KJohnson

Gburns--I agree that the amounts withheld are clearly plan assets and that fidciary rules apply other than the trust requirement. I think the EBIA green manual agrees with this also. My point is that if the assets of the employer and plan are permissibly commingled, then it would be hard to prove any fiduciary breach if the employer, at the end of the year, can account that the amount of $ withheld were used for benefits or administrative expenses If it can't do this you have fiduciary issues such as the employer directly pocketing any experience gains (forfeitures) and not using them for plan purposes. As long as the employer gets this right, I am not sure why the employer could not invest the amounts as it pleases. As for the Grande decision, as I recall the real issue was whether services incurred in one year could be reimbursed in another. The FSA relied on the proposed treasury regs but the SPD referred participants to IRS Publication 502. 502 said that you could include the medical and dental expenses paid during the year regardless of then the services were provided and the FSA was lost based on its own SPD

I agree that under the plan asset regulations they are definitely plan assets. However underf ERISA Technical Release 92-01 (T.R. 92-01) these plan assets are exempt from the trust requirement as long as they are maintained as part of the general assets of the plan sponsor until used to fund benefits. Also, I thik you could have problems under 92-01 if salary reductions are sent to an intermediary account other than an account that is part of the plan sponsor’s general assets. However, once they are in the general assets of the employer, who is to say what is the plan's assets and what is the employer's? If the employer did not maintain sufficient liquidity of its general assets to pay the claims, then I think you might have a fiduciary issue, but with no requirement of the trust and a requirement for it to be part of the general assets it would seem to be impossible to say---those particular $$ are the plan's assets you are investing imprudently.

And, PWC purportedly put one in for Bank of America also: http://www.gottesdienerlaw.com/news/pdf/co_12_2_04.pdf This probably is not like the products described above, but the idea of "hypothetical" participant direction in a cash balance plan has been arround for at least five or six years.

I think PWC actually set up such a "second generation" cash balance plan for its employees. That design and also some allegations as to questionable testing practices for its 401(k) plan are the subject of a participant suit described in this link: http://sfgate.com/cgi-bin/article.cgi?file...0912EST0037.DTL

I don't know if I would want that provision in my document. What if administrator does not know of the divorce, pays the ex-spouse and gets sued by the contingent/successor beneficiary. I would sure want something that says that the divorce decreee has to be provided to the administrator to be effective as a termination of the beneficiary designation.

I agree with Pax that is should pass 401(a)(4) but I am not sure whether it would still be a safe harbor uner the multiple formula provisions of the regs. As to the 411(d)(6) issues the employer could simply start another plan with a 1/1/04 effective date on 12/31/04 which provided for the contribution and merge the plans on 1/1/05. Kind of silly right? I have had instances where I have kept the old allocation formula "intact" added a new allocation formula and stated that the contribuiton would be the sum of the two formulas and flagged what I was doing in the cover letter for the determ and have gotten a letter (but both formulas covered all participants). I agree, however, that this is an area where you could get differing views from the IRS. However, they seem to acknowledge that the new plan/merger method would work (as long as your new allocation forumal passes 401(a)(4 on its own) so it all seems to be form over substance. You also get into some semantic issues on what is "adding" a formula and what is "amending" an exising formula --for example is adding a class to a crosstested plan adding a new formula or amending the exisitng formula? As to why the additional 3% would make a diference, the IRS reasoining would be if you put the additional $ in under the old formula, different people would get the money than if you put the additional $ under the combination of the new formual and old formula and that the person had accrued a benefit for any $ put into the plan for that year. On the other hand, the sponsor would argue that all they have accrued the right to is the "formula" and not the dollars put in under the "formula" (which are discretionary) and that the old formula is still in the plan.

