KJohnson

You may consider automatic enrollment (negative election)--but you might as well go ahead and do a message board search on "finding missing participants" because you will have to distribute the amount deferred to the particpants. I would worry a little about the "effective availablity" of being able to receive amounts in cash rather than the deferrals (which is required for negative elections to work). But if you have communciation materials in Spanish and the opportunity to "waive out" of the deferral is made clear, I don't suppose there would be a problem.

See the following: (if the link doesn't work its Q&A 156 in the correcting plan defects Q&A column. http://www.benefitslink.com/cgi-bin/qa.cgi...qa_plan_defects I would expect to see something soon saying you cannot have bottom-up QNECs. For a deferral only plan with the revision in the 415© limit you might be able to, say, make a 100% of comp QNEC to a particpant making a few thousand dollars a year and really skew your ADP test.

My understanding is that your understanding is correct. However, the "gotcha" is that while notice is now not required for the VFC program in general, it is required under the proposed PTE for waiver of the excise tax. Although the PTE is not final, IRS has indicated that it will not charge the excise tax in the interim if you meet the conditions of the VFC and the proposed PTE. See announcement 2002-31 http://www.benefitslink.com/IRS/ann2002-31.pdf

If the plan says that the employer pays all administrative expenses then (while I don't think that this makes payment of administrative expenses a "settlor" function) clearly the Plan could not pay the expense. However, it would seem to me that the costs associated with both marshalling plan assets and allocating those assets to participant accounts is a classic plan/fiduciary expense. What were you envisioning that would make this a settlor function (as opposed to a fiduciary function where the employer agreed to bear the cost of that function).

This is an issue facing a number of terminated plans who are receiving demutualization proceeds (in addition with some issues on "whose money is it'--i.e. participating v. non-participating contracts etc). I agree there is no easy answer. BTW--For anyone out there who has decided the must allocate demutualization proceeds to former participants in a terminated db (or even a mppp that bought a group annuity contract) how did you go about deciding which of the former participants were entitled to the proceeds and the allocation that should be made to these participants? I have tried to get the insurance company to give me some more explicit breakdowns and have gotten nowhere. As to JPOD's issue of getting paid (and Kirk's comment) I think that if the Plan provided for payment of administrative expenses from plan assets this is defintiely a plan/fiduciary rather than a settlor issue and the fees could be paid from the "discovered" assets.

Last time I checked there was still not a finalized new 5310. Also note that when you file the 5310 you need to file the OLD Schedule Q.

MBOZEK--Wickersham seemed to indicate that his initial thoughts were originally along those lines. From a "real world" perspective the employer was getting rid of the MPP and why should the rules on termination be different from merger. He also made a series of comments regarding the potential of forfeitures reverting to the employer which is an indication of a partial termination. However, I didn't completely follow these concerns since I believe that the rules on allocation of forfietures for PS plans and MPP plans have been the same since TRA '86. Wickersham is obviously brilliant and knows the regs inside and out. He is also incredibly useful at these conferences He often, however, "thinks aloud" when answering certain questions (Which in itself can be useful if you can follow his train of thought but if you are not listening carefully you may hear two contrary answers in his musings before hearing the final response.) At any rate, he did say that after a good bit of study they had concluded no full vesting --which was followed by a round of applause from the crowd.

The no aggregation of multi rules were around pre-EGTRRA. The no aggregation of a multi with a non-multi for the 415(B) 100% of comp purposes was added with EGTRRA.

Mike, Assuming you have to aggregate I think that the single would be aggregated with each multi separately. Otherwise you would be aggregating multis. This seems to me to be the only reading that gives meaning to both the first two sentences of 1.415-8(e). I have worked with a number of multis but have never had the pleasure of working with any in the entertainment industry (other than a little bit with IATSE). However, I think the 302©(5) worry may be a little more real than you think. The IRS and PWBA both "punt" on the 302©(5) issues (Look at a DOL opinion letter a few years back own "owners" as employees in multis for ERISA purposes that specfically states that it is not opining on the 302©(5) issue.). I think the point PJK raises regarding inconsistent treatment for purposes of withholding would be a worry. However, I can envision this issue arising where a disgruntled studio in a feud with a loanout stops contribuitons on behalf of a loanout claiming "illegality," or a disgruntled participant of a studio might bring suit alleging that receipt of contribuitons from the loanouts are illegal, or the multi may start refusing contribuitons on the grounds of illegality. The Supreme Court has ruled that illegality is one of the few defenses that employers have in suits for delinquent contributions.

