KJohnson

Does it want to? This disclosure is not required by ERISA's specific rules relating to disclosure . Also, I think that the Ninth Circuit ruled, if I recall correctly in an en banc decision, on almost this exact issue that there was no general fiduciary requirement of disclosure.

Probably time for the actuaries to chime in...and I am not one of them. However, I would think it would only be an issue when you get ready to make a distribution.

BTW here is the link to the prior message board discussion: http://www.benefitslink.com/boards/index.p...t=0entry19175

It is not required, but it is advisable. Sending the suspension of benefits notice means that you do not have to give the actuarial increase. I have worked with several multis who referred to this as the "birthday letter" when a participant turns age 65 and is still getting credited service under the plan. I haven't looked at this for a while, but even if you don't send the notice I think you can offset your actuarial increase by post-age 65 service. It would seem that this would be o.k. if our plan document is really silent on any actuarial increase. This is a bit dated, but it is a good link: http://benefitslink.com/ppib/industrynews/...orrection.shtml

I had an associate look at this for me at one time and this is what he found: 1. Sec. 1362 requires the consent of all persons who are shareholders on the day the S election is made. The IRS regulation applying this rule in various contexts such as joint ownership of stock, ownership by trusts, etc. has not been updated since SBJPA, and thus has no provision for how organizations described in Sec. 401(a) must consent. I could not find any IRS guidance on this. However, Sec. 1361©(6) is very clear that the organization is the shareholder. The current regulations applicable to ownership of S corp. stock by trusts require consent only by the person treated as the shareholder for purposes of counting to 75 – that is the trust itself except for voting trusts and electing small business trusts (ESBTs). See Reg. 1.1362-6(b)(2). Reading these together, the logical conclusion is that the ESOP itself is the shareholder who is required to consent. The alternative rule would imply that you also had to count the participants in counting to 75, which was surely not intended. 2. On Sec. 409, I have not found anything more convincing than the arguments made by the participants in the message board discussion and others that I have thought up, but I think these are very convincing. The consent is not “a corporate matter which involves the voting of the shares.” Furthermore, an S election is not a “reclassification” – nowhere else in the Code is S corp. status considered a matter of “classification”; rather it is an election which is terminable at will and is purely an issue of tax law. “Reclassification” in 409(e)(3) appears to refer to changes in the nature of the stock, as when the corporation has several classes of stock with different rights. All of the other matters listed in 409(e)(3), such as merger, recapitalization, liquidation, etc., refer to similar changes that affect the state corporate law substance of the underlying investment, which an S election does not. Finally, the whole basis for requiring unanimous consent for an S election is because the shareholders are being taxed directly on the corporate income even though they have not necessarily received any of it, and of course ESOP participants are not taxed on the corporate income until they receive it upon distribution. It seems a little strange that there is not specific guidance on these points, especially #1, but it may simply be that nobody thinks it’s a problem. In light of the above, let me know if you want me to try to find more. Thanks.

Especially the portfolio on the Securities Law Aspects of Employee Benefit Plans (assuming Kirk gets a royalty).

Did you check the suspension of benefits section? You might want to look at these posts: http://www.benefitslink.com/boards/index.p...t=0entry78972 http://www.benefitslink.com/boards/index.p...t=0entry35224

I guess the real question is whether there has been a termination of employment if both the employer and the employee agree its a sham. If the plan document requires a termination of employment; the fiduciary knows that there has not been a termination of employment; but allows the distribution anyway you have a 404(a)(1)(D) breach of fiduciary duty. f

I think the original poster might be worried about how to classify the individuals participating since there is no apparent business reason for who will participate and who will not. I agree with MBOZEK that if they are all NHCEs then you can go ahead and "name names" with regard to participation in a qualified plan. I believe that as long as you pass 410(b) based on ratio percentage as opposed to average benefits then defining classes by names would be o.k. If you only cover NHCEs you automatically pass under ratio percentage. Of course such a design has problems in having to constantly update your participation criteria to the extent you are going to let new people in the Plan. Also, you need to watch out for creating a CODA. To the extent that you let people in and out of the Plan and to the extent that they get something (more comp, more vacation etc) for not being in the Plan you would have issues.

