Kirk Maldonado

As to whether a non-fiduciary must be bonded, ERISA section 412(a) provides as follows: Every fiduciary of an employee benefit plan and every person who handles funds or other property of such a plan (hereafter in this section referred to as “plan official”) shall be bonded * * *. In this case, the consultant receives a check containing plan assets. Accordingly, the consultant is required to be bonded because the consultant "handles" plan funds, even though the consultant is not a fiduciary. For additional detail regarding this specific requirement, see DOL regulation section 2580.412-6. As to whether the bond has to provide protection against forgery, ERISA section 412(a)(3) provides as follows: Such bond shall provide protection to the plan against loss by reason of acts of fraud or dishonesty on the part of the plan official, directly or through connivance with others. Thus, the bond must protect the plan against losses caused by forgery. For additional detail regarding this specific requirement, see DOL regulation section 2580.412-9.

I have just reviewed Cheryl's article and my reaction to it is that many of the reasons that she mentions really do not relate to whether the plan uses the prior year or the current year methodology. Rather, they are comments stating that the plans need to increase the contributions by the NHCEs and providing some approaches that can be taken to achieve that result.

Although I wouldn't have worded the same way as QDROphile, I concur in the result he reaches.

Why not avoid the entire issue and send it to both of them?

Peter Gulia: Thanks for the plug. The answer is that the use of plan assets to purchase the fidelity bond was approved in DOL Reg. § 2509.75-5, which provides, in relevant part, as follows: Q. FR-9 May an employee benefit plan purchase a bond covering plan officials? A. Yes. The bonding requirement, which applies, with certain exceptions, to every plan official under section 412(a) of the Act, is for the protection of the plan and does not benefit any plan official or relieve any plan official of any obligation to the plan. The purchase of such bond by a plan will not, therefore, be considered to be in contravention of sections 406(a) or (b) of the Act.

I could be wrong, but doesn't the definition of compensation in the section 401(k) regulations preclude using royalties. Also, doesn't the section 414 definition of compensation cross-refer to the section 415 definition? (I've not checked any of these items, so please feel free to point out that I'm wrong if I'm having a "senior moment.")

There are some securities law issues that need to be examined, arising under both state and federal law.

I never cease to be amazed at the incredibly arcane, but extremely useful, postings that we get here on the Message Boards. The post by Tom Poje is a perfect example.

GBurns: I am offended as you are by a person blatantly soliciting some work in the boards. However, I've not seen any lately. (I don't read all of the topics.) If you see a posting that you feel is inappropriate, notify me and I will look into it. (As a super moderator, I can delete offending messages on any Message Board.) ESOP Attorneys in SF I think that there are one or more top-notch ESOP attorneys in almost every major city. However, the best ESOP attorney that I've ever seen was in SF before he retired.

1. A private company's stock, by definition, is not registered under the Securities Act of 1933. All sales of company stock, whether private or public, are subject to the registration requirements of the 1933 Act. However, there are a number of exemptions from the requirement that the sale of stock be registered. 2. Accordingly, you are correct in assuming that the payment of shares to a director (which would be treated as a sale of those shares to the director) must either be registered under the 1933 Act or there must be an applicable exemption from registration. Don't forget that you also have to comply with applicable state securities laws. This is often overlooked.

StevenA: You stopped reading too soon. The following paragraph provides as follows: Note: A written consent of the accountant is required with respect to the plan annual financial statements which have been incorporated by reference in a registration statement on Form S-8 under the Securities Act of 1933. The consent should be filed as an exhibit to this annual report. Such consent shall be currently dated and manually signed.

stevena: The Form 11-K expressly states that an audit is required. You can find the form at: http://www.sec.gov/divisions/corpfin/forms/exchange.shtml.

Pensions in Paradise: Moe is close but no cigar. If a retirement plan invests in a partnership that produces UBTI, then the plan must file a Form 990T. I'm pretty sure that the plan must have UBTI of at least $1,000 to trigger this filing obligation, but I don't recall whether this threshold is based on gross or net income.

I agree with the prior comments about the inadvisability of using a standardized document. I once worked on an acquistion where the standardized plan of the target company required universal coverage of all members of the controlled group, but the target hadn't done that. (I think that all standardized plans have a similar requirement.) I will freely admit that most employers that have standardized plans are not part of a controlled group. Also, my general impression (I don't do much work with prototypes) is that they were much larger (150+ employees) than most employers that use prototypes. Nevertheless, this problem complicated the acquisition considerably, for a number of reasons.

The relevant portions of Treas. Reg. section 54.4980B-2 are as follows: Q-8. How do the COBRA continuation coverage requirements apply to cafeteria plans and other flexible benefit arrangements? * * * © The conditions of this paragraph © are satisfied if (1) Benefits provided under the health FSA are excepted benefits within the meaning of sections 9831 and 9832; and (2) The maximum amount that the health FSA can require to be paid for a year of COBRA continuation coverage under Q&A-1 of §54.4980B- 8 equals or exceeds the maximum benefit available under the health FSA for the year. (d) If the conditions in paragraph © of this Q&A-8 are satisfied for a plan year, then the health FSA is not obligated to make COBRA continuation coverage available for any subsequent plan year to any qualified beneficiary who experiences a qualifying event during that plan year. (e) If the conditions in paragraph © of this Q&A-8 are satisfied for a plan year, the health FSA is not obligated to make COBRA continuation coverage available for that plan year to any qualified beneficiary who experiences a qualifying event during that plan year unless, as of the date of the qualifying event, the qualified beneficiary can become entitled to receive during the remainder of the plan year a benefit that exceeds the maximum amount that the health FSA is permitted to require to be paid for COBRA continuation coverage for the remainder of the plan year. In determining the amount of the benefit that a qualified beneficiary can become entitled to receive during the remainder of the plan year, the health FSA may deduct from the maximum benefit available to that qualified beneficiary for the year (based on the election made under the health FSA for that qualified beneficiary before the date of the qualifying event) any reimbursable claims submitted to the health FSA for that plan year before the date of the qualifying event.