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Employer X is an insolvent 501©(3) organization going through state receivership proceedings. X sponsors a 403(b) plan providing for a matching contribuiton equal to 1% of compensation to employees who are accruing benefits under the employer's defined benefit plan (which is going through a distress termination) and are employed on December 31of the plan year. In addition, the 403(b) plan provides a nonelective contribution equal to 5% of compensation for those employees hired after January 31, 2007 and employees who elect out of the defined benefit plan as of April 1, 2007 who are employed as of December 31 of the plan year and are credited with at least 1,000 hours of service for the plan year. May X amend its plan to cancel the employer contributions since no employee will have yet earned the right to receive the contribution on December 31? Alternatively, may X amend its plan to further condition the contributions upon there being sufficient funds after satisfying the claims of creditors entitled to greater priority in the state receivership?

A VEBA which has been funded to the maximum extent permitted under Code Sections 419 and 419A has its taxes paid by the employer. Would the treatment of this from the perspective of the VEBA be treated as a contribution to the VEBA by the employer followed by the payment by the VEBA of the taxes? Does it matter whether the employer pays the taxes directly or the trust pays the taxes and is reimbursed (or advanced) the amount of the taxes by the employer? If the trust is already fully funded under 419 and 419A, the concern is that the employer is making a nondeductable contribution to the trust. Or does the trust's immediate payment of the taxes effect a wash? Alternatively, is the "contribution" treated as not exceeding the VEBA's "qualified direct cost" in that the amount contributed does not exceed the benefits provided during the taxable year?

Employer X maintains a prototype defined contribution plan for its employees. In 2011, X amended the plan to provide t hat nonelective employer contributions would be allocated on a weighted age and service formula. Such formula was not one of the permitted choices in the adoption agreement. The prototype sponsor has informed X that the amendment takes it out of preapproved status. According to the IRS Rev. Procs, X may use the preapproved plan cycle to submit its determination letter request for its now individually designed plan. For the next cycle, the employer is on the individually designed 5-year cycle. The IRS recently stopped accepting applications from sponsors for DC preapproved plans and it will announce when it will accept determination letter applications from adopting employers. Is my understanding correct that the employer would make a submission of its now individually designed plan during the period IRS states it is willing to accept determination letter submissions from employer adopting preapproved DC plans?

Employer P maintained a nonqualified defined benefit SERP for its employees. Because the amount was not reasonably ascertainable until just before an employee retired, P determined the FICA liability and paid it for the year in which the employee terminated. Employee C terminated employment in 2010 and his/her FICA liability was determined and paid during 2010. P is in bankruptcy proceedings during 2010. Two years later, P emerges from bankruptcy and agrees neither to fund or pay its nonqualified deferred compensation plans. Does the fact that the payments under the plan stopped require a recalculation of the FIC A liability? .df

Let's assume an employer has a final average pay defined benefit plan. There is a one-year of service eligibility requirement. If the employer amends the plan to provide that participants initially hired after, say 12/31/2012, are no longer eligible, is a 204(h) notice required in that situation? Notice that the amendment would not apply to employees who have not yet completed the one-year of service requirement when the amendment becomes effective.

My client made a VCP submission based on a late amender and submitted a determination letter application in connection with such submission. At the time, some IRS agents bounced deficient VCP submissions and this client's VCP submission was bounced and never entered into the IRS system. Subsequently, the National Office clarified that submitters of deficient VCP submissions were to be advised of what had to be done to complete the submission and that the submission would be entered into the IRS system and listed in a suspended status pending the completion of the application. Just before the revised application was submitted, the determination letter submission was assigned to an IRS agent. The agent is unaware of the pending VCP application because it was not logged into their system. Does anyone have any practical suggestions on having the IRS complete the processing of the VCP submission prior to turning to the determination letter application? Thanks.

I have a client with a qualified plan who is about to submit a VCP application that did not timely make interim amendments and optional amendments adopting certain optional qualified plan changes, including EGTRRA changes. The most recent determination letter was issued in 2002 under GUST. I have the following issue: 1) For purposes of the compliance fee, the general fee based on the participant count would apply. However, if amendments adopting certain interim and/or optional plan changes are adopted within one year of the remedial amendment period for adopting such changes, then there is a 50% reduction in the compliance fee. If the plan is being submitted solely due to late amendment of certain interim and optional plan qualification changes and the amendment is application is submitted on the streamlined VCP application, especially, Appendix F, Schedule 1, the compliance fee is $375. If the only error covered by the VCP submission involves the late adoption of certain interim amendments and/or discretionary plan qualification changes, if one or more of the amendments made changes other than interim amendments and adoption of certain discretionary qualification changes, such as plan design changes or any other change not impacting plan qualification, has anyone had the experience of having the IRS bounce them out of Appendix F, Schedule 1 and require the payment of a higher fee? How strictly does the IRS interpret or apply this in your experience? Thanks for your insights on this. I feel comfortable that we can submit the VCP filing under the F1. I just need to hear people's real world experiences in dealing with this.