This may be old news, but in the MPP termination/merger session at the Mid-Atlantic IRS benefits conference last week Wickersham said that vesting was not required. Earlier in the day Shultz had said that gudiance was forthcoming on this issue and that we would be "pleased."

I'm not continuing to ignore the point. I am just questioning your analysis of "They do it so it must be correct."

It is often hard to "evolve" around Supreme Court precedent absent subsequent Supreme Court action. I think the Walsh v. Shlecht distinction is still a thorn in, primarily, the Teamster's side on owner/operators. The subsequent cases usually revolve around the question of not whether the CBA requires contributions on the owner/opearators but whether the owner/operators benefit from the contribuiton which would then make the contribution illegal (yes a criminal violation believe it or not). That said, I am sure that it still happens--in the collectively bargained world, PWBA and IRS are the only regulatory authority that generally coms in contact with the plans and this would fall under the DOL's office of labor standards.

mbozek--Getting back to your point regarding contributing for indepenent contractors. My recollection was that in Walsh v. Schlecht back in the mid-70's the Supreme Court said that basically you could base your contribution obligation on anything you wanted to--including the hours worked by non-employees/independent contractors. However, the benefit of those contributions could only go to the common law employees of the signatory employer and could not go to the benefit of the independent contractors working for the signatory employer. Thus I think from a Taft-Hartley context you might have a problem if the contributions benefit the independent contractors.

I can't imagine that they wouldn't be multiemployer plans. In fact, the SAG/Producers plan (which is a DB) states that it is a multiemployer plan in its FAQs QUESTION: What type of Pension Plan is this? ANSWER: The SAG-Producers Pension Plan is a multiemployer defined benefit plan. It is different than many corporate plans because you are promised a monthly benefit rather than accumulating a dollar balance.

I think just because you are in a multiemployer plan does not get you around the exclusive benefit rule (as is apparent for multiple employer plans). I think that the employer of the employees on whose behalf contributions are made has to be considered the sponsor of the plan (even if there is a contractual agreement among the parties that someone else will actually make the contribution). Thus if the employee is the common law employee of the production company and not the studio and the studio is the only employer maintaining the multi I don't see how the employee could permissibly participate in the multi.

Merlin, you are right about the $ limit. The relief under 415(f) was really geared to union officers who often times participate both in a jointly trusted multi and a multiple or single sponsored solely by the union. In those cases the individuals are usually earning well under the 415(B) $ maximum but because of the multiple plans, were running into 415(B) 100% of comp problems.

See 1.415-8(e). Also the onus for the 415 testing is really put on the employer and not the multi because generally if there is a 415 violation, the single employer plan and not the multi will be disqualified. (See 1.415-9(B)(3)(ii). As to your other questions, I suppose if they were legitimately independent contractors, not in the controlled group then each individual could have his or her own plan. However, from the question it appears that the employer was contributing to multis.

An employer who contributes to a multiemployer plan "sponsors" that plan for 415 purposes just as it sponsors a single employer plan. Therefore for 415 purposes, absent specific relief, they must be aggregated. I assumed these plans were multiemployer (from the description they almost had to be). I looked at SAG and the Writer's Guild Plans and they are definitely multis. The SAG pension cite is great (SPD, Plan Document etc.). http://www.sagph.org/ The writers cite indicates that it is a multi as well (ie. jointly trusteed by union and management): http://www.wga.org/members_index.html The rules I expressed in my prior post reflect, I believe, the current status of 415 testing with multis. Thus because of EGTRRA each plan would stand on "its own" for any db testing under 415(B). However, it appears that this employer may contribute to three multiemployer plans in addition to a single for the same employee. Where I am not sure of the outcome is how the 415© testing is done because you don't aggregate the multis, but you would aggregate the single with each multi. There maybe a reg on this, but I guess there would be three tests. Actors multi plus single Directors multi plus single Writers multi plus single. You may want to see if the regs deal with this situation.