1) If Plan is required to be subject to QJSA (in other words you have former money purchase pension plan amounts in the plan) threaten to buy them an annuiity. 2) If the Plan is not required to be subject to QJSA but has QJSA and/or annuity provisions in them, I am not sure whether you can amend the plan to eliminate the provisions post-termination (you could definititely do it pre-termination). However, I know that post-termination amendments are often made pursuant to an IRS request on in response to a 5310. If you can eliminate the annuity options see (3). 3) If you don't have an annuity form of distribuiton, consent is not required for distribuitons over $5,000 in the event of a terminating plan as long as you meet the following from 401(a)(11)-11 regs: (e) Special rules--(1) Plan termination. The requirements of this section apply before, on and after a plan termination. If a defined contribution plan terminates and the plan does not offer an annuity option (purchased from a commercial provider), then the plan may distribute a participant's accrued benefit without the participant's consent. The preceding sentence does not apply if the employer, or any entity within the same controlled group as the employer, maintains another defined contribution plan, other than an employee stock ownership plan (as defined in section 4975(e)(7)). In such a case, the participant's accrued benefit may be transferred without the participant's consent to the other plan if the participant does not consent to an immediate distribution from the terminating plan. See section 411(d)(6) and the regulations thereunder for other rules applicable to transferee plans and plan terminations.

I just called in and was told the teleconference was cancelled and they did not have a reschedule date as of yet.

I am not sure there would be 410(b) issue assuming that these are the only non-collectively bargained employees in the plan. The CBs and NCBs would be mandatorily disaggregated and tested separately. If all NCBs are NHCEs then would you ever have a 410(b) problem? Since this is a multi, you might want to check the collective bargaining alumni rules in 1.410(b)-6(d). If any of the staff once were CBs then they may remain CBs under this rule. If you don't have a participation agreement or some other document allowing these folks to participate then you may have some big problems regarding past practice.

Be careful, the cite given by Begarath is for fiduciary breach only. For many other ERISA actions the limitations period selected is the most analagous state law limitations period. My recollection is that this applies for benefit overpayments as well but I haven't gone back and looked.

I have always understood that the owner would not be in the "bargaining unit" even if he or she was a union member. Thus I do not think that the owner could be a collectively bargained employee. If there is already a plan for the "union" employees, it would appear that the owner would have to be disaggregated in testing that plan (if it is a multiemployer plan there are certain rules regarding "bargaining unit alumni" still being treated as collectively bargained). Thus, if he is not collectively bargained, he could set up a plan for himself. This assumes that all the rest of the employees are part of the bargaining unit and there are no bookeepers, secretaries etc. who are non-collectively bargained.

Kirk, I guess the logic is that the plan is only using its money to purchase insurance that has recourse. The individual fiduciaries (or plan sponsor) are purchasing separate "riders" for the non-recourse. Thus the plan's payment of premiums still fall within the statutory provisions. Is that your understanding?

alanm I think the issue you are referring to is a plan indemnifying a service provider. Fiduciary liability insurance, on the other hand, protects the plan (not the service provider) in case of a fiduciary breach. This is a legitimate plan expense that can be paid for by the plan. What the plan cannot pay is any non-recourse premium for the fiduciaries themselves. Without a non-recourse provision, the insurance company, after it pays the plan, could go after the fiduciary. Typically, however, non-recourse premiums are fairly low (sometimes less than $100) and the fiduciary or the plan sponsor can pick this up with money outside of the plan's assets. This is a bit old, but it is a decent article: http://www.rsgroup.com/pics/spring02.pdf

Winter 2004" Be Careful What You Wish For: The Proposed 401(k) Regulations are Here" pp. 8-9

EGTRRA got got rid of the four year look back as to who is a key. Do you know whether the IRS takes the position that this also eliminates the four year look back for aggregating any plan in which the "key employee participate in the plan year containing the determination date and any of the four preceding plan years?"

I think the IRS would acknowledge that they couldn't take any action in a closed year if a schedule P were filed. Their argument woudl be that they were not doing anything in a closed year but that a uncorrected defect from a closed year means your plan is disqualified in the subsequent open year. Thus they would not be going after taxation in a "closed year." Luckily, I have never had to look too far into this so I don't know how strong their position is. You might very well be right that there are defenses.

