J Simmons

The insurers from which quotes are being solicited have indicated they will not issue a quote for a group policy unless they have the info as to both active employees and COBRA continuees.

An ER with more than 20 but fewer than 100 EEs has a few former EEs that have elected and currently are on COBRA continuation. The group health policy year is going to end on 9/30, and the ER is shopping for quotes for the next policy year. One of the COBRA continuees is refusing to provide the info required by health insurers before they will issue quotes. Can the ER send this obstinate COBRA contiuee a notice explaining that if she does not provide the info in a timely manner, that her COBRA continuation coverage will end due to failure to cooperate?

A QDRO can be modified after distributions begin. See 29 CFR § 2530.206©(1) and ©(2), Example (3). The judge should make rulings without his personal emotions factoring in, but it isn't uncommon that such do cloud a judge's decisions. Appealing the judge's ruling is, in my opinion, the proper place to fight this issue.

Step-transaction doctrine might be a problem for achieving a result in two steps (IRA to 401k into stock in IRA owner's company) what would be a prohibited transaction in one (IRA into stock in IRA owner's company) if the IRA owner then operates or is employed by the company.

The 3rd Circuit has also held that there is standing to sue for additional benefits (due to claimed breach of prudent investment rule) despite a 'lump sum' having previously been paid out. Graden v. Conexant Systems Inc., 3d Cir., No. 06-2337, 7/31/07

IRC §4975(d)(1)(D) and DoL Reg sec §2550.408b-1(a)(1)(iv): to not be a PT, the loan must bear a 'reasonable rate of interest'. Also see Treas Reg §1.72(p)-1 about interest rate being 'commercially reasonable' in order for the loan not to be deemed a distribution.

If it is a CG and one plan, then one Form 5500, coded a single employer plan; one testing of the CG. If it is not a CG, but two or more 'unrelated' ERs adopt one and the same plan all the assets of which are available to pay the benefits claim of any eligible employee, then one Form 5500, coded as a multiple employer plan; separate testing for each of the 'unrelated' ERs. If is not a CG, but two or more 'unrelated' ERs adopt one and the same plan, but the plan assets are not all available to pay the benefits claims of every eligible employee but there is 'separate' funding, then a separate Form 5500 for each separate fund of plan assets; separate testing for each of the 'unrelated' ERs.

Treas Reg §1.410(b)-9, and then IRC sections 414(b), 414©, and 414®.

You might want to specify how many days from the date of your letter that they'll have to submit a revised DRO or appeal the initial denial. I'd also send the letter certified so you have proof that all received it.

One 5500 per plan.

In the communication to the P, the AP, and the lawyers, did you provide a copy of the plan's written QDRO processing procedures that explained how and the timeframes in which they could contest the initial decision that the DRO was not a QDRO? Did the communication set out any time line for when they must challenge the initial determination that the DRO was not a QDRO?

I don't think it would be the employer that would be subject to the P/T excise taxes, but if anyone is, it would be the owner who defaulted on the loan. That's the disqualified person dealing with the plan (without an exemption, at least per the IRS stance you describe). IRC sec 4975(a).

QDROphile: Does this yet hold true after the issuance of 29 CFR § 2530.206©(1) and ©(2), Example (3)?

The NHCEs could be harmed by not obtaining the QNEC to cure ADP failure that they'd otherwise receive if this end run around the ADP test were not attempted.

I think it's egregious. It's lasted 8 years. The operational failure has favored a highly compensated employee.

11g amendment refers to an amendment that might be made within the parameters of Treas Reg 1.401(a)(4)-11(g).

You're not entirely alone, Medusa, but based on my observations, you are likely part of a cautious minority.

Your original post suggests that the VEBA provides other benefits as well as medical reimbursement. You'll need to keep track inside the VEBA how much of the funds, per employee, are for medical reimbursement (keeping in mind the nondiscrimination rules of 105(h)) and how much for other benefits. This may be why Don Levit suggests 'subtrusts'. By having separate depository/brokerage accounts taken in the name of the VEBA, you might be able to reduce the manual recordkeeping chores significantly.

