ERISA25

The calculations for determining withdrawal liability (both partial and complete) tend to look at an ER's contributions over past 5 years or so. What happens if you have only been in plan for one or two years? How is the calculation done?

We have a situation where the merger of two plans within same company occurs on 13/31/10, but assets will not be transferred until 4/01/11. It's always been my understanding that the date of the merger is controlling for purposes of Form 5500, so that in this case legal control of the assets transferred on 12/31/10 and the former plan will file a final 2009 Form 5500 and will not file for 2010. I have read previous posts on this point and that seems to be the consensus, but I am unable to find any guidance supporting this position. Can anyone cite to some guidance on this point?

I'm trying to find authority on this point. Can you merge a plan retroactively? For example, if plan year is 7/01/09 - 6/30/10, could you in August, 2010 make the merger retroactive to 6/30/10? If permitted, I assume that would mean that a 5500 filing would not be required for 2010 plan year. In other words, 2009 filing would be the last.

I was wondering if anyone can cite to an article that summarizes the process for a leveraged ESOP in bankruptcy, or if someone can provide a general summary of the process.

With respect to a situation where a withdrawal and demand for withdrawal liability occur prior to the withdrawing employer filing for chapter 11, can anyone confirm that the fund becomes an unsecured creditor and the employer should cease to make any scheduled payments until ordered by the bankruptcy court.

I am finding it difficult to locate consistent rulings on the Contract Clause and its application to governmental pension plans. Specifically, I have seen some discussion on this board that many states protect from impairment of future benefit accruals. I am wondering whether a government who has reserved the right to amend and terminate the plan may reduce or eliminate benefits to be accrued in the future? (See Southeastern Pennsylvania Transportation Authority, 145 F.3d 619.) It appears to me that they can in the state of Maryland, for example, regardless of whether the employee is vested or not. The Maryland cases that I have seen say that pension plans create a contractual relationship with vested participants, and they say further that there is no issue with any plan amendment that does not reduce or diminish accrued benefits (i.e., a prospective amendment). I am over-generalizing a complex issue, but I am wondering if anyone has any thoughts on whether the government can reduce or eliminate future accruals in a governmental pension plan? Citations are appreciated. I think this may other issues under IRC Section 401(a)(7).... do the partial termination rules apply to governmental plans?

I received an odd question the other day: an employer was advised that PBGC has issued a ruling requiring prospective withdrawal liability calculations to be made assuming that all employers are withdrawing at once, like a complete termination. The only fact I am told is that the plan has had 50% of employers withdraw in past 7 years. It is apparently a new PBGC ruling. I have no idea...any thoughts would be appreciate???

Facts are that a spouse through a QDRO has a separate account under participant's (who is alive) employer-sponsored plan. I realize that under Treas Reg. 1.401(a)(9)-8, Q&A-6 the APs account is separate from the participant's and RMDs are generally determined according to employee's required beginning date. My question is what happens when the alternate payee rolls the money over to an IRA. Would that money still be subject to the employee's required beginning date or would it now be subject to the alternate payee's beginning date?

Can someone confirm this for me: A plan only gets one bite at the apple to make an assessment of withdrawal liability. In other words, if you assess at 1 million, you cannot go back and assess at 1.5 million. Please provide citations.

Can anyone cite any case law other than Supervalu saying that 4212© (evade or avoid) does not apply to only sham or fraudulent transactions?

I should clarify that the group that they would like to give a different safe harbor match is not a separate line.

I do not think you can do this, but can an employer offer one safe harbor match to one group of employees and then a different safe harbor to another group? It seems that Treas. Reg. 1.401(k)-1(b)(4)(iii)(B) would not allow this. Assume no separate lines or control group issues.

Can units of an LLC count as Qualifying Employer Securities? That term is defined in ERISA 407 to include (i) stock, (ii) a marketable obligation or (iii) an interest in a publicly traded partnership. Technically, an LLC unit is not stock and I cannot find any advisory opinions on point. I believe that a plan can hold LLC units, but I cannot find any specific guidance out there confirming this point.

Very helpful. Thanks, Brian!

Company is selling assets (only at one particular location) and contributes to a multiemployer plan. Seller is also subject to CBA with union. The seller will be subject to withdrawal liability as a result of the sale. What can we do to protect the purchaser from incurring any liability associated with the withdrawal? I understand that the seller is liable, but is there any extra steps that can be taken to protect the purchaser? Is there an argument of successor liability, and if so, what is the best way to protect against that type of claim? Thank you.

