KJohnson

I assume that everyone who is doing this (chargng terminated vesteds a fees but not actives) is retaining evidence of their BRF testing. The method of allocating expenses is a BRF. I am still not completely sure how to do the testing. I assume it would be looking at the TV's who are receiving the charges and determinig who are HCEs and who are NHCEs. Then you would compare this group to the actives who are not receiving the administrative charges again determining who are HCEs and who are not. For a plan with any size, I don't suppose this would ever be an issue. But with a smaller plan (and with cashouts in many plans dropping to $1,000) I suppose it could be.

Another non-consensual distribution that can be made from a Plan with account balances over $5,000 is when a particiant has reached the later of NRA under the Plan or age 62. 1.411(a)-11©(4). It appears that you could mandate such an involuntary distribution and not provide that automatic rollover under the following langauge of Q&A 2 of 2005-5 which provides that such an involuntary distribution is not a "mandatory distribution". Q-2. What is a mandatory distribution? A-2. A mandatory distribution is a distribution that is made without the participant’s consent and that is made to a participant before the participant attains the later of age 62 or normal retirement age.

Plan requires a break in service for a distribution. Calendar year plan. Participant is over age 50. Plan does not have immediate payment to alternate payee. QDRO entered in February before particpant has 500 Hours of Service. QDRO rceived by plan in March after particpant has 500 hours of service. What is the earliest retirement age? I know in this situation it would be "The earliest date on which the participant could begin receiving benefits under the plan if the participant separated from service with the employer " However, when do you determine the hypothetical termination? When QDRO was entered (which would mean the participant would have a break in the current year)? Received(which would mean the particpant woudl not have a break into the folloiwng year)? Some other time?

I just went back and looked at the handout of the powerpoint slides. In the margin I have written: Holland: NRA must be tied to the age when individuals customarily retire. I also have written--that there are issues regarding suspension of benefits/or post NRA actuarial adjustments.

I didn't go this year, but I did go last year and I remember negative comments from Holland last year. As, I recall that the concern was not only taking "in-service" distributions from a pension plan but its use as a method of avoiding the whipsaw. The "method" I remember being mentioned was to put NRA at the earlier of 65 or five years of service.

No, I think Mal meant ESA and not EBSA. http://www.dol.gov/esa/olms_org.htm

Kirk, Exec-U-Care is underwritten by Jefferson Pilot

I think the ability to limit has to be in the document, but what the limit is does not have to be... 7/8/2005: Technical Tip: Limiting HCE Deferrals through Corporate Resolutions (Reish Luftman Reicher & Cohen) Excerpt: "Technical Tip 148: .... If a plan document provides that the administrative committee may limit HCE deferrals in order to prevent ADP testing violations, and the plan administrator takes that action through resolution and not by plan amendment, is this considered to be an 'employer-provided limit' so that contributions in excess of this imposed limit are eligible to be treated as catch-up contributions? Response: Yes"

