Kirk Maldonado

That seems like a great way to trigger a wrongful termination lawsuit (because the damages could be increased).

Search the message boards. This topic has been covered many times before. In fact, it is a good idea to always search first. Otherwise, it looks like you are just too lazy to do that, and you want others to do your work for you.

Blinky: Fortunately, I don't prepare Form 5500s, but don't they ask if the plan passed the ADP test? If so, wouldn't that mean that you would have to contribute the amount before you file the Form 5500?

GBurns: As the moderator of this Message Board, I am asking you to do all of us a favor and don't post anything unless you know something about the topic. Your posts on this message thread achieved nothing but demonstrating to all of us that you not only know nothing about the topic, but you think that all of us have a duty to answer every inane question that comes into your mind. Your comment to Lizana about learning about how retirement plans work was insulting and unnecessary. The person that needs an education is you; both about manners and securities laws issues. Your comment to Lizana that she should have posted this on the 401(k) message board was just wrong. She posted it on the exactly the right message board. Posting it on the other board would get more responses, but from people like you that know nothing about securities laws matters. If you do anything like this again on my Message Board, I will delete all of your posts. Furthermore, I am going to recommend to Dave Baker that you be banned from the Message Boards immediately for your offensive behavior. Your ignorant and arrogant posts are something we should not have to endure. As seen by this message thread, you add nothing but detract dramatically from the discussions. Lizana: You are prescient. I have very recently submitted updates to the portfolio that include a discussion of this issue. The answer is that the exemption under the 33 Act does not apply to multiple employer plans. My position is that any time you have a multiple employer plan, you have this problem, regardless of the situation arose (such as those examples you mentioned). My recollection is that there is the same trouble under the 40 Act, but I can't confirm that. (I don't do much 40 Act work and if you don't have an exemption under the 33 Act, you're dead in the water anyway, so it is pretty much moot.) Your statement that securities lawyers speak a different dialect than ERISA attorneys is an understatement. The way that they analyze issues is fundamentally different. Whenever I give a speech on securities laws issues to ERISA practitioners, I spend the first five or ten minutes trying to explain to them how the securities laws are so fundamentally different than ERISA.

Alf: I assume that the ESOP did not purchase the stock in a leveraged transaction, right?

The comments by ERISAatty shouldn't be interpreted as implying that in most cases the argument for the tolling of the deadline was rejected (so that tolling of the deadline was accepted only in a few cases). Rather, I believe what ERISAatty meant was that this issue has been presented to the courts only a few times, which is true.

Is this a governmental plan? For some reason, I thought that there was a problem with requiring mandatory contributions as a condition of employment unless the employer was a governmental entity, but I can't remember what the basis for that supposed problem was. Does this ring a bell for anybody else?

There is also a California law that places some limitations upon the ability of employers to use Social Security Numbers. (I don't know if any other states have similar laws.) This law is not directed at medical plans; it is much broader in scope. There seems to me to be an ERISA pre-emption issue to the extent that law would apply to employee benefit plans subject to ERISA.

If you want to go to the source, look at section 414© and the regs under that provision.

I'm not saying that there aren't any cases applying QDROs in those circumstances. There are many ERISA cases that are wrongly decided (in my book). But to be subject to the QDRO rules or even the non-alienation rules, the plan has to be first subject to Part 2 of Title I of ERISA, and it doesn't apply to nonqualified retirement plans. Because the nonqualified plan is subject to Part 5 of Title I of ERISA, it enjoys the pre-emption of state laws. Also, because it isn't subject to Part 2, it is not subject to the QDRO rules. While it would be hard to convince a court of that result, I think that is the analytically correct result. On the other hand, I would never advise a client to fight this point. The odds of losing are great and the legal fees could be astronomical.

