Christine Roberts

No deferral past march 15 is allowed under the scenario I was asking about.

If a performance based bonus is paid to an employee by March 15 of the year in which it is earned, is the arrangement exempt from 409A; i.e., can the parties dispense with the otherwise-applicable requirement that the deferral election precede the end of the performance period by 6 months?

MPP Plan for professional medical corporation was last amended for TEFRA, DEFRA, & REA in 1985. Accountant for corporation has discovered failure of owner to take required minimum distributions over a 5-year period. Presuming that both the amendment failure and the RMD error can be corrected through VCP, are two separate VCP filings necessary or can both problems be corrected in a single VCP filing?

How are practitioners/administrators handling DCAP enrollment for 2005, given the new definition of dependent under IRC Sec. 152, and in particular the earnings cap imposed on "qualifying relatives"? There is legislation pending to remove the earnings cap for purposes of a dependent care reimbursement arrangement, but it will not likely become law until later this year (2005). Just wondering if people are taking the conservative approach and imposing the earnings cap for purposes of enrollment, or are counting on fix-it legislation to remove the cap sometime later this year.

The answer to your question depends upon whether the various group health plans are self-standing plans with separate Summary Plan Descriptions (SPD), or are combined under a "wrap document" that serves as an umbrella SPD for all the arrangements. If you use a wrap document then your initial COBRA notice could be inserted in the wrap document/SPD, for all plans. But make sure that if some of your group benefits are not subject to COBRA (e.g., disability coverage) that the COBRA section specifically excludes these benefits. Also, you should be very careful in drafting your COBRA election form & notice for qualified beneficiaries - those who have either terminated employment or experienced another qualifying event such as divorce. Make sure each type of coverage that is subject to COBRA rules is set forth clearly so the qualified beneficiaries can choose what coverages they want to continue.

G Burns, sorry for the confusion. The Agency would administer the insured benefit. It would not be a situation where an insurer does admin without selling a policy. I just used the "Administrative Services Only" or ASO arrangement as an analogue but it was unnecessarily confusing. Agency employees would be County employees. The insurance benefit would be available first to County employees (including Agency employees) then possibly to members of the public.

GBurns, the County Agency is trying to determine if there will be ERISA implications in its offer of insurance to several different types of groups, one being member of the public, one being its own employees, one being other County employees. The administration scheme would be similar to an ASO arrangement for an insurer, where the insurer provides admin only not the coverage. Cleary ERISA would not be involved if member of the public were the only participants. And if the only participants were Agency employees and/or other people directly or indirectly employed by the County, ERISA would seem to be initially implicated but the governmental plan exemption would likely apply. The more complex issues come in envisioning a scheme were Agency/County employees are covered, but the insurance is also offered to members of the public. If the two type of benefit were completely separate, possibly the Agency/County arrangement could be an exempt governmental plan, and the benefits provided to members of the public could be an insurance product, only, not a "plan"?

Thanks for the comments. The scenario that is likely to transpire here is that the Agency, which is an express instrumentality of the County will offer either HMO, PPO, or individual coverage to employees of a separate County agency. It is likely that the coverage will be obtained from an insurer but the Agency will administer the benefits, similar to the way it administers federally funded health benefits to County residents. It is likely or possible that some eligible individuals (again, employees of a separate County agency) will themselves qualify for the federally- and state-funded programs that the Agency administers in its normal course of business. So in sum you have one County Agency providing individual and group coverage for employees of a separate County agency. It is possible that the Agency will want to make this same type of coverage available for certain of its own employees but that is only a possible side-effect of the initial offer of coverage to employees of a separate County agency. The governing statutes allow the County Agency to provide insurance under certain provisions of the government code.

County Agency administers publicly funded health care plans serving County residents. It is a creature of state law and its board is chosen by County Board of Supervisors. The Agency devises a health insurance product directed at a sub-class of employees of another, unrelated County Agency. The Agency is also considering offering the health insurance coverage to other County employees, to School Board employees, to its own employees, and to members of the public. Is it safe to assume: 1) that offering the health insurance to employees of the sponsoring Agency would be an employee welfare benefit plan that is exempt from ERISA Title I as a governmental plan? 2) that offering the health insurance to members of the public would not implicate ERISA but would instead fall within the state's insurance laws, under ERISA's savings clause? 3) that offering the health insurance to other governmental employees (e.g., employees of the School Board and the County) would not implicate ERISA but would instead fall under the state's government code provisions governing benefits for civil servants? Or is it also possible that the Agency sponsoring the health insurance could be deemed to be an "employer" of non-Agency governmental employees, either under by acting "indirectly in the interests of an employer" under ERISA Sec. 3(5), or under common control/controlled group principles under the "good faith" standard set forth in IRS Notice 95-48? Any advice/commentary welcomed.

The new deferred compensation provisions under the Jobs Creation Act (Sec. 409A) except bonus or other deferred compensation that is paid out within 2 1/2 months into the year following the year the compensation was earned. Does that mean that a perfomance bonus earned in 2005 that is completely paid out to the participant by March 15, 2006 is not subject to the requirement that the deferral election be in place on or before June 30, 2005??

Well, the reason it bounces back is that plans don't usually define "employment" in this context as "employment with the plan sponsor." This allows the participant to claim that they indeed terminated "employment" in the abstract, due to the disability; i.e., they no longer work at the job they held at the time they were disabled. What I am finding is that you can usually work your way through various defined terms (e.g., service, hour of service) in a way that eventually leads to a reference to the plan sponsor as the "employer" for these purposes. But it would be nice to have some external authority for this.

