Christine Roberts

I have left several messages on the VCP status line the IRS posts online (626) 927-2011 over the past several months and have never received a follow up call. The line seems to have gone dark since they switched to electronic submission. Any different experiences out there? Any other suggestions on how to check status of an application?

A lot of the issues here also apply to (k) plans, not just IRAs: https://eforerisa.wordpress.com/2012/04/29/reality-check-on-ira-investments-in-real-estate/

QDROphile are you aware of what state statute might so provide re: governmental plan QDRO fees? Thanks.

I work with doctor and dentist groups frequently and have had success boiling these concepts down into terms they can understand and act on with assurance.

Fidelity has stated that they use the SSA databank to cross-check and verify duplicate SSNs. Whether the initial duplication arises within Fidelity's own databank of participants, I don't know. This is all transpiring w/regard to a 401(k) plan. Not sure of their policy re: IRAs. The problem I have is that there is nothing in ERISA that requires a plan participant to have a valid SSN, that I am aware of, anyway. Also that these individuals continue to meet all plan criteria and Form I-9 criteria for participation in the plan, and continued employment in the US.

Fidelity Investments and, I understand, other large investment providers in the 401(k) space, are performing SSA checks on participants' SSNs and when a duplicate or otherwise "bad" SSN turns up, they are preventing the participant from: taking loans taking a withdrawal or distribution accessing their account online. They will permit ongoing deferrals and employer contributions, but employees are reluctant to continue to defer with no assurances they will ever see their money again. This practice creates a sub-class of 401(k) participants and raises a number of legal issues going beyond ERISA. This is particularly a concern for employers in the agricultural and hospitality fields, who may validly have documented their employees' right to work in the US based on work permits rather than Social Security Cards. Just wondering if anyone else has dealt with this type of situation and whether there are any means by which affected employees can access their retirement savings.

New variable hour employee changes employment status during their initial measurement period, to permanent full-time position. The proposed regulations require that they be "treated as a full time employee" by (a) the first day of the fourth month following the change in employment status or, if earlier and the employee has averaged at least 30 hours/week during the initial measurement period elapsed to date, (b) the first day of the first month following the end of the initial measurement period (including any optional administrative period associated with the initial measurement period). The question is, does "treat as a full time employee" mean to offer immediate enrollment in coverage, or to apply a 90-day (or less) waiting period as applicable to other full-time employees? I think that the (a) and (b) periods are meant to serve as the equivalent of waiting periods (i.e., no additional waiting period applies) but would be interested in comments on the meaning of "treat as a full-time employee" in this context.

Thank you. I agree completely with the $1 dollar point.

Hedge fund has concentration of benefit plan investors (BPIs) nearing 25% threshold under ERISA 3(42) and 29 CFR 2510.3-101(f). However none of the BPIs are qualified retirement plans, only IRAs. Were the level of IRA investment to reach 25% would the hedge fund manager be subject to full ERISA Title I duties when none of the underlying investors are ERISA-covered plans?

