jpod

For a PBGC covered plan, it is a termination that must comply with the Title IV requirements.

If the plan says that each installment payment is a separate payment for 409A purposes, and if the plan permits election changes, in AgTrader's example can't he/she make an election to further defer the second and subsequent installment payments (as long as each is deferred for at least another five years)? For example, the second payment can be split in two and deferred for 5 and 6 years respectively, the third payment can be split in two and deferred for 6 and 7 years respectively, etc.

Yes. I just felt like starting a fight!

Employee X has a child and Employer pays for child's college tuition. Employee Y does not have a child, or his child is not going to college, so Employer doesn't pay anything extra. Can you really distinguish that from the married/health insurance scenario? If you can't, but you still think this is "apples and oranges," then you're right we'll have to agree to disagree.

I guess it's in the eye of the beholder. I have been married forever and enjoyed that benefit many years ago for several years, and I happen to think it's grossly unfair.

Until they see that information, and not all employers provide it, how would they know about it? In any event, I was only suggesting that it would not be unreasonable for one to see some unfairness in this.

We all know it's legal, but it's a fair observation don't you think? Nirin is not the first one to observe this, as it has been going on for decades. Employee A and Employee B do exactly the same work and they are led to believe that they get the same compensation, but in fact they don't.

Is this a 401k plan? If so, it may not be an illegal CODA, but it sounds like these are salary reduction amounts which should be treated as such for 402(g) purposes, FICA, and all other relevant purposes. If it is a non-401k 401(a) plan, I agree it is an illegal CODA and also an impermissible FICA dodge. If it is a nonqualified plan, and the contributions are immediately vested, wouldn't the FICA be picked up immediately anyway under 3121(v)?

Hah! Thanks. I read that provision in the regulation too quickly first time around.

Interesting question, I think. (Maybe not!) In determining HCE status, Employer does NOT make the top-paid group election for its five 401(a) plans. It is desirable for coverage testing that it not make that election. Does the "consistency" requirement of the top-paid group election rules mean that the Employer cannot make the election for any of its non-401(a) plans where HCE status is relevant? In this case it is for a 129 plan.

Extremely unlikely that the Plan or the loan instrument expressly prohibits accelerated repayment in any manner. If they are silent, it is permissible.

They haven't canceled her coverage, so there is nothing to reinstate. What I am anticipating is the probability that they would cancel the coverage if she doesn't fork over the $500 for past premiums, and I am saying that I don't think they have a legal basis for that. In any event I did recommend she talk to a lawyer. You are recommending that she pay the $500 without thinking about it. There we differ.

It sounds like this is a controlled group and he can probably amend the plan to extend it to company B's employees, but this is too important and too fact-critical to resolve through a message board inquiry.

I don't have any proof beyond the stated facts, the law and some common sense. First, we don't know if this is fully insured coverage or employer self-insured. If fully insured, I would assume the insurance company has been paid in full or this wouldn't have taken so long to come up, in which case the employer/PA has gone out of pocket and wants to collect the shortfall. In that case, it seems to me the participant has not failed to pay timely as described in 4980B(f)(2)(B)(iii). If it is self-insured, same answer: PA billed $X, participant paid in a timely manner. Now PA is saying "we should have billed you 2x$X, so you owe us another $X." I don't see how the refusal to pay that extra retroactive $X results in a failure to pay timely as described in and contemplated by 4980(f)(2)(B)(iii). If there is something in regulations or case law that contradicts this, so sorry.

If it is any consolation I don't see a legal basis for them terminating your COBRA coverage if you don't pay PAST amounts which they claim are due as a result of their mistake. They may have a case strong enough to sue you for the past amount, but that doesn't mean you need to give up without a fight. Talk to a lawyer.

If the account balance is $2.00, well sure go ahead and pay it to the Father. If it is $200,000, acknowledging the ambiguity and proceeding cautiously is the way to go.

fmsinc, I didn't have the patience to read your entire post, but the salient point here is that the Plan document, by its terms, says that a spousal designation is automatically revoked upon divorce which is in fact becoming more common these days as an effort to avoid having the plan becoming involved in contentious litigation. As such, ex-spouse is out of the picture regardless of what the decedent's intent may have been.

That is the point we are debating here. You're overconfident.

I think if the participant could talk to us he would most likely say that he wants his Father to get 100%. However, whether he realized it or not the caveat in the instructions became a part of his beneficiary designation and, consequently, the waters are muddied.

So it would seem. Why not go 403(b) and not ever have to worry about nondiscrim. rules at all?

I don't know, I think it's ambiguous and not a slam dunk either way. Hopefully Mom and Dad will cooperate and agree on a course of action and give the PA a hold harmless.

I had the impression from the original post that there may have been a concern that the loan may not actually be paid off unless repayment was taken out of the son's hands, but I could be way off base on that.

It's been a long time but I believe the IRS' position is that the "deductibility clause" to which you refer is not self-executing; namely, the employer can get the non-deductible amount back only if the IRS actually denies the deduction. There was (is) a Rev. Proc. that provides a quick and dirty way of "deeming" a disallowance, but I think that applied only to quarterly contributions to DB plans.

Thanks. If a pre-end-of-year election by a Schedule C filer is necessary (I don't believe it is), this is no different than what I would expect and I am sure I wouldn't write it any differently. By this election the "employee" is authorizing the "employer" to deduct from his compensation the amount stated. In the context of a Schedule C filer, the employee and employer are the same individual. Accordingly, this is nothing more than a "note to self." I am not being critical, just stating a fact.

Care to share the form of election you provide for a Schedule C filer?