rocknrolls2

What disturbs me most about including a Trump account in a cafeteria plan to which employees can make salary reduction contributions is the following: Section 125 makes it very clear that any benefit that provides for the deferral of compensation (with certain statutory exemptions for HSAs and carry over of certain unspent flexible spending account balances) is a nonqualifying benefit which cannot be provided under the cafeteria plan. A Trump account is an IRA (which is not subject to the general requirement that the beneificary have compensation as a condition to being to make contributions to it). The balance in the Trump account is expected to be used by the child in adulthood (or possibly, converted to a traditional or Roth IRA to which the former child beneficiary can make additional contributions once s/he begins to receive compensation. The Trump account defers these amounts and thus, violates the prohibition against a cafeteria plan providing benefits deferring compensation. This is a definite problem that should have been rectified as part of the process of drafting the OBBBA. Therefore, at worst, including a Trump account in a cafeteria plan or even allowing for salary reduction contributions to be made to it by employees is technically enough to disqualify the cafeteria plan.

I am in the midst of preparing a restated defined benefit plan document for a multiemployer pension plan client. Since it had been a while since I even looked at them, I looked to see if there were any changes made to the recent IRS update on its Listings of Required Modifications for defined benefit plans. I noticed that the Code citation to the definition of current liabilities was to 412(l)(7). As you may know, in the mid 2000s, 412 was amended to take a good chunk of it out of the section and put it into Sections 430-433 instead. Surprisingly, the LRM did not catch this. Since this client has had to adopt a funding improvement plan, looking at the assets being 110% of current liabilities for the rules not to apply makes little sense in this context. I know that there is a blanket exemption from the nondiscrimination rules for collectively bargained emplloyees. Since the pre-termination restrictions are contained int he 401(a)(4) regulations, it seems to me that they do not even have to be included in the plan. Am I missing something? Thanks in advance.

Subject to the terms of the service agreement, you should remind the client that the timely filing of an accurate Form 5500 is ultimately their responsibility. If the client does not provide complete data for the completion of the Form 5500, if this is the first time that this is happening, again subject to the service agreement, you could either refuse to file one at all (especially is NO information is provided) or file a partially complete Form 5500 with blank portions for the areas where the client failed to provide timely information. I prefer the former approach because the latter could make your organization appear to be less than professional. If asked to provide services which include the filing of a Form 5500 after a first occurrence, consider imposing a penalty fee for the client's lack of cooperation. Also, tell the client that if it fails to provide any information or any material information, your firm will have the right to resign. Also remind the client that it is their ultimate responsibility to file an accurate and timely Form 5500. Prospectively, consider tightening your service agreements to impose tighter controls over the client's timely cooperation, include non-cooperation of the client as a reason for terminating the ageement, subject to 30 days' advance notice, and include a penalty fee for a first-time incident of non-cooperation or unjustified failure to furnish timely information needed to complete a Form 5500 filing. This is not to be construed as the provision of legal advice.

The EPCRS (which is long overdue for an overhaul in light of SECURE 2.0) requires that practices and procedures be in place in order for the plan to avail itself o the self-corections program under EPCRS. There is no specific requirement for a document, although it would be a good idea to compile one for proof that they exist if the plan were ever to be audited. A lot of machinations of administrative procedures would be based on how the plan's recordkeeper handles certain things. In addition, the plan should consider adopting written policies addressing such things as uncashed checks, missing participants, making sure that RMDs are processed, among a host of other possibilities. For that, it would be best to defer to an experienced ERISA attorney.

For this purpose, "determine" is synonymous with "calculate.' No DRO has, as yet, been presented. Perhaps that could justify the triggering of the 18-month period to at least wall off the portion of the benefit that would not be payable to theparticpant pending the presentation of the DRO. Otherwise, the plan would commence payment of the participant's full benefit payment notwithstanding the presentation of the DRO after payments commenced.

