Chaz

Off the top of my head and without checking, my recollection is that the recent extension of the transition rules allows linking through the end of 2008.

I agree with QDROphile. Note that you also must check state law before giving DCAP forfeitures to charity.

Good point. It's REALLY not a 409A issue in that case.

Let me explain. Clearly, a change in control can be a vesting event if there is no right to a payment before the "CIC." In such a case, a CIC can be defined pretty much as whatever you want and need not meet the 409A definition as long as there is a SRF. It's outside of 409A if the amounts are paid within the ST deferral period. If such is the case (I agree that vesting upon "contemplation" of a CIC is not a SRF, but, for instance, entering into an agreement and plan of merger is, even if the deal ends up falling apart), an employer can determine that payment be made even if the CIC didn't occur (in a sense, it is an acceleration of vesting). That was my suggestion, although I noted that I did not have all the facts of her situation. The OP stated that the arrangement "provides for a benefit to otherwise ineligible employees, upon a change in control," which is why I think that the ST deferral rule may be useful for those employees, at least.

I guess my "CIC" as a vesting event and payments being made in the ST deferral period idea was a non-starter?

I don't know all your facts but based on your posts it seems to me that the plan termination was premature and really didn't happen (because there was no CIC as appears likely). Perhaps you can take the position that the payment upon the CIC is subject to a SRF and is payable within the ST deferral period (and is thus outside of 409A and the CIC is not the payment event). Instead of the distributions being made because of the termination of the plan, the company can determine that the payments were made because the company decided to accelerate vesting, which is permitted under 409A. Of course, there are corporate governance issues with this and I really don't know your facts, but this is a possible approach, I think.

An initial question: What exactly is the definition of "change in control" in your NQDC plan? If it is merely entering into an agreement to sell and the agreement, in fact, is executed, then a change in control has indeed occurred (whether closing ever happens), and in my view, payment can be made using the ST deferral exception (if the payment is made in time) because the CIC is a vesting event. If the CIC is defined as the closing of the transaction, then more analysis is needed.

My original post was questioning the accuracy of the last part of this phrase regarding rolling money over (which was not discussed): "Although, and I assume this can detailed in the plan document, since a MERP is a year-by-year plan, the unused employee contribution would be forfeited to the employer, whereas in a traditional HRA the rollover feature would keep the contributions active until the employees is dismissed or retires (?)."

leevena, My comment was about the ability of employees to contribute to an HRA on a pre-tax salary reduction basis, which is governed by the Internal Revenue Code, of course. I do not know of any way for an employee to contribute and be able to carry over unused amounts. Can you give me an example of an arrangement that would permit this? I also can't conceive of any HRA that is not subject to ERISA, whether there are employee contributions or not. An HRA is an employee welfare benefit plan and is subject to ERISA to the extent that the the employer is not otherwise exempt. The only time that "employee" money can be used to fund an HRA is when they are on COBRA (and are generally no longer an employee). In such a case, ERISA's trust requirement MAY be triggered. But otherwise, no employee money is permitted. What am I missing?

If I understand this right. The EE is not contributing to the arrangement but to a trust as a salary reduction and falls under the ERISA laws. Whether contributions can be made by employees on a pre-tax salary reduction basis is an Internal Revenue Code issue, not an ERISA one.

Maybe I am dense but I can't see how employees can make contributions to an arrangement without satisfying Code Section 125 (including the use-it-or-lose-it rule). How can putting the requirements in a trust get around this issue?

I read somewhere awhile ago that it might be a violation of the ADA to "require" (by providing a disincentive not to) participation in a health risk assessment if the health risk assessment makes "disability-related" inquiries. I believe what I read said that only de minimis incentives such as a key chain or a coffee mug are permitted. Now this issue has raised its ugly head again. Employer wants to require employees who do not complete an HRA to only be eligible for an HDHP and not its PPO plans. Does anyone have an update to this thread? Is it possible that the standard under the ADA will be the same as under HIPAA (i.e., 20%) for bona fide wellness programs?

