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Could you be more specific as to which DB accrual rules such a provision would violate? Thank you.

Employer X maintains a cash balance plan. It wants to amend the cash balance plan so that it only has to make a principal credit for a plan year if an employee is employed on the last day of the plan year. Is there any reason they cannot do this? Thanks,

Acquirer maintains a qualified 401(k) plan and Target also maintains a qualified 401(k) plan but it requires spousal consent with respect to certain distribution elections and plan loans (even though it does not provide for an annuity form of distribution except as applied to a merged money purchase plan). Acquirer would like to merge Target's plan into its own. May Acquirer delete the provisions of the Target plan requiring spousal consent even though it is not legally required?

To effect the election of an employer decision to exclude seasonal employees, does the employer need to do anything official, such as amend the plan, adopt a corporate action (e.g., through board resolutions), file anything with the IRS, DOL and/or HHS?

Some states have non-discrimination laws in effect that prohibit discriminating both in favor of younger employees and against younger employees (in English, they prohibit age discrimination both against older employees and against younger employees). Given the ERISA preemption angle, this would not be as likely to survive preemption. In addition, to the extent the employee is age 65 or older (and therefore Medicare eligible) ADEA specifically permits the provision of less employer-provided medical for Medicare eligible employees without violating the age discrimination prohibition against discriminating against older employees. This is because they are eligible for and deemed to have elected to be covered under Medicare.

However, please note that the Code allows employers to cover a "reasonable classification of employees." If interns are not defined by reference to a duration of time or hours worked per any period of time, you might be able to hang your hat on this, especially if the employer develops reasonable criteria for classifying interns. One possibility might be to develop a program with hr recruiting which ties in to regional colleges and universities and provides employment for these individuals for a semester or trimester or less, so that they can write a paper summarizing their experiences to their professor to get a grade and have periodic meetings with interns at that institution to compare notes, and allow enough free time at the end so they can concentrate on their final exams. If you develop the classification in that manner, the exclusion should hold up. If you hire the person as an employee, however, his/her service as an intern must be counted for benefits purposes.

I have a situation where a client wants to categorically exclude interns from participation in a 401(k) plan. Before posting this, I came across a thread between 2010 to 2011 on the subject and whether suh an exclusion could be viewed as a violation of Code Section 410(a) as imposing an indirect service requirement. I am not completely confident that this could completely avoid the issue but could an employer adapt language used to exclude independent contractors from the plan to interns? Namely, any individual who is classified by the employer as an intern and has entered into a written agreement with the employer providing that such individual is excluded from the employer's employee benefit plans? r

A client has a number of participants who took out plan loans and then default due either to failure to make repayments or termination of employment. The client is filing under VCP and proposing to correct by reamortizing those loans to allow a longer period of correction for those participants who are within the five-year period for repaying plan loans. According to Section 6.02(6) of Rev. Proc. 2013-12, "the employer should pay a portion of the correction payment on behalf of the participant equal to the interest that accumulates as a result of such failure--generally determined at a rate equal to the greater of the plan loan interest rate or the rate of return under the plan." Does anyone have any thoughts on the meaning of the term "rate of return under the plan?" It might be easiest if the client took the pure earnings amounts on the previous year's Form 5500 and compared it to the beginning plan balance to arrive at the "rate of return under the plan." Thoughts?

I have a client that has a number of participants with plan loan problems. About half of the affected participants have terminated. I am proposing to file a VCP application and propose that the correction would be done by allowing the affected participants to reamortize their loans for up to the 5-year limit. I am also proposing that no reporting of these corrections take plan on Form 1099-R. Does anyone with experience dealing with the iRS loan corrections in VCP know if the IRS allows the reamortization approach as applied to former participants? Thank you.