A married couple divorces. They reoch a marital settlement agreement providing for the entry of a shared interest QDRO under a defined benefit plan. Based solely upon the terms of the settlement agreement, the plan's administrator proposes to implement a deternination of the shared interests of the parties, which is driven by the fact that the partidcipant is about to retire. May the plan's administrator appropriately determine the separate interests of the parties prior to the court's entry of the DRO and the plan administrator's determination that such order is qualified?

Your client can't just slap an "independent contractor" label on an employee and expect that the federal and/or state gov't will respect it. To make the label stick, your client should retain competent counsel to guide them through the steps needed for a worker to be treated as an independent contractor under the law. Counsel should instruct your client on how to change the working relationship in a way that it would be respected. Regarding the impact if an employment relationship is defensibly recast into an independent contractor one, the former employee likely would need to be fully vested and whether the former employee can be considered to have a severance from employment is a valid concern.

A contributing employer enrolls a new employee into a multiemployer money purchase and health & welfare funds. Assumne further that we are referring to two individuals: one of whom is an undocumented alien and one who is an American citizen. After contributions have been made by the employer and allocated to or for the benefit of the employee, it is discovered that the individual supplied a false Social Security number. Frpm the perspective of the two funds, what should be done in this instance regarding the following: (a) the amounts that have already been contributed; and (b) the payment to the fund of future contributions? At the outset, it is important to note that the contributing employer, and not the fund, is responsible for complying with the I-9 requirement. In my view, for (a) and (b), an employee's citizenship or immigration status should not matter for purposes of answering this question. With respect to the amounts already contributed to the qualified plan, unless the plan document has been amended to take advantage of therecovery of overpayments, in accordance with Section 414(aa) of the Code, nothing can be done to theamount already allocated to the employee's account because it would run afoul of tIn my view, with respect to the amounts already contributed to the qualified plan, nothing can be done to theamount already allocated to the employee's account because it would run afoufloyhe antialienation requirement. If the employee terminates employment, the account could be forfeited subject to thevesting schedule and the timing of the distribution would be dependent upon whether the account is less than the cash-out threshold. For the health and welfare fund, there are no individual account balances and no accrued benefits under a welfare plan and contributions to the fund would be pooled, similar to a defined benefit plan. Unless the plan or trust includes a provision protecting amounts contributed by the employer on behalf of its employees, an argument can be made that the amount could be applied to satisfy administrative expenses under the fund or as acredit to future contributing employer contributions. If the individual's right to benefits is otherwise protected by the fund's plan and/or trust, and the individual incurs a claim for the period to which the contributions apply, then the individual could obtain coverage and/or obtain reimbursement of a medical or dental claim incurred during that period.re With respect to future contributions, for both the money purchase fund and the health and welfare fund, the contributing employer should be notified that no future contributions on behalf of the individual will be accepted by the funds. My reasoning is that the funds were not aware of the validity of the Social Security number issue when the previous contributions were made. However, once the funds became aware of these facts, continuing to accept such contributions could make the funds complicit in the fraud. Now forthe real heart of my question: considering the implications of ejecting the "employee" from the plans and their impact upon the plan's qualification and eligibility for income tax exclusions, does anyone have any suggestions or other thoughts concerning the adoption of an amendment containing pro-active language which would (i) enable the funds to revoke contributions allocated (or benefits accued in the case of a defined benefit plan) prior to the fund's discovery that the employee supplied a false Social Security number, (ii) if (i) is not permissible, prevent the allocation of future contributions to the employee's account, (iii) to the extent amounts previosly contributed to the fund on behalf of the employee cannot be revoked, to prevent vesting of such contributions; or (iv) to provide a blanket exclusion of such employees from participation in the plan without causing havoc or negative results for coverage testing? In a sense, this is something that plans should be able to do since Social Security numbers are integral to proper tax withholding and reporting from both a payrolll and plan administration perspective. Thanks in advance!

I am in full agreement with everything that was said in this thread. I did want to make one comment. Since your basic assumption was that the beneficiary was a non-EDB, this presupposes that the qualified plan in question is a defined contribution plan. In the case of a defined benefit plan, however, the SECURE 1.0 10-year rule does not apply and the beneficiary's status as an EDB (or not) is irrelevant.