I'm not sure if she is enrolled in your plan and later becomes eligible for the DHS plan that she can drop your plan. The regs only talk about election changes being permitted when a participant LOSES coverage in a government plan, not the other way around.

This is the scenario (with the names of places changed to protect the innocent). The employee lives in New York and works Monday through Friday in Albany. The employee takes mass transit (Amtrak) every Monday morning to his job in Albany. The employee stays at temporary housing in Albany during the week and commutes back on Amtrak to his permanent house in New York on Friday. Can the employee participate in a qualified transportation plan with respect to the cost of the Amtrak tickets? I don't see anything in the regs that require the commute to be "local."

I agree that a terminating director has "separated from service" under 409A and can take his distribution (if the plans are not aggregated) even if he stays on as an employee, but where do you find the language that the director does not have to wait six months? The regs all talk about the six month hold out being required if the service provider is a specified employee upon the separation from service. The regs do not state that the service has to be a specified employee with respect to the compensation being distributed. I think that the reasonable rule would be not to require the six month hold out, but a plain reading of the regs may dictate otherwise. (Hopefully, you or someone else can show me where I am going astray.)

Was the option fully vested before January 1, 2005?

Sorry for being "silly." I do note that per Google there are at least 92,000 websites that incorrectly (as I've apparently learned) refer to "a HSA" (including, as I noted before, the Treasury Department). Perhaps the authors at those sites were equally as poorly educated as to the nuances of the proper use of the indefinite article before an acronym. I apologize in advance for the use of passive voice.

Good research! So, then, one offers "AN HSA" but "A health savings account"?

Does one offer "a HSA" or "an HSA"? A Google search indicates that more sites use "an HSA" but there are 14,200 hits that used BOTH phrases on the same web page (including on the Department of Treasury website).

Employee is a "specified employee" and also serves as a member of the board of directors of the same company. The employee participates in various arrangements as an employee but also participates in a otherwise 409A-compliant plan in which he can defer his directors fees until he ends his service as a director, which is the distribution event. Is the director's fee deferral distribution subject to the six-month hold out requirement?

Not sure but perhaps the sponsor of the plan may lose the ability to use Forms S-3, S-8, etc.?

Steelerfan - After reading your first paragraph (and right after I exclaimed "Wow!"), I thought of the exact question you pose in the second paragraph. And assuming that the IRS sticks with this position, can my plan even be fixed?

I sincerely advise that you consult legal counsel in implementing a wrap plan.

My understanding is that enrollment/disenrollment information were never excluded from the definition of PHI; just that if an employer holds this information in its capacity as employer it is not PHI. The present matter involves a multiemployer plan. Multiemployer plans do not generally have employment functions, so I think it is difficult for their enrollment information not to be PHI. The plan does not disclose whether an individual is a participant in the plan unless the disclosure otherwise complies with HIPAA.

jpod, Don't give up so easily. I'm with you on this (although I am in the minority in the office here). I have question along the lines where you are going: Take the traditional "bad boy" clause: No payment upon conviction of a felony, willfully disobeying an lawful order of a superior, commission of an act of moral turpitude or a "wide stance," etc. In all other cases of involuntary termination, the executive gets paid. No argument that this is a SRF(?) So, if an executive is a "specified employee" and decides he wants to leave but also wants to get paid under the agreement, all he has to do is generally be incompetent, then he gets fired and paid off. He wouldn't have to wait the six months to get paid if payment is made during the ST Deferral period. But if another agreement provides that the executive gets a payment if he is terminated for "cause," which definition includes general incompetence, jhall, steelerfan, etc. are saying that there is no SRF and he would have to wait the six months. But in either case, the ability to "create the cause" is the same. Although the IRS/Treasury Department's use of the phrase "involuntary termination without cause" gives me pause, the result of the above scenarios doesn't make sense. Just my thoughts . . . . [WRITTEN BEFORE STEELERFAN'S LATEST]