Locust, I agree that it is not the greatest solution, but I have been told by two small plan sponsors that they could not find a brokerage house that would provide the 1099R/941 service for a reasonable fee for a small account, or a bank that would keep the account open or not charge fees. I did not go out and test this on the market myself, but assuming this is true this seemed like one solution that would work, there might be others. As to your points: 5. IMO - Brokerage houses that don't have a reasonable way to handle payments should not be given the business. I agree but I am told that for some small accounts, brokerage firms won't provide these services or they come with ridiculous fees. Also, my first suggestion when this came up was to change banks, but was again told that you could not find a bank that would hold open an account like this one that has a $0 balance for most of the year. Mbozeks comments seem to confirm this 4. Why doesn't the employer just pay the bank fees? I agree that this is the best solution if you can get the bank to bill the employer directly but: a) I have dealt with one plan sponsor who indicated its a plan expense and they are not going to pay it; b) It doesn't deal with the issue of the account being closed for a $0 balance and c) Typically the fees are deducted from the account directly. If the account is in the plan's name and you have the employer then reimbursing the fees and you have more of an accounting headache than the no-interest loan. Is it a contribution, does it have to be allocated. 3. The Plan has to account for this seed money every year. This would be another quirk in administration that has to be explained to everyone who works with the plan every year. It would be a static asset and liability. I agree it would have to be on the balance sheet etc. but I don't really see this as a big deal. 2. You still have the issues with loans and reimbursement of expenses paid by the company. I'm not convinced that this works under the rules. I could be wrong, but I'm an experienced person and my doubts are reasonable. Why have this sort of issue that must be explained to the IRS or DOL or participants if it is ever reviewed? In my experience asset issues are the first ones that a DOL auditor reviews - and if he or she sees a suspense fund like this, it is an issue. Why don't you think this works under the PTE? What are your doubts? I would be the first to agree its not the best way to handle this, and the two situations I reviewed it was already in place and I wanted to make sure that there was no PT. Finding a different brokerage house or bank is the best solusiton assuming you can get the services for a reasonable sum. That said, I think the explanation to the regulatory authories is fairly simple-- the employer wants to save the plan fees and expenses. I would think DOL audtor would appreciate the concern 1. The documentation for the seed money - "it's a loan but it's exempt, it's not an asset that is to be allocated, it's not a suspense account, etc." - will be more expensive than just paying the bank fees. It is much cleaner not to have these issues. The asset is completely offset by the liabiltiy so I am not sure that there is really anything to allocate. It is also not a contribution or earnings. So I am not sure this is an issue. The documentation issues of 80-26 are not really that cumbersome.

I have talked with DOL about the situation that is common for some small plans where the brokerage house does not agree to perform any withholding or 1099’s and therefore pays the distribution to the trustee of the Plan. The Trustee then deposits it in a checking account for the Plan and makes the distribution to the participant and applicable withholding. However, the employer is constantly given grief by the bank or charged fees because this bank account typically only has assets for a few weeks each year (especially for those plans that only allow distributions after the end of the plan year). I asked whether under PTE 80-26 the employer could “seed” the account as an interest free loan in a sufficient amount so that the account would not be subject to closure by the bank if there was no balance or be subject to fees if the balance was below a certain minimum. The person I spoke with at DOL said that he believed that this should work under PTE 80-26 and would fall under the “payment of ordinary operating expenses of the plan including the payment of benefits in accordance with the terms of the plan” You would just book the seed money as an asset and reflect the repayment obligation as a corresponding liability. That way your plan assets and account balances should still match. He also indicated that although it was not certain, he thought it very likely that there would be an amendment to 80-26 in the near future which would remove the three day limit for an interest free loan incidental to the ordinary operation of the plan. This would then remove, in his words, “all doubt” on the subject.

At least in Enron I think DOL's argument was that there were things that could have been done with the insider information consistent with securities law and ERISA such as disclosing the information to other shareholders and the public at large or eliminating Enron stock as an investment option. See pages 24-29 in DOL's brief that can be found here: http://www.dol.gov/sol/images/EnronBrief1.fnl.PDF I am not sure if DOL has gone so far as to say that a plan fiduciary must actually violate the insider trading rule beccause of exclusive benefit notions, but it may have.

I think EM's cite to the 401(a)(11) regs is right on. There might be some concern that the 401(a)(11) regs were pre-REA, but support can also be found in Treas. Reg. 1.401(a)-20, Q&A 31(b)(3) which provides that "After the participant's death, a beneficiary may change the optional form of survivor benefit as permitted by the plan." Of course it has to be provided by the Plan. In many (most) QJSA/QPSA plans that have this provision, people do not elect the survivor benefit form of distribuiton prior to the death of the participant. Thus while the QPSA maybe the default, the spouse can change it if the approrpriate language is used in the Plan. Where I sometimes see conceptual problems is where a form of benefit is actually chosen before death and the spouse signs a piece of paper saying that his or her consent to the form of benefit is "irrevocable". Then, it seems a little bit contradictory to say that someone can change an irrevocable election Of course also always remember: "WDTPS" (What Does The Plan Say).

