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ERISA25

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  1. I believe most, if not all, of the large recordkeepers do not withhold local taxes from plan distributions. I assume that it's just too difficult to track and administer the various local tax withholding laws/rules. I would also think that there may be some preemption arguments because it's disruptive to the uniform administration of retirement plans. Without doing any research, I would think that some local jurisdictions would specifically require withholding and some may not (or may not have any rule at all). I'm thinking that the potential liability to a plan sponsor would be low b/c of some combination of the following: (i) the underlying local tax liability belongs to the participant; (ii) it's a low amount; (iii) limited local resources to enforce; (iv) maybe preemption attaches; and (v) market practice of not withholding for local taxes. Anyone have any thoughts/direction on this issue?
  2. The regs and everything I have looked at refer to the "plan sponsor" as the eligible recipient so I think in the context of a single-employer, self-insured health plan that is funded by a VEBA, retiree drug subsidy should be paid to the employer. I think this is an interesting question, but that's my interpretation. Has anyone else looked at this issue?
  3. I'm not an actuary, but trying to get a better understanding of the "most valuable" requirement, as set out in Treas. Reg. Section 1.401(a)-20, Q&A - 16. If a plan uses an interest rate that is more favorable than those prescribed in IRC 417(e)(3) for determining LS and let's say 6.5% for converting among annuity options, would there be a concern that the LS option is more valuable than the QJSA, which is the normal form for married participants? How is the most valuable determination made? Is it simply a matter of using the more favorable factors to determine the present value of the QJSA?
  4. The plan document requires payment to the estate when no beneficiary is named. Would that mean that the benefits are paid to the estate's EIN, taxed to the estate, and then distributed to the estate's beneficiaries? In that case, the beneficiary would not be able to rollover the benefits, correct? And, the beneficiary will be able to itemize deductions for any estate tax paid? If you have any Code citations or formal IRS guidance on this, please provide. Thanks!
  5. If an employee's domestic partner participates in the employer's health plan and then the two (employee and domestic partner) marry during the plan year, does the employer consider the employee married for the entire plan year ( and recoup overpaid taxes for benefits paid while a DP) or should the marriage only be honored on a prospective basis for tax purposes (i.e.,tax breaks apply only for the portion of the year during which they were married)? Any citations would be appreciated.
  6. I've seen some threads on this, but I can't seem to find any that directly answer my question. Assume that overpayments were made to 401(k) participants as a result of the application of an improper vesting schedule. The custodian issued 1099-Rs for the total distribution (including the overpayment). I am comfortable with the EPCRS correction procedure for this error (which includes the plan notifying the participant that the overpayment is not eligible for rollover and asking for the return of the overpayment [and if not returned, plan needs to be made whole]), but, I'm struggling with the tax reporting. Assume for purposes of numbered paragraphs below that the distributions were not coded as direct rollovers: 1) Should the plan instruct the custodian to issue amended 1099-Rs to reflect the correct amount of the distribution and issue a 1099-MISC for the overpayment amount? 2) Alternatively, should the plan only issue amended 1099-Rs if the participant returns the overpayment? Under this approach, the plan would do nothing unless the overpayment is returned. If the distributions were coded as "direct rollovers," I believe the plan would have to issue an amended 1099-R to reflect the amount eligible for direct rollover and the amount not (i.e., overpayment). Any thoughts would be appreciated.
  7. My understanding is that if you have two separate 401(k) Plans in the same controlled group and they separately pass 410(b) coverage testing, then they can also be tested separately for ADP/ACP testing. Does anyone have citations for this position?
  8. I was wondering if someone can tell me whether a plan's nondiscrimination results are reported on the Form 5500. I do not see a specific spot on the Form for such information, but I'm curious to know whether that is something that is addressed in the auditor's report in connection with the Form 5500? Any guidance is appreciated.
  9. Any thoughts on whether beers after a shift at a beer brewery are taxable compensation. It does not appear as though they are provided for the convenience of the employer. The only potential/arguable exclusion I can think of would be as a de minimis benefit.
  10. In a plan subject to QJSA rules, who usually provides the required QPSA notice (which has very specific timing requirements tied to an employee's age)? Does the employer typically provide this notice or is it the plan's TPA?
  11. Section 4204(a)(2) provides that if a buyer defaults on its withdrawal liability obligations, the Seller (or the bond if a bond is used) shall pay to the plan an amount equal to the withdrawal liability that would have been due but for Section 4204. This seems to suggest that no matter the amount of withdrawal liability owed by the buyer (i.e., even if that amount is less than the bond amount), the fund may collect the entire bond amount. This seems rather unfair in light of the fact that the buyer's withdrawal liability is based, in part, on the seller's contribution history. Has there been any guidance with respect to this point? PBGC Opinion Letter 83-10 touches on some of the fairness issues, but it is not directly on point.
  12. Bill: I do not see the attachment. Could you reattach? Thanks!
  13. Does anyone have a 4204 bond document that they can share? I am looking for boilerplate with respect to terms to include (i.e., terms in the actual bond document - not the sale agreement) that would trigger the payment under the Seller's 4204 bond.
  14. The PBGC has indicated that a letter of credit held in escrow satisfies the bonding requirement, but it also said that it is within a fund’s discretion as to whether a given institution is an acceptable party to hold a letter of credit in escrow. See PBGC Opinion Letter 1981-32 (addressing buyer’s bond, but I believe same rationale would apply to seller’s bond). Are funds reluctant to agree to letters of credit? Is it the normal course to approach the fund for permission to use a letter of credit?
  15. ERISA25

    Cutback?

    ESOP currently provides that normal form of distribution is employer stock; ER would like to amend plan to make normal form of distribution cash, but have ER stock as optional form of distribuiton (i.e., participants have to affirmatively elect to receive distribution in ER stock). In my view, there is not a cutback issue because we are not eliminating an optional form of benefit (i.e., we are not eliminating optional protected right to receive distribution in form of employer securities). Any thoughts are appreciated.
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