Belgarath

Have no idea whatsoever WHY they want to do this. The question was posed to us as to IF they can do this. The question isn't necessarily so much whether a Trust can be a beneficiary, but whether the measuring life for a J&S calculation can be a person, when the beneficiary is not a person, but is a revocable trust. Not concerned with the tax implications - we'll just tell them they need to work with their tax counsel as to whether this option (if permissible) is the best way to handle. Thanks.

Hi Kevin - thanks for the input. The plan uses an initial computation period of 12 months from DOH, then reverts to plan year. So computation period 1 would be 2/15/19 to 2/14/20, then computation period 2 and subsequent would be plan years. And as consider it further, I think that means that entry would be 1/1/2020, not 2/15/2020. Well, actually I think it will still be 2/15/20...seems inconsistent with the above to end up with the entry date being at a time during that initial eligibility computation period. Sheesh.

Luke, there is no problem with the spouse signing off on spousal rights when retirement distributions begin, to have the trust as the beneficiary. So the questions still are in play. Thanks.

This is a constant headache. If we were smart, I swear we wouldn't allow it, but there is great demand for it. Anyway, suppose you are utilizing this exclusion. Someone who is HIRED at 8 hours per week, and is therefore "reasonably expected" to work less than 1,000 hours, is subsequently put on full time. Let's further suppose it is a calendar year plan, DOH is February 15, 2019 and full time status starts in July of 2019. Does the person (A) enter immediately in July, since no longer "reasonably expected" to work less than 1,000 hours in the initial computation period, or (B) does the person actually have to work the 1,000 hours, and therefore subsequently enters on February 15 of the following year, (2020) when the initial computation period is complete? Even if (b) is the more technically correct answer (which it is IMHO) do you think it is reasonable to interpret it, as long as done consistently, such that you use (A) instead?

In a way I feel better, as I'd never seen this before, either. (Even though I don't have much to do with DB plans anyway.) We are talking initially about a retirement distribution. The retirement distribution options provide for Life, Life with a 120 month period certain, and the 3 standard J&S options. Section 5.8 referred to at the end is merely the RMD rules. The plan says the following for death prior to the annuity starting date. But that isn't the situation here. From all this, it seems to me that the requested distribution cannot be paid to the revocable trust, as even if one decided it was acceptable to use the RMD rules to govern this situation, they require an IRREVOCABLE trust in order to comply. However, I'd love any and all opinions. Thanks!! (f) Alternative form of distribution. If the present value of the total death benefit does not exceed $5,000 at the time of distribution, then the Administrator shall direct the immediate distribution of the present value of the death benefit. Otherwise, to the extent the death benefit is not paid in the form of a Pre‑Retirement Survivor Annuity, it shall be paid to the Participant's Beneficiary one of the forms of annuity described below. However, any such annuity may not be in any form that will provide for payments over a period extending beyond either the life of the Participant's designated Beneficiary. (1) Monthly pension payable over the life of the Participant's Beneficiary. (2) Monthly pension payable over the life of the Participant's designated Beneficiary, with the provision that, if the Participant's designated Beneficiary dies prior to the completion of 120 monthly payments, such monthly payments shall be continued to the Participant's beneficiary until the monthly payments made to the Participant's designated Beneficiary and the Participant's beneficiary shall total 120. Notwithstanding the above, if the death benefit payable pursuant to Section 5.4 is payable in an annuity, payments shall be subject to the rules specified in Section 5.8.

Non-ERISA DB plan - a public school. A participant who is retiring wants to receive her retirement benefit in an option that used her spouse's DOB as the basis to calculate the various optional forms of benefit. But, she wants to reflect their REVOCABLE trust as beneficiary. I know this wouldn't qualify under the RMD rules, but is it allowable under the "regular" rules? Is it allowable for the plan to calculate the retirement options using the spouse as measuring life, yet have the death benefits paid to a revocable trust (even assuming the spouse is sole beneficiary under the trust)?

Does the plan also have safe harbor? Match or nonelective? Discretionary match? Additional profit sharing? Does the bonus amount get included/excluded for different purposes? In other words, is this strictly a deferral problem, or are there also missed employer contributions for 15 years? The problem could get larger than it seems at first glance. You might consider seeking ERISA counsel on this - it is possible, depending on the amount of money involved, the recommendation might be to ignore the issue and just correct moving forward. I'm making no recommendation, just tossing that out there for consideration.

