perhaps has second thoughts. Alternatively, you could ask the divorce court to order your ex to pay you a like amount from other resources available to your ex. That way, DOMA would have no impact.

Peter, I've come across situations where a plan sets up a second plan trust and transfers enough assets to it to purchase the R/E, names the employee as an additional Co-TEE of just the second trust, to segregate the R/E and attendant potential liability from the main plan trust holding non-R/E assets. I've not been the attorney setting up such a trust, but have wondered about the efficacy? What do you think?

A cafeteria plan may but is not required to reimburse for premiums paid for individual coverage. So if the cafeteria plan so specifies, it is possible. It would need to be made part of the premium payment benefit, not part of a flex account, such as your 'medical reimbursement account'. While it is possible, it is fraught with potential hazards for the employer to do so. Proceed with extreme caution. Get a benefits lawyer before doing so.

It would be interesting to learn how enthused the TEE will be about plan investments in real estate after all the issues Sieve pointed out have been vetted, both to what extent they need to be by the former EE from his/her end and by the TEE from his/her end, and then the TEE coordinates the annual valuation, etc. for a year or two. ERISAnut succinctly said it in 5 words: "Everything legal is not practical." This might be especially so for the TEE when having to deal with all these issues for a real estate investment for a former EE.

Hi, Kevin1, If a 403b plan is subject to ERISA, both the IRC and ERISA provisions would have to be observed. I don't think the DoL or courts would agree that Treas Reg § 1.403(b)-(3)(b)(3)(ii) removes ERISA responsiblities from the employer. Nevertheless, ERISA allows the employer to name others as fiduciaries for the plan. Under ERISA, the employer would yet be ERISA responsible for revisiting periodically whether continuing those fiduciaries is in the best interests of the plan's participants and beneficiaries. However, the frontline ERISA responsibilities would be effectively "removed" from the employer and placed upon those others named as plan fiduciaries. Anyone functioning as a fiduciary with respect to a ERISA plan is subject to ERISA fiduciary duties. If the 403b plan is not also subject to ERISA (i.e., sponsored by a public school district for its employees), then what responsibilities does a delegate for plan-wide 403b compliance with the IRC have? Such a delegate would have contractual responsibilities for damages to the employer, if not also the employees as third-party beneficiaries, if the delegate accepted the allocation of responsibility and then the tax advantages were lost because the delegate did not perform under the contract so made. In the non-ERISA 403b context, state laws would not be preempted. Those state laws would apply. The applicable state's statutory/regulatory law would need to be examined, as well as the caselaw of the state's appellate courts to determine what responsibilities that state's law impose.

I agree with Larry. One Sched R is all that is needed for a MEP's 5500. My understanding is that each testing method used by any participating ER for the year reported by the 5500 should be indicated, rather than just a single method.

Hey, Larry, I was fishing in hopes ERISAnut knew of some authority that perhaps gave clarification, particularly through examples. Yes, Treas Reg § 1.401(a)(4)-4(e)(3)(iii)(G) provides that different rates exist if based on formulas that are not substantially the same. That does cut against the match/deferrals ratios being BRF tested. But what is a formula? and what would make two or more of them substantially the same? Laura's phraseology in Post #1 suggests she thought (at least subconsciously) there was but a single formula: "401(k) plan has a match formula of 100% of salary deferral up to 2% of compensation; however, only those who defer at least 4% of compensation are eligible for the match." Laura's description of Sal's example from the 2007 ERISA Outline Book "an example of testing a tiered match formula for current availability. The formula is 50% on the 1st 2% deferred and 100% on the next 4% deferred." I mention this not that I think it is Laura's position that there is necessarily only 1 formula in either situation, but merely to point up the vagueness in the regulation's use of the term formula without defining it. Perhaps Laura's fact patter can be deconstructed into being two formulas: 0% match on deferrals up to but not quite 4%-of-pay, and 50% on 4%-of-pay. Or a third formula can be found, 0% on deferrals to the extent that they exceed. ERISAnut's comments in Post #11 have made me examine my own assumptions on what is a formula and when would two or more not be substantially the same. Knowing the answers is necessary to knowing when you have more than one 'rate of match' that must be BRF tested. So now I'll try fishing in another pond: do you know of parts of the regs or other authority where the IRS defined the difference between one formula and two and when two might not be substantially the same? Thanks.

ERISAnut, I agree that it boils down to defining 'rate of match'. Do you have a cite to any authority for rate of match being match/deferrals rather than 0% for those deferring less 4%-of-pay, 50% for deferring 4%-of-pay, and 0% again for deferrals in excess of 4%-of-pay? If not, what is your logical deduction from any regulation or pronouncement for the match/deferrals as the definition of 'rate of match'? Thank you.

Laura, Stepping back for a moment, is the reason for the potential BRF issue because the matching scheme does not pass ACP testing?