The requirement that an individual own at least 5% of a corporation or partnership, for that entity’s interest to be proportionally attributed to the individual, seems to be different depending on whether the attribution is from a corporation or partnership. Specifically, Treas. Regulation Sections 1.1563-3(b)(2) and 1.414©-4(b)(2) both contain illustrations in which a partner with a 4% direct interest in a partnership is excluded from attribution. No mention is made of other forms of attribution – such as family attribution – increasing the 4% partnership interest up to or past the 5% threshold. By contrast, Treas. Regulation Sections 1.1563-3(b)(4) and 1.414©-4(b)(4) contain illustrations in which attribution from a spouse of a 1% additional interest in a corporation increases the 4% partner up to the 5% threshold such that the partner is attributed with a proportionate share of the corporation’s ownership interest in another entity. I have copied the Section 414 regulations below for convenient reference. Does this mean that an individual who is a <5% partner is not attributed with a proportionate share of the partnership's in another entity - period, full-stop, even if, under family attribution rules, the <5% partner's interest would exceed the 5% threshold? But if the entity were a corporation, attribution from the family members would apply, such that the individual whose direct ownership stake is <5% would be attributed with his proportionate share (including through attribution) of the corporation’s ownership stake in another entity? Sec. 1.414©-4 Rules for determining ownership. (a) In general. In determining the ownership of an interest in an organization for purposes of section 1.414©-2 and section 1.414©-3, the constructive ownership rules of paragraph (b) of this section shall apply, subject to the operating rules contained in paragraph ©. For purposes of this section the term "interest" means: in the case of a corporation, stock; in the case of a trust or estate, an actuarial interest; in the case of a partnership, an interest in the profits or capital; and in the case of a sole proprietorship, the proprietorship. (b) Constructive ownership-- (1) Options. If a person has an option to acquire any outstanding interest in an organization, such interest shall be considered as owned by such person. For this purpose, an option to acquire an option, and each one of a series of such options shall be considered as an option to acquire such interest. (2) Attribution from partnerships-- (i) General. An interest owned, directly or indirectly, by or for a partnership shall be considered as owned by any partner having an interest of 5 percent or more in either the profits or capital of the partnership in proportion to such partner's interest in the profits or capital, whichever such proportion is greater. (ii) Example. The provisions of paragraph (b)(2)(i) of this section may be illustrated by the following example: Example. A, B, and C, unrelated individuals, are partners in the ABC Partnership. The partners' interest in the capital and profits of ABC are as follows: (In percent) Partner Capital Profits A 36 25 B 60 71 C 4 4 The ABC Partnership owns the entire outstanding stock (100 shares) of X Corporation. Under paragraph (b)(2)(i) of this section, A is considered to own the stock of X owned by the partnership in proportion to his interest in capital (36 percent) or profits (25 percent), whichever such proportion is greater. Therefore, A is considered to own 36 shares of X stock. Since B has a greater interest in the profits of the partnership than in the capital, B is considered to own X stock in proportion to his interest in such profits. Therefore, B is considered to own 71 shares of X stock. Since C does not have an interest of 5 percent or more in either the capital or profits of ABC, he is not considered to own any shares of X stock. (3) Attribution from estates and trusts—[….] (4) Attribution from corporations-- (i) General. An interest owned, directly or indirectly, by or for a corporation shall be considered as owned by any person who owns (directly and, in the case of a parent-subsidiary group of trades or businesses under common control, with the application of paragraph (b)(1) of this section, or in the case of a brother-sister group of trades or business under common control, with the application of this section), 5 percent or more in value of the stock in that proportion which the value of the stock which such person so owns bears to the total value of all the stock in such corporation. (ii) Example. The provisions of paragraph (b)(4)(i) of this section may be illustrated by the following example: Example. B, an individual, owns 60 of the 100 shares of the only class of outstanding stock of corporation P. C, an individual, owns 4 shares of the P stock, and corporation X owns 36 shares of the P stock. Corporation P owns, directly and indirectly, 50 shares of the stock of corporation S. Under this subparagraph, B is considered to own 30 shares of the S stock (60/100 x 50), and X is considered to own 18 shares of S stock (36/100 x 50). Since C does not own 5 percent or more in the value of P stock, he is not considered as owning any of the S stock owned by P. If in this example, C's wife had owned directly 1 share of the P stock, C and his wife would each be considered as owning 5 shares of the P stock, and therefore C and his wife would be considered as owning 2.5 shares of the S stock (5/100 x 50).

Court can award legal fees in its discretion but it cannot order that the legal fees be included in the QDRO. Thank all of you for your replies.

Is is possible to get attorneys' fees incurred in getting a court order to force a participant to sign a QDRO or otherwise petitioning the court to sign the QDRO on the recalcitrant participant's behalf? The jurisdicton is California but I would be interested in any and all on-topic comments, thanks.

I am looking for sources of guidance on the 408(b)(2) fee disclosure regulation as it applies to a “traditional” multiple employer 401(k) plan, specifically a PEO arrangement. A client has forwarded a fee disclosure packet from Transamerica that identifies itself as a disclosure for the “Principal Participating Employer”/MEP Sponsor (the PEO) and states that Transamerica is not a service provider to any Participating Employer. It also says that the PPE/MEP Sponsor can use the disclosure as a tool to comply with reporting duties for Participating employers but that the packet s not intended to satisfy those duties for Participating Employers. I am wondering if data is even available from Transamerica or other providers, on the Participating Employer level. If you have knowledge of any means by which the PPE could bridge the gap between the “umbrella” disclosure, and disclosures to each Participating Employer, I would appreciate your thoughts and comments.