Can anyone weigh in on how the term or concept of "employment" is defined under ERISA? Specifically, that "employment" is always meant to exclusively refer to the employment relationship between the participant and the employer sponsoring the DB plan, and not some other employment relationship. The reason is as follows: DB plan permits a disability retirement payout if a participant terminates "employment" on account of a disability. A former employee is requesting a disability retirement benefit but it appears that she terminated employment with the plan sponsor for reasons other than disabilty, but later became disability. Presumably, the term "employment as used in this context means only "employment" between the plan sponsor and the participant. But what statute, regulation, or published opinion supports this assumption? Any and all comments appreciated.

A medical corporation maintains a 105(h) medical reimbursement plan. They do not have a cafeteria plan. They also offer an HSA as well as non-high-deductible PPO and HMO options. Given the IRS guidance (in Rev. Rul. 2004-45) on coordinating HSAs with HRAs and health FSAs, is it appropriate to treat a self-standing 105(h) plan as the equivalent of a health FSA, or is the Rev. Ruling. limited to health FSAs that are nested inside a 125 arrangement? The corporation wants to allow participants to be reimbursed, under the 105(h) plan, for the high-deductible deductible under the HSA. Its my conservative understanding that the IRS wants HSA participants not to be insulated from that high-deductible, such that the "health FSA" terminology would be extended to include self-standing 105(h) plans. Any comments appreciated!

Per pax, posting on the NQDC board, page 524 of the conference report excludes all 457(b) plans, whether organization-wide, or top-hat.

I appreciate the comments. However, here is what led to my query: the legislative commentary on the Act states that "a governmental eligible deferred compensation plan (sec. 457) is a qualified employer plan under the provision" (and hence exempt). The commentary goes on to say "Plans subject to section 457, other than governmental eligible deferred compensation plans, are subject to both the requirements of section 457, and the provision." How would a private tax-exempt employer's top-hat 457 plan not be a section 457 plan other than a governmental deferred compensation plan, and hence subject to both the provisions of 457, and the Act?

New deferred comp rules under American Jobs Creation Act do not apply to eligible 457(b) plans. Presumably this means an organization-wide deferred comp plan of a governmental or private tax-exempt employer, and NOT a top-hat 457(b) plan for the executive of a private non-profit; i.e., the new deferred comp rules DO apply to a top-hat 457(b) plan??

New deferred comp rules under American Jobs Creation Act do not apply to eligible 457(b) plans. Presumably this means an organization-wide deferred comp plan of a governmental or private tax-exempt employer, and NOT a top-hat 457(b) plan for the executive of a private non-profit; i.e., the new deferred comp rules DO apply to a top-hat 457(b) plan??

Thanks - and is your moniker related to jazz (as suggested earlier) or the late, great Boston Celtics?

Thanks for these comments - an employer contribution would not work because only about 30% of total participants were invested in the GIC. One suggestion I have seen elsewhere on these boards is to pay the affected participants the difference in cash, outside the plan, and subsequently allow them to make an extra deferral under the plan.

Employer is converting retirement plan assets from a variable annuity/GIC arrangement, to mutual funds. Approximately 30% of participants are invested in the GIC. Employer can avoid paying a large surrender charge under the GIC only by moving GIC funds to a money market two months prior to the conversion date. Employer has calculated that each of the 500 or so employees invested in the GIC will lose approximately $10 in earnings during the 2 month holding period, and would like to make a $5,000 restorative payment to the plan to make them whole. Employer would not treat restorative payment as a deductible plan contribution, just as added earnings under the plan. Employer will comply with blackout disclosure rules. Is a restorative payment of this type permissible? Can it be reported on Form 5500 in a way that does not invite an audit?

If the EOB shows the names of medical care providers, dates of treatment, etc., it is going to be PHI.

It turns out that the assignment of income problem is the bigger hurdle here. Transferring the cash value of unused vacation time to other employees would most likely constitute an assignment of income such that it would be included in the taxable compensation of the donating employee, rather than the donee. The IRS carved out a very small, time-limited exception to the assignment of income rule following 9-11, to allow employers to establish plans that transferred the cash value of unused leave to charitable organizations related to the disaster. See See 2001-64 and 2001-69, which were applicable to contributions made before January 1, 2003. In Notice 2003-01, the Service declined to extend its ruling to contributions made after 2002, and also declined to amend Treasury Regulations under Internal Revenue Code Section 61 to exclude leave-based donation programs from the assignment of income doctrine.

From the DOL online guide to QMCSOs: Q1-23: When must a plan begin to provide coverage to an alternate recipient pursuant to a QMCSO? It is the view of the Department that following a determination that an order is qualified, the alternate recipient (and the participant, if necessary) must be enrolled as of the earliest possible date following such determination. For example, if an insured plan only adds new participants or beneficiaries as of the first day of each month, such plan would be required to provide coverage to the alternate recipient as of the first day of the first month following the determination that the order is qualified. As described in Q’s 1-8 and 1-9, the state laws described in section 1908 of the Social Security Act require that when a child is enrolled in a plan pursuant to a court or administrative order, that enrollment be made without regard to open season restrictions. [§ 1908 of the Social Security Act]

Thanks for this comment. I wonder if this provision is limited to leave sharing in the event of medical emergencies, or if other types of catastrophes (death in family, fire, etc.) are covered. Also raises the question of whether the process of determining eligibility creates an administrative scheme such that the leave sharing program becomes an ERISA plan.

That may be because UCLA is a state entity and may not have to worry about the prohibition on forfeiture of accrued, unused vacation. HOWEVER, another thought has occurred to me - Cal. Labor Code 227.3 only prohibits forfeiture of vacation pay upon termination of employment. It does not expressly prohibit a voluntary forfeiture the employee elects. So it may be that there is not an inherent conflict between the "haircut" provision needed under federal law to avoid constructive receipt, and California's anti-"use it or lose it" provision. Additional comments appreciated.....