traveler

I am curious as to why one would want to excluded from Company A's plan the new employees that were previously Company B employees? And if Company A wants to extend the plan to these new employees, must Company A amend its plan prior allowing this class of employees to participate?

Larry, did you mean to indicate that one does not count service earned while working for a member of a controlled group? Its my understanding that If the foreign parent and the US subsidiary are part of a controlled group under 414(b) or (c), and employee A who worked at parent is transferred to subsidiary, A's service at parent should count for all purposes in any US plan offered by the subsidiary. The non-resident alien exception applies for 410(b) coverage testing purposes, but not for service crediting.

Thanks CuseFan and Pension Pro. The issue here is that the 457 rules limit in-service distributions to small accounts (less than $5,000) where the employee has not made contributions for the last 2 years, and to accounts of individuals who have attained age 70 1/2. Neither of these rules apply to the rehired part-time employee.

I have a new client that is a governmental entity that sponsors a 457(b) plan for its employees. An employee has attained normal retirement age under the plan and retired. He did not take a distribution at retirement. Four months later, the individual is re-employed in a part-time position which makes him ineligible for contributing to the 457(b) plan. The employee has now asked for a distribution from the 457(b) plan. The plan provides that upon severance from employment with the entity, a participant shall be entitled to receive a distribution of his account. Severance from employment is defined as a voluntary or involuntary termination of employment. The regulations under 457 provide that an employee has a severance from employment with the eligible employer if the employee dies, retires, or otherwise has a severance from employment with the eligible employer, and directs one to see the 401(k) regulations for additional guidance concerning severance from employment. Because of the individual’s status as a rehired employee, and the reference to the 401(k) regulations, I am concluding that his rehired status makes him ineligible for a distribution now. I am being told that in the past the client has taken the position that a “retirement” is sufficient to allow for subsequent distributions, even while the individual is working for the entity as a part-time employee. I can’t find any guidance on 457 plans that would allow for a distribution based on the prior retirement when the individual is currently working for the entity, and I am wondering if the group knows of any unofficial IRS guidance on this issue.

Would anyone have a copy of the basic plan document that MetLife used in its RetireServe program pre-2009? In May 2007, my client executed the MetLife 403(b) Adoption Agreement, but was not given a copy of the basic plan document. The Adoption Agreement contains a footer indicated that it is an "ERISA/January 2007" document and a 2004 copy write by MetLife. I would not be asking the question, but for the fact that the client was really late in signing MetLife's 2009 restatement. Just wanted to know what the plan provides, and if there is an argument that the 2007 document qualifies as a good faith written document as of 2009 under guidance issued by the IRS.

I did not find any guidance on the issue other than the regulations. In your situation, at least everyone who is subject to the QACA will get to the same deferral percentage (6%); there just may be a few individuals who take longer. Your client has a better chance arguing that the regulations allow those hired before 2016 to reach 6% over a number of years.

Client has a QACA which includes an intial deferral percentage of 3%, and subsequent annual increases at 1% to a maximum of 6%. It's now considering changing the QACA formula effective 1/1/16 but only for new hires. The initial deferral pecentage will be 6%, with 1% annual increases to a maximum of 10%. It does not want to apply this new formula to anyone hired before 1/1/16. The regulations require that the deferral percentage be uniform for all employees, except that it may vary based on the number of years (or portions of years) since the beginning of the initial period for an eligible employee. The initial period begins when the employee first has contributions made pursuant to a default election under an arrangement that is intended to be a qualified automatic contribution arrangement for a plan year and ends on the last day of the following plan year. The regulations would seem to preclude maintaining the two differnt formulas. Has anyone seen informal guidance from the IRS that would allow different formulas for different groups? Could the different formula's be used if the group covered by each formula passes 410(b)?

FYI, per a discussion that I just had with the Department of Labor, I was told that the DOL's first "notice" of a missing form 5500 is sent via email to the address used for the most recent filing. If there is no response, the DOL then sends out a letter via UPS next-day-air to the Plan Sponsor's address. I also got the impression from speaking with the representative that DFVCP was available if the 5500 is filed on or before the deadline for responding to the snail mail letter. If the 5500 is not filed by the deadline in the snail mail letter, expect to receive a Notice of Intent to Assess Penalty, at which point DFVCP is no longer available.

