KJohnson

Kirk, I agree with you. But I thnk that the instances where someone who terminates emloyment and remains a party in interest would be few and far between Once you terminate you will, by defintion, no longer be an employee of the plan sponsor. I would assume that terminated employees remaining as officers would also be rare. Typically anyone terminated would also be removed as a fiduciary for the Plan. I guess where you would have to look out is 10% shareholders, directors in rare instances and relatives of various parties in interest. Thus, while rare you would have to keep your "eyes open." On the other hand, can't your provide that repayment/offset is required/accelerated upon termination of employment, death, retirement, disability or otherwise entitled to a distribution? Wouldn't this get around the problem? I guess they could take a loan but it would immediately be accelerated and offset--the same as taking a distribution. I guess an alternate payee who is not entitled to an immediate distribution could still be a problem. However, couldn't you just amend your plan to provide for immediate distributions to alternate payees and still avoid the issue?

Under Rev. Proc. 2000-20 the IRS will not issue opinion letters for a prototype on any of the following types of plans: .03 Areas Not Covered by Opinion Letters - Opinion letters will not be issued for: 1 Multiemployer plans or multiple employer plans, within the meaning of § 413(b) and § 413© respectively; 2 Plans that have been negotiated pursuant to a collective bargaining agreement and submitted to the Service as a plan maintained pursuant to a collective bargaining agreement. This does not preclude an M&P plan from covering employees of the employer who are included in a unit covered by a collective bargaining agreement or the adoption of an M&P plan pursuant to such agreement as a single employer plan which covers only employees of the employer; 3 Stock bonus plans; 4 Employee stock ownership plans; 5 Pooled fund arrangements contemplated by Rev. Rul. 81-100, 1981-1 C.B. 326; 6 Annuity contracts under § 403(b); 7 Defined contribution plans (other than target benefit plans) under which the test for nondiscrimination under § 401(a)(4) is made by reference to benefits rather than contributions; 8 Cash balance or similar plans or defined benefit plans under which the test for nondiscrimination under § 401(a)(4) is made by reference to contributions rather than benefits; 9 Plans described in § 414(k) (relating to a defined benefit plan which provides a benefit derived from employer contributions which is based partly on the balance of the separate account of a participant); 10 Target benefit plans, other than plans which, by their terms, satisfy each of the safe harbor requirements described in § 1.401(a)(4)-8(b)(3)(i), as well as the additional rules in § 1.401(a)(4)-8(b)(3)(ii) through (vii); 11 Plans that provide for the disparity permitted under § 401(l), other than plans which use a definition of compensation that includes all compensation within the meaning of § 415©(3) and excludes all other compensation, or that otherwise satisfies § 414(s) under § 1.414(s)-©; 12 Defined benefit plans that provide for employee contributions not allocated to separate accounts, other than plans that provide the minimum benefit described in § 1.401(a)(4)-6(b)(3)(ii); 13 Plans that would not satisfy the qualification requirements except as a governmental plan as described in § 414(d); 14 Church plans described in § 414(e) that have not made the election provided by § 410(d); 15 Plans under which the § 415 limitations are incorporated by reference; 16 Plans that do not contain a § 414(q) definition of highly compensated employee or under which the definition is incorporated by reference; 17 Fully-insured § 412(i) plans, other than plans that, by their terms, satisfy the safe harbor for § 412(i) plans in § 1.401(a)(4)-3(b)(5); 18 Plans that fail to contain a provision reflecting the requirements of § 414(u) (see Rev. Proc. 96-49).

Neither 98-1 nor the proposed regs address timing. In 1998 and 1999 you heard all of the IRS officials say that once the remedial amendment period was over, it had to be in the Plan prior to the begining of the Plan Year. According to an article in this month's Journal of Pension Benefits some IRS representatives have said that an amendment during the year would be o.k. I doubt anyone has heard an IRS official condone an amendment after the end of the plan year, but Blinky is right that there is nothing in any official guidance to my knowledge. The article in the Journal speculates that you might have a cutback issue for an after-year-end amendment in the unlikely event that a plan mandates a QNEC as a correction mechanism.