I think the IRS takes the position that when a disqualifying defect occurs, the disqualification taints all future plan years until the defect is corrected-- even if the defect is in a closed year. I have a cite--which I haven't looked at...Martin Fireproofing Profit Sharing Plan v. Commissioner, 92 T.C. 1173 (1989). Of course whether they would even ask for the records of a closed year is another question.

I guess that is the question of whether they would have to be included in 410(b). Would a leased non-resident alien have to be included. Would a leased employee who termed with less than 500 hours have to be included in 410(b) for a profit sharing plan? Maybe so, but I have my doubts. It may come down to a question of whether there is a requirement that the CBA be with the employer who sponsors the plan running coverage testing. If that is the case you would appear to be out of luck. However, I am not sure whether that is the test. Also, your fact scenario raises some questions about the bona fides of any CBA (which was GBurns point). While I don't know the answer looking at this for five minutes, I can at least give you the language from the 410(b) regs regarding the definition of collectively bargained employees that can be excluded from coverage.... (2) Definition of collectively bargained employee--(i) In general. A collectively bargained employee is an employee who is included in a unit of employees covered by an agreement that the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, provided that there is evidence that retirement benefits were the subject of good faith bargaining between employee representatives and the employer or employers. An employee is a collectively bargained employee regardless of whether the employee benefits under any plan of the employer. See section 7701(a)(46) and Sec. 301.7701-17T of this chapter for additional requirements applicable to the collective bargaining agreement. An employee who performs hours of service during the plan year as both a collectively bargained employee and a noncollectively bargained employee is treated as a collectively bargained employee with respect to the hours of service performed as a collectively bargained employee and a noncollectively bargained employee with respect to the hours of service performed as a noncollectively bargained employee. See Sec. 1.410(b)- 7© for disaggregation rules for plans benefiting collectively bargained and noncollectively bargained employees. (iii) Covered by a collective bargaining agreement--(A) General rule. For purposes of paragraph (d)(2)(i) of this section, an employee is included in a unit of employees covered by a collective bargaining agreement if and only if the employee is represented by a bona fide employee representative that is a party to the collective bargaining agreement under which the plan is maintained. Thus, for example, an employee of either a plan or the employee representative that is a party to the collective bargaining agreement under which the plan is maintained is not included in a unit of employees covered by the collective bargaining agreement under which the plan is maintained merely because the employee is covered under the plan pursuant to an agreement entered into by the plan or employee representative on behalf of the employee (other than in the capacity of an employee representative with respect to the employee). This is the case even if all of such employees benefiting under the plan constitute only a de minimis percentage of the total employees benefiting under the plan. Also, I think you lose the exclusion if more than 2% of the employees covered by the CBA are "professionals"

I don't think DOL has a hard and fast rule, here is a Q&A from the last ABA session in April '04: Question 2: In light of recent case law and existing business practice with respect to nonqualified deferred compensation plans for executives and management employees and other highly compensated employees, what are the DoL’s current views regarding the definition of a “top hat” group and will the DoL issue guidance to clearly and appropriately reflect a more practical approach to defining a top hat group? Proposed Answer 2: It is noted that practitioners and employers do not have clear, workable guidance from the DoL regarding the definition of a top hat group. The DoL’s most recent pronouncement in this area, Advisory Opinion 90-14A (5/8/90) which is now almost 14 years old, takes an extremely restrictive and truly unwarranted pproach to the determination of a top hat group by focusing on whether an eligible participant has the ability to influence the terms of his or her compensation. See also DoL Adv. Op. 92-13A (5/19/92) (reaffirming the standard established in Adv. Op. 90-14A for determining whether a top hat group exists). This DoL guidance is to be contrasted with two more recent court cases (note: it would appear to be impossible to reconcile this DoL guidance with these two cases). In Demery v. Extebank Deferred Comp. Plan, 216 F.3d 283 (2d Cir. 2000), a top hat plan was found even though it covered over 15% (i.e., 15.34%) of the employer's employees and where the compensation of some of the eligible employees was relatively low. In In re: The IT Group, Inc., 2004 WL 226041 (Bankr. . Del.), a top hat plan was also found where the plan covered management mployees below the level of executive and employees whose base annual salary was at least $100,000. DoL Response 2: The Department expressed the view in Advisory Opinion 90-14A (May 8,1990) that, in providing relief for “top hat” plans from the broad remedial provisions of ERISA, Congress recognized that certain individuals, by virtue of their position or compensation level, have the ability to affect or substantially influence, through negotiation or otherwise, the design and operation of their deferred compensation plan, taking into consideration any risks attendant thereto, and, therefore, would not need the substantive rights and protections of Title I. There is no initiative underway at the Department to reexamine the AO in light of the cases cited in the question.