An employee resides in state X and his marriage is dissolved by a state x court which enters a judgment of divorce and the decree provides for spousal continuation. At the time of the divorce, employee works for Company A. It is unknown whether employee elected insured or self-funded medical coverage at the time the divorce decree was entered. Employee moves to state y and works in state x for Company B. Employee eleects coverage under an HMO issued in state x. Assume both state x and state y have spousal continuation statutes for insured medical coverage. Generally, I would be fine if employee were employed by Company B at the time the divorce was entered. However, there seems to be an implied provision in the spousal continuation statute that the employee be a member of the plan at the time the divorce was entered and that s/he continue to be a member. Does this mean that if employee terminates his/her job and is hired by another employer, the spousal continuation statute would not apply to the new employer?

Company X maintains a number of welfare benefit plans providing benefits to its active and certain former employees. For its former employees, X has a separate plan document and offers particpants a choice among different medical, dental and employer-paid life insurance options. For medical purposes, the retirees are rated for experience separately from their active employee counterparts (which results in a substantially higher premium payment for retirees). However, for Form 5500 purposes, the active and retired employee plans are bundled with certain other active employee coverages and filed under the bundled plan's plan number. Does X's plan for its retirees meet the retiree only exception for purposes of HIPAA and the PHSA provisions added by PPACA?

If you represent an employer that seeks to avail itself of the Early Retiree Reinsurance program, what amendments would you suggest should be made to your group health plans covering such early retirees?

I have looked at the legislative language and the interim final regulations on the requirement to cover adult dependents up to age 26. The term "group health plan" is used but there are many definitions. In other words, is dental coverage subject to the requirement? The interim final regulations do not include a definition nor do they amend an existing regulations to expand the list of sections subject to the definition that has applied for HIPAA and certain other health benefit purposes.

An employer maintains a medical plan as one of the options available under a cafeteria plan. Under the plan, the children of a domestic partner are considered eligible dependents under the plan. Under pre HCERA law, there were many hurdles which made it difficult (if not impossible) for a child of a domestic partner to qualify as a dependent for purposes of Code Sections 105 and 106. Under the law as amended by HCERA, a dependent includes any child (as defined in Code Section 152(f)(1)) who has not attained the age of 27 as of the end of the taxable year. The child definition includes a stephchild. Since it is likely that the child of a domestic partner will be a stepchild to the employee, would the employee's coverage of such individual be tax-free?

I have been advising a client with a large 401(k) plan (a few billion in assets) where other situations have arisen, not quite factually related to yours. The very first thing I would do would be to impose a suspension on the participant's account until an investigation can be conducted and findings can be made a s result of such investigation. You would need to hire an investigator who would be good at following the money trail through the international banking system. Some times, the participant is a party to the fraud, in which case, you might want to terminate his/her employment. Sometimes, the transactions are requested by a former spouse or significant other with knowledge of all the correct numbers and information so that s/he can access the account. Once your investigation has been completed, you would need to involve the law enforecement authorities to arrest any wrongdoers and order them to pay restitution as a condition of whatever sentence the court orders. Until the investigation has been completed and the conclusions of the investigation are presented, it would be premature to recharacterize any transactions, including any allegedly resulting from fraud. If it is indeed found that the account was fraudulently accessed, the loan should be reversed from the beginning and the particiipant's account should be recredited with the amount allegedly "borrowed." In addition, you might want to consider amending your plan to authorize account suspensions where reports are made that the account has been fraudulently accessed and in other circumstances where it is apparent that the transactions were made under suspicious circumstances.

A 401(k) plan allows a participant to have up to two loans outstanding at any time. The participant could either take two loans with up to 5-year terms ("personal loans") or one personal loan and one principal residence loan. A participant has purchased undeveloped land. S/he is interested in having a home constructed on the lot which will become his/her principal residence. Can we make a principal residence loan in this instance if it has been a few years since s/he purchased the land?