Check you appeals langauge. My guess is that if there is an appeal, the PHI is coming back to the plan sponsor in some form to determin the appeal. Also, at least one national TPA is taking the position that they are not a business associates with the plan, but rather are an agent/subcontractor of the employer who is administering the plan. Therefore they insist that they are not BA's per se, but agents of the employer under section 164.504(f)(2)(B), which says: "The plan documents of the group health plan must be amended to incorporate provisions to: ... (B) Ensure that any agents, including a subcontractor, to whom it provides protected health information received from the group health plan agree to the same restrictions and conditions that apply to the plan sponsor with respect to such information." Thus if the information is coming to an "agent" of the employer it is treated as coming to the employer and you must have an amendment. This TPA is providing "BA-like" "agent" agreements for the plan sponsor.

100% excise tax on reversion if I recall correctly. You can typically use the remainder for other VEBA type benefits or even make taxable distirbutions to members/participants.

Here's the text of Q&A 44 from the 2000 Enrolled Actuaries Meeting (of course separation from service is no longer the "trigger" even for (k) amounts but I think the logic fits). While helpful, it really is a "non-answer" "A 401(k) participant incurs a bona fide separation from service. Two years later she returns to employment with the sponsor before having elected a termination distribution of her 401(k) account. Can the plan allow her to take a distribution of her pre-separation balance before she again separates, attains age 59 1/2 or encounters a "hardship"? If the plan is silent, may she demand a right to withdraw those amounts? RESPONSE A distribution may be made once a bonafide triggering event has occurred. However, if the person does not elect the distribution within a reasonable time frame, it is interpreted that the person chose to leave the value of her account on deposit. Once reemployed, the individual would need a second triggering event in order to be able to receive a distribution. The plan could provide that the distribution is not available if requested while the plan sponsor currently employs the individual. If the plan is not clear, the Plan Administrator would be responsible for the interpretation of the plan."

I think people "cite" the PLR together with informal remarks by Beker at an ECFC (employer's counsel on flexible compensation) National Conference for the proposition that you can do this. If you are only letting HCEs have this option, you might have some discrimination issues. I have incorporated this provision into the langauge of a few 125 Plans and I think it is in the sample plan contained in the EBIA manual.

I would look at a Tax LLM from Georgetown with a employee benefit "certificate" see the following: http://www.law.georgetown.edu/graduate/emp_benefits.cfm Look a the course offerings and faculty. They use adjuncts who are some of the leaders in the field and not just "academics" I am not sure about John Marshall, but I have always viewed the LLM from Georgetown with the employee benefits certificate as putting you a step ahead in marketability (and I did not even go there).

From the regs: Q-15. If an amount is distributed by one plan (distributing plan) and rolled over into another plan (receiving plan), may the receiving plan distribute the amount rolled over in accordance with a section 242(b)(2) election made under either the distributing plan or the receiving plan? A-15. No, if an amount is distributed by one plan (distributing plan) and rolled over into another plan (receiving plan), the receiving plan must distribute the amount rolled over in accordance with section 401(a)(9) whether or not the employee made a section 242(b)(2) election under the distributing plan. Further, if the amount rolled over was not distributed in accordance with the election, the election under the distributing plan is revoked and section 401(a)(9) will apply to all subsequent distributions by the distributing plan. Finally, if the employee made a section 242(b)(2) election under the receiving plan and such election is still in effect, the amount rolled over must be separately accounted for under the receiving plan and distributed in accordance with section 401(a)(9). If amounts rolled over are not separately accounted for, any section 242(b)(2) election under the receiving plan is revoked and section 401(a)(9) will apply to subsequent distributions by the receiving plan.

I agree with Lame Duck from an administration standpoint. From a legal standpoint you can have as many amendments as you want and I have seen plans that only amend up until it is time to seek a determination letter and then they restate. This is because the IRS requires a restatement if you have 4 or more amendments. I guess the IRS thinks that a document with any more than 4 amendments is unwieldly. This is from Rev. Proc. 2004-6 Restatements may be required .04 A restated plan is required to be submitted if four or more amendments (excludingamendments making only non-substantive changes) have been made since the last restated plan was submitted. In addition, the Service may require restatement of a plan or submission of a working copy of the plan in a restated format when considered necessary. For example, restatement may be required when there have been major changes in law. A restated plan or a working copy of the plan in a restated format generally must be submitted for a plan that has not previously received a determination letter that takes into account all requirements of GUST. However, see section 3.04 of Rev. Proc. 2000–27 for exceptions to this requirement.

