jpod

I am assuming that they were improperly excluded because of faulty operation, not because of a bad document, in which case would they not be included in the particpant head-count as of the first day of the plan year?

I have this recollection that you need basically zero information for the pre-2009 403(b) filings. No dollars, no participant counts, no nothing. Not true?

If it is a db plan I wouldn't be concerned. If it is a dc plan, what kind of dc plan? Daily valued self-directed? If so, what is the source of payment? Forfeitures? Pro rata depletion of participants' accounts?

If it truly is a one-person plan exempt from Title I of ERISA, you are correct that DOL won't care, but that would be because it doesn't have any jurisdiction to care. However, 412 still applies, as does the 10% excise tax for minimum funding violations. By any chance does the plan have a "last day" rule? If it does, are we talking about the current plan year (I know that you said "current plan year," but your discussion of the 5500-EZ threw me off a bit)? If we are talking about the current plan year, I think that is a sufficient basis for amending the plan to reduce the contribution to 0% for the current plan year without violating the anti-cutback rule.

I tend to agree with Austin that it is impossible to use the "less than 20" rule in an ERISA governed plan. That is because the language of the plan cannot, due to the Title I equivalent of 410(a), exclude someone under the "less than 20" rule, and you don't satisfy the "all or nothing" element of the "less than 20" rule if the document does not reflect that element. With that said, let's get back to Austin's goal, which is to keep the plan population under the audit threshold. While it is cumbersome, can you separate your population by having two plans? The "main" plan is available to anyone who has satisfied the ERISA one year of service requirement. Entry into that plan can be deferred until the applicable bi-annual entry date, if the employer chooses to go that far. The other plan is available to anyone who is not eligible for the main plan. This should, as a practical matter, keep all or most of Austin's "less than 20" people out of the main plan.

Can those "self-employed" people who are interested adopt the plan and create a multiple employer plan? If a DC plan, contributions made by the non-profit on their behalf first go as a top line item on the Schedule C, subject to self-employment tax on Schedule SE, but then the individual takes the income tax deduction on page 1 of 1040. Much more complex, I suppose, if its a DB.

An IPO may not be a 409A CIC, but it doesn't matter. An IPO condition can create a SRF. So too can a CIC condition that is not a 409A CIC.

Too complicated for me to think through at the moment, but does IRS Notice 2009-92 help?

Interesting. You would advise a client to ask for the missing $10 and cancel coverage if the individual doesn't pay the $10?

Does the group insurance contract (or the plan document if self-insured), permit the employer to drop dependents due to a failure of proof? Be careful.

I consider myself to be open-minded (dare I use the "L" word) politically and socially. However, we had COBRA for about 23 years without any government subsidy. While I think it was a good thing to do during the worst of the economic catastrophe, I say "enough already."

Does the plan allow the beneficiary to designate a beneficiary? If so, but the beneficiary did not designate a beneficiary, then presumably the plan provides for a default beneficiary in this instance. More likely, however, the plan is silent, and does not purport to allow the beneficiary to designate a beneficiary, in which case I would expect that the estate of the beneficiary is the beneficiary. This better be handled correctly. There could be a nasty dispute over this, unless the dollars are very small. Lots of competing interests: spouse of beneficiary (if any), children of beneficiary (if any), creditors of beneficiary, etc.

Assuming this is an insured plan, is it clear that adding the DP would require imputation of income even though the 3rd party premium is not going up? There may IRS guidance that says so, I just don't remember.

Many employers, and perhaps this describes the employer described by RandyO, don't wish to give employees the cash option. So, while mbozek's solution is the simple and intelligent solution, quite often there is push back to it.

Ok, so you escape 72(u); good. In that case, what theory could the IRS possibly assert for counting the inside build-up in the CAP computation? Is there one? Doesn't the Rev. Proc. say that the sanction is computed by assuming that the trust loses its tax exemption (as opposed to the income being taxable)? Either you're concerned about nothing or I am not seeing the forest through the trees.

What is the effect of Section 72(u)?

I hate instant replay in baseball, I hate the DH, I even hate the post-68 intra-league division structure. If they reverse that call (as bad as it was), I may stop watching.

If you are acting as an ERISA lawyer advising this client, you will find that there are potential pt issues here but possibly things can be structured to avoid them. Way too complicated to try to sort through on a message board. If you are serving as the recordkeeper or another service-provider but not as ERISA lawyer, you will be doing your client a favor if you suggest to them that there are ERISA legal issues here and they need to discuss with an ERISA lawyer.

I agree with Sieve 100%, but I didn't mention it because there is ancient IRS authority (still good, I think), suggesting that you don't have a good 401(a) trust if the "merger" doctrine would apply. Query what happens if it is merely a custodial account with a bank or other non-bank custodian and not a trust, as is permitted for a one-person, non-ERISA plan, that recites all the magic 401(a)(2) language and contains non-assignment language? Is it automatically at risk because it is not a "trust"?

Last Day rule can work, but then it might lead to a 410(b) problem or at least an unanticipated 410(b) complication depending upon the size of the 1000+-hour seasonal population in relation to the rest of the workforce.

It isn't 401(a)(13) that could protect the assets. A tax-qualification requirement for securing favorable tax treatment has no substantive effect on the application of other laws. However, if the money is in an irrevocable trust as required by 401(a), that money should be protected as long as it is held in trust; not because of 401(a), but because of the likely terms of the trust. On the other hand, depending upon what this fellow did to have all his assets seized, the State may be able to force him to terminate the plan and as settlor of the trust cause a distribution of his plan assets, and THEN seize those assets.

I think the ERISA preemption position is probably valid, but as a practical matter: what's the big deal? If for some reason they try to hit you with penalties or try to assess state taxes against the plan, that's when you can assert your preemption argument. If you think it's a good idea you can note in your filing transmittal letter that you believe the filing requirement is preempted by ERISA, but I don't think that's necessary.

Does DOL consider an enforceable payroll deduction authorization sufficient "other security" for purposes of the 408(b)(1) regulation? If not, do DOL and IRS look the other way when they see loans up to 10k that are in excess of 50% of account balance? I seriously doubt that any plans are asking for collateral on loans greater than 50%.

I can see both sides of the philosophical issue. However, I am not grasping the distinction between DB and DC which some on this Board are making. There are plenty of DBs set up by business owners in the age 55+ category with no intention of keeping them around for more than 5-10 years.

I am assuming that the contract has not been distributed to the participant; if it had then from a plan administration perspective I think you would have to take the position that the former participant is no longer a participant in the plan and consequently the QDRO has no effect. Based on that assumption, I don't have a definitive legal answer, and don't know if there is one. However, if I were in your shoes I would try to save myself some aggravation. If I could get confirmation that both spouses and their counsel are in agreement that the benefit should be split (notwithstanding the issuance of the annuity), I would then go back to the ins. company and find out if I can "trade in" the annuity for two annuities. I would proceed from there based on the ins. company's answer. I realize that there are all sorts of clean up questions to be addressed, but I think they are manageable.