Media Release Release Date: 02/10/2004 Release Number: 04-111-ATL Contact Name: Gloria Della Phone Number: 202.693.8664 Printer Friendly Version Former Owner of Mississippi Home Health Care Agency Sentenced for Embezzling Pension Assets Atlanta, Georgia - The former owner of Complete Health System, Inc. of Vicksburg, Mississippi, (formerly Haworth Home Health Agency, Inc.) was sentenced on January 23, 2004 to four months in prison, four months of home confinement, probation and restitution to the company’s 401(k) plan. Ida J. Haworth was sentenced in federal district court in Jackson, Mississippi after pleading guilty to one count of embezzling assets belonging to the Haworth Home Health Agency 401(k) Plan. “Theft of employee benefit assets jeopardizes the benefits of workers,” said Howard Marsh, regional director of the Employee Benefits Security Administration (EBSA) in Atlanta. “This case reaffirms our commitment to protect the benefit promises made to workers.” Haworth was indicted on August 20, 2003 for failing to remit approximately $53,000 in employee contributions to the 401(k) plan’s investment manager. She operated several home health care agencies in Louisiana and Mississippi for several years. The Atlanta regional office of the U.S. Department of Labor’s Employee Benefits Security Administration investigated the case. The U.S. Attorney’s Office for the Southern District of Mississippi prosecuted the case. (U.S. v. Haworth) Criminal No. 3:03-CR-128BN U.S. Department of Labor news releases are accessible on the Internet. The information in this news release will be made available in alternate format upon request (large print, Braille, audio tape or disc) from the Central Office for Assistive Services and Technology. Please specify which news release when placing your request. Call 202.693.7773 or TTY 202.693.7755.

mbozek--That's what I always thought as well. When there was a payout, someone asked me the quesiton. I said I couldn't imagine that we had to amend the filing but I would just call to make sure. I called Canary's number at DOL and someone called me back a couple days later--I've forgotten the name of the person and said that while you only filed one statement, that statement needed to remain accurate. Like you, I am not sure this is consistent with the regs and I can't imagine any enforcement in this area.

What is the practice for updating thse filings. Let's say you add pay someone out. Do people go in and amend the number. I had an informal conversation with DOL and they said that you should.

Many (most) practitioners would say that if you did this without a 125 plan you would have a taxable event not only for those who took the "cash" but also for those who took the family coverage.

The first case is out of the Western District of Texas. The numbers are the docket number assigned by the Court. It's not going to be of much help unless you have access to one of the two major on-line legal data bases--westlaw or lexis. I did a quck google search and found a westlaw number: .., 2001 WL 681690 The second case is out of the southern district of Alabama. The cite is an identifier in the lexis database. Great West is a Supreme Court case and it can be found here: http://supct.law.cornell.edu/supct/html/99-1786.ZO.html

From the OPM cite: http://www.opm.gov/hsa/faq.asp#eligibleHSA Who is eligible for an HSA? You must participate in a High Deductible Health Plan, have no other insurance coverage other than those specifically allowed, and not be claimed as a dependent on someone else’s tax return in order to be eligible for an HSA. Some examples of other coverage that would cause ineligibility are: a flexible spending account (FSA), a spouse’s FSA, a spouse’s HMO, other non-high deductible health insurance coverage, TRICARE, Medicare, or receipt of VA benefits within the previous three months. You can still have other disability, dental, vision and long-term care insurance policies