Larry, is disallowing loans to terminated employees who yet have benefits in the plan subject to BRF testing?

Hi, Larry, Current availability is more of an on-its-face, appearance test, while effective availability more an impact-in-operation test. Now for my analogy, I look at current availability as whether the gate is open wide enough that if they choose, at least 70% of NHCEs could as a practical matter walk through the gate if 100% of HCEs may. In determining whether the gate is swung open wide enough, you look at the current facts and circumstances, but you can ignore that there are certain impediments in the pathway, as listed in Treas Reg § 1.401(a)(4)-4(b)(2). Other impediments in the pathway must be considered as part of the facts and circumstances in determining if the gate is open wide enough. If the gate is open wide enough, effective availability provides a fail safe. We now look at those that actually do walk through the open gate in order to make sure that HCEs are not pretty much the only ones going through. If it is a disproportionate number of HCEs, then there must be some practical impediment in what otherwise appears to be an open pathway, which substantially favors the HCEs. Just because someone did not walk through the gate (e.g., an NHCE that did not defer 4%) does not mean that it was, under the facts and circumstances (sans the conditions to be disregarded) that the NHCE did not have a practical opportunity to do so. 4% deferrals is a condition for the 2% match, and is not one of the specified conditions to be disregarded. Therefore, the 4% deferrals condition must be taken into consideration. 4% as the threshold for deferrals to get the 2% match is, in my opinion as buttressed by those factors that Laura has mentioned, low enough to make the 2% match a practical opportunity open to all employees. If the disproportion of HCEs that receive the 2% match (BRF), given the 4% deferrals condition, is such that it 'substantially favors' the HCEs, then the 2% match would be a BRF that fails the effective availability test.

Hi, Larry, It seems to me that your approach to current availability blurs that concept with the other BRF requirement, i.e. effective availability. As I understand it, the current availability component requires that among all eligible EEs each BRF must pass the ratio percentage test, treating as benefiting only those EEs to whom the BRF is currently available. Current availability is "determined based on the current facts and circumstances with respect to the employee (e.g., current compensation, accrued benefit, position, or net worth)", disregarding certain spelled-out conditions. Treas Reg § 1.401(a)(4)-4(b)(2). From looking at the current facts and circumstances, what is to be determined? Current availability. Keep in mind, the other requirement (effective availability, Treas Reg § 1.401(a)(4)-4©(1)) means the BRF "must not substantially favor HCEs". Thus, what is the role being played by current availability? What interpretation of current availability would not merely make it a redundant subset of effective availability? In reference to Sal Tripodi, Laura used the term 'opportunity' in describing current availability. I would re-phrase current availability as current, practical opportunity. I use the qualifier 'practical' because it gives substance to the part of the regulation that provides that current availability is to be determined from the current facts and circumstances. Since each EE has the current, practical opportunity to make 401k elective deferrals of at least 4%, each EE has the current, practical opportunity to the 2% match. Among those that must be taken into consideration, the ratio percentage test must be passed by those who have a current, practical opportunity. I agree with Laura that if the condition (deferring a certain percentage of pay into the plan) is set too high, then certain employees would not have a practical opportunity to get the match. For the reasons Laura expressed in post #9 of this thread, I do not think 4% is so high that it removes the opportunity. Keep in mind, if those that have and exercise that opportunity (for whom it is currently available) are disproportionately HCEs, the effective availability component will fail. I don't know if this explanation helps. I have an easier time understanding my own thinking on this topic when it is expressed as it is in post #2 of this thread than when I've given it the wind-bag version of this post.

No such client. The qualified reservist distribution must be paid between the date of the order calling the individual up to active military service and the last date that reimbursements could otherwise be made for the plan year of that order. The Act is not clear on the amount of the payment. Is it the unused part of the annual amount elected less the unpaid salary reductions for the rest of the year? Or is it an amount by which salary reductions to date of call up in the year have been made less amount of reimbursements to that date? Or is it the annual flex amount less prior usage, disregarding that the entire annual flex account has not been paid for?Even the deadline for payment is somewhat in question. Is it the last day that expenses can be incurred under the flex, or is it the last day of the run-out period? The payment is likely taxable income as HEART Act does not specify that it is tax-free and there are no corresponding 213(d) expenses. Is the employer required to run it through payroll, subject to payroll withholding and taxation? Or is it a Form 1099-MISC type of payment. How do these payments play into the cafeteria plan's nondiscrimination testing? How is COBRA affected? Inquiring minds want to know--and HEART Act doesn't answer them.

So you basically have the retirees in question having had a COBRA qualifying event when they retired, they were given COBRA notices, they did not timely return them electing COBRA, they have had retiree coverage and now you are terminating that retiree coverage before they have been retired 18 months. I don't know that the retirees failure to timely elect COBRA is 'an effective waiver', but it looks like they are outside their COBRA election window.