Except--isn't 80% reduced to 50% in a parent/sub relationship solely for the purposes of 415?

It is hard to speak generally, but in most instances two plans will not be parties in interest with each other. However, where you have to be careful is "who" is deciding to buy and "who" is deciding to sell. If you have the same fiduciary making the call for both plans, I think you have a potential 406(b)(2) issue prohibiting a fiduciary (2) in his individual or in any other capacity act in any transaction involving the plan on behalf of a party (or represent a party) whose interests are adverse to the interests of the plan or the interests of its participants or beneficiaries, or If you have the same fiduciaries but have multiple individualss then you could try the abstain/vote route--one votes for one plan and abstains from the other. However, you still have an issue that even if the fiduciary is abstaining on one end, he is still a fiduciary to that plan for which he abstains and the interests of the plan for which he is voting stilll could be considered adverse to the plan for which he is abstaining. Of course if the fiduciaries are completely different, then the transaction, on its face, might not present the 406(b)(2) issue.

You are running the risk of the IRS considering this taxable income for both those who choose the cash payment as well as those who choose the health benefits. http://benefitslink.com/boards/index.php?s...=0entry100424

wmyer is referring to the following: (5) Spouse. (i) Except as provided in subdivision (ii) of this subparagraph, an individual shall be considered to own the stock owned, directly or indirectly, by or for his spouse, other than a spouse who is legally separated from the individual under a decree of divorce, whether interlocutory or final, or a decree of separate maintenance. (ii) An individual shall not be considered to own stock in a corporation owned, directly or indirectly, by or for his spouse on any day of a taxable year of such corporation, provided that each of the following conditions are satisfied with respect to such taxable year: (a) Such individual does not, at any time during such taxable year, own directly any stock in such corporation. (b) Such individual is not a member of the board of directors or an employee of such corporation and does not participate in the management of such corporation at any time during such taxable year. © Not more than 50 percent of such corporation's gross income for such taxable year was derived from royalties, rents, dividends, interest, and annuities. (d) Such stock in such corporation is not, at any time during such taxable year, subject to conditions which substantially restrict or limit the spouse's right to dispose of such stock and which run in favor of the individual or his children who have not attained the age of 21 years. The principles of paragraph (b)(2)(iii) of Sec. 1.1563-2 shall apply in determining whether a condition is a condition described in the preceding sentence. I think your alternative if you can't get in under the inactive spouse rule is to try and go through VCP and convince the IRS that you never intended "dual coverage" under both plans. I think as part of this you would need to establishe that for each applicable year the plans could pass 410(b) and 401(a)(4) if they were separate plans tested on a controlled group basis.

http://a257.g.akamaitech.net/7/257/2422/04...pdf/03-1407.pdf

Also this is apparently from IRS guidelines on employee/independent contractor status in the entertainment industry:3. Guild or Union Benefit Payments. Many workers in the Television Commercial Production segment (and some in the Professional Video Communications segment) are members of guilds or unions which are subject to the provisions of the National Labor Relations Act (29 U.S.C.). Generally, the collective bargaining agreements between the production companies and these guilds or unions establish various benefit plans such as health plans and retirement plans (sometimes referred to as "Taft-Hartley Plans"). These plans are authorized by 29 U.S.C. §186©(5)-(8), which require that the plans be established for the sole and exclusive benefit of employees (and their dependents). The definition of "employee" for tax purposes is the same as the definition for purposes of the National Labor Relations Act.(10)(9) Therefore, if a company is making contributions to a guild or union benefit plan on behalf of a worker who is not providing services through a loan-out corporation (see Section VII B, below), the worker must be considered an employee. Note, however, that these guidelines do not address the treatment of workers who provide services through loan-out corporations. Thus, the analysis of payments to Taft-Hartley plans on behalf of employees of loan-out corporations is also beyond the scope of these guidelines. ********* B. Use of a Loan-Out Corporation It is not uncommon in the Industry for certain workers (particularly those that are the most highly compensated) to render their services through a loan-out corporation, i.e., a corporation owned by the worker which "loans out" the worker's services to the production company. In the 1991 case of Sargent v. Commissioner, the Eighth Circuit Court of Appeals ruled that a hockey player was an employee of his loan-out corporation, rather than the hockey team which retained his services through the loan-out corporation. The Service has 'non-acquiesced" in this decision. An analysis of the Sargent case and the issues pertaining to loan-out corporations in the Industry is beyond the scope of these guidelines. Of course, if a worker qualifies as an independent contractor with respect to the production company under these guidelines, the production company would not be required to treat the worker as an employee even if a loan-out corporation is involved. Nonetheless, the worker may be an employee of the loan-out corporation.