Here's a link to another discussion along the lines of the above. http://benefitslink.com/boards/index.php?s...56&hl=surrender

In order to preserve the top-heavy "pass", I have amended plans to have forfeitures from prior matching contributions and prior profit sharing contributions go first toward administrative expenses and then to offset the safe harbor match. The amendment was approved by the IRS in a determination letter filing. You just want to make sure of your timing so that the amendment comes before anyone meets the criteria for an allocaiton of forfeitures under your old language.

You can accomplish this by running an FSA through the cafeteria plan for employee contributions and running a separate HRA for the employer contribution piece. Go to benefitslink.com and search for HRA and you should be able to find some guidance. Uniform coverage does not apply to HRAs. You could write your HRA to only cover expenses that go toward the deductible. You can also allow employees to "carry over" amounts in an HRA, but this is not required. Another possiblity would be to have a single HSA assuming your high deductible health plan qualifes. HSAs were part of the Medicare bill late last year. You can have both employee pre-tax contributions through a 125 Plan and employer contributions to an HSA. The employee controls the HSA and there is no uniform coverage rule. Again, search for HSA under benefits link. If you only wanted the employer piece to go towads the deductible rather than other medical expenses, this might to tough to accomplish with an HSA. There is a good article on today's benefitslink comparing HRAs and HSAs.

TMH's idea is a good one. Indeed, you may well have a fiduciary duty to notify the participants directly if the failure to contribute could adversely affect the employees' benefits. Rosen v. Hotel and Restaurant Emp. & Bartenders Union of Phila., Bucks, Montgomery and Delaware Counties, Pa. 637 F.2d 592 (3rd 1981) If you are in the construction industry, you also might want to check out what there is on mechanics liens, little Miller Act claims, etc. I am not sure where the courts are these days on the preemption analysis. However, without regard to whether you could have a valid lien claim, generals are sometimes willing to cut joint checks to their subs and the plans to which the subs contribute to make sure that the subs keep current--if only for the "labor peace" issues implicated in TMH's post.

I haven't looked at this in years, but I know that some multis have taken the position that the Trustees can "kick out" a perpetually delinqent employer--in other words refuse to accept contributions and refuse to give credited service. I think you would have a much better chance of this in the welfare plan area. I guess I am not completely sure about the scope of the problem. For a welfare plan, and profit sharing plan you do not have to give credit unless contributions are actually received. Therefore, unless you have something to the contrary in your document, I am not sure what exposure there is. For a db plan (or if for some reason you have not converted your mpp to a profit sharing plan) the "kicking the employer out" issue becomes much more complicated. Unless you can terminate the obligation to contribute (in the CBA) I think you are stuck with crediting service in the IRS' view--see GCM 39048

I have had very limited success with the + signs. Seaches that I know should return results sometimes do not. Other times the + signs don't seem to "take" and I get an absurd number of "hits". I think there is also some sort of limitation that your word must be at least 4 charachters long. So searching on issues regarding the "put" in with ESOPs, or "MRD" or "REA" etc. come up with nothing.

Archimage, I thought it was just me as well. The search function is not nearly as good as it was about two years back. When Dave changed the software it helped in a number of areas, but searches became much more difficult. I find the search function on the main benefitslink page much easier to use. If I had one suggestion for an upgrade on the Boards, revising the search function would be it.

papogi--I think before you make that statement you need to know what Red Shoes means by "participate." My guess is if they have over 100 people in premium conversion, they have over 100 elgible to make salary reductions into the Health FSA even if less than 50 choose to do so. If that is the case, then they are covered by HIPAA privacy.

http://ebia.com/static/weekly/questions/20...IPAA030807.html

I agree no 411(d)(6) problems. I haven't gone back and looked at the reg, but you might want to see if there could be an "amendment timing" issue under 401(a)(4). The timing of amendments cannot signficianly favor HCEs. If the company makes a profit sharing contribution that the HCE would have to "share" with the NHCE but for the new amendment, there might be a 401(a)(4) issue...then again there might not.