Thanks Tom!

Got a little more information today. It is currently an S-corp, and they are changing to an LLP mid-year. So to be more precise, it was formerly Company A, and now it will be "Wile E. Coyote LLP dba Company A" - no other changes. But a new EIN, as mentioned earlier.

Thank you. I just don't know, at this point, what the business organizations/transactions/reorganizations etc. might be. (I don't even know what type of entity the current business is!) But your response was quite helpful.

At this point, I've given the only details I have. Obviously, not much! I speculate that perhaps they are changing from unincorporated to incorporated, but that is purely a guess. So in a general way, I'm just trying to determine if the employer can "assume" a prior employer's Section 125 plan, similar to the qualified plan world. Thanks.

So, suppose you have entity "A" which sponsors a Section 125 Plan. Entity "A" is now changing their name, and will become entity "B." Same employees, but new name, EIN, and management roles. Can the new entity simply adopt the existing plan assets and liabilities, via a resolution and amendment, similar to what happens in a 401(k) plan, or are there different requirements for this situation for the 125 plan? I have no details whatsoever, other than that they do have an FSA - don't know if there are other types of benefits as well. Assuming they have premiums paid through this plan, do you have any experience with whether the insurance carriers just allow the policies to "transfer" to the new entity, or will they have to re-apply, etc.?

Have used it. Worked fine.

Thanks Patricia. Yes, I just took a look at 1.403(b)(10) and it is quite clear.

Well, anything "works" if it is never questioned. While I think it is unlikely to cause a big problem, there are penalties for intentionally filing an incorrect return. https://www.irs.gov/government-entities/federal-state-local-governments/increase-in-information-return-penalties Anyway, since you now aren't going to do it incorrectly, no worries!

If I understand what you are saying: suppose ACP refund is $5,000, and he is withdrawing $10,000. The entire $10,000 is going to be coded as an eligible rollover distribution, and you are going to withhold $2,000 in taxes, (even though 20% withholding not required on the ACP refund amount) and consider the ACP refund requirement satisfied? Seems doable... P.S. - is this an audited plan? Auditor might have a problem with it. As to the IRS, I have a hard time seeing why IRS would care - it is taxable either way, and as long as he doesn't roll it over, seems like no harm, no foul. I certainly wouldn't recommend this approach as SOP, however.

Also, (without checking) I think the successor plan rules don't apply to a 403(b) anyway.

I know nothing about it, but this might be helpful as a starting point. https://www.medicaidplanningassistance.org/medicaid-eligibility-401k-ira

Even if you can come up with an exclusion that only keeps him out, and doesn't exclude anyone else who should otherwise benefit and will now get shafted, is there any possibility that such a move will trigger some Medicare fraud thing, or violate the ADA, or something crazy like that? I have no idea whatsoever - I just wondered... What an unfortunate situation. Keep us posted if you can find a way around it.

FWIW, virtually none of our plans allow rollovers into the plan by terminated employees. Our employers generally want nothing to do with potential problems/questions/issues with, for example, ineligible rollover money coming into the plan, etc., etc... On a personal level, if I were an employer, I certainly wouldn't allow it.

Thank you both.

1.72(p)-1, Q&A 19(b)(2)

The 125 plans I've seen use disability insurance, and disability is determined by the insurance company, so the "new" DOL disability procedures wouldn't apply. Are there 125 plans out there where the situation is otherwise, so that the plan/SPD must be modified to take these procedures into account?

I've seen wrap documents for Section 125 plans, that allow you to file just one 5500 form for all of the benefits that fall under the 125 plan. I've also just seen reference to a "Mega Wrap" document, which incorporates the cafeteria plan and underlying benefits, in addition to certain health/welfare benefits that are NOT under the cafeteria plan. Is this a viable technique for doing only one 5500 form? Ignoring document issues, for now anyway - just interested in the 5500 question. Thanks.

How sad for you. Just kidding. I root for the Dolphins, so I'm familiar with losing and frustration, and in no position to make fun of any other teams...