I assume that this is the enterntainment industry, the guild plans are multis, the participant is working for a producer/studio etc and is being compensated by 1099 income and that the producer/studio is the contributing employer to the guild plan. My concern woudl be the same as Effen's but appartenly this is a common practice with entertainment industry plans. Here is a link that discusses these issues as well as the 415 aggregation issues: http://benefitslink.com/boards/index.php?s...opic=14810&st=0

oriecat you may be right and I misunderstood the question. I had assumed that the employee plus one coverage was for their first child and that they were having their second baby. If the employee plus one was actually double covering the husband, then I think that the change would not correspond to a change under another employer's plan and I would agree with you.

People use (b)(2) example 1 and ©4) example 7 to say that there is "tag along" rule with regard to dependents. For example if you have not covered your spouse and have a child, you can then make an election change for family coverage and cover that spouse in addition to the child. This is consistent with Example 1 and would make sense if the plan only had employee and family coverage. The tricky part comes when a plan has employee, employee plus one and family. Arguably, the employe could elect employee plus one and not elect family and this would be more "consistent" with the event. The IRS however has informally said that a tag-along rule applies in this case and family coverage could also be chosen. In your case, it would seem that adding the husband to the "other plan" by selecting family coverage would be consistent with the change in status --even if the other Plan had a tier that would cover just the wife and the two kids. Then as far as dropping the husband's coverage in your plan, you would rely on the following from the regs (assuming this is in your document): (4) Change in coverage under another employer plan. A cafeteria plan may permit an employee to make a prospective election change that is on account of and corresponds with a change made under another employer plan (including a plan of the same employer or of another employer) if-- (i) The other cafeteria plan or qualified benefits plan permits participants to make an election change that would be permitted under paragraphs (b) through (g) of this section (disregarding this paragraph (f)(4)); or (ii) The cafeteria plan permits participants to make an election for a period of coverage that is different from the period of coverage under the other cafeteria plan or qualified benefits plan.

Prospectus delivery is by far the biggest problem since it is "dynamic" and can't be accomplished through annual enorllment meetings or the like. The SEC only requires delivery to the Plan and not the individual participant. Making a prospectus "available" on line or otherwise is not sufficient to constitute delivery. I would think that this would be an issue in any large Plan RFP and you would not go to a provider who could not promise to deliver a prospectus directly to a participant immediately after the particpant firsts invests in any mutual fund.

The Code defines an eligible rollover distribtion by tellying you what it is not. Section 402©(4) of the Code provides: (4) Eligible rollover distribution For purposes of this subsection, the term “eligible rollover distribution” means any distribution to an employee of all or any portion of the balance to the credit of the employee in a qualified trust; except that such term shall not include— (A) any distribution which is one of a series of substantially equal periodic payments (not less frequently than annually) made— (i) for the life (or life expectancy) of the employee or the joint lives (or joint life expectancies) of the employee and the employee’s designated beneficiary, or (ii) for a specified period of 10 years or more, (B) any distribution to the extent such distribution is required under section 401 (a)(9), and © any distribution which is made upon hardship of the employee