I do agree with Mbozek that there would never be a situation where DOL would agree to a PTE to let you live rent free. I am aware, however, of certain sale lease back PTEs: Accounting firm sells its building to its profit sharing plan and leases the building back from the plan at fair market value. http://www.dol.gov/ebsa/regs/fedreg/notices/97_14559.htm The hypo I proposed in the other thread was Suppose a house was purchased legitmately as a rental property and was rented to unrelated third parties for a number of years. Then, the rental market goes south and the house sits vacant for a year with no renters. I suppose in that situation DOL might condone this if you had an independent appraisal as to the rental value; put in a rental escalator that mirrored the CPI; and had the house reappraised for rental value every three years or so. (I think this is the typical requirements in sale lease back situations). I am not sure that this hypo would be any more "extreme" than a sale lease back situation. Again I completely agree that the DOL would be skeptical about the "smell". I went back and looked at this one sale lease back PTE (I believe that there are one or two others) and I have posted the DOL's 12 conditions below. Not only would the "smell test" be difficult to overcome, but the conditions that would be imposed by DOL--which I am sure would be similar to those below-- would make it impractical. All that said, I am not sure given the right facts and meeting conditions similar to that below it would be "impossible" to obtain DOL's agreement. (A) The terms and conditions of the transactions are at least as favorable to the Plan as those obtainable from unrelated parties; (B) The Plan is represented at all times and for all purposes with respect to the Sale and the Lease by a qualified, independent fiduciary; © The Sale is a one-time transaction for a lump sum cash payment; (D) The purchase price is the fair market value of the Property as determined on the date of the Sale by a qualified, independent appraiser; (E) The monthly rents paid to the Plan will be adjusted every year after the first 12 months of the Lease by an amount to reflect the greater of either a 3 percent per year increase or the most recent percentage increase in the U. S. Department of Labor Consumer Price Index; (F) In addition, the rents initially paid under the Lease are no less than the fair market rental value of the Property as determined by a qualified, independent appraiser, and thereafter are adjusted every third year to be no less than the fair market rental value as then determined by the independent appraiser; (G) The Lease is a triple-net lease under which the Employer as the lessee is obligated for all expenses incurred by the Property, including all taxes and assessments, maintenance, insurance, utilities, and any other expense; (H) The qualified, independent fiduciary of the Plan monitors and enforces compliance with the terms and conditions of the Lease and the exemption herein proposed; (I) At all times the qualified, independent fiduciary for the Plan determines that the Lease is in the best interests of the Plan and its participants and beneficiaries, and at all times determines that there are adequate protections of the rights of the participants and beneficiaries of the Plan, and takes all the necessary steps to protect those rights; (J) In the event the Plan sells the Property and the proceeds received from the sale plus the net rentals received for the Property are less than the Plan's cost of acquiring, holding, and maintaining the Property plus a 5 per cent per annum compounded rate of return on the cost to the Plan in acquiring, holding, and maintaining the Property, the Employer, or its successors, shall pay in cash the difference to the Plan within 45 days of the sale; (K) No commissions, expenses, or costs shall be incurred by thePlan from the Sale or the Lease; and (L) At all times during the Sale and Lease, the fair market value of the Property represents less than 25 percent of the total assets of the Plan.

Nothing new there. Getting an exemption under ex-pro for the transaction you described would, I think, be extremely difficult to sell to DOL. This came up before on the Boards. I indicated I could imagine a situation where it MIGHT fly with good facts but Mbozek disagreed--see the following http://benefitslink.com/boards/index.php?s...t=0entry50653 In any event, I think that based on both costs and chances of success this is impractical unless you had very unusual facts. Also I am not sure it makes that much economic sense in most situaitons as Mbozek points out.

Do you have a link to any website that talks about how you can structure this. Even if you could set up the LLC as a REOC and get around the "look through" rules, I am not sure how you get around 4975©(1)(E) and (F) if you are setting up your LLC for the purposes of this transaction.

You are right, ADP testing for a collectively bargained 401(k) is not technically a discrimination issue but a CODA issue. My recollection is that the preamble to the regulations has a good explantion of this. Therefore you run your ADP test like you normally would and distrbute excess contributions. The one "neat" thing that would seem to work conceptually is if you have a match you may be able to "shift" matching contributions over to your ADP test with impunity. This robbing Peter to pay Paul usually doesn't work very well in other situations, but in a collectively bargained context while you have to run ADP, you get a pass on ACP so who care?

Pax, Is there any authority cited for the statement that: I know some people cite PLR 8031091 for the opposite conclusion.