jpod

You can dazzle me with the arithmetic and projections all you want, but when it comes to Roth 401k I say: don't look a gift horse (i.e., the tax exclusion for contributions) in the mouth. That is my bird in the hand theory. Roth, Shmoth. Does anyone remember the "excess distributions" excise tax from the 1986 Act and the related provision that conned people into taking taxable distributions earlier than they had planned in order to avoid the excise tax? I'm certain that for people of a certain age and a low tax bracket who have a crystal ball, Roth makes a lot of sense when you crunch the numbers, but you're making a big assumption about future tax laws.

Assuming this is a plan subject to ERISA, isn't the key question whether the employee died "before the annuity starting date?" ASD is a defined term and the regulations should lead to the correct answer. If employee died before the ASD, spouse gets it, period, unless spouse had consented to a different pre-retirement death beneficiary. If employee died on or after ASD, I suppose plan language would control.

1. If you file DFVCP before dol contacts you, there cannot be any additional dol penalties or any irs penalties. You have a tough problem for which there is no clear solution, but your problem is not uncommon. Consider the following. 2. Unlikely that either agency will ever contact you, especially dol, because if no 5500s were ever filed as far as they know the plan does not exist. 3. In the unlikely event that irs contacts you notwithstanding what I said in 2, the "first time filer" status, coupled with evidence that you are in fact working on the problem and getting ready to submit under dfvcp, should allow you to avoid being hit with penalties prior to the dfvcp submission. 4. If neither 2 nor 3 gives you sufficient comfort, I would consider filing the 3 most recent 5500s asap under dfvcp along with incomplete 5500s for the earlier years (i.e., fill in the plan and plan sponsor identifying information and whatever other information immediately available), and explain in your dfvcp cover letter that you are working on securing the data for the earlier years. DFVCP is designed to encourage voluntary compliance; dol will not be eager to test a hard line position in court if you've done what I suggest in the preceding sentence.

Sounds like someone didn't wish to risk the mortality of his or her job (pun intended).

mbozek: Good points. I agree about the participant still having a claim against the plan, but how exactly would that claim be satisfied in the context of an individual account plan where investments are self-directed? Suppose there is nobody who is liable to the plan, other than the thief, and there is no recovery from the thief, and no fiduciary liability insurance either. Further assume as FGC said that there is no fidelity bond coverage here. Further assume that neither the employer nor anyone else is going to step up and voluntarily make the participant's account whole. Where does the money come from to make the participant's account whole? I really don't have a clue. Making the other participants share in the misery seems logical, but I suspect that the plan document would not support that.

mbozek: you are asking questions which neither IRS nor DOL nor, to my knowledge, any court, has answered FGC: I am aware that some practioners feel comfortable with that position, but I never understood why/how. Some rely on the rule in 401(a) added in 1986 that says, basically, a plan is a psp if it says it's a psp. I never understood that logic, because if Congress wanted to make that rule available in the 403b context it could have done so. In my view, J&S is the rule, and the exemption for psps is the exception, and exceptions should be construed narrowly. Frankly, I am surprised that after all these years, there has not been a published opinion in a case where an employee took his or her 403b money, blew it away, then died, and after which the surviving spouse filed a claim. I'm not sure the protection offered to fiduciaries in certain contexts involving J&S under Title I would apply in this instance. Perhaps it is because the vast majority of 403bs are exempt from ERISA, either because the employer is a gov't entity, a church or church-related entity, or the employer does not make contributions.

This is an age-old question of whether a 403(b) plan, as a defined contribution plan, is a "profit sharing plan" exempt from J&S if no annuity option is offered, or a "pension plan" subject to J&S. Smart money is to operate on the assumption that J&S applies.

I assume this is a prototype and you have already checked with the vendor. If not, check with the vendor. I find it hard to believe that the vendor accepted deposits of contributions without being satisfied that the plan was adopted. Even if they destroy their copies they should have some record of having received a copy of the completed adoption agreement, and the date of receipt if not the date of the document was executed, in which case a letter from the vendor reciting all this should help you in vcp. Also, if there is an institutional trustee I would check with that institution for a copy of the adoption agreement; hard to believe it would accept trustee status without a copy of the document, and further hard to believe that it would destroy the adoption agreement.

If structured correctly, you have one welfare plan for 5500 filing purposes - your medical benefits plan. The pop would be merely a Section 125 plan that is not subject to any 5500 reporting (at least for so long as the 6039D filing obligation remains waived), regardless of the number of individuals eligible for or making use of the pop.