Employer X offers its employees a health plann with a menu of choices. One of the options available to employees is a high deductible health plan ("HDHP") in tandem with a health reimbursement arrangement ("HRA"). Normally, the HDHP would have declined claims for expenses and applied them to the deductible until it was reached. However, the employer would pay those amounts to the employee under the HRA. It was recently uncovered that the insurer had been paying claims incurred from the beginning of the year under the HDHP in spite of the deductible (so the plan was working in direct opposition to the way it would currently work). The HRA is, of course, funded by employer money. Once this situation was uncovered, it was corrected prospectively. However, for those employees who were reimbursed under the HDHP, what options are available to effect correction? The only options occurring to me are: (1) treat the employees' reimbursement as if they had actually been made under the HRA rather than the HDHP but credit these amounts toward the deductible under the HDHP (this might require a wash transfer of monies from the employer to the insurer and vice-versa); or (2) require the employees to reimburse the insurer for the amounts incorrectly paid under the HDHP and the employer would cut a check for an equal amount under the HRA. If this option is chosen, does the employer have to tax-report those amounts paid to employees who fail to reimburse the plan?

A client has proposed to issue an SAR for all of its plans with a generic cover page, a back page summarizing the participant's rights and an attached spreadsheet which references all of the plans and contains the numbers used to fill in the blanks for what has to be in the SAR. Is this a valid way to do this? While I have no objection to having one giant SAR for all of the plans with each plan listed separately, I think the spreadsheet would be too confusing to the average participant. Any thoughts?

My client's traditional defined benefit plan is doing a lump sum window and hopes to open it up to alternate payees. The recordkeeper has suggested an approach that would simplify the eligibility of potential alternate payees to elect a lump sum. If there is a divorce decree and the decree mentions division of the pension, then further documentation is requested from the participant and/or his/her soon-to-be former spouse. If no division is mentioned in the decree, then no further documentation is mentioned and the only change that will occur is a change in marital status for the participant from married to single. Does anyone have any reason to object to the taking of this type of approach?

I am looking into whether a health plan's smoker surcharge should be included in the cost required to be reported on the Form W-2. For the surcharge itself, since it is a type of wellness program, it seems clear that it would be reportable if coverage is provided under a group health plan. See IRS Notice 2012-9, Q&A-32. However, if the provider of the program charges the employer a program fee which is not passed through to employees, should that be included in the reportable cost since it is a cost of the group health plan? Or is it treated as a wellness program for which the employer does not charge a premium and would be excluded from the reportable cost?

Assume company A is the group policyholder on Insurance Company L's medical insurance policy. Employee E participates in Company A's cafeteria plan, elects medical coverage under L's policy with A paying 60% of the total amount due and E paying 40% on a pre-tax basis. During 2014, L issues a medical loss ratio rebate to Company A in the amount of $10,000. If Company A elects to pay the rebate to those who were participating in the plan for the year the premiums giving rise to the premium were paid, even if they no longer participate in such plan or are no longer employed by A, on what tax form would A report the taxable rebate paid to E if s/he were a former employee during 2014? An active employee during 2014?

I am handling a DFVC correction for failure to file Forms 5500 for three plan years. The following questions have arisen: (1) Is an ERISA 403(b) sponsored by a 501©(3) entity which is neither a government nor a church and which is funded solely with an annuity contract eligible to file Form 5500-S/F? In other words, would such a 403(b) plan satisfy the requirement that 100% of its assets constitute "eligible plan assets?" (2) Is such a 403(b) plan subject to ERISA's minimum funding standards? Thank you.

It does.

I have a client that recently received a letter from the IRS asking about a 5500 from a prior year which it claims was not filed. I know that the DFVC program ceases to remain available after the "date on which the administrator is notified in writing by the Department [of Labor] of a failure to file a timely annual report under Title I of ERISA." Does the fact that the IRS and not the DOL is sending the letter mean that the sponsor can still avail itself of DFVC?

The American Taxpayer Relief Act of 2012 restored parity between the monthly limit for mass transit and qualified parking, retroactive to 2012. How can an individual retroactively take advantage of this change in filing his/her 2012 federal income tax return? Is it based on the actual amount paid for transit up to the limit and can the individual claim a tax credit for the difference. Assume an employee participated in his/her employer's qualified transportation fringe benefit program during 2012, electing a mass transit pre-tax amount of $125 and that his/her mass transit fare exceeds even the $240 adjusted limit. If the monthly fare were equal to $250 and the individual elected $125 in pre-tax amounts and $125 in after-tax payroll deductions, could the individual claim a tax credit equal to the FICA and federal income tax withheld on the additional monthly $115 s/he is now able to claim retroactively?

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.