J Simmons

Randy, I'm assuming the way your question is worded that the targeted defendant of the class action suit is not the plan nor the fiduciaries themselves, but some third party. The plan fiduciaries are, of course, to act on behalf of the plan beneficiaries in matters affecting the plan. If it is some third party vendor that is the targeted defendant of the suit, and it is the same services or charges for services that the plan receives that is the subject of the suit, I think the plan fiduciaries are required to investigate the suit, evaluate joining in and actually join the class action on behalf of the plan, if that's the prudent thing to do for the plan and its beneficiaries under all the circumstances. If the plan is the recipient of the services or charges in question, then the plan beneficiaries may have no standing of their own to join the suit except through the plan. This would be particularly true of any breach of contract claims that might apply, where the plan is privy to the contract with the vendor, but the participants are not. You're right, not knowing the details does make answering difficult.

Not from Deland, but in the early 80's I lived in Tallahassee and a little town north of Daytona Beach called Bunnell. Since then, out West.

According to a Sungard Corbel pension technical update of 1/23/2003, you would need to give them the 2% to satisfy the gateway because they are entitled to the 3% safe harbor nonelective. You may need to make a post-year amendment (Treas Reg 1.401a4-11g) to accomplish this if the plan documents do not currently permit the 2% top-off.

Hi, Leevena, You might check Treas Reg 1.125-1, Q&A-4, which in relevant part provides: "The term 'employees' includes present and former employees of the employer. All employees who are treated as employed by a single employer under subsections (b), ©, or (m) of section 414 are treated as employed by a single employer for purposes of section 125. The term "employees" does not, however, include self-employed individuals described in section 401© of the Code. Even though former employees generally are treated as employees, a cafeteria plan may not be established predominantly for the benefit of former employees of the employer."

I think that the argument that the TPA's duty to an ER re TH status is only post-PY would have much more traction if TH status could only be determined definitively after the PY has ended, as is the case with ADP when current year nonHCE ADP is used. However, TH status actually depends on data as of the day before the PY even begins, and is therefore ascertainable and can be reported by the TPA to the ER early in the PY. TH status for a PY is more akin to the TPA being able to ascertain the nonHCE's ADP from the prior year, if that method is used, and advise the ER of the implications so that the HCE deferals can be pre-determined to avoid ADP failure.

Correct. And so if any key employee made a deferral because it was believed that the plan was not top heavy and the key making the deferral would not engender any top-heavy minimum contribution requirement, then the employer has been damaged by having to make such a contribution if the employer can establish that the TPA was obligated to inform the employer of the top-heavy status at anytime before the key made the deferral. For example, for a calendar plan year 2006, the determination date for top heavy status was 12/31/2005. If the contract or course of dealings between the TPA and the employer was that the TPA was to inform the employer of the top-heavy status for 2006 (based on the 12/31/2005 determination date) was sometime in early 2006, but the TPA did not do so and a key went ahead and made an elective deferral, then the TPA might be responsible for the top-heavy contribution triggered by the key's elective deferral under the mistaken belief that the plan was not top heavy for 2006 because the TPA had not timely informed the employer that the plan was, in fact, top heavy for 2006.

I have some experience with a DB plan that was maintained by a single employer for some time since 1989, but then broken up into three separate companies without related ownership. You have to test separately, of course. But in determining the minimum funding and who is entitled to what portions of the standard funding credits, you have the opportunity to either re-allocate the assets each year over the accrued benefits of all employees or to do separate tracking per employer until there is a certain type of event, such as a plan spin-off, the withdrawal of a sponsoring employer, or termination of the plan altogether. On those events, the re-allocation of assets across the benefits liabilities of all employees is required--this is because each employee in essence is entitled to have all of the sponsoring employers jointly and severally liable for the benefits promised that employee under the plan. Until one of those events occurs, however, you can choose separate tracking or annual re-allocation. If all sponsoring employers are going to do nothing more than the bare minimum funding required, it won't make much difference. However, if one sponsoring employer might want to fund up--particularly now that you can go to 150%--in good years while the other sponsoring employers do not, then annual re-allocation will have the effect of those sponsoring employers doing the bare minimum receiving a windfall (i.e., a reduction in their share of the plan's overall underfunding) at the expense of the company that made an extra contribution. Separate tracking would give the company that contributes extra the opportunity in a later year (but before there is a plan spin-off, the withdrawal of a sponsoring employer, or termination of the plan altogether) to recoup some of the extra earlier contributed, without 'sharing' the credits created thereby with the other sponsoring employers, those that did the bare minimum all along. Another issue you will have initially is the allocation of current assets to which benefits liabilities. This comes into play because there are retirees in pay status, former employees with vested benefits, current employees with vested benefits, and current employees with unvested benefits at the time you go from one plan sponsor to two or more. Who gets the retirees in pay status and/or former employees with vested benefits? If it's disproportionate, it will result in a disproportion of any underfunding between the companies sponsoring the plan, because of the priority in allocating assets to cover the benefits liabilities for first retirees in pay status, then former employees not yet in retiree status, before any assets may be allocated to cover the benefits liabilities of active employees. This may be determined incidentally by the documents that governed the business reorganization; if not, there will need to be agreement on which of those inactive employees with benefits accrued under the plan 'belong' to which of the sponsoring employers. I would suggest that any one of the sponsoring employers that might be considering funding any more than the bare minimum required of it (a) first obtain an agreement for separate tracking from all other sponsoring employers, and (b) at that, consider the impact of re-allocation upon a plan spin-off, the withdrawal of a sponsoring employer, or termination of the plan altogether if any of those events occurs before perhaps recouping the benefit of the funding credits created through the earlier extra funding.

