Everett Moreland

It seems from your question that the employer is contractually obligated to make the top-heavy contribution. It probably would be easier to make the contribution than to deal with ERISA suits to force the contribution and claims against the employer for any tax benefits lost by participants.

Based on the following in preamble to the proposed 457 regulations, I conclude that 457 plans need not be amended by 12/31/03 for EGTRRA and the final 457 regulations: "Plan amendments to reflect EGTRRA, and any other requirement under these regulations, are not requried to be adopted until the later of when guidance is issued addressing when plan admendments must be adopted or the date final regulations are issued." 67 Federal Register at 30831 (5/8/02). Any votes to the contrary?

The IRC places no restriction on the employer's selection of employees who may participant. The employer will need to comply with applicable discrimination rules outside the IRC.

I haven't thought about how cash balance plans satisfy 411(b)(1), so don't have a useful response to your question.

I looked at this a few years ago and concluded that it's probably not allowable. The ruling seems to assume there is only one "determination date," not a determination date for each year. If there is only one determination date, the offset DB benefit can be conceived of as accruing over a period of years in the same manner as the DB benefit accrues before the offset. If there is a separate determination date for each year, the offset DB benefit cannot be conceived of as accruing in the same manner as before the offset.

Self-directed DC accounts that offset DB benefits cannot qualify for 404© protection.

If I understand your question, an individual's participation in a governmental 457(f) plan will not affect the individual's 402(g) limit.

The 402(g) limit does not apply to 457 plans. An employee whose employer has both a 457(b) and a 401(k) can contribute the full amount to both.

Your question is answered in Raymond J. Byrne v. Commissioner, 2002-319 T.C. Memo.

Proposed 1.414(m)-3©: © MULTIPLE EMPLOYER PLANS-- (1) GENERAL RULE. If a plan maintained by a member of an affiliated service group covers an individual who is not an employee of that member, but who is an employee of another member of that affiliated service group, the plan will be considered to be maintained by the member that does employ that individual. Thus, the plan will be considered to be maintained by more than one employer for purposes of section 413©(2) (relating to the exclusive benefit rule), (4) (relating to funding), (5) (relating to liability for funding tax), and (6) (relating to deductions). Therefore, a member of an affiliated service group may deduct contributions on behalf of individuals who are not employees of that member, if the individuals are employed by another member of that affiliated service group. (2) SPECIAL RULE. The multiple employer plan rule contained in paragraph ©(1) shall not apply in the case of a controlled group of corporations (as described in section 414(b)) or a group of trades or businesses under common control (as described in section 414©).

This could be a violation of the duty to administer the plan in the exclusive interest of participants and beneficiaries, particularly if your fee is paid with plan assets. The lump sum value would be withheld or given to advance the interests of the employer. Also, I know this is stretching to the breaking point, but what if the benefit statements are a right or feature and the employer gives lump sum values to HCEs but not NHCEs? It seems to me that if the IRS or EBSA were to discover this they would be tempted to shake the plan until something falls out.

Here's 1999 IRS pdf_irs_q_a_jceb_1999.pdf

Here's DOL 1999 pdf_ebsa_q_a_jceb_1999.pdf

1.457-10(b)(4) deals with transfers between plans of the same governmental entity. 1.457-10(b)(5) does not include a comparable provision for tax-exempts. I think the reason is there are no assets to transfer and so the regulation on transfers need not be complied with. I agree you can do what you propose.

If this is for a tax-exempt (not a government), the plan has no assets so there are no assets to transfer or merge.

Interestingly, 1.401(a)(9)-6T appears not to allow the variable feature of the benefit to continue during pay out. The Oregon Public Employees Retirement System has such a feature (variable during employment and during the pay out phase). That's probably one reason why the IRS is giving governmental DB plans a break under the 401(a)(9) rules.

MGB: Revenue Ruling 78-403 is a DB ruling. The ruling seems to be saying that the statement I quoted above applies to DB plans.

Well, I have to correct myself. Revenue Ruling 78-403: "Rev. Rul. 185, 1953-2 C.B. 202, provides that benefits will not fail to be definitely determinable merely because they vary with the investment experience of the plan assets or with a generally recognized cost of living index."

There are old revenue rulings (still good law) that prohibit a defined benefit plan from basing the benefit on the plan's investment return.

My understanding is that the restricted employee rules apply to an alternate payee of a restricted employee (including an alternate payee with a separate interest) and that a QDRO cannot grant an alternate payee a right not granted by the plan and so cannot avoid the restricted employee rules. See the following IRS Q&A from 2001 ASPA Annual Conference: "14. Are payments under a QDRO 'on behalf of' a restricted employee for purposes of the limitations on distributions under 1.401(a)(4)-5(b)(3). "Yes; you cannot get out of the restrictions by obtaining a QDRO."

31.3121(v)(2)-1 has some helpful guidance on what is severance pay and what is deferred comp.

Heileman-Baltimore Local 1010 IBT Pension Plan v. Bullinger, 16 E.B.C. 1024 (D. Md. 1992); and Clouse v. Philadelphia, Bethlehem & New England Railroad Co., 787 F. Supp. 93, 15 EBC 1347 (1992). The following is from the EBSA's Frequently Asked Questions for Reservists Being Called to Active Duty: "I am a participant in a 401(k) plan. While I am on active duty, may I give my spouse or another individual the authority to change my investment allocations through a power of attorney or other legal document? Can that individual also apply for a participant loan or hardship withdrawal on my behalf? "The terms of the plan would generally govern this situation. However, if some employees are permitted to designate individuals to act on their behalf in other contexts when they are away from work, the employer should permit the service member to designate someone to act on his or her behalf also."

If your question is whether there is any state or local government retirement plan that allows elected officials to participate, the answer is Yes. If your question is whether there is any plan that is limited to elected officials, then I don't know.

I would determine whether one result of the forfeiture provision would be that the deferred compensation would not be subject to FICA until paid. That would be a poor tax result. Start with 31.3121(v)(2)-1. My memory is it directs you to the § 83 regulations.

There are few court decisions stating that a general durable power of attorney does not apply to an ERISA plan unless the power of attorney is specific that it applies to the plan. I agree with Harwood that the power of attorney should state that the agent may direct the investment of the participant's accounts. A power of attorney that is effective only in case of incapacity raises the problem that the plan administrator needs to determine whether the participant is incapacitated as defined in the power of attorney. (For that reasons I have never conditioned a power of attorney on incapacity.) It would be better for the power of attorney to give the agent the power to direct investments in all events, not just in case of incapacity. The power of attorney should release the plan administrator and the plan from all claims relating to the plan administrator acting in good faith at the direction of the agent. As an estate planner, I have a lot of sympathy for honoring a properly drafted power of attorney.