Christine Roberts

Not for profit employer maintains an ERISA 403(b) plan, and a 401(a) plan (money purchase). Terminating employee wants to roll 401(a) money over to the 403(b) plan. There is no group annuity, just individual annuities/custodial accounts, on the 403(b) side. 401(a) plan permits rollovers TO a 403(b) plan; 403(b) plan does not currently permit rollovers FROM any source other than a 403(b) plan or account. Can post-term rollover from 401(a) to 403(b) happen (presuming 403(b) is amended to allow it)?

The trustee of a defined benefit plan makes an investment in what seems to be a legitimate investment but is later revealed to be a Ponzi (pyramid) scheme. The plan was an early investor in the scheme and realizes a gain of over $30,000 in the investment. The investment is revealed to be a Ponzi scheme and later investors bring a class action against to recoup their investments. Can they obtain recovery from the DB plan? Can the DB plan participants sue the trustee for fiduciary breach, even thought the plan made money on the investment?

Hi, Liz - My EBIA manual on HIPAA compliance says this about the notice requirement for special enrollment rights: "The Interim Regulations require that plans provide notice of special enrollment rights on or before the time an employee is offered the opportunity to enroll. The regulations provide the following model description of the special enrollment rules: [text omitted] Employers should include the text of this model description on their plan enrollment forms or on a separate form included with enrollment materials. Merely including the statement in the SPD would be insufficient, because employees who decline coverage are not given an SPD and therefore would not receive notice of their special enrollment rights. Note that the sample DOL audit document request letters request [sic] copies of this notice and a distribution log." I hope this helps somewhat...!

If you search this forum for "wrap" documents you will find discussions of how to satisfy SPD requirements with a brief attachment that incorporates the insurance booklet by reference.

Under HRAs the employer can impose a cap on carry-overs from one plan year to the next -e.g., max carry over is 50% of the annual reimbursement budget. Is it permissible to cap lifetime accruals, as well? E.g., maximum accrual under the plan limited to $50,000.

Answering my own question - no, per DOL Reg. 2550.408b-1(a)(4) - Example (1) (T, trustee of plan P, receives loan on the same terms as other participants - loan not a PT)

Partner with greater than 10% interest in a p'ship may take out a loan from p'ship qualified plan, per PT exemption under EGTRRA. However, plan is being amended to name individual partners as named Trustees. Would not loan to partner now constitute a PT, despite the EGTRRA exemption?

If these savings vehicles become as popular as they are predicted to be, it would be nice to have some clue as to documentation requirements. I don't know how the HSAs will be documented themselves but I would expect that ERISA would require at minimum a "wrap" summary plan description outlining the high-deductible plan that is linked with the HSA, and the HSA features. Any comments/suggestions.......?

Many medical surgicenters are established in such a way that they are partly owned by the physicians who treat patients at the surgicenter, often giving rise to affiliated service group arrangements, or ASGs. I have heard that there is a private letter ruling issued to a large law firm (Jones, Day?) in which the IRS takes a non-enforcement stance on such arrangements. Is anyone aware of such a PLR?

Thanks for two helpful points: (1) the DOL is being flexible in resolving plan asset errors resulting from demutualization (depends upon facts, of course) and (2) it appears they are getting lists of who to audit from the insurance companies. Sort of what I expected - thanks for the input.

The DOL appears to be making pre-field audit inquiries into whether health plan sponsors properly allocated proceeds of the Principal's demutualization. The inquiry is only relevant if plan participants were required to pay all or part of health plan premiums for themselves or their dependents. The inquiries are not triggered by Form 5500 filings. I am seeking comments from other practitioners who have had to deal with such inquiries. Thanks.

I agree Example 5, quoted above, applies to the early retiree plan, but my advice to the client in this situation is to offer COBRA to all participants (retirees and dependents) in the early retiree and the Medigap plan. Participation in the Medigap plan commenced upon an employee's retirement at age 65 (Medicare eligibility) and Medicare entitlement (enrolling in Part A or B) followed. All retiree participants are enrolled in Medicare thus must be offered COBRA if the plan terminates, per my understanding. In addition, the retiree coverage (Early retiree and Medigap) cost more than active employee coverage an my understanding is that this is a loss of coverage under the 2001 final regulations.

Kip, thanks for diving in on this one. Yes, all retirees themselves are enrolled in Medicare - one of the retiree's dependents is not yet eligible for Medicare, however, and presumably COBRA would have to be offered to that individual.

