Ron Snyder

As Kirk's post points out, certain fully insured welfare benefit plans that cover only key executives are exempt from Part I of Title I of ERISA. Lori Friedman also made this point relative to fully insured health benefits.

Welfare benefits are subject to several sets of nondiscrimination rules. Lori mentions IRC §105(h) rules for self-funded medical plans. Flex plans have their own nondiscrimination rules under IRC §125. Life insurance plans have nondiscrimination rules under IRC §79. And certain welfare benefit plans are subject (also) to the nondiscrimination rules in IRC §505. Plans subject to §419A are also subject nondiscrimination rules of IRC §505. Also note IRC §414(n)(3) (nondiscrimination in welfare benefit plans of affiliated service groups) and IRC §414(t) (nondiscrimination in welfare benefit plans of controlled groups). All employee welfare benefit plans are covered under ERISA and require a SPD. Some unscrupulous and/or incompetent promoters claim that their welfare benefit plans are "Top Hat" plans and are therefore exempt from ERISA. (1) Top Hat plans are deferred compensation plans, not welfare benefit plans; (2) Even Top Hat plans are subject to certain provisions of ERISA, although exempted from most requirements; (3) The citations to DoL Regs that the promoters use don't even relate to Top Hat plans; and (4) The promoters has filed their plans with the DoL as a Top Hat plan.

I am interested in the principle they enunciate.

There is no one resource. The EBSA website contains only ERISA information, no tax info. If you Google welfare plan topics, you will find several publications on the IRS website that are instructive. Also, Tax Facts for Life Insurance and the Life Insurance Answer Book contain good welfare plan information.

1. Profit sharing and/or 401(k) funds are rolled over into a DB or MP pension plan that includes a 401(h) feature. This apparently is not a Section 420 transfer of funds. Under these circumstances is a share of such funds allowed to become 401(h) account funds? Is it required? 2. Funds from a DB or MP plan are directly transferred into a profit sharing plan through merger. Are such funds still considered to be "pension" funds making them eligible to be transferred into a 401(h) account? Not much guidance out there on these issues.

You said that you were not a man of few words. However, I couldn't have said it better myself. 680? It's amazing you kept your posts so short.

How about "actuarial screw up"? Or "actuarial oops"? "Bad actuarial estimate?" "Actuarial inaccuracy?" In mathematics "error" is defined as "The difference between a computed, estimated, or measured value and the true, specified, or theoretically correct value." The term "actuarial error" is correct.

The ILI Mark refers to is frequently provided through policies not available to the general public through normal agent channels. The contracts must have good investment value (high minimum face, low mortality charges) to be successful. Companies like John Hancock, Mass Mutual, Pac Life and MetLife are also quite active in the market.

I have seen a successful situation involving a company with a few thousand (4-5 K) employees where the associate general counsel was an ERISA attorney was hired to do lots of corporate duties as well as in-house ERISA work. They used outside counsel for drafting and litigation, but most ERISA questions were handled internally.

I've seen it done both ways. However, the single-plan multiple participant with individual participant elections makes the most sense to me.

The outstanding loan can be repaid by the deceased participant's beneficiary or estate. If it is not, however, the fiduciary's duty to the remaining participants would require him/her to withhold the amount due from any distribution paid.

Sounds like the insurance company should be replaced with someone who does their work timely.

Locust: Split dollar refers to shared-ownership arrangements. An employer may purchase a life insurance policy on an executive and assign the ownership of the cash value to the employee. Of course the executive will be taxed on the non-protection premium paid each year, so that part of the benefit is not "deferred". Some employers even bonus enough extra for the executive to pay the taxes on such premium amount. The balance of the increase in the value of the insurance policy due to increases in the underlying investment value of the policy is available to the executive tax-free via policy loan after retirement. While this is not what most of us think of as deferred compensation, it contains some elements of DC. Such arrangement was excluded from 409A.

AMP refers to a correct principle: the reason for running the nondiscrimination tests is to ascertain the amounts that need to be included on the W-2s of Key Employees if they receive excess benefits.

Perhaps IRS will clarify whether they really are separate concepts. IMHO the language of 409A refers to split dollar arrangements, not just to the policies. For any split dollar arrangement there is now a choice: consider the policies to a funding vehicle for a "salary continuation agreement", or draft a "split dollar agreement" that clarifies the terms of the split dollar plan and incorporates the policies as a part of the plan. If someone doesn't wish to be subject to 409A, the latter approach should be sufficient. Query: What if an arrangement is part of a split dollar arrangement but violates one of the requirements of the split-dollar Regs? Does that make 409A suddenly applicable as of the failure date? I think so. Other thoughts?

