Belgarath

Humph!! Well, thanks for the information. I'm actually not surprised...

Thanks Bill. Nice to see that common sense prevails sometimes!

This seems like a ridiculous question. However, I'm suffering from pre-holiday brain cramp... Suppose your plan defines comp as W-2. Further suppose that the employer buys shoes for its factory workers, and, I don't know, maybe something like gym memberships. The employees don't have the option to receive this money in cash, but it is still taxable compensation, and included on the W-2 because it is a "nonaccountable" plan according to the employer's CPA. I proffer no opinion as to whether that is correct or not - I'm assuming it is correct for purposes of this question. From a practical viewpoint, how would this be handled when calculating the deferral amount to come out of the employee's paycheck? I assume this is really a payroll/employer problem. For example, base pay that would otherwise be paid to the employee for the year is $10,000, and employee defers 5%. But, there is TAXABLE fringe benefit of another $1,000, and the employee's W-2 is going to show $11,000. Does the employer/payroll company, at some point, have to withhold another $50 from the employee's paycheck? Or, since the employee could never have elected to receive this compensation in cash, is it simply ignored for deferral purposes?

Perhaps it must be filed showing a zero FMV by the transferor, but the transfer itself isn't reported? And the transferee also files one showing the transfer amount coming in? I grant you it seems stupid, but the instructions sort of seem to lead you in that direction? As to the transfer amount itself... 　 Transfers. Do not report on Form 5498 a direct trustee-to-trustee transfer from (a) a traditional IRA to another traditional IRA or to a simplified employee pension (SEP) IRA, (b) a SIMPLE IRA to another SIMPLE IRA, © a SEP IRA to another SEP IRA or to a traditional IRA, or (d) a Roth IRA to another Roth IRA. For reporting purposes, contributions and rollovers do not include these transfers.

Chaz - yes, you are correct - one of the exceptions in 2520.104b-10(g) is for a welfare benefit plan as you describe, under 2520.104-44(b)(1)(i). None of the other exceptions listed could apply in the situation I'm looking at. While this doesn't help much in this situation, as nearly all of the plans in question have insurance, it might exempt a couple of them. Thanks again!

Sorry - I probably should have specified that these all have more than 100 participants and are required to file 5500 forms. So are you perhaps are talking about the possible 5500 exception under 100, etc.? However, as I look at it, you are probably talking about the exceptions in 2520.104b-10(g). I'll have to look into this, and thanks for bringing it up.

I'm looking at a bunch of welfare benefit plans for which it appears that SAR's have not been done. I'm not aware of any guidance that says you don't have to do a SAR for these plans. Is there something I'm missing?

Taking this a step further - if you have a non-ERISA deferral only 403(b) plan, and an ERISA 403(b) plan (employer nonelective contributions only, NOT matching anything based upon the employee deferrals to the non-ERISA plan) of the same employer, does this alter anything where the employer wants to merge the non-ERISA plan into the ERISA plan? I don't think so - seems like the same asset transfer issues still exist. I presume the employer would not be able to require the participants to surrender their individual annuity contracts under the non-ERISA plan, but would have to require that they be "re-registered" under the ERISA plan? These types of situations seem to be driven more by what is good for the investment broker than what is good for the employer and the participants, but that's perhaps an unworthy observation.

I just noticed that the formatting didn't come out right right! I've corrected it below. Just want to see if people agree. The "old" 404© had most of the participant disclosure stuff rolled into the 404a-5 regs. So, under the "old" 404©, there was a laundry list of items that follows, among other requirements. It is my understanding that of these items below, the only ones still required are 4a and 4g. All of the others are now subsumed into the 404a-5 regs. (There are still some requirements not listed below, such as the availability of the "broad range" of core investments for example, etc., right?) Thanks. 4. Participants will be provided with the following information in order to make informed decisions regarding their investments. Information which is to be given to all participants: a. An explanation that the Plan is intended to comply with ERISA Section 404© and Title 29 of the Code of Federal Regulations Section 2550.404c-1 and that Plan fiduciaries may be relieved of responsibility for losses resulting from participant investment direction. b. Description of investment options – objectives, risk and return characteristics, type and diversification of assets within each option, historical returns. c. Identification of any “designated investment managers.” d. Explanation of how participants may give investment instructions, any restrictions on transfers between funds. e. Description of any fees associated with investment option purchases, sales, or transfers. f. Name, address, and phone number of the Plan fiduciary (or assigned person) responsible for providing the information which is to be provided upon request (see (5) below). g. For plans which include employer stock as an investment option, a description of procedures for maintaining confidential information. h. Prospectuses for investment options which are subject to registration under the Securities Act of 1933. i. A description of voting and tender rights, if any. 5 The following information will be made available to participants upon their request to: Name: Address: Telephone #: a. A description of each investment option’s operating expenses and management fees of the underlying investment media, expressed as a percentage or average net assets of the designated investment alternative. b. Any investment materials which are made available to the Plan, such as prospectuses, financial statements, and reports of underlying investment media for investment options which are not subject to the Securities Act of 1933. c. The latest information available regarding a list of asset holdings, value of assets, GIC provider, term and rate of return of the contract, and the like. d. Unit values or net asset values, historical returns (net of expenses). e. Information of the value of an individual’s interest in the investment.