This is an interesting discussion. I would add the following, from DOL FAQs re: Delinquent Filer Program as specifically applied to top hat plans that failed to file a notice: "Note: If a plan sponsor has more than one top hat plan that is participating in the DVFC program at the same time, a single statement covering all of the plans may be filed consistent with the general requirements for top hat plan filings under 29 CFR § 2520.104-23." (Emphasis added.) Source: http://www.dol.gov/ebsa/faqs/faq_dfvc.html

457(f) plan provides for 10 year cliff vesting schedule; executive director continues working through 10th year and full amount of contributions made to (f) plan are included in her taxable compensation in year 10. We know that rolling risk of forfeiture is no longer permitted under 409A. Is there any reason why the employer could not start a NEW 457(f) plan with a new 3- or 5- or more-year vesting schedule, in Year 11? 409A contains language preventing an employer from starting up a new deferred compensation plan within 3 years of affirmatively terminating and liquidating a plan but I don’t think that completion of a vesting schedule = plan termination for this purpose. Treas. Reg. 1.409A-3(j)(4)(ix)©. Particularly if plan is not limited to Exec. Dir. but also includes other top hat group members. Would welcome any comments pro or con.

457(f) plan provides for 10 year cliff vesting schedule; executive director continues working through 10th year and full amount of contributions made to (f) plan are included in her taxable compensation in year 10. We know that rolling risk of forfeiture is no longer permitted under 409A. Is there any reason why the employer could not start a NEW 457(f) plan with a new 3- or 5- or more-year vesting schedule, in Year 11? 409A contains language preventing an employer from starting up a new deferred compensation plan within 3 years of affirmatively terminating a pre-existing plan but I don’t think that completion of a vesting schedule = plan termination for this purpose. Treas. Reg. 1.409A-3(j)(4)(ix)©. Would welcome any comments pro or con.

Thanks for the comments, George. I appreciate the input. Can I understand your reply to be the same even though a benefit would be available to an employee who voluntarily resigned for reasons other than cause? I.e., your reply could be read to say no bonus if (a) voluntary resignation or (b) fired for cause, when in fact the plan would provide no bonus to an employee who either was fired or resigned for "cause" reasons.

Service bonus policy for non-top hat group provides that company will pay an employee a cash bonus in or immediately following the end of the employee’s final year of employment provided that: 1) The employee has worked for the employer at least 10 years at the time of termination. 2) The employee has received satisfactory performance reviews in the year of termination and in the two years prior (or in the three years prior for an employee who terminates prior to receiving a performance review for the year in question). 3) Termination or resignation is for reasons other than unsatisfactory performance or violation of any company policy or standard of conduct. 4) The employee executes a general release of liability in favor of the company. Timing of payment will comply with Notice 2010-80 and in no event will be made after March 15 of year following year of termination (employer follows calendar year). Benefits are forfeited in event employee refuses to sign release. The Company reserves the right to modify or eliminate the service bonus policy at any time, for any reason, without notice. The amount of the service bonus is completely within the Company’s discretion but generally will take into account the employee’s length of service and final base compensation. Question - does fact that bonus formula is based on past service meant that a deferral election is required upon initial eligibility, e.g., completion of 10 years of service with satisfactory performance reviews? Or does true eligibility not arise until the reason for termination is clear and it is not for unsatisfactory performance, violation of policy? And does fact that termination must meet certain criteria preserve SROF until that time? Any comments are appreciated.

Employer would like to pay cash awards to all employees upon termination of employment for reasons other than cause. Award is available after a set period of service (not very long) and is based on position and pay. Even if the plan were structured to fit within the definition of an ERISA welfare benefit plan (pays no more than 2 x salary within 2 years of termination) it arguably is not a severance plan because it pays benefits "when" termination of employment occurs rather than "because" of termination (PLR 199903032). If not an ERISA welfare plan, must it meet ERISA pension plan requirements? Or does the short-term deferral exception under 409A create a "space" where the plan could exist; i.e., benefit is paid out by March 15 following the year of termination; therefore not "deferred compensation"; if not "deferred compensation" than no concern arising from the fact that the plan is not limited to a top-hat group. What if the plan met another exception than the short-term deferral exception such as the limited amount exception (maximum benefit does not exceed 402(g) dollar limit for the applicable year). Still no "deferred compensation" and hence no need to limit to top-hat group? What if the employer simply inserted the right to eliminate the plan at any time, such that there was no legally binding right to the payment? Would it still be a workable deferred compensation arrangement not limited to the top-hat group? It just seems to me that, between PLR 199903032 and 409A's carve out for involuntary severance benefits, establishing a voluntary severance plans for rank and file employees is not possible save for the 409A exceptions, if in fact those are available.