I think it depends on who was ordered by the court to pay the interest. If it is the employee, then the case law will apply and the interest paid probably taxable. However, if the divorce court was concerned about the time value of the benefits to be awarded under the QDRO, then the divorce court should just amend the QDRO to specify the date of division and specify that investment earnings since that date on the awarded portion belong to the alternate payee--and the divorce court rescind the order for interest.

listened to a web conference by aspaa i believe by aspaa i believe and they handed out a statement which included the actual vesting schedule. is there disagreement out there on this point? ? Did aspaa represent the sample provided as the very minimum it thought necessary? or might it have had more info than aspaa thought minimally necessary? The reason I ask is that the individual benefits statements are to provide "the nonforfeitable pension benefits, if any, which have accrued, or the earliest date on which benefits will become nonforfeitable" (ERISA 105a2AiII, as amended by PPA '06) or alternatively "such information as is necessary to enable a participant or beneficiary to determine their nonforfeitable vested benefits" (ERISA 105a2C, as amended by PPA '06). The Committee Report specifies that the statements should indicate "the participant's or beneficiary's vested accrued benefit or the earliest date on which the accrued benefit will become vested". Joint Committee Taxation (J.C.T. REP. NO. JCX-38-06), PPA '06 Act section 508. I could find nothing on point in DOL Field Advisory Bulletin 2006-3 specifying in detail what must be provided. The sample including the vesting schedule would certainly seem to satisfy the requirement, but so too it would seem would just providing info about the amount of vested benefits--not going into detail about vesting years, vesting schedule, etc.

I would contact the regional office of the Employee Benefits Security Administration of the U.S. Dept of Labor. That would be for the region where the plan is administered. I would send a letter, and send a copy to the employer's benefits office you've been dealing with. This usually gets the attention of the benefits office, and the check you are due will likely be sent pronto.

I would contact the regional office of the Employee Benefits Security Administration of the U.S. Dept of Labor. That would be for the region where the plan is administered. I would send a letter, and send a copy to the employer's benefits office you've been dealing with. This usually gets the attention of the benefits office, and the check you are due will likely be sent pronto.

I would specify the percent vested, the vesting years earned, and reference the vesting schedule in the SPD.

I would think so if the celiac disease diagnosis was made by a physician and the physician has recommended the books, and the books were written specifically for those suffering celiac disease. This would not be for mere general health, but for a specifically diagnosed condition or ailment.

I think the 401a4 nondiscrimination testing must be performed--and pass--twice. First, test the employer contributions excluding the QNECs. In this stage, you cannot count the QNEC toward satisfying the gateway or otherwise. Then, 401a4 test all employer contributions, including the QNECs. This time, the QNECs can be counted towards the gateway necessary.

Treas Reg §1.457-8(b) addresses funding of non-profit's 457b plans. The employee contributions must remain part of the employer's general assets until the employee is to be taxed on them, not go into a trust separate and apart from those general assets and that would remove any assets from the reach of the employer's general creditors. So the regulations do not address a timeframe for segregating employee contributions to a non-profit's 457b from the employer's general assets--as the regulations (Treas Reg §1.457-8(a)) do as to governmental's 457b plans where a separate trust is required.

Scenario: In 1993 the employer purchased individual insurance policies with a promise that each employee would get the policy when he or she retired. No plan documents, just policies and conversations. The employees expected to get the policy tax free on retirement and defer the income until they withdraw the cash from the policy. Since there is no documentation, I am concerned that anything I do will be construed as a material modification that would trigger income and the 20% penalty. Any thoughts and suggestions will be greatly appreciated.