I also suggest that you terminate rather than covert to a multiple. Look at the "Who's the Employer" Q&A's on Benefitslink. There are a number of Q&As on the new Rev. Proc. In particular you might be interested in this one: Rev. Proc. 2002-21 Relief For Multiple Employer Plans (Posted May 6, 2002) Question 173: With regard to a PEO "single employer" plan, does the new revenue procedure provide any relief from possible violaitons of 410(B), ADP/ACP and the like? Most of it deals with the exclusive benefit rule but there is a special rule for terminating plans in Section 4.03; if a single employer PEO plan terminates, does it get a complete pass on all of these other compliance issues? Answer: This is one of the most awkward parts of Rev. Proc. 2002-21, and I allude to it in Q&A 166. As part of the relief offered by the Rev. Proc. to PEO Retirement Plans that comply with its provisions, Section 4.03 says: For the purpose of determining whether a PEO Retirement Plan or Spinoff Retirement Plan satisfies the qualification requirements in § 401(a) upon plan termination (as described in section 5.06), Worksite Employees may be treated as if they were employees of the PEO. I spoke with the author of the Rev. Proc., and she said that this clause was intended to apply to all compliance issues, not just to the exclusive benefit rule. (Of course, that isn't binding on the IRS, but it is a reasonable interpretation.) That doesn't amount to a free pass, however. It simply says, in effect, that if you have been testing the plan hitherto as though the Worksite Employees were employees of the PEO, you don't need to rerun those tests for purposes of determining whether a terminating PEO plan or spinoff plan is qualified. You are correct; there is no comparable clause for a PEO that chooses to convert its plan to a multiple employer plan. I give a detailed example of why this is a problem in a multiple employer plan in Q&A 165. Continuing that example, if that same employer were to terminate its plan instead of converting to a multiple employer plan, there would be no 410(B) issue. The terminating plan would be able to rely on Section 4.03 to insulate it from liability so long as it complied with the Rev. Proc. What issues would be covered by Section 4.03? Any issue in which it makes a difference whether the PEO or its client is the employer. So it would deal with 410 participation and coverage, 411 vesting, 415 limits, 416 top heavy rules, 401(k) distribution restrictions, the ADP test (both for purposes of determining whether the plan satisfies 401(a)(4) and for purposes of determining whether the 401(k) feature is valid), the ACP test (again, both for nondiscrimination and for testing the validity of the match), safe harbor 401(k) issues, etc. The lack of any such comprehensive provision for a continuing plan that converts to multiple employer status is a major disincentive for adopting such plans. This is one of many questions and issues the IRS should resolve as it considers future guidance on this issue. -------------------------------------------------------------------------------- Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation. The laws, regulations and court decisions in this area change frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the laws, regulations or court decisions that occur after the date on which that Q&A is posted.

Isnt' the guild plan a multiemployer plan? Under EGTRRA the new rules are 1) you do not aggregate multis with other multis for any purpose under 415 2) You do not aggregate multis with any other plan for purposes of the db limit in 415(B). 3) You still would need to aggregate multis with other plans (except for another multi) in determining the $40K and 100% of comp limit for 415©. So I guess the answer to your question is yes.

Delinquent deferrals implicate both the Code and ERISA. Even though it is a Code Section, the "obligation" to credit accounts based on the 6621 rate (even if the accounts would have had negative earnings) comes from the DOL's Voluntary Fiduciary Correction Program that was made permanent in late March of this year. Try this link-- http://www.benefitslink.com/DOL/volfiductext.pdf Also, in your situation if you actually use the VFC program (and the deferrals are not more than 180 days late), there is a prohiibted transaciton exemption so that the 4975 tax (reported on the 5330) would not actually be due. Use of this PTE actually requires some disclosure. However some people find actual use of the VFC program to be more trouble than it is worth. And, since the 4975 tax is often very small in these situations they just go ahead and pay the excise tax under 4975 and use the VFC program as a "guideline" of how DOL wants things corrected but do not go through all of the paperwork and documentation that DOL requires for a VFC filing.