With respect to a 401(k) safe harbor 3% nonelective plan, can an employer amend the plan during the plan year to exclude a category of participants (i.e. leased employees/ or part-time)? Can you make such exclusions and still stay within the safe harbor? Citations are appreciated. Thanks for your help.

Is this the GENERAL procedure for calculating withdrawal liability: (1) withdrawal liabiilty determined under a method provided in ERISA Section 4211 (this is the actual W/L amount); (2) That amount is amortized over a number of years in accordance with ERISA Section 4219. It seems to me that an employer wanting to pay W/L in a lump sum payment would pay the amount that is determined under Section 4211. There would not be any type of discount for paying in a lump sum payment. Is this correct? Please let me know if you know of any cases/PBGC opininons, etc., that discuss lump sum withdrawal liabiilty payments. Thanks.

Has anyone seen any cases challenging the enforceability of a settlement for a discounted withdrawal liability?

After reviewing EPCRS, it appears to me that if an employee is improperly excluded from the plan and is catch-up-age-eligible, in addition to making the missed deferral/match payments, you also have to make a catch-up contribution for an amount equal to 25% of the applicable amount (i.e. 25% of $5,500 for 2009), assuming the contribution amount does not exceed the participant's gross income (Section 415). Is this correct?

Has anyone come across any private letter rulings, or are there any cases, or regulations discussing on what basis an administrator may reject a beneficiary designation form? For example, if the participant indicated that both primary beneficiaries should receive 100% of the benefit or if the total designation exceed 100% on the benef designation form. My thought is that it is ambiguous and the plan document would control. See Metropolitan Life Insurance Company v. Parker, 436 F.2d 1109 (9th Cir. 2006).

What are the tax consequences to the ER for disqualification to a DB plan? I understand that the regs provide that if funded and has more than one participant, ER may take a contribution deduction only if a separate account is maintained for each employee. This doesn’t really make much sense to me. If the money is distributed to the participants, then the ER should get a deduction for the compensation paid to the participants. Thoughts?

There are so many out there. Start with this one: Deak v. Masters, Mates & Pilots Pension Plan, 821 F.2d 572 (11th Cir. 1987), cert. denied, 108 S.Ct. 698, 9 EBC 1306. Also: 04/26/1990, U.S. District Court, Colorado, Joint Apprenticeship and Training Committee of Sheet Metal Workers' Intern. Ass'n, Local No. 9 v. Flansburg, 744 F Supp 1008, 119 CCH LC ¶10758, 1990 WL 120015 Thanks, Bill. Deak is very helpful. It seems to me that a trustee is acting in a fiduciary capacity when it determines the date that a withdrawing employer completely withdrew from a fund. It seems that it would be a fiduciary breach if a trustee based that decision on loyalty to the appointing party (i.e. picking a date b/c it results in less withdrawal liability for the withdrawing er). Have you seen any cases with this type of fact pattern?

There is a supreme court case that specifically says a multiemployer plan trustee must act solely in the interest of plan participants when wearing his fiduciary hat. See Amax, 453 U.S. 950. I am looking for cases in which a fund or participant has brought a fiduciary-breach case against either a labor or employer appointed trustee, where the plaintiff is alleging that the trustee has acted in the interest of the appointing party rather in the interest of the beneficiaries. Any law review articles or cases on point?

A disqualified individul means any ind'l who is, among other things, a highly compensated individual. An HCE is an indivdiual who is a member of the group consisting of the highest paid 1 percent of the employeees of the corporation or, if less, the highest paid 250 employees of the corporation. any idea as to whether that would include foreign employees to in determining who is top 1%?

If two parachute payments will be made in the same year, one in January and another in June, can an employer delay withholding the excess parachute tax (20%) until the June payment or must it withhold the 20% for both payments. IRC section 4999 indicates that parachute taxes are subject to withholding just like ordinary income under IRC section 3402. I was wondering if there was any type of exception that would allow a company to avoid withholding the parachute tax on the first payment and withhold instead the entire 20% when the june payment comes due. i.e. if payment of $1,000 were made on January 31, and a second payment of $1,000 were made on June 31, and there is a $400 parachute tax, can you withhold the entire $400 from the second payment, rather than deducting $200 from the January payment and $200 from the June payment? Thanks.