"Don't forget to remind the AP that she will be taxed on these distributions, whether or not she wants to receive them." Great point!!!

Inform her via certified mail return receipt that if she doesn't choose a payment option and return the completed forms to you within 30 days, you will immediately pay all the funds to the participant (her ex.) Obviously I'm only kidding, but wouldn't it be fun to see how fast you get a response! Sorry, I have no bright ideas to help.

Tom - I think, as TPA's, we probably all know in whose lap the responsibility is likely to fall... Now it is time to rant a little bit. My own feeling is that the DOL should require only a website URL/LINK on the statement that refers them to the DOL website for the calculator. Then the DOL can have whatever assumptions they want on the calculator, as well as any disclaimer language, and the statements can have just a canned statement, developed by the DOL. This stuff about requiring the payment amounts on the statements is utter foolishness, and in my own cynical view, is being pushed (under the guise of helping participants) by those who have or will obtain a financial stake in lifetme payouts, as well as some well-meaning but sadly misguided do-gooders. I hasten to say that I have no evidence whatsoever to back up my cynicism. The simple fact is, whether you like it or not, that most participants in DC plans don't want, and will never take, a lifetime monthly payout option! Rant over. For now.

SRobertson, you sent me the following question: I have another question: Is serving on the board of directors and receiving income from the position considered being employed for the purpose of delaying RMD? He is retired from the institution. He is making a contribution to his Keogh as well. A corporate director would not, in my experience, be treated as an Employee - see also Revenue Ruling 58-505. But ultimately this should be determinable by whether he receives his income on a W-2 or a 1099 - presumably it is the latter.

Yes.

I think it is a very good question! I agree, the guidance seems to indicate that you would be eligible. (See section 2 on the link below) I'd say to go ahead and file. what's the worst that can happen? It gets rejected, and you are no worse off than before. And if nothing else, it could put you in a stronger bargaining position if it comes to trying to negotiate if the DOL imposes the full penalty. http://webapps.dol.gov/FederalRegister/HtmlDisplay.aspx?DocId=26618&AgencyId=8&DocumentType=3

Thanks David - yes, that's one of the questions I'm trying to get at. The participant says they are applying for a benefit - asks for quote on a bunch of options, then says, "oops, I don't want to take my benefit now after all." Then comes in 6 months later and asks for the same thing. I feel like the plan needs to provide, free of charge, all distribution amounts for all options available when requesting a distribution. However, beyond that is where it gets murky - if they ask for quotes at various ages, or multiple quotes in the same year, then it seems like some charges may be justified, and I'm just wondering what people think about this.

Rcline - thanks for the response. I completely support that the actuary must charge. The question there is what can be charged to the participant. And my inclination, for someone who wants a quote at 8 different ages is to think that the Plan Administrator can say, " You get one quote per year, based upon age X. If you want quotes for additional ages, there will be a charge." While that seems reasonable to me, and doesn't appear to be explicitly prohibited under the regs, I'd love to hear anyone's opinions.

Thanks Andy - so, in your situation where quotes for multiple retirement dates are being requested, would you say the plan sponsor must provide these for free, once a year? Or would you say that you get one per year at one age, and fee charged for all others? (We are fortunately not encountering this extreme situation, but might in the future, so I'd appreciate any thoughts) I'm not sure there is a realy good answer to this - seems a little gray...

