Carol V. Calhoun

The plan is clearly governed by at least one federal law: Internal Revenue Code section 403(B). However, the provisions governing 403(B) plans in general tell an employer what it is required to provide, and what it is forbidden from providing, but then let the employer select the specific provisions within those parameters. Thus, if the 403(B) plan does not permit the sort of distributions which can be rolled over, nothing in federal law will make it do so. ------------------ Employee benefits legal resource site

No. Even in the context of a 401(k) plan, a plan need not require employees to suspend contributions if the employer is willing to use other means to determine whether an employee has other resources with which to meet the financial need. In a 457 plan, the safe harbor of requiring the suspension of contributions is not available, so the employer must always verify whether the employee has other financial resources which could be used to meet the financial need. In doing so, the employer should consider whether the employee plans to make future contributions only insofar as discontinuing contributions might in some instances be an alternative way of meeting the need. ------------------ Employee benefits legal resource site

Actually, the mutual funds must be held in a custodial account, so as long as the bank custodial account you refer to does nothing but hold mutual fund shares, the custodial account should not have a problem. But it should not have named trustees. I'm wondering exactly what those named trustees do, in any event? ------------------ Employee benefits legal resource site

Just remember that "soon" in IRS time and geological time have similar meanings.

I don't believe that they have so far, although last I heard, they were working on it. Anyone else heard of anything new in this area? ------------------ Employee benefits legal resource site

For those of you who may have missed the notice on Benefits Buzz page, a case has now come down clarifying this issue. Colville Confederated Tribes v. Somday, 2000 U.S. Dist. LEXIS 7037 (E.D. Wash. 2000) held that a plan of an Indian tribal government was a "governmental plan" for ERISA purposes. ------------------ Employee benefits legal resource site

Actually, a multi-employer welfare arrangement ("MEWA") is something you want to avoid, not something you want to strive for. Under ERISA, most employee benefit plans are exempt from most state laws. ERISA provides, however, that a MEWA is subject to state as well as federal law. However, it appears that you are asking whether it is possible to set up a health benefit plan for a number of governmental employers. The answer is yes, provided that state law allows it. Governmental plans are not subject to the preemption provisions of ERISA in any event, so they must comply with state law whether or not they are MEWAs. However, it is quite common to have a governmental health plan which covers various governmental entities, so long as that plan complies with applicable state and local law. ------------------ Employee benefits legal resource site

Alas, at the moment there really isn't one. I'm currently writing the Governmental Plans Answer Book, scheduled to be published by Panel Publishing this December, for that very reason. ------------------ Employee benefits legal resource site

I always have a governmental plan issue a Notice to Interested Parties in connection with the filing of a determination letter request. It seems to me that a plan is "described in" section 410©(2) if it is described in any one of the paragraphs of section 410©(1). Governmental plans receive the benefit of section 410©(2) and therefore are described in that section inasmuch as they are exempted from the rest of section 410© by section 410©(2). The language of the second clause of section 410©(2) was intended to exempt governmental plans from rules governing nondiscrimination in plan coverage, but did not cause them not to be described at all in section 410©(2). ------------------ Employee benefits legal resource site

No, this merely means that the pre-1989 distributions are subject only to the pre-1989 distribution requirements, not to the actual distribution method elected before 1989. Although the statute did not contain distribution requirements for 403(B) plans prior to 1989, private rulings had required in general that distributions begin by the time the participant attained age 75, or would have attained age 75 if s/he had not died. ------------------ Employee benefits legal resource site

The nondiscrimination rules of 403(B) plans, except as regards salary reduction contributions, are identical to those for qualified plans. See Code section 403(B)(12)(A)(i), which specifically cross-references the Code sections covering nondiscrimination by qualified plans. Of course, if you have a state or local governmental plan, it may be exempt from at least most of the nondiscrimination rules, regardless of whether it is a 401(a) or 403(B) plan. ------------------ Employee benefits legal resource site

A couple of additional comments: a 403(B) does not require either discrimination testing (except for the universal availability rule for salary reduction contributions) or Forms 5500 if it is a governmental or church plan. If it is not, then JWBrown has provided a summary of the ERISA coverage rules. Note, however, that the 403(B) nondiscrimination rules for salary reduction contributions are much less onerous than the comparable 401(k) rules, as they require only universal availability, not ADP testing of actual contributions. ------------------ Employee benefits legal resource site

No, there could be a range of permitted contributions. But the one-time irrevocable election rules would then apply not only to the decision, but as to the level of contributions. For example, suppose that a plan permitted contributions equal to 2, 3, or 4 percent of compensation. A participant could make a one-time irrevocable election to contribute at a 3 percent rate. However, the participant could not thereafter switch to a 2 or 4 percent rate, and could not cease to participate at all. ------------------ Employee benefits legal resource site

