KJohnson

I agree with pax. Since its a benefit based on family status its disregarded for the current availability test--you only have to meet effective availability. You can still meet a 401(a)(4) safe harbor for subsidized benefits because you pass current availablity. J&S has to be at least as valuable as any other distribution option, but not vice versa so you should be o.k. there. You would have to talk with an actuary, but the benefit seems very expensive.

Unless the participant is a 5% owner, this is really no longer a MRD in 1998. You now simply have an in-service withdrawal option in your plan that you were prohibited from eliminating prior to 1/1/99 (or the date of the amendment if later). I would treat it like any other benefit overpayment and ask for the money back (with interest). 99-31 has guidance this overpayment correction method. If it is not paid back, I would think that you could offset. The 99-31 overpayment correction method for dc plans assumes that the entire balance of an account was distributed and therefore other participants are "hurt" by any amounts that are not repaid. Accordinlgy the employer has to put back into the plan (in a suspense account) any amounts not recovered. However, here you really have a stream of periodic payments and the entire account has not been distributed. I would think that you would have a logical argument that the the "adjustment of future payments correction method" in 99-31 could be used even though this method is specified for only db plans.

I don't know about an action against the insurer. You could probably still sue the plan. ERISA contains no statute of limitations for 502(a)(1)(B) litigtion so courts generally look to state statute of limitations for written contracts. This will vary by state. Of course if the Plan no longer has assets or exists, such an action might be futile. You could consider an action against the applicable fiduciaries on a fiduicary breach theory. Technically, any failure to abide by the Plan document is a fiduciary breach. Courts, however, are very reluctant to turn a traditional benefits action into a fiduciary breach action except in unusual circumstances--however this might qualify. Statute of limitations for fiduciary breach is generally either 3 or 6 years depending on the circumstances. Have you tried simply contacting the Plan sponsor? Also, if this is a DB Plan, there is a PBGC guarantee. They might be able to help you out if the plan sponsor is not cooperative.

Check your Plan for the defintion of "Limitation Year" That is the period used to judge your 415 limitations. Hopefully they are the same even if your Plan Years are different. If they are not the same, I believe that the employer generally makes a written resolution of which Limiation Year is controlling.

Some typical problems with savings accounts is that 1)there is often problems opening them in names for which you do not have signatures 2) for small amounts, service fees often take the entire amount of the accounts in a few months/years. I believe DOL's problem with escheating to the state is based on preemption of state escheat laws. However, if you wrote the escheat provision into your plan document I don't know what their position would be. I've seen some plan language about buying savings bonds in the name of the participant. This takes care of the problem of the service fees eating into the balance, but who physically holds the bond? Anybody had experience with this?

You could (believe it or not) have a problem under 406(B). Look at the last two examples under 2550.408(B)-2(f). Under these regs... Your president cannot "engage in an act" with a person in who "he has an interest which may affect the exercise of his best judgment as a fiduciary" (DOL getting a little risque on its regulatory phrasing). Under the reg, family members (as defined in the statute) are a definite problem. A brother-in-law does not qualify as a faimly member. However the reg lists family members only "by way of example" as a person who might affect one's judgment as a fiduciary. Under an abundance of caution you might want the president to recuse himself in the future decision making process on whether to retain or fire the broker.

Amounts can be forfeited as long as your plan provides that the benefit is subject to reinstatement if a claim is subsequently made. 1.411(a)-4(B)(6).

An employer maintianing a DC Plan indicates that they had a DB Plan which terminated in June 1994. I have calculations of the annual accrued benefit at NRA for each participant at the time of plan termination and the lump sum benefit using PBGC rates (each participant elected this lump sum option). I also have years of service under the Plan, "high three" compensation data, as well as birth and normal retirement dates. Could someone walk me through how I get to the 415(e) DB fraction--particularly with regard to the lump sum distributions, pre-social security age distributions and distributions to participants will less than 10 years of service?