In response to the question of how fast is DOL sending out notices of missing 5500's, I have a client that late last month (June 2015) receive a second notice(sent via UPS nex day air) from the DOL Division of Reporting Compliance asking about a missing 2013 Form 5500 for a calender year plan. The client never received the first notice, and the DOL has yet to tell us how it was sent. Does anyone know if the first notice is usually sent via email? Any experiences - good or bad - with responding to these notices via email? I am accustomed to working with the IRS which is very reluctant to use email, so I wondered what the groups' experience has been with the DOL and email.

The last paragraph of the article below states that the IRS has informally mentioned that the amount of cash opt-out payment under a cafeteria plan must be added to the monthly premium for single coverage to determine if the coverage is affordable. Has anyone else heard similar comments? The Nov. 6, 2014 DOL Q & A's include an example which concludes that an employer's offer of cash or coverage to high risk employees did not comply with the market reforms. It included a discussion about how a high-risk individual must effectively contribute more to obtain coverage, since the employee is waiving the annual $10,000 opt-out payment and must pay $2,500 for coverage. But nowhere did the guidance suggest that the opt-out payment under a broad based cafeteria plan must be included for affordability purposes under 4980H. http://www.healthcarereformdigest.com/new-aca-affordability-rules-impact-cafeteria-plan-flex-credits

Information about lawsuit is on Tiaa-Cref's website. The link is here. http://tiaa-cref-lawsuit.com/ Don't have any more details for you.

Will the employees of company B remain employees of Company B? If so, then you need to look at Company A's plan document to see whether employees of a related company are allowed to participate in Company A's plan. Also, the Stock Purchase Agreement may provide that service with Company B counts for purposes of eligibility in Company A's plan. If that is the case, then your point 1 is probably correct, but you may still need to amend Company A's plan to credit the service.

Client thought it had properly changed the fixed contribution to its 401(k) plan. A few years later, it determined that the amendment was never prepared. Needless to say, the client owes a significant sum to the plan. The client filed a claim under its Employee Benefits Liability rider to its general liability insurance policy. Under this rider, the insurance company is to pay to the client “those sums which the insured shall become legally obligated to pay as damages because of a “wrongful act” in the “administration” of “Employee Benefits”. The insurance company has denied the claim based on the policy language that excludes "any claim or suit arising out of an insufficiency of funds to meet any obligation under any "Employee Benefits" Plan”. Does anyone have any experience with this exclusion? The client had sufficient funds to make the matching contribution at the full level in the years when it thought it match liability was a smaller amount.

Did you ever get an answer to this question? I was just wondering the same thing.

jmc51, what I think you are saying in your first sentence is that the offshore private equity fund will fall under the 25% exception to the plan asset look-through rule of DOL Reg. Sec. 2510.3-101(f)(1). If the look-through rule does not apply, then your fiduciary need only make sure that the initial investment in the private equity fund is not a prohibited transaction and the manager of the private equity fund does not become a fiduciary with respect to the pension assets which are invested in the fund. Compliance with the look-through exemption does not mean that the initial investment in the offshore private equity fund complies with ERISA 404(b). The regulations under 404(b) provide that a fiduciary may not maintain the indicia of ownership outside the US unless the foreign securities are under the management and control of certain institutional fiduciaries (US bank with equity capital in excess of $1 million dollars, US insurance company, or registered investment adviser). If your fiduciary is not one of the listed institutional fiduciaries, then legal counsel to the plan/fidiciary should review the subscription agreement and underlying fund documents. The subscription agreements that I have seen are documents by which an investor agrees to purchase an interest in the fund. Usually, these documents provide that the fund manager has the right to accept or reject a subscription agreement, and therefore I don't think of the subscription agreement as being an "indicia of ownership". The fund's organizational documents (limited partnership agreement, limited liability agreement, etc.) should describe how the entity will keep records, and where the entity is organized. That information would be necessary to determine whether the "indicia of ownership" is outside the US. If anyone knows of any good articles ERISA 404(b), I would love to know about them.

I was just given a copy of CIGNA's 401(a)(9) amendments which did not need to be signed by the employer who used that prototype. If anyone else needs a copy of it, send me an email.

Kevin, you are on point with the question. I'm trying to determine if Cigna amended at the prototype level, in which case a copy of the amendment will satisfy the auditor, or did Cigna send out interim amendments to each adopting employer which required the adopting employer to take action in order to have a valid interim amendment. Does anyone know how CIGNA amended its Basic Plan Document 03?