This recent case discusses some of the issues but not a benefits claim directly: http://pacer.ca6.uscourts.gov/opinions.pdf/05a0078p-06.pdf Here is a quote This narrow issue has not yet been addressed by the Sixth Circuit, see Eckel v. Equitable Life Assur. Soc. of the U.S., 1 F.Supp.2d 687 at 688 (noting that the Sixth Circuit had not yet addressed the issue); however, the majority of courts considering this issue have held that disputes arising under ERISA, including COBRA claims, are subject to arbitration under the FAA. See Kramer v. Smith Barney, 80 F.3d 1080, 1084 (5th Cir.1996); Pritzker v. Merrill Lynch, Pierce, enner & Smith, Inc., 7 F.3d 1110, 1115-16 (3d Cir.1993); Bird v. Shearson Lehman/American Express, Inc. 926 F.2d 116, 122 (2d Cir.1991), cert. denied 501 U.S. 1251 (1991); Arnulfo P. Sulit, Inc. v. Dean Witter Reynolds, Inc., 847 F.2d 475, 479 (8th Cir.1988); Peruvian Connection, Ltd. v. Christian, 977 F.Supp. 1107, 1111 (D.Kan.1997); Fabian Fin. Serv. v. Kurt H. Volk, Inc. Profit Sharing Plan, 768 F.Supp. 728, 733-34 (C.D.Cal.1991); Southside Internists Group PC Money Purchase Pension Plan v. Janus Capital Corp., 741 F.Supp. 1536, 1541-42 (N.D.Ala.1990); Glover v. Wolf, Webb, Burk & Campbell, Inc., 731 F.Supp. 292, 293 (N.D.Ill.1990).16 Notwithstanding the foregoing, the following discussion reveals why this issue need not be resolved herein. A longstanding principle of this Circuit is that no matter how strong the federal policy favors arbitration, “arbitration is a matter of contract between the parties, and one cannot be required to submit to arbitration a dispute which it has not agreed to submit to arbitration.” United Steelworkers, Local No. 1617 v. Gen. Fireproofing Co., 464 F.2d 726, 729 (6th Cir.1972). See also AT&T Techs., Inc. v. Communications Workers of America, 475 U.S. 643, 648 (1986) (“[A]rbitration is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed so to submit.”); Bratt Enters., Inc., v. Noble Int’l Ltd., 338 F.3d 609, 612 (6th Cir.2003); Roney & Co. v. Kassab, 981 F.2d 894,897 (6th Cir.1992). This Court has drawn a clear line between the extensive applicability of general arbitration provisions and the more narrow applicability of arbitration clauses tied to specific disputes. When faced with a broad arbitration clause, such as one covering any dispute arising out of an agreement, a court should follow the presumption of arbitration and resolve doubts in favor of arbitration. See Masco Corp. v. Zurich Am. Ins. Co., 382 F.3d 624, 627 (6th Cir.2004). Indeed, in such a case, “only an express provision excluding a specific dispute, or the most forceful evidence of a purpose to exclude the claim from arbitration, will remove the dispute from consideration by the arbitrators.” Id. at 627 (internal quotations and citation omitted). However, when an arbitration clause by its terms extends only to a specific type of dispute, then a court cannot require arbitration on claims that are not included. See Bratts Enters., Inc., 338 F.3d at 613.No. 03-1192 Simon v. Pfizer Inc.

Also I don't know about your corrective amendment. For example, like a QNEC you don't have to make a discretionary profit sharing contribution for any year. However, on these Boards you will find an extensive discussion on whether you can change the allocation formula for any profit sharing contribuiton that will be made after a particpant has done everthing to "earn" an allocation for that contribuiton (last day, 1,000 hours etc.). Thus if you have a QNEC provision that says you will make a QNEC for all NHCEs who are eligible to defer on a comp to comp basis, I am not sure whether you could change this formula to a bottom up formula retroactively since the NHCE has done everythin neccesary to be entitled to a QNEC under the old formula. There might be some exception with regard to QNECs but I am not sure why it would be treated differently from a profit sharng contribuiton.