IRS guidance on how to price coverage provided to domestic partners, for imputed income purposes, has been doled out piecemeal over the years via private letter rulings. Among other options the PLRs provide that amount includible in the employee’s gross income may be calculated as equal to the difference between the amount the employer would contribute for the employee alone, and the amount the employer would contribute for coverage of an employee and a spouse or family, as applicable (i.e., excluding employee contributions). This is a calculation method that will be quite a bit lower than using COBRA premiums as a standard. More recently there has been guidance in Notice 2011-28 and now 2012-9 on how to value coverage for purposes of reporting the value of group health coverage only, not taxing it, on Form W-2. It is not clear to me whether or not the W-2 guidance for reporting only supplants the prior PLR guidance on imputed income calculations of what is actually taxed. In general the PLR guidance on what is taxed, is narrower than the W-2 guidance on what is reported “for information purposes only.” For instance the PLR guidance allows exclusion of the employee’s portion of contributions whereas the new guidance on W-2 reporting specifically provides that employer and employee contributions towards coverage must be included in the value for reporting purposes. Technically of course the PLRs are only citable authorities for the taxpayers who obtained them but I am wondering the degree to which payroll departments that have been relying on PLR-sanctioned methods of calculating imputed income, are switching over to one of the valuation methods cited in Notices 2011-28 and 2012-09.

Provided that the employer contribution to a SEP-IRA meets the minimum percentage of compensation amount, and otherwise meets the requirements in 26 CFR 31.3121(b)(7)-2, is there any reason why this particular savings vehicle would not qualify as a retirement system as defined under SSA Sec. 218?

I would like to know if anyone has purchased/used Sungard Corbel's "prototype" wrap document for multiple welfare benefit plans. I have a self-drafted wrap template but am looking for ways to save time/money for clients and am wondering if the Sungard Corbel product has accomplished those goals for anyone. Thanks.

Independent consulting agreement (subject to 409A e.g., independent contractor does not meet any exclusion requirements) provides for a monthly compensation amount to be paid on the fist day of each month during the 10-year term of the agreement. Even though the agreement creates an enforceable right to compensation paid in a later year (and does not subject the compensation to any substantial risk of forfeiture) does not the "payable on the first of the month" requirement put the arrangement within the short term deferral rule? Same example as above, however the compensation amount is increased by $25,000 per year, payable monthly, provided certain company-wide annual sales goals are met. Agreement is silent on when it is determined that the sales goals are determined to have been satisfied each year. Under these provisions, short term deferral rule is not met. Any comments, rebuttals or thoughts appreciated.

Peter thanks for the comments.

Transition reporting relief applicable to pre-2009 annuity contracts or accounts require that, in order for the contract/account to be excluded from plan assets for reporting purposes, all rights and benefits under the contract or account must be "legally enforceable against the insurer or custodian by the individual owner of the contract or account without any involvement of the employer." (FAB 2009-2). FAB 2010-1 clarified that employer confirmation of the account or contract holder's employment status (active, terminated) is not "involvement" for these purposes. The question is whether or not employer involvement could be inferred from self-serving contract or annuity endorsement language regarding required minimum distributions, such as the example below: MINIMUM DISTRIBUTION REQUIREMENTS FOR SECTION 403(b) PLANS 4. Code Section 403(b)(10) requires a Participant to take withdrawals from the Contract or 403(b) Plan in a manner which satisfies requirements similar to the required minimum distribution rules under Code Section 401(a)(9) and the regulations promulgated thereunder. To the extent they apply to 403(b) Plans, these required minimum distribution rules are hereby incorporated by reference in this Endorsement as a permissible withdrawal, subject to Section 3. This incorporation by reference includes changes made to such minimum distribution rules by legislation, proposed and final regulation, or rulings by the United States Department of Treasury. We assume no responsibility for monitoring withdrawals, mandating distributions or insuring compliance with these required minimum distribution rules. ERISA REQUIREMENTS If this Contract is subject to the requirements of ERISA, we are not the Plan Administrator. Any responsibility related to the appropriateness of any withdrawal, consents (or revocation thereof), or any other fiduciary decision related to the administration of the Plan is that of the Employer or the Plan Administrator. In this particular instance the carrier notifies participants on their 70th birthday of the upcoming requirement to begin RMDs but does not provide follow-up contact. It is my opinion that the self-serving "we assume no responsibility" language in the endorsement does not give rise to any legal right enforceable against the employer, such that a contract or account subject to such language (and meeting other requirements of FAB 2009-2) would still be excludible under 2009-2 transition relief. Basically the responsibility for timely RMDs lies with the former employee and the endorsement language does not change that. However I would be interested in hearing other viewpoints/comments on the issue particularly from readers who have reviewed the same or similar endorsement language.