Scenario: P, age 53, is a participant in a 401k plan with a Roth option and that permits the purchase of life insurance. P is married to S, age 36. P's life insurance agent has proposed that P make the maximum $20,500 in elective deferrals for 2007, and declare them to be Roth. Then, direct benefits in the Roth account to pay for life insurance, under a policy that will be paid up in 12 years (when P reaches age 65, and presumably retires). The agent explains that whenever P dies, the death benefits will be paid to the plan with no tax, and that when S withdraws those Roth benefits there will be no tax due, not even on the interim investment earnings on the death benefits. As compared to P purchasing this life insurance on his own, outside of the 401k plan, the recommended approach will shield the post-death investment earnings on the unused death benefits from taxation. As compared to P purchasing this life insurance inside the 401k plan, but with pre-tax benefits, the recommended approach will shield the death benefits and subsequent investment earnings from taxation when and as withdrawn. Does anyone know if there's a reason that so leveraging a 401k Roth with life insurance in this way will not work?

Treas Reg §1.457-8(a)(2)(ii): "Amounts deferred under an eligible governmental plan must be transferred to a trust within a period that is not longer than is reasonable for the proper administration of the participant accounts (if any). For purposes of this requirement, the plan may provide for amounts deferred for a participant under the plan to be transferred to the trust within a specified period after the date the amounts would otherwise have been paid to the participant. For example, the plan could provide for amounts deferred under the plan at the election of the participant to be contributed to the trust within 15 business days following the month in which these amounts would otherwise have been paid to the participant."

I don't think he has a COBRA right. He had no coverage to continue. He could have elected coverage, but did not. He had all the information and the internet access at work during the 3 days an employee. I think it is irrelevant that he did not have internet access at the hotel. His having asserted COBRA puts the employer in an awkward spot. Don't extend the COBRA opportunity, so don't give notices and thus don't start the COBRA retro election period. The risk is being second guessed in court much later, and having to provide coverage because the election notice wasn't given. You might want to consider filing a declaratory judgment action in federal court, given that he has asserted that he should be given COBRA coverage--unless facing such a suit, he will agree in writing that he has no COBRA right.

Check out Guilbert v Gardner, #04-1003-cv, decided March 7, 2007, by the 2d Cir Ct of Appeals. In there, it is provided that (1) you can have a plan subject to ERISA even without a document (though not having one is a violation of an affirmative duty imposed by ERISA), but (2) mere promises to employees without implementation steps being taken by the employer to 'establish' the plan falls short of being an ERISA plan.

It depends on what the plan document provides. It's possible if either in-service distributions of the profit sharing benefits are allowed and the amount to be withdrawn derives from contributions made at least two years before withdrawal. It's also possible if the normal retirement age is such that he has already reached that age. If not but an amendment is considered, first analyze regarding whether doing so would, given the timing, be discriminatory.

Hi, Paul, The answers depend on a number of design options permitted under federal pension rules, and specified for your plan in the plan documents. The safe harbor k provisions either require a 3% of pay contribution by the employer for all eligible employees, whether they put into the plan or not. This is the Safe Harbor Nonelective Percentage. Alternatively--and again as would be specified in your plan document--the required employer contribution can be a $-for-$ match on the first 3% of pay that an employee might elect into the plan, and match equal to another 1% of pay over the 4th-and possibly 5th and 6th-percentages of pay the employee might elect. That extra 1%-of-pay match might be simply $-for-$ on the 4th percentage of pay the employee elects, and none on the 5th and 6th percentages the employee might do. With the required $-for-$ on the first 3%, this would translate to $-for-$ on the first 4% of pay, and that MIGHT be how your plan is configured. This is the Safe Harbor Match Percentage. A notice was required 30-90 days before the plan year began, specifying whether the required Safe Harbor contribution was to be the Nonelective or the Match. If your plan years are calendar years, then for 2006, this notice would have likely been dated and provided to employees in October or November 2005--if it was timely provided. Any other company contribution that is only made in response to an employee electing part of his pay be diverted into the plan is Non-Safe Harbor Matching. Your other question, about how much you'd have to contribute for the partner to get another $29,000 ($44,000 less the $15,000 you've already accrued in the plan for the year) depends on the profit sharing formula, again as specified in the plan. You should quickly hire a pension professional to look over the plan documents and advise you as to what to do.

The approach concerns me because of the permanency requirement for qualification. If Company A sets up a spin-off plan when it withdraws from the MEP and then quickly turns around and terminates the newly set-up spin-off plan, that belies that the spin-off plan was intended to be permanent when set up. If the spin-off plan is not qualified, that would make attempting IRA rollovers hazardous, and there could also be implications for the MEP for having transferred some of its assets to the spin-off plan.

Hey, Don, Glad you pointed out that there's HIPAA nondiscrimination issues as well as tax nondiscrimination rules that Nini will need to sort through.

Could still pass ACP with those zeroes. Some of those zeroes brought in might, for example, be HCE zeroes.