David, I will agree with your statement that most DB plans pay annuities from the plan's assets. As for whether the DRO has been qualified, the plan sponsor has asked us for advice on whether to qualify it and how to pay it, if it is determined to be qualified. According to the DOL regulation I cited, the timing of the issuance of the order does not, by itself, adversely impact the qualification of the order. Since the alternate payee would be receiving payments during the participant's lifetime only, therre is no issue that the plan is being asked to provide for a form of payment not provided under the plan, which would disqualify the order for other reasons. As for the retroactivity of the payment, the order itself provides that it is effective as of the annuity starting and such orders are valid, per the DOL regulation and case law which is controlling in the plan's and parties' circuit. Effen, The plan withheld the alternate payee's share, which is the principal reason why I believe that the alternate payee should be compensated by some measure or interest or earnings to compensate her for the delay in commencing payments to her.

A participant and his spouse become divorced prior to the participant's annuity starting date under a defined benefit plan. Unlike many plans, benefits are paid from current plan assets (instead of from annuity contracts purchased from an insurance company). The participant and his ex-spouse agreed upon a proposed division of his benefit, based upon the fraction of the months in which the couple was married over the participant's entire period of service with the employer. However, no formal QDRO was entered by a court until 11 years after the participant's annuity starting. Nevertheless, the participant commenced receiving reduced pension payments based upon the parties' agreed division as of his annuity starting date, in the form of a ten-year certain and life annuity. The QDRO reaffirms the division between the parties and entitles the ex-spouse to a portion of the participant's total retirement benefit (under the agreed-upon formula) retroactive to his annuity starting date. Based on DOL Regulations at 29 C.F.R. Section 2530.206, the timing of the entry of the QDRO does not adversely impact its qualification. In addition, the QDRO provides for payment to the ex-spouse for the participant's lifetime (since the 10-year guarantee period has expired), which is a fomr of payment provided under the Plan document. Moreover, case law which is contolling in the circuit in which the Plan is administered and in which the participant and former spouse reside do not compel a different result. This is my question: given the eleven-year period that has elapsed since the annuity starting date, is the payment due to the spouse for the period beginning on the annuity starting date and ending on the date on which the first prospective payment begins under the QDRO, permitted to be increased by interest or some other manner of compensatiing the former spouse for the delay in commencing the benefit payments to her? If the benefit had been provided under an annuity contract, I would be inclined to say no. However, since the benefit is provided from the assets of the plan's trust, I am inclined to conclude that some measure of earnings is due to the former spouse. Also, as a corollary to my question, if you agree that the spouse should be entitled to interest or earnings for the period of the delay in commencing payments to her, how should the plan arrive at an appropriate level of interest or measure of earnings? Thanks in advance!

Yes, it is. Agreement was reached between the parties of the prrcentage payable to each prior to the annuity starting date and the participant was paid solely his percentage.

A married couple were divorced and had agreed that the participant's spouse would share in a portion of benefits otherwise payable to the employee. A QDRO was drafted but was intensely litigated. In the interim, the employee retired and began receiving the agreed upon portion of pension benefits in the form of a straight life annuity. Ten years later, a draft QDRO which appears to be acceptable to both parties to the former marriage was submitted to the plan. If the plan determines that the proposed order is qualified, can payments to the ex-spouse be made retroactively to the annuity starting date? Please note: that there is no issue of a reannuitization here based on the DOL Regulations at 29 CFR Section 2530.206 because it is being paid as an annuity for the life of the employee only. Therefore, when the employee dies, all payments (even to the former spouse who survives the employee) cease.

Write to HR demanding a written copy of the plan document and SPD. Not only should you be eligible forlost earnings but the employer has to kick in an employer contribution according to IRS correction procedures. The employer has to provide the plan document and SPD within 30 days of your written request. If they keep stalling, hire an attorney to go after them.

I know that there were numerous lawsuits filef following HHS' issuance of final regulations under Section 1557 of the Affordable Care Act. These lawsuits challenged the validity of the regulations and HHS rescinded a portion of these regulations. As a result of these suits, are the section and the regulations still on the books? Thanks in advance.