Does anyone have a copy of the Code Section 401(a)(9) final regulations interim amendment that CIGNA would have adopted in 2003 for its Basic Plan Document No. 03? I have an IRS auditor asking for a copy of it. As an alternative, does anyone have a name and contact information for someone at Prudential (the successor to CIGNA) that might be able to provide me with the document?

In 2006, Client completed forms directing the 401(k) plan trustee to do a direct rollover to her IRA. The rollover was received by the custodian of her IRA and recredited to her IRA account. The client just found out that her IRA was a Roth IRA and not a tranditional IRA. The client did not intend to convert this distribution to a Roth IRA, and would have told the IRA custodian to open a separate traditional IRA if she had been advised at the time of the rollover. According to the IRS Notice on Distribtuions, the direct rollover should not have been made to a Roth IRA. So, besides telling the IRA Custodian to transfer the distribution plus earnign to a tradtional IRA, what else has to be done to correct this error?

mming, I'm wondering, did the IRS stick to the $3,000 sanction amount, or were you able to negotiate it down?

I was wondering the same thing myself. I do agree that if an employer is providing medical coverage to an individual who is not a "dependent" of an employee, then the coverage is taxable income. Note, the new Section 152 definition of dependent includes a "qualifying child" and a "qualifying relative." A qualifying child includes a student who has not attained the age of 24 as of the close of the calendar year. A qualifying relative can include a child who has gross income of less than the exemption amount (currently $2,000) and for whom the parent pays over half of the individual's support. As I see it, the $2000 gross income amount will be the problem. I would expect that a summer job would put the student over that limit. I have yet to see this issue addressed by any of the TPA's, although the changes are effective next year. For one client, we are considering leaving the age 25 limit but adding the requirement that the employee will only enroll a child if the employee can claim the child as a dependent on his or her income tax return. What is everyone else doing?

With the DOL's deadline for adopting new claims procedures quckly approaching, I was wondering what is happening in the market place with self-insured plans. Have your clients been appointing their TPA's as fiduciaries with authority to make final benefit appeal decisions under a self-insured plan, or are they authorizing the TPA's to make the initial determination, and maybe a first level appeal decision, but retaining final appeal responsibility? Have the TPA's agreed to be the fiduciary? I know that Blue Cross/ Blue Shield will take responsibility for all levels of the appeal, but what if the TPA is not BC/BS? Any sense of what is happening?

I have been told by the Plan Administrator of a governmental thrift plan (similar to a 401(k) plan) that it decided to collect new beneficiary designation forms. It supposedly sent a letter in 1998 to all participants, including retirees, advising them that the prior beneficiary designation forms were revoked, and that if the individual did not submit a revised form, then the terms of the plan would apply. The plan provides that the beneficiary is the spouse, if surviving, then the estate. Has anyone heard of a plan doing such a thing? Was that action in the best interest of the participants? In my client's situation, the Plan Administrator is telling us that the 84 year old aunt did not return the correspondence in 1998, so she had no named beneficiary, and payment must go to the estate. The Plan Administrator's position is that the beneficiary designations signed at the time of the participant's retirement were revoked by its 1998 correspondence. Oh, and, by the way, the plan administrator also mentioned that the 2000 correspondence from the record keeper that said that minimum distributions are based on the niece as beneficiary does not matter, since the beneficiary for minimum distribution purposes could be different than that for death benefit purposes. Just wondering if anyone has heard of other Plan Administrators doing this.

Thanks - that makes sense.

I am curious as to how other practitioners are interpreting Code Section 414(k)(4) which was added by EGTRRA. This section provides ‘‘(4) SPECIAL RULES FOR SECTIONS 403(B) AND 408.— For purposes of this section, any annuity contract described in section 403(B) for the benefit of a participant shall be treated as a defined contribution plan maintained by each employer with respect to which the participant has the control required under subsection (B) or © of section 414 (as modified by subsection (h)). For purposes of this section, any contribution by an employer to a simplified employee pension plan for an individual for a taxable year shall be treated as an employer contribution to a defined contribution plan for such individual for such year.’ It is effective for limitation years beginning after December 31, 1999. It seems to retroactively require employers to aggregate contributions between employer 401(a) plans and 403(B) contracts that might not have any employer money, but I am not quite sure due to the refernce to 414(h) which deals with pick-ups. If I am reading it correctly, then some clients need to review 2000 and 2001 401(a) and 403(B) contributions for any excees contributions. What commentary that I have seen about this provision just repeats the law.