Employer elects to terminate two different types of retiree group medical plan: 1) an early retiree medical plan that offered the same coverage as was available to actively employed employees; and 2) a Medigap plan available only to retirees who were enrolled in Medicare Part A & B. Employer never offered COBRA to employees transitioning to these plans. Employer is now terminating both plans effective next year and intends to offer COBRA to those former employees (and dependents) who are enrolled in the early retiree plan. (Even though Treas. Reg. Sec. 54-4980B-4, Question 1, Ex. 5 only appears to require COBRA be offered to qual. beneficiaries whose 18 month period of coverage did not expire under the employer's alternate coverage). But for those in the Medigap plan, isn't COBRA available only to the spouses and dependents of the Medigap plan participants, upon plan termination?

Several not-for-profit organizations are contemplating a merger. One of the entities sponsors a 403(b) plan that is subject to ERISA (includes employer match), while two other entities sponsor non-ERISA 403(b) arrangements. The entities sponsoring the non-ERISA plans will cease existence as part of the merger. Will employees of these former entities be able to transfer custodianship/trusteeship of their 403(b) accounts over to the surviving organization's ERISA 403(b) arrangement?

Company maintains a self-funded national plan for which a TPA has developed fully-insured equivalent premium rates. There are 27 locations and each location has a different fully-insured equivalent rate. How does the employer calculate the COBRA rate? Does it look at the Plan as a whole and come up with a national COBRA rate or does it base the COBRA rates off the fully insured equivalent at each location? Since the COBRA statute refers to coverage costs for "similarly situated" active employees, and since regional differences in health costs is a factor that goes toward determining whether or not one is "similarly situated," I am presuming that different COBRA rates for different regions is appropriate, assuming different regional coverage costs. Any comments appreciated.

As failure to meet minimum coverage and or nondiscrimination failures are deemed to be demographic failures, the Voluntary Correction Program, but not self-correction, is available under EPCRS, I have confirmed.

For an employer that failed to recognize it was part of an affiliated service group (ASG) and thus failed to include eligible employees and/or failed discrimination testing on an ASG basis, is EPCRS available under Rev. Proc. 2003-44? I am not aware of any express correction methods for ASGs or controlled groups, but wouldn't the consequences of an unrecognized ASG or controlled group, as mentioned above, would seem to fall squarely within the Rev. Proc. and be susceptible to self correction?

Thanks for your thorough assistance.

A health care provider provides health services to the public, and also provides health services to its own employees under a self-funded group health plan. In such instances is it recommended to maintain one notice of Privacy Practices ("NOPP") for the hospital to provide to member of the public who become patients there, and a separate notice for employees of the self-funded group health plan who are treated at the hospital or one of its clinics? I am thinking "yes" is the answer but am not sure of any regulatory support.

Has anyone encountered a model document for Health Reimbursement Arrangements?

A 501©(3) org. has maintained a non-ERISA 403(b) arrangement since 1990. In 2002 the plan is "restated" as an ERISA 403(b) plan with employer matching contributions. Is this in fact a restatement, or is it a creation of an entirely new plan? More specifically, should the plan document/Form 5500 identify the initial effective date as being in 2002 or 1990? I am thinking the former, but cannot recall any statute, regulation or guidance that is directly on point as to the correct answer.

A couple who had divorced and obtained a QDRO dividing the husband's retirement plan account decide to remarry. The wife's share of the husband's account was segregated within the plan but never transferred out of the plan. My understanding is that it is possible to get a court order declaring a QDRO null and void, but that un-segregating the segregated account may constitute a breach of fiduciary duty under ERISA. Does anyone know of legal authority to this effect?

A 401(k) participant names his spouse as beneficiary of his 401(k) plan, then divorces. The MSA contains mutual disclaimers of each party's retirement benefits and is notarized. Its a community property state. He changes his life insurance beni designation from the ex-wife, to his mom, but forgets to make a corresponding change under the 401(k) plan. The participant dies. The ex-wife is now a non-spouse, named beneficiary. The mom wants the retirement benefit. Can the ex-wife disclaim interest in the benefit, so the mom can get it? The plan definition of beneficiary says that in the absence of a designation, it goes first to a spouse, then to children, then to the participant's estate. He has no children.

Kristina, I think you have an "alternative coverage" situation. You offer COBRA or the Medigap coverage to active employees who lose HMO or PPO eligibility at age 65. If they choose Medigap, its "alternative coverage" and if another qualifying event takes place (e.g., termination of coverage), then you offer COBRA a second time. I believe this is addressed in Paul Hamburger's COBRA Q&A column (see link below). http://benefitslink.com/modperl/qa.cgi?db=...=qa_COBRA&id=15