Has anyone seen, drafted, been involved with or otherwise dealt with drafting model Section 436 language?

sieve and Bird, Forgetting about the peculiarities of the current plan design, for a moment, I have seen some 401(k) plans continue to provide matching contributions at the same rate that would have applied had the participant not reached the 402(g) limit. I also do not consider such contributions to be nonelective, or profit sharing contributions because they would have matched deferrals had the limit not applied. In fact, I recently obtained a favorable determination letter on behalf of a client that had such a design. At no time did the agent raise the question whether such contributions should be treated as nonelective contributions with benefits, rights or features discrimination issues. A genuine true-up contribution could be structured either by recomputing the match based on annual compensation or by applying a cumulative percentage of contribution at the time the match is recalculated so long as there is no reduction in the matching contribution credited to a participant's account after the recalculation of the match.

Allow me to clarify a few things. The payroll-by-payroll match is intended to be retained for the regular matching contributions but without a last day requirement while the last day requirement would be applied solely to the true-up conributions. In addition, the plan does contain provisions referring to a payroll-by-payroll match.

Company C maintains 401(k) plan X for its employees. Under Plan X, C makes matching contributions on a payroll-by-payroll basis. Plan X provides matching contribuitions on any combination of before-tax 401(k), Roth 401(k) and after-tax contributions provided that contributions in excess of a specified percentage are not matched. When participants' before-tax and Roth 401(k) contributions reach the 402(g) limit, the participant is treated as having elected to contribute an equal percentage of after-tax contributions for the remainder of the year so that matching contributions can continue to be allocated to his/her account. C is considering making an amendment to X which eliminates this automatic after-tax contribution rule and instead permits matching contributions to be paid after the participant's elective deferrals reach the 402(g) limit. If X is amended in such a way, would this feature be subject to benefits, rights and features nondiscrimination testing? I also recall that the coverage regulations provide that if a plan imposes a last day of the plan year requirement as a condition to eligibility to share in an employer contribution, that the employees who fail to meet the requirement would have to be included in the test as nonexcludable employees. What if X instead were amended to provide a true-up match by comparing employee contributions as a percentage of compensation?

You might be better served by someone inside the Beltway, preferably someone who recently worked at IRS or Treasury in that area. I can give you an entire list of names including a recent former Benefits Tax Counsel at Treasury.

No, but the definition of a domestic relaitons order is one which "relates to the provision of child support, alimony payments,or marital property rights to a spouse, former spouse, child or other dependent of a participant," Code Section 414(p)(1)(B)(i).

A participant's former spouse has obtained a court order directing the employer's 401(k) plan to pay a specific sum of money, the vast majority of which will be applied toward attorney's fees for the parties and a small portion of which would be applied to the former spouse for rent, security and moving expenses. While the very small portion of the amount of money could be considered to relate to alimony, can the order qualify if a vast majority of the money is applied toward attorney's fees?

Company X maintains a 401(k) plan. Participant C was born on 10/9/1940 and started receiving minimum distributions during 2010. On February 4, 2012, C dies. Under the RMD regulations, the lifetime RMDs end with the year of the participant's death even if the participant dies before payment for that year was made. This raises the following questions: (1) To whom should the 2012 RMD be paid? and (2) How should the 2012 RMD be tax reported?

Company X provides medical benefits to its active and certain retired employees. Company X is changing its post-retirement medical plan so that if a retired employee who is eligible for such coverage declines to enroll in it, s/he will be forever barred from electing into such coverage. In addition, it is intended that such retired employee cannot get back into the plan through the occurrence of an event that would be a change in status for active employees under its cafeteria plan or that would entitle the retired employee to elect back in through HIPAA special enrollment rights. The only concern is whether HIPAA's special enrollment rights rules apply to retired employees. The Code and ERISA refer simply to "employee" while IRS regs at 54.9801-6 refer to a "current employee." There is nothing in the preamble to the regs which clarifies this. Any thoughts?

The next questions to answer are the following: (1) is the medical coverage insured? (2) if (1) is yes, was the contract issued or renewed after July 1, 2009? (3) if (1) and (2) are both yes, then it would appear to apply. However, if the medical coverage is provided on a self-insured basis, the contract is issued or delivered outside of NYS or the contract is not up for renewal until later, then the answer would be no. If the contract is issued outside NYS, then any state mandates imposed by that state would most likely apply.

An employer has a fully insured medical plan issued in New York which covers employees in all 50 states and US territories. MA has a mandate providing continuation coverage for a former spouse. The statute, found at Chapter 175, Section 110I (a) specifically provides, "The provisions of this section shall apply to any policy issued or renewed within or without the commonwealth and which covers residents of the commonwealth." Does the mandate apply to a contract issued in NYS which covers MA residents?