The following link to a thread is pre-HIPAA, but privacy issues aside, some insurers/HMOs simply will not provide you with this data. http://www.benefitslink.com/boards/index.p...st=0entry4376

Here are the ASPA comments: 6. A plan that fails to meet the requirements of the safe harbor rules under §401(k)(12) and/or §401(m)(11) should be permitted to utilize ADP/ACP testing if the plan document so provides. The proposals provide that it is impermissible for a plan to state that, in the event that the safe harbor provisions of §401(k)(12) and/or §401(m)(11) are not met, the plan will revert to ADP and ACP testing to show nondiscrimination. Plans have been approved in the GUST restatement process that contain provisions permitting the application of the safe harbors in such years as the employer meets the requirements. Therefore, the position expressed in the proposals represents a departure from current practice. This departure is not mandated by the Code, which requires only that the cash or deferred arrangement meet the contribution and notice requirements. In fact, the very title of §401(k)(12)(A) (“Alternative Methods of Meeting Nondiscrimination Requirements”) contemplates that this is one means by which the employer can comply with the Code as an alternative to ADP/ACP testing. This proposal interferes with a common and reasonable practice under provisions that are present in documents that have been the subject of favorable determination letters. Many pre-approved and individually-designed documents provide that a plan will operate as a safe harbor plan for a plan year only if notice is given to participants within a reasonable period prior to the beginning of the plan year. In this manner, the document itself uses the timely delivery of the notice as a trigger for when the safe harbor provisions apply to the plan. If notice is not properly given, the safe harbor provisions with respect to nondiscrimination testing are inapplicable and the ADP/ACP nondiscrimination testing is performed for such year. Prohibiting such “default” plan provisions will simply be a potential disqualification trap for no apparent policy reason. ASPA agrees that, depending on the terms of the plan, the plan sponsor may still be required to make contributions at the same level as though the plan continued as a safe harbor plan. For example, the 3% nonelective contribution or 4% matching contribution may be required even though the plan is not a safe harbor plan that year for purposes of nondiscrimination testing. In other words, the plan sponsor must take action before the start of the plan year if it intends to remove such provisions or be liable for such contributions to the extent those amounts are required under the terms of the plan. ASPA Recommendation: Remove from the proposals the requirement that plans not be able to “default” to ADP/ACP testing.

http://www.benefitslink.com/boards/index.p...st=0entry5531 http://www.benefitslink.com/boards/index.p...t=0entry49951 http://www.benefitslink.com/boards/index.p...t=0entry48830

That is my understanding.

In fact I have seen employers "walk into" a situation where they should have covered them when in fact they did not. Controlled group rules bring in foreign controlled group members. A standardized protype document covers all controlled group members. I have seen a U.S. controlled group member with no directly employed non-resident aliens sign a standardized adoption agreement figuring that they did not have to check the non-resident alien box for exclusion from coverage. They did not realize that they had just made a decision to cover all employees in the controlled group in foreign subs, parents etc.

Not it does not cover individually designed plans

I think the fact that the "toaster" exemption in PTE 93-1 http://www.dol.gov/ebsa/programs/oed/93-1.htm and the bank services at reduced cost exemption in 93-2 http://www.dol.gov/ebsa/programs/oed/93-2.htm were specfically limited to "non-ERISA" vehicles such as an IRA or a Keogh gives you a pretty good idea what DOL's ideas on this were. There would be no need for an exemption if it was not a PT to begin with.

Kirk, Are you talking formally or informally. I know in advisory opinions they always say that the 406(b)(1)/4975©(1)(E) issues are inherently factual and they won't issue an opinion. From the Code side (where DOL still has jurisdiciton for PTs) they have said in instances where IRA assets have been lent to a corporation in which the IRA owner was a shareholder (but did not hold sufficient shares to make the corporation a party in interest/disqualified person) that 4975©(1)(E) was an issue but because of the factual nature would not issue an opinon on the issue.

I thought you had to run your ADP test separately for the collectively bargained and non-collectively bargained portion of your Plan 1.401(k)-1(g)(11)(ii)(B). Did the bargained section failed the ADP test as well. If not, I would think that from a a correction point of view the QNEC would only be required for the non-bargained. However, you may have some language in your plan with regard to the allocation of QNECs that you will have to deal with.

I am with Mike on this one. I always advise against doing this, but I don't see a PT on the face of it (assuming that the Plan did not first acquire its 1/6 from a party in interest) Section 406(b)(1) really does have a very subjective nature to it. That said, I think that when you engage in such a transaction you are just asking for trouble even if there is no problem with the initial purchase. Handling repairs on the property, the collection and allocation of rent, preparing leases etc. All of this is going to be involving allocations of moneys between the plan and a party in interest--presumably a fiduciary in this case. Maybe you could have the owner do repairs, rent collection and the like and bill the Plan for its share and try and get away with it under 408(b)(2), but I would have serious doubts about whether jall of this would "services" and there is also the ongoing battle about whether 408(b)(2) covers transactions with fiduciaries. Otherwise, you would obviously try and divide all costs based on ownership. However, are you really cutting a separate check from the Plan for every expense?