I agree I always send in every amendment since the last D.L. The extension of the remedial amendment period basically covers all changes to a plan since December 7, 1994. My experience is that the IRS will then specifically reference those amendments in the D.L. in addition to referencing the 1/01/02 restatement.

Mike, I think you may be right that using the current year as the effective date and simply making sure that the specific GUST provisions have the correct retroactive date may be the simplest way to go. That would also solve T-Bone's issue. But the IRS's own FAQ on GUST seem to indicate that they are mostly seeing 1997 Plan Year effective dates : Plan Language Issues: Are most GUST plan restatements written to be effective in 1994, 1997, or in the "current" (i.e. year of adoption) plan year? Does it matter as long as the specific provisions relate back to the appropriate effective dates? In our experience, the most frequently occurring plan restatement effective date has been the beginning of the 1997 plan year. Assuming there are no other relevant issues involved, the general effective date of the restatement does not matter as long as the correct effective date of each GUST provision is clearly defined in the document. Going back to T-Bone's question. if you are dealing with a document that generally has a 1997 effective date I guess he has the best solution. You definitely do not want retroactive 1997 effective dates floating out there for amendments that were not made until much later.

PJK-- While you and Keith used the term "penalties" on delinquent contributions with regard to the method of funding the "delinquency fund", I doubt that many multis are actually calling these fees penalties because if they are, they could not be collected (as a contractual matter) in a number of Circuits--including I believe yours--Idaho Plumbers and Pipefitters Health and Welfare Fund v. United Mechanical Contractors, 875 F.2d 212 (9th Cir.1989). There are two alternatives. First they can be "liquidated damages" on upaid contribuitons under 502(g)(2) of ERISA in which case the plan document can "charge" whatever it wants (up to 20%) irrespective of whether it would be a penalty under common law. However, to fall under 502(g)(2) these must be "liqudiated damages as provided in the plan." Thus, to collect the Plan must have a "liquidated damages" provision. Second the plan could use the term liquidated damages (not penalties) and they may be collected as a contractual matter (usually a 301 suit). I believe that the Courts have stated that in instances where an employer is delinquent but pays the delinquency prior to when suit is brought, 502(g)(2) is inapplicable to the attempt to enforce the plan's liquidated damages provision because there are no "upaid contributions" at the time of suit. Therefore as a matter of "federal common law" a number of Courts have stated that the liquidated damages clause must be analyzed to see if it is really is a good faith estimate of the administrative and other costs to a Plan that arise from the delinquency over and above interest. If they fail under this test, thouse courts have said the liquidated damages clause is, in actuality, a penalty and cannot be enforced. Going back to Keith N's quesiton. How would you go about "funding" the accounts of participants of delinquent employers if that is what the Trustees wanted to do (or are required to do in the case of a MPP). I had posed to Wickersham merely treating it as an administrative expense of the Plan. However, he did not believe that such a charge fell within the definition of an administative expense that could be assesed against the accounts of other participants.

PJK--I was just adressing your point with regard to the liquidated damages being treated as contributions. I don't see what you are getting at as far as a possible solution of Keith N's problem. The goal is not to use "late fees" or liquidated damages to offset expenses of the plan but to allocate them to the accounts of participants of delinquent employers. I suppose that you could allocate them as received (assuming a plan provision to the effect) but that may lead some employers to think--If we are going to be delinquent its better to be delinquent at the beginning of the year because our employees will then be the first to be made whole (and believe me cash strapped employers will "game" any multiemployer delinquency system that may be set up). I think the best thing to do would be to wait until the end of the year to do an allocation of the entire account. Then you would not have a "carry over" suspense account, yet all participants of delinquent employers would be treated ratably with a pro-rata allocation of their delinquent contribuitons. (I really doubt that liquidated damages collected will come close to making up outstanding delinquencies for a year.)