Kim, You could purchase a copy of Derrin Watson's book, Who's the Employer, and plop it down on the conference table in front of your management. Maybe turn to some of the diagrams of the more exotic situations, and ask your management about what resources they'll make available for you to perform the due diligence investigations into the background facts, as well as to perform the analysis on the facts turned up--and that it will need to be revisited each testing year to either verify that there's been no change in ownership, or new relationship (business or marriage) between any of the existing owners, or how such changes the most recent analytical conclusions. Make sure you invite your company's risk management director to that meeting.

I've not seen the term "subsidized health plan" defined (but there may be a definition for purposes of its use in IRC Section 162(l)(2)(B)). Barring some definition that others may point to, I would think that the situation of the spouse's employer paying 10% of the premium cost for family coverage (which would include the S corp owner) would be 'subsidized health plan'. The situation where the spouse's employer pays all (or part) of the premium cost for coverage of the spouse (that employer's employee) but not for any coverage for the S corp owner is a closer call. The S corp owner might yet be eligible for coverage in that other employer's health plan (having to pay 100% of the premium cost for the S corp owner's coverage), and it could be said to be subsidized because that other employer is paying the premium cost (or at least part of it) for the spouse. The interpretive argument cutting the other way is that while the S corp owner is eligible for coverage, the S corp owner's coverage is not subsidized to any extent by that other employer. However, since we are talking about an above-the-line deduction on the S corp owner's Form 1040, personal tax return, it might be that if filing married/jointly, the subsidy by the other employer of the spouse's coverage is enough to 'wire' the situation and prevent them from claiming the S corp owner's health premiums as an above the line since the S corp owner is eligible and looking at if as 2-party coverage and 1 of the 2 H&W filing jointly has subsidized health plan coverage. If married filing separately, it might nevertheless be allowed as no one whose return then the S corp owner's 1040 is would have any subsidized coverage. Great question; I hope others weigh in with some good info.

“[T]here is no authoritative checklist that can be consulted to determine conclusively if an employer’s obligations rise to the level of an ERISA plan” * * * “In this cloudy corner of the law, each case must be appraised on its own facts.” Belanger v Wyman-Gordon Co, 71 F3d 451 (1st Cir 1995).

Some, if not most, cafeteria plans are employee welfare plans subject to ERISA, and perhaps group health plans for HIPAA and COBRA purposes. One must thread the needle carefully to avoid the application of these federal laws other than just IRC section 125. Include a flex account option, and you likely have an ERISA plan. Make employer contributions available to cover part of the premium costs, you likely have an ERISA plan. If as part of the cafeteria plan the employer selects the insurance policy or 'endorses' it, you likely have an ERISA plan. If employees get a break on the premium costs, you likely have an ERISA plan.

Observing the VEBA rules simply avoids income tax on the fund's investment earnings. Observing the rules of IRC 105 (such as HRA rules) is necessary to keep the employees/beneficiaries from being income taxed on the reimbursement of medical expenses out of the fund.

Probably not in EPCRS because that's an IRS program. Disclosure is a Title I issue under jurisdiction of DoL, not a tax qualification under IRS jurisdiction.

One of the correction methods of EPCRS calls for the Plan Sponsor to "notify the affected participant and spouse (to whom the participant was married at the time of the distribution), so that the spouse can provide spousal consent to the distribution actually made or the participant may repay the distribution and receive a qualified joint and survivor annuity." Rev Rul 2006-27, sec 6.04(1). Otherwise, the correction is to provide the spouse a benefit "equal to the portion of the qualified joint and survivor annuity that would have been payable to the spouse upon the death of the participant had a qualified joint and survivor annuity been provided to the participant under the plan at the annuity starting date for the prior distribution. Such spousal benefit must be provided if a claim is made by the spouse." Rev Rul 2006-27, sec 6.04(2)(a). The plan can offer the spouse an actuarially-equivalent lump sum payment instead of a survivor annuity form of benefit. Rev Rul 2006-27, sec 6.04(2)(b).