With a large plan, you will have people coming and going, so the idea of unilaterally spreading out over a long period seems imperfect, not to mention complicated. I do not recommend the EPCRS approach. I have nothing to back this up, but I find it hard to believe IRS would disqualify the plan or force it into audit cap over a single pay period failure like this. However, I think you need to do something; specifically, notify the affected employees of the error, and remind them of their right to increase future contributions if they wish to make it up. Also, if you do a pay period by pay period match, I would give them the match as if they had contributed for that pay period. I think this will get the plan off the disqualification hot seat, even if it doesn't work perfectly because some people choose not to make up the missing deferral, or can't make it up because they've terminated.

"Short-term deferral" is 409A lingo for an arrangement whereby the deferred compensation will be paid within a short period of time after the deferred compensation ceases to be subject to a "substantial risk of forfeiture" (more 409A lingo). Based on your facts the $XXX ceases to be subject to a substantial risk of forfeiture only upon expiration of the 2-year period. No offense intended, but I am surprised that you are attempting to resolve an issue under 409A yet don't know what "short-term deferral" means.

You left out an important fact in your first post, which is that B is going out of business and liquidating. If there is no seperately "reportable event" under the PBGC regs., then it looks like you've analyzed this correctly.

Sniffles: legalities aside, this isn't an issue of covering the dependent's dependents, it's an issue of whether you are going to exclude certain types of medical expenses incurred by an otherwise covered dependent. Given that, what exactly do you mean?

What do you mean by "sponsorship?" Do you mean the entity with the obligation to contribute to the plan? IF B is merging into A and going out of existence, this would happen by operation of law. If employees of B are transferring to employment with A, probably not any issues, but you should consult the collective bargaining agreement covering the union employees and confer with labor counsel to make sure there are no labor law issues to resolve or procedural hoops to jump through. In either scenario, you may wish to take another look at the PBGC regulations. If neither a merger nor a transfer of employees, then I would need to know what it is that the parent wishes/is intending to accomplish.

If administration of your plan is outsourced to an experienced and reputable TPA I would expect them to have their own counsel's legal analysis to support this exclusion. I doubt that your Company thought of this itself and foisted it upon the TPA who then said, simply, "ok, whatever you wish."

If you're talking about qualified plans, I'm not sure there is any distinction. If there is one, I think the only distinction is that if you merge plan a into plan b you end up with one plan, plan b; whereas, if you consolidate plan a with plan b, you end up with one new plan, plan c (with a new ERISA plan number and a new plan effective date). Even then, however, I don't think there is any other distinction from a Code or ERISA perspective.

Question for Ms. BLB: Are you employed in HR or personnel or in some other position involving the administration of employee benefits? If so, it's good that you are asking questions about this. If not, what exactly is your reason for asking? Whatever the answer is, what do you intend to do with that information? Just curious the day before a long holiday weekend.

no

I am not advocating this because I think the employees' preference for the current investments is a silly reason to perform headstands to try to accomodate them. For what it's worth, however, could you not spin-off the piece of the plan covering those employees and then terminate that spun-off plan (and not allow those employees to participate in the oritinal plan or any successor plan)?

It could be they are just running everything onto each partner's Schedule C (to "facilitate" deduction of expenses). Obviously, this would be wrong. Need to see the partnership's Form 1065 and all K-1s. Need to understand the true legal relationship between the so-called partners. Maybe there is a partnership for certain purposes, but also separate sole proprietorships. Could be an affiliated service group with 1 plan for all members and their collective employees.

To the extent that vebaguru's comments were directed at my earlier comment, note that the crux of the matter is whether or not there is a "plan." That this is not such an easy issue is evidenced by the Supreme Court's analysis in the Fort Halifax case as well as a couple of Circuit Court opinions, the one I remember off the cuff being the 11th Circuit's decision in the Williams case from 10-15 years ago.

It could be. Case law isn't perfectly clear, but generally not worth worrying about; assume it is and file top-hat statement.

I thought that one of the requirements for an accountable plan was that there must be no reimbursement absent appropriate substantiation. This appears to be merely a blank check expense account.

The mere co-investment between an IRA and the IRA owner, or a family member of the IRA owner, could be a pt under Section 4975 of the Code.

This is new area for us: it appears to us a church plan is not exempt from erisa;but just title I of Erisa. Is this correct? NO Does this mean no 5500 is done? YES (UNLESS PLAN HAS ELECTED ERISA COVERAGE) Is actuarial valuation done? NOT PER ERISA OR INTERNAL REVENUE CODE Is there any 401a4 and 410b testing? GO TO SECTION 410(d) OF THE INTERNAL REVENUE CODE TO FIND OUT WHAT QUALIFICATION RULES DO NOT APPLY TO A NON-ELECTING CHURCH PLAN (AND YOU WILL ALSO NOTE THAT A COUPLE OF PRE-ERISA PROVISIONS OF THE CODE DO APPLY TO NON-ELECTING CHURCH PLANS) Stan