A good question, but unfortunately one which does not, to my knowledge, have a clear answer. Only recently have 457 plans had trusts which were treated for tax purposes as entities separate from the employer. (And even now, only governmental plans have such trusts; plans of nongovernmental tax-exempts do not.) So long as the trust was treated as part of the assets of the employer, it was simple enough for the employer just to take mistakenly contributed money back. Now, for governmental 457 plans, we have a situation in which the plan must have a trust. The statute indicates that such a trust is subject to exclusive benefit rules. However, it is not clear whether those exclusive benefit rules include the same exceptions as would apply to a qualified plan under Code section 401(a)(2). ------------------ Employee benefits legal resource site

One of the difficulties here is determining how large the market is for such plans. For many providers, it makes sense to draft a form ERISA document, because the potential market for that is very large -- and in fact, as you point out, includes even governmental plans which use ERISA-based documents. Thus, the cost per potential client for devising a plan is correspondingly small. The market for a non-ERISA plan is, of course, much smaller, and thus the cost/benefit ratio for the provider is much less favorable. So far, at least in my firm, we have not found enough of a market to make it economically feasible to develop a prototype, even though the bulk of our work is for governmental employee benefit plans. ------------------ Employee benefits legal resource site

The cite is really 414(h)(2) itself, which states that the contributions are treated as if they were employer contributions. Thus, they are part of annual additions if and only if they would be part of annual additions if the employer had made them without salary reductions. For example, an employer contribution to a defined benefit plan would not normally be treated as part of annual additions, unless the contribution was credited with actual trust earnings (and therefore would be treated as made to the defined contribution portion of a hybrid defined benefit/defined contribution plan). Obviously, this is a gross simplification, and you'd need to consult the regulations under 415 to determine when an employer contribution is and is not treated as part of the annual addition. But the general rule is that a picked-up contribution is treated just the same as an employer contribution would be for annual additions purposes. ------------------ Employee benefits legal resource site

So long as there is only one employee, the nondiscrimination rules should not be an issue. ------------------ Employee benefits legal resource site

Because this is an ERISA plan, it should be subject to the same fiduciary rules as a 401(k) plan. ------------------ Employee benefits legal resource site

Try clicking on this link to get resources on the DB/DC issue from a governmental plans perspective. ------------------ Employee benefits legal resource site

We've looked at this, and it does not appear that there is a governmental exception to the 401(h) rules. Anyone else found one? ------------------ Employee benefits legal resource site

For a more direct link to the RFP, you can click here. This document requires the free Adobe Acrobat Reader to read or print. ------------------ Employee benefits legal resource site [This message has been edited by CVCalhoun (edited 05-02-2000).]

Well, typically it would have to be the employer which would require plan participation as a condition of employment. However, in the case of a statewide plan embodied in a statute, the difference may not be meaningful, because the state statute would govern the employer (the state and/or local governments) as well as the plan itself. From an IRS perspective, there is no problem at all with making plan participation a condition of employment. However, you need to check applicable state and local law carefully. States may, for example, have laws stating that no amounts may reduce an employee's paycheck unless the employee voluntarily consents to them. Under such circumstances, it may be better to have plan participation something as to which employee's make an irrevocable choice at the time of first employment, rather than making it something which is required as a condition of employment. Either approach works from an IRS perspective. ------------------ Employee benefits legal resource site

Have you checked out the recent IRS Coordinated Issue Paper on this topic? ------------------ Employee benefits legal resource site

In the original question, the statement was made that although the new employer was making MEA calculations, the old employer's plan was a "defined contribution plan." Because there were no references to it being a 403(B) plan, or to the old employer doing MEA calculations, I made the assumption that the old plan was a 401(a) or 403(a) plan, not a 403(B) plan. (Note that it is not the status of the employer, but the type of plan, which is relevant.) Moreover, there are special rules if the employee makes a C election under the new employer's plan.) The situation would indeed be different if both the old and new plans were 403(B) plans. Because 403(B) plans are treated as if they were maintained by a business controlled by the participant for 415 purposes, two 403(B) plans for the same participant would indeed have to be combined for 415 purposes. Nevertheless, this situation does not require an extensive exchange of information between the two employers. This is because the 415© limit is equal to the lesser of 25% of compensation or $30,000. Thus, if the first plan has put no more than 25% of the compensation received from the first emplyer into the plan, and the second employer has put no more than 25% of the compensation received from the second employer into the plan, the limit will not be exceeded unless the aggregate contribution exceeds $30,000. The participant or the prior employer should be able to certify (a) whether the old plan was a 403(B) plan, and (B) what the total dollar amount of contributions to it for the current year was.

Sorry, got off on a tangent here. Yes, we have looked at the issue, and agree with you. ------------------ Employee benefits legal resource site