The questions that came up are with regard to a small, frozen, DB plan. There are terminated former employees who have elected not to receive their benefits yet. How often is the plan required to provide benefit statements, both automatically and on request? It appears that under ERISA 105(a)(1), the automatic "every three year" EBS is required only for EMPLOYEES who are participants. It also appears that this requirement may be satisfied by proper notification, at least once per year, of the AVAILABILITY of an EBS. But specifically with regard to a terminated participant, although it appears they must receive an annual funding notice, it does not appear that they must automatically receive an EBS. However, under ERISA 105,it appears that a participant or beneficiary may request, in writing, an EBS, and that they are entitled to only ONE per year under ERISA 105(b). Furthermore, under proposed regulation 2520.105-2©(2), it appears that IF the benefit information has not changed since the last statement furnished upon termination or break in service, no additional statement is required to be provided. Agree/disagree? Assuming you agree with the above, what is the required content, and IF a Plan Administrator agrees to provide a benefit calculation more than once per year, may the participant be charged for the extra calculation? With regards to the charge, although 2520.104b-30 prohibits charges for disclosures REQUIRED under 105(a), since only one statement on request is REQUIRED, then I would conclude that charging the participant for any extra calculations would be permissible. Thoughts? As to the content - I'm not sure on this. For example, if the plan permits lump sum, life annuity (normal form of benefit), Jt. & 100, 75, and 50%, must the mandatory annual statement furnished upon request provide payments under all these options? Under ERISA 105, it must provide "total benefits accrued." Under proposed regulation 2520.105-2(d)(5), it does not appear that the statement must provide the benefit amounts for alternative forms, but must contain a statement referencing this and referring them to the SPD. And must any extra statements provide them as well? As a practical matter, if you are going to charge the participant for the extra statement(s)m there shouldn't be a problem with providing the additional option payment amounts, but I don't know that it is required. However, if a participant is actually electing to take a distribution, then clearly the distribution amounts under the various options must be provided. I'd appreciate any thoughts or comments. Thanks! P.S. - one final question: Suppose a participant comes in and says, "I want to take a distribution." So the Plan provides, at no charge, the various payments under the options available. Once having received this, the participant says, "I've changed my mind." How could this be handled? Could the Plan Administrator say, when the initial request is made, "There is no charge for you to receive quotes on the payment option for your distribution, but if you then decide not to take your distribution, we will bill you $250.00?" Alternative solutions?

See what I mean? So you take whatever approach you or your attorney feel comfortable with, and run with it. Believe me, I can (and have, when it suited my purposes) use QDROphile's approach. "Go not to the Elves for counsel, for they will say both no and yes."

On the service crediting, this is a difficult topic, and I've discussed this with several of the "big name" ERISA attorneys in this business over the years, and even they do not have universal agreement. Here's my own take, FWIW: DOL regulation 2530.210(d) (d) Controlled groups of corporations. (1) With respect to a plan maintained by one or more members of a controlled group of corporations (within the meaning of section 1563(a) of the Code, determined without regard to sections 1563(a)(4) and (e)(3)©, all employees of such corporations shall be treated as employed by a single employer. (2) Accordingly, except as referred to in paragraph (a)(1) and provided in paragraph (f) of this section, in determining an employee's service for eligibility to participate and vesting purposes, all service with any employer which is a member of the controlled group of corporations shall be taken into account. Except as referred to in paragraph (a)(2) and provided in paragraph (f) of this section, in determining a participant's service for benefit accrual purposes, all service during periods of participation covered under the plan with any employer which is a member of the controlled group of corporations shall be taken into account. It seems to me that the regulations do not exclude service credited before a company became part of a controlled group. The “exceptions” in (a)(1) and (a)(2) don’t seem to override the basic premise of (d). Granted that Treasury regulation 1.411(a)-(b)(3)(iv)(B) is not as clear on this issue for vesting purposes, the first sentence is ambiguous enough that it would seem consistent to interpret it in conjunction with the paragraph (d) of the DOL regulation, which DOES seem clear, at least to me. Beyond that, what about IRC 410(b)(6)© - do you think this helps you out for 2012 (and 2013?)

Yes, I am saying it is an "other right or feature."

Yes, I think it is potentially discriminatory. Given that age is generally disregarded when testing availability of optional forms of benefit under 1.401(a)(4)-4(b)(2)(ii), and given that this dispensation is NOT specified in 1.401(a)(4)-4(e)(3) for "other rights and features" I think that there is potential discrimination, so you'd have to test it.

Sorry - I was focusing on how to handle a "late" contribution in terms of earnings, not on whether your situation actually constituted a "late" contribution. I agree that it isn't "late" under the timeframes you are using, and that therefore no earnings would be necessary. I should read the original posts more carefully...

Revenue Procedure 2013-12, Appendix A, .01(1) says that ..."Corrective allocations and distributions should reflect Earnings and actuarial adjustments in accordance with section 6.02(4) of this revenue procedure." .02 of the Appendix A says to properly contribute and allocate the Top Heavy minimums. So although the DEADLINE is a little gray, I don't think there's much question that you have to include earnings. And informally, it seems like most folks (me included) use the one-year standard, although that's only anecdotal.