jlf, what about multiemployer DB plans as the "champion" of the working man. 1) contributions are almost always collectively bargained so money goes "in" even if it is in excess of the minimum funding standard, 2) multiemployer nature provides portability 3) benefit levels are sometimes bargained, but even when they are not "Taft-Hartley" funds require equal employee representation on the Board for both setting benefit levels and investments. 4) For larger plans, trustee directed nature allows a percentage of the assets to be invested "cutting edge" investment opportunities not usually afforded in participant directed plans such as VCOCs REOCs etc. Given recent investment returns, some multiemployer plans have 415(B) 100% of comp problems. 5) DB nature provides guaranteed benefits in retirement for the life of the participant. Finally, if DB Plans are so much more favorable for employers, why have large corporate employers moved away from traditional DB Plans to DC Plans over the past 20 years? I am sure that regulatory complexity and employee desire for portability and "control" of investments are factors. However, I would think that the "bottom line" analysis by these employers is that, in the long run, the DC Plan is generally less of a financial commitment. [This message has been edited by KJohnson (edited 11-01-1999).]

I came across PLR 9633006 which states that if a private foundation is a designated beneficiary, the private foundation would owe an excise tax on the difference between the contributions made to the Plan and the actual distribution to the foundation. This makes no sense to me. Has anyone else had experience with this issue?

MWEDDELL MIGHT BE RIGHT FROM A TECHNICAL STANDPOINT BUT I WOULD BE CAREFUL. I THINK HE CONTEMPLATES: 1) TAKE A $1,000 LOAN ON MONDAY FROM THE PLAN. 2) ON TUESDAY TAKE YOUR HARDSHIP. ASSUMING THE PLAN HAS A ONE LOAN AT A TIME POLICY, YOU SHOULD BE ABLE TO TAKE THE FULL AMOUNT BECAUSE YOU HAVE ALREADY "MAXED OUT" AVIALABLE LOANS. MY QUESTIONS ARE: 1)WOULD THE IRS VIEW THIS AS SUBTERFUGE, AND 2) WOULD YOUR HARDSHIP "NEED" BE ONLY THE $1,000 TO REPAY THE PLAN LOAN THEREBY GIVING YOU RENEWED ACCESS TO A LARGER LOAN FROM THE PLAN.

THANKS MWEDDELL--I GUESS I WAS IN A 'FOREST FOR THE TREES' MODE--YOU'RE RIGHT IF PRE-QNEC PROFIT SHARING PORTION PASSES 410(B) THEN BY DEFINITION WE SHOULD BE O.K UNDER 401(a)(4) AND WE JUST NEED TO DOCUMENT THE GENERAL TEST. AS TO PLAN DOCUMENT ISSUES, I AGREE AND EMPLOYER WAS CONSIDERING AN AMENDMENT OF THE QNEC ALLOCATION PROVISIONS.

A Plan excludes one of several plant locations (all NHCEs) from the profit sharing portion of the plan but these employees do participate in the 401(k) and 401(m) portions. (There is no 410 problem) Based on the Plan documents, these NHCE employees while not eligible for NECs would be eligible for QNECs. If a QNEC needs to be made do we now have a 401(a)(4) problem since aggregated NECs and QNECs have to pass 401(a)(4) under k regs? The profit sharing plan has a safe harbor allocation, does the addition of these NHCE employees who receive QNECs but no NECs blow the safe harbor? Is a general test now requried? The alternative of excluding these NHCEs from the QNEC makes no sense from a policy standpoint.

International Foundation has several books on multiemployer plan issues. You can get to their website by clicking on their banner in benfitslink. They also have a "collections" conference once a year and you might be able to get that material. They also sometimes have reciprocity presentations at their annual meeting. Reciprocity--There really is not that much out there. The hot issue several years back was whether DC to DB reciprocity could be a forfeiture or cutback. Multi DC Plans typically have immediate vesting while DB Plans typically have five year cliff(or up until recently 10 year cliff). So if DC reciprocates to DB is there a cutback or forfeiture. However "money-follows-the-man" reciprocity agreements typically provide that the "away fund" is merely a conduit to the "home fund" so the DC plan can argue that no benefit was ever accrued. I think there was one Asbestos Workers case out of D.C. District Court in the early 80's adressing some fiduciary issues in reciprocity collections (later vacated on other grounds by the D.C. Circuit). This is a tricky issue on whether Home Fund or Away Fund has the fiduciary obligation (or a combination of both). Most reciprocity agreements are silent on this issue. PBGC does have a letter on reciprocity and withdrawal liability. As to delinquencies look at PTE 76-1--this is still the definitive statement on Trustee obligations. There are a couple of follow up DOL opinion letters (one on allocating delinquencies among a family of funds). [This message has been edited by KJohnson (edited 10-22-1999).]