Run the nondiscrimination tests set forth in Regs. 1.105-11©.

A fiduciary is one who has any power of control, management or disposition over the funds or other property of the employee benefit fund. Citing a DOL Q&A from 1976 is not determinative. There have been many cases on this issue since then. Some have held that certain individuals (consultant, TPA, attorney, insurance company and agent, accountant) are not fiduciaries under the facts provided. Others have held that similar individuals are fiduciaries because they exercise such control. Determining the amount to be paid to a participant (which an actuary does and a TPA firm may do) can qualify an individual as a fiduciary unless no discretion is involved. Determining eligibility for a payment can also make one a fiduciary. A TPA firm needs written direction from the Employer or Administrator (depending on the plan docs.) in cases where discretion is involved to avoid being deemed to be a fiduciary. Note that cases where service providers are not considered ERISA fiduciaries may still subject the service providers to liability under traditional theories of negligence, malpractice or fraud. If I am not a party to a legal action but am in possession of relevent materials subject to subpoena, I would first contact my client and suggest that they may wish to object to certain disclosured. If no objection is made, I would tender the materials subject to the subpoena and no other materials. If I can still safeguard items that are considered to be confidential while complying with the subpoena, I will do so.

You have received good information and good advice here. There is no "Administrator's Privilege" or "Actuaries' Privilege" in any jurisdiction. The TPA has no excuse for not complying with a subpoena. He may not selectively choose to provide information only applicable to the plan participant. Under ERISA, the actuary is a named fiduciary. And under ERISA, fiduciary duties run to the plan participants. I am therefore surprised to see an actuary suggest that the TPA has "no direct fiduciary duty to the participant". This is simply wrong for the actuary and wrong for the administrator. The TPA has a similar duty to participants whether he is deemed to be a "Plan Administrator" (a named fiduciary), or simply to be employed by the Plan Administrator to carry out administrative functions. Disclosure pursuant to a valid subpoena doesn't require "permission" from the Employer, the Trustee or the Administrator. As mentioned above, failure to comply with the subpoena requires an objection.

You are asking questions about getting rid of an asset that was improperly obtained? Violation of the prohibited transaction rules not only REQUIRES undoing the transaction, it requires that form 5330 be filed each year until corrected and an excise tax be paid. Has the plan been doing this? I'm afraid the remaining trustees may well have screwed up and subjected themselves to liability and excise taxes needlessly.

Any good ERISA attorney who specializes in health plans will have such a list. That is where I suggest that you start. Most national actuarial consulting firms have such a list that their health care consulting division uses. Get someone competent involved rather than risking malpractice by trying to do this yourself.

You have posted 12 times in 4 years? You seem not to be very involved in the business. If 5 or fewer owners have an overlapping controlling interest in more than one business, those businesses need to be consolidated for testing purposes. You didn't mention an affiliated group relationship which would require 10% overlapping ownership and services provided back and forth between the entities. Family aggregation refers to husband and wife aggregation along with aggregating interests of parents and children. None of those seems to be applicable to the situation you mention. Since you obviously are not familiar with these rules and are too lazy to look them up, I suggest that you ask the client's CPA to confirm that the companies are neither a controlled group nor an affiliated service group.

I have found some amazing stuff posted on websites by performing such searches. Material that rightfully ought to be proprietary from major law firms has been posted. Good advice.

Such an orphan plan is considered by IRS to be a wasting trust and must be liquidated within 12 months of becoming orphaned. It is not a frozen plan. If (a) some of the participants have gone to work for an employer who wishes to sponsor the plan, or (b) a company related to the original sponsor is willing, such employer may become a sponsor. Failure to liquidate in time by the trustees may result in their incurring personal liability for the plan's disqualification and pursuant negative tax implications.

It would not be a prohibited transaction, but might be an impermissible reversion. However, the company is being used as the disbursing agent for the VEBA. So long as the employer doesn't keep the funds, the arrangement should be okay.

I know of no additional notices except with respect to filing form 5310, if applicable. However, it sounds like the employer is not transferring participants to a new plan. So why is the employer withdrawing from a frozen plan?