DC, separate account.

ERISAnut, Would not your method of measuring match against deferral to arrive at a benefiting percentage always yield the phenomena you describe if there's a cap on the matching, regardless of the twist that Laura posed (i.e., only get the match if your deferrals reach a certain level)? That portion of what you describe as would describe a plan that has a cap on match at 2%, regardless of the 4% deferral threshold that Laura posited.I would think that the varying ratios you observed there are not a problem. The match capped at 2% is one BRF, and the ability to make elective deferrals to whatever percent is another. I'm not aware of what requirement would tie them in a way that results in a ratio for testing comparison. I think your observation, , captures the essence of Laura's question. So for minimum coverage, would you include this NHCE in the test as benefiting or not?

If BCD are concerned about the operational or document histories of the MEP 401k, then starting a new plan would give them a clean slate to begin with. However, for the old MEP 401k to terminate, it must distribute out all the benefits. That means that BCD's EEs will have to be without a 401k plan for at least 12 months. In my view, BCD probably should be concered about those histories if the current MEP 401k was being operated by A, the plan sponsor, and BCD might not know the compliance level. But if BCD are NOT concerned about the operation or document histories of the MEP 401k, then they'll have their own plan DOCUMENT after the EGTRRA restatement, and they choose the features and design BCD want.

In my area, the custom is the divorce attorneys draft the putative QDROs. The boilerplate circulating among those divorce attorneys specifies in the order that the AP's estate is the death beneficiary. The contrary situation to Janet's situation. I review for several ERs the orders they receive to determine if they pass muster under IRC 414p and ERISA 206d3. To date it has not cropped up, but supposing that a particular plan document has default death beneficiaries listed by type and allows participants to specify a death beneficiary, what would the plan do with the benefits if the order found to be a QDRO specifies the AP's estate, the AP nonetheless submitted a specific death beneficiary designation other than the estate, and then dies with benefits remaining in the plan? On the one hand, the AP has followed the plan's provisions, but by doing so has violated the court order by which the AP was awarded the benefits in the first place. The specification in the court order of a death beneficiary may presumably be a condition of the benefits being awarded. Is the attempted designation of someone other than the AP's estate invalid?

What about A turning over sponsorship of the MEP to B, C or D, and then A withdrawing? Also, restate for EGTRRA to update documents. This way, you won't run afoul of B, C and D having to sit out for 12 months having a 401k following distribution of the benefits to their employees from an otherwise terminating MEP 401k.

Tom, 2 cents enough for the match? Only if your annual pay is $2.00 or less!

I think #1), availability being the test.

Interesting that Kahn was making the case for how embracing the EPCRS is for those that come hat-in-hand to the IRS. This contrasts with recent hardening of the IRS position on CAP resolutions when problems are discovered by the IRS on audit. Sungard's Tech Update: Not so kind and gentle IRS

In my simple way of thinking, the DoL is wrong on this one. In plans where the trustee and/or plan administrator makes the investment decisions or limits to a dozen or two options what choices the employees may choose from, it makes sense to impose a fiduciary standard to the way the trustee/plan administrator makes those decisions and chooses those limitations. Where as with the Deere and Co plan the employees have a wide open or virtually wide open choice (2600+ choices in the Deere situation), the investment decisions are being made by the employees and not the trustee/plan administrator. All the DoL's position does is to reduce plan trustees/administrators to being a potential punching-bag for litigation by employees that make poor investment choices or are disappointed that the investment markets have turned downward as those employees near or are in retirement. Is the public policy truly that if an individual's employer wants to open up tax-advantaged retirement savings to its employees, beyond the limited amount that can be placed into IRAs that the employer must expose itself and/or its officers to liability for decisions they allow the employees? It should be the purpose of the SEC (and fee disclosure required by the SEC or the DoL) to make sure that the proper information is presented in a readable, accessible format for investors, not the DoL to insist that employers be placed in a precarious position because they accommodate employees' desire for tax advantages when saving for retirement and respect those employees to make their own investment decisions. That's the way it looks from my perspective.

Ah, Larry, lazy? I doubt it. DoL amicus brief in Hecker v Deere The 3 subheadings of the argument portion of the DoL's brief read: I. ERISA Section 404© Does Not Provide a Defense to Plaintiffs’ Allegations that the Defendants Imprudently and Disloyally Selected Investment Choices with Excessive Fees II. Fiduciaries' Duties to Disclose Material Information Can Arise From Their Core Statutory Duties of Prudence and Loyalty, Not Just From Specific Reporting and Disclosure Requirements III. The District Court Erred in Holding that the Fidelity Defendants Were Not Fiduciaries With Respect to the Selection of Funds Based Solely on the Plan Documents Without Regard to the Fidelity Defendants' Actions

Thank you, J4KFBC, Tom Poje and ERISAnut!