From the Regs: Q–4. If a distribution is required to be made to an employee by section 401(a)(9)(A) or is required to be made to a surviving spouse under section 401(a)(9)(B), must the distribution be made even if the employee, or spouse where applicable, fails to consent to a distribution while a benefit is immediately distributable? A–4. Yes, section 411(a)(11) and section 417(e) (see §§ 1.411(a)(11)– 1©(2) and 1.417(e)–1©) require employee and spousal consent to certain distributions of plan benefits while such benefits are immediately distributable. If an employee’s normal retirement age is later than the employee’s required beginning date and, therefore, benefits are still immediately distributable, the plan must, nevertheless, distribute plan benefits to the employee (or where applicable, to the spouse) in a manner that satisfies the requirements of section 401(a)(9). Section 401(a)(9) must be satisfied even though the employee (or spouse, where applicable) fails to consent to the distribution. In such a case, the plan may distribute in the form of a qualified joint and survivor annuity (QJSA) or in the form of a qualified preretirement survivor annuity (QPSA), as applicable, and the consent requirements of sections 411(a)(11) and 417(e) are deemed to be satisfied if the plan has made reasonable efforts to obtain consent from the employee (or spouse if applicable) and if the distribution otherwise meets the requirements of section 417. If, because of section 401(a)(11)(B), the plan is not required to distribute in the form of a QJSA to a employee or a QPSA to a surviving spouse, the plan may distribute the required minimum distribution amount to satisfy section 401(a)(9) and the consent requirements of sections 411(a)(11) and 417(e) are deemed to be satisfied if the plan has made reasonable efforts to obtain consent from the employee (or spouse if applicable) and if the distribution otherwise meets the requirements of section 417.

just cut and pasted from the regs on-line.