Standards of performance for actuaries are generally set forth in 20 CFR 901.20--Grounds for supsension are in 901.31. "Any person" may make a report of a violation of the standards to the Executive Director of the JBEA or "any officer or employee" of DOL, PBGC or Treasury.20 CFR 901.32 I don't recall ever seeing anything on transitioning records.

IRS says that state escheat statutes are o.k. to use--DOL disagrees. Check your Plan. Usually Plans provide that such benefits are forfeited subject to reinstatement if a claim is made at a later date. You could use this method as long as you are not terminating the plan. See 1.411(a)-4(B)(6) Finally the IRS has a "letter forwarding" program that can be very effective and is free if you do not have a number of names.

If a self-funded plan is funded, in part, by employee contributions and there is no 125 Plan in place, is there any way to get out of the Trust requirement?

Generally Participant must max out all available plan loans before receiving a hardship. See 1.401(k)-1(d)(1)(iii)(B)(4). However there are certain exceptions if the plan loan would actually "increase" the amount of the hardship need. (i.e. a participant would not have to take out a plan loan if that loan would disqualify the participant from obtaining a traditional mortgage for a home. In such an instance the plan loan would actually "up" the amount needed as a hardship distribution)

I agree. You need to follow your Plan document and the beneficiary designation form. I know that some individually designed plans have put in provisions allowing "disclaimer" of benefits in certain limited instances. However, without a "qualified disclaimer" the distribution would be income to the designated beneficiary and must be reported as such. I know that the IRS has specific rules on when a beneficiary can disclaim a benefit and not have it treated as income. I don't have the cite off the top of my head.

I agree with Wessex based on comments made by the IRS at the Key District conference in Baltimore this past summer. You could have established a separate 401(k) Plan for a short year of three months or more and then merged the 401(k) Plan with the profit sharing on the following January 1. However, I don't think that that you can add a safe harbor 401(k) portion to an existing profit sharing plan "mid-year." (Some may say that this is form over substance, but it appears to be the IRS's position). If you take the position that the safe harbor was "effective" the prior January 1 and therefore you did not have a short year, then it would appear that you would have notice problems.

I don't know of anything. Plan design decisions are "settlor" rather than fiduciary functions and therefore no participant could bring such a case on fiduciary grounds allegeing that a DC plan would be more in the interests of p's and b's. If an employer agreed to make the conversion and then did not, there might be some type of misrepresentation claim under the Supreme Court's Varity decision or some type of qasi-contractual claim.

A plan miscalculated the MRD for 1998 and sends the participant a "make up" distribution in 1999 along with the "regular" MRD for 1999. Particpant is seeking waiver of the excise tax for the underpayment in 1998. Should the "make up" MRD be reported on an amended 1099 for 1998 or should both the make up and regular MRD be reported on a 1999 1099.

Pax--Is there some reason you thought you needed a Plan amendment or can you simply institute the $5,000 provision as long as you adopt an amendment within the remedial amendment period?

IF THIS IS A TRUE MULTIEMPLOYER PLAN (AS OPPOSED TO A MULTIPLE EMPLOYER PLAN) THE VAST MAJORITY OF THE PLAN, BY DEFINITION, IS COLLECTIVELY BARGAINED. YOU THEN HAVE AN AUTOMATIC PASS FOR THIS PORTION OF THE PLAN UNDER 1.401(m)-1(a)(3). IF THERE ARE NON-COLLECTIVELY BARGAINED EMPLOYEES IN THE PLAN, I BELIEVE THAT THEY WOULD NEED TO BE TESTED ON AN EMPLOYER BY EMPLOYER BASIS.

For 401(k) and 401(m) portions you must make QNECs to correct--see 1.401(a)(4)-11(g)(3)(vii).