Mbozek: I seem to recall, but I'm not entirely certain, that the DOL has indicated that even if the plan has already been terminated, the demutualization proceeds should be treated as if they had been paid into the plan. At any rate, I'm pretty sure the DOL has espoused something about how to deal with this situation, although it may have been just some comments in a speech by a DOL official. At this point in time, my memory is too hazy to be sure.

jeanine: You missed the issue. The plan has the COB information. The plan wasn't a party to the divorce decree, so it has no right to enforce the terms of the divorce decree. You should read QDROphile's post again (or maybe for the first time).

ERISA Section 514(b)(7) provides as follows: Subsection (a) shall not apply to qualified domestic relations orders (within the meaning of section 206(d)(3)(B)(i)), qualified medical child support orders (within the meaning of section 609(a)(2)(A)), and the provisions of law referred to in section 609(a)(2)(B)(ii) to the extent they apply to qualified medical child support orders. I agree that qualified domestic relations orders are not preempted by ERISA, as evidenced by the above language. However, the threshold issue is whether nonqualified retirement plans are subject to the QDRO rules. In the case of ERISA, the QDRO rules are contained in section 206. However, nonqualified retirement plans are exempt from the provisions of Part 2 of Title I of ERISA (which includes section 206). Thus, nonqualified retirement plans are not subject to the QDRO rules.

The American Bar Association has been trying to get guidance from the IRS on this issue for many years, so you probably shouldn't hold your breath waiting for it.

There's at least one court case and several DOL letters on this precise issue. You might want to review those documents to see if there are any other issues before you go too far down this path.

Appleby: Is the word "Congress?" (Because the grandfathering treatment was enacted by Congress?) If that wasn't responsive to your post, could you be a bit more expansive in a subsequent post, clarifying your prior message? I appreciate concise posts, but I think you lost some clarity in your quest for brevity.

Revenue Procedure 2002-64 lists the Indian tribal governments that are treated as governmental entities.

The situation isn't as simple as the other posters have assumed. For example, if there was some turnover between the time of the receipt of the demutualization proceeds and the time of plan termination that would complicate things somewhat. I was personally involved in a situation where an ongoing plan found an asset of well over $50,000 in value. It looked like cleaning up the situation correctly would have cost more than that, because of (1) the size of the plan population,(2) the high volume of turnover in the plan population, (3) the number of years (18, if I recall correctly) that this the asset had been "lost," (4) the huge appreciation in the asset during the interim (from approximately $100 to approximately $65,000), (5) the difficulty in trying to locate former participants that had been paid out many years ago, etc. Fortunately, the corporate attorney whose client this was switched law firms, so I never found out what the client did to resolve this problem. I didn't see a good solution.

I second QDROphile's comments.

The QDRO rules do not apply to non-qualified plans.

Randy Watson: Read ERISA section 408(e).

(1) Qualified beneficiary. (A) In general. The term “qualified beneficiary” means, with respect to a covered employee under a group health plan, any other individual who, on the day before the qualifying event for that employee, is a beneficiary under the plan— (i) as the spouse of the covered employee, or (ii) as the dependent child of the employee. Such term shall also include a child who is born to or placed for adoption with the covered employee during the period of continuation coverage under this section. IRC Section 4980B(g)(1).

That's what is often done when an ESOP is terminated.

Q-4. Is a waiver before the end of the election period effective to end a qualified beneficiary's election rights? A-4. If, during the election period, a qualified beneficiary waives COBRA continuation coverage, the waiver can be revoked at any time before the end of the election period. Revocation of the waiver is an election of COBRA continuation coverage. However, if a waiver of COBRA continuation coverage is later revoked, coverage need not be provided retroactively (that is, from the date of the loss of coverage until the waiver is revoked). Waivers and revocations of waivers are considered made on the date they are sent to the employer, employee organization, or plan administrator, as applicable. Treas. Reg. § 54.4980B-6.

I'm not a bankruptcy attorney, and you need the advice of one. But my understanding is that the payment to you shortly before they file bankruptcy would be a preference that you would have to pay back, with the result that you stand in line with the other unsecrured creditors.