From the 414(s) regulations-- (f) Prior-employer compensation and imputed compensation--(1) General rule. Solely for purposes of determining whether a defined benefit plan, as defined in Sec. 1.410(b)-9, satisfies section 401(a)(4) or 410(b), an alternative definition that includes prior-employer compensation or imputed compensation satisfies section 414(s) as a reasonable alternative definition if the definition satisfies the requirements specified in paragraphs (f) (2) and (3) of this section. For this purpose, prior-employer compensation is compensation from an employer other than the employer (determined at the time that the compensation is paid) maintaining the plan that is credited for periods prior to the employee's employment with the employer maintaining the plan and during which the employee performed services for the other employer. For this purpose, imputed compensation is compensation credited for periods after an employee has commenced or recommenced participation in a plan while the employee is not compensated by the employer maintaining the plan or is compensated at a reduced rate by that employer because the employee is not performing services as an employee for the employer (including a period in which the employee performs services for another employer, e.g., a joint venture) or because the employee has a reduced work schedule. (2) Requirements for definitions of compensation crediting prior- employer compensation or imputed compensation--(i) General requirement. The definition must otherwise be described in paragraph © of this section or must otherwise satisfy the requirements of paragraph (d) or (e) of this section for alternative definitions of compensation, including the nondiscrimination requirement in paragraph (d)(3) of this section. (ii) Benefit determination. A definition of compensation that credits prior-employer compensation or imputed compensation must actually be used to calculate the benefits under the plan. For example, the definition may not be used to determine whether a defined benefit plan satisfies section 401(a)(4) unless the benefits for each employee in the plan are determined using that definition of compensation. (iii) Provision applied to all similarly-situated employees. A provision in a plan's definition of compensation crediting prior- employer compensation or imputed compensation must apply on the same terms to all similarly-situated employees in the plan. The criteria for determining whether employees are similarly situated for this purpose are the same as the criteria for determining whether a plan provision crediting pre-participation or imputed service satisfies the requirements of Sec. 1.401(a)(4)-11(d)(3)(iii)(A). (iv) Legitimate business purpose. There must be a legitimate business purpose, based on all of the relevant facts and circumstances, for crediting prior-employer compensation or imputed compensation to an employee for the period being credited. The standard for determining whether crediting prior-employer compensation or imputed compensation satisfies this requirement is the same as the standard for determining whether crediting pre-participation or imputed service under a plan satisfies the requirements of Sec. 1.401(a)(4)-11(d)(3)(iii)(B) and whether crediting imputed service satisfies the additional requirements of Sec. 1.401(a)(4)-11(d)(3)(iv)(A). However, if the legitimate business reason for crediting imputed compensation relates to the services the employee is performing for another employer and the reason satisfies the standard in Sec. 1.401(a)(4)-11(d)(3)(iii)(B), the additional requirements of Sec. 1.401(a)(4)-11(d)(3)(iv)(A) are deemed to be satisfied. For example, if an employee becomes employed by another employer as a result of a merger, acquisition or similar transaction with the other employer and imputed compensation is credited to the employee while the employee is performing services for the other employer, the crediting of imputed compensation to the employee satisfies the standard in Sec. 1.401(a)(4)-11(d)(3)(iii)(B). Thus, under that example, crediting the imputed compensation to the employee is deemed to satisfy the additional requirements of Sec. 1.401(a)(4)- 11(d)(3)(iv)(A), even if the employee is not performing those services under an arrangement that provides an ongoing business benefit to the employer maintaining the plan. (v) No significant discrimination. Based on all of the relevant facts and circumstances, crediting prior-employer compensation or imputed compensation must not by design or in operation discriminate significantly in favor of highly compensated employees. The standard for determining whether crediting prior-employer compensation or imputed compensation satisfies this requirement is the same as the standard for determining whether crediting pre-participation or imputed service satisfies the requirement in Sec. 1.401(a)(4)-11(d)(3)(iii)© and whether crediting imputed service satisfies the additional requirement of Sec. 1.401(a)(4)-11(d)(3)(iv)(B). (3) Reasonable method--(i) General rule. Any reasonable method may be used to determine the amount of prior-employer compensation or imputed compensation provided that the requirements of paragraph (f)(3) (ii) or (iii) of this section are satisfied, whichever is applicable. (ii) Requirements for prior-employer compensation. Prior-employer compensation credited to an employee for a period that an employee is performing services for another employer must be compensation for the employee from the other employer (or be based on the employee's basic or regular rate of compensation from the other employer) for that period. In addition, prior employer compensation credited to an employee must not exceed the amount of compensation from the other employer that would have been included under the definition of compensation in effect for that period for compensation from the employer maintaining the plan. Reasonable assumptions may be made in determining the amount of compensation received from another employer for a period that would have been included under the definition of compensation in effect for that period for compensation from the employer maintaining the plan. (iii) Requirements for imputed compensation--(A) General rule. The amount of imputed compensation credited to an employee during any period, when combined with the amount of any actual compensation being included, must not exceed an amount that, based on all of the relevant facts and circumstances, is reasonably representative of the amount of compensation that the employee would have received and that would have been included under the definition of compensation in effect for the period if the employee had continued to perform services for the employer during that period at the same level as the employee was performing before the employee stopped performing services or changed to a reduced work schedule. The relevant facts and circumstances include the compensation that the employee was receiving immediately before the employee stopped performing services or changed to a reduced work schedule, and, if applicable, the rate of compensation in effect while the employee is not performing services or has a reduced work schedule that is applicable to the employee's specific job grade immediately before the change occurred. (B) Imputed compensation from another employer. Imputed compensation credited for a period that an employee is performing services for another employer is deemed to satisfy paragraph (f)(3)(iii)(A) of this section if the amount of compensation credited satisfies the requirements of paragraph (f)(3)(ii) of this section for prior-employer compensation. Thus, for example, the amount of imputed compensation credited to an employee for a period that the employee is performing services for another employer is deemed to satisfy paragraph (f)(3)(iii)(A) of this section if the amount credited is compensation for the employee from the other employer (or is based on the employee's basic or regular rate of compensation from the other employer) for that period, and the amount credited does not exceed the compensation from the other employer that would be included for the employee under the definition of compensation in effect for that period for compensation from the employer maintaining the plan. (4) Special nondiscrimination rule for safe harbor definitions. If a definition of compensation crediting prior-employer or imputed compensation is otherwise described in paragraph © of this section, and the prior-employer compensation or imputed compensation credited satisfies the requirements of paragraphs (f) (1), (2), and (3) of this section, then the definition is deemed to satisfy paragraph (d) of this section (i.e., it is deemed to be nondiscriminatory).

I think that there is some older case law to support the notion that before a Trustee can resign it must make sure that there has been "adequate provision" for the continued prudent management of assets. I am not sure how this argument has faired more recently. See Chambers Kaleidoscope Inc. Profit Sharing Plan and Trust, 650 F.Supp. 359, 369 (N.D. Ga. 1986); Freund v. Marshall & Isley Bank, 485 F.Supp. 629, 635 (W.D. Wis. 1979).

I believe that one of the "seminal" cases with regard to the staute of limitations for fiduciary breach actually invovled the plan set up for the J. Geils Band 76 F.3d. 1245. Of course they lost, how could a judge have sympathy for the band that gave use "My Angel Is The Centerforld"

Below is a link to comments where Harry Beker stated that PRA's could also be used to under a cafeteria plan to permit employees to pay premiums on a pre-tax basis (1) for a spouse's coverage under the group health plan sponsored by the spouse's employer; or (2) for an individual policy owned by the spouse http://ebia.com/weekly/articles/2003/Caf030320IRS.jsp