Kirk Maldonado

Not that I'm aware of. But I would get a determination letter if you were going to use an age lower than 55 (or maybe 50).

I agree with K Johnson. I hope that the other plans with more liberal withdrawal rules have favorable determination letters.

JanetM: I think that there is a serious risk that state escheat laws are preempted.

I haven't reviewed the letter you are referring to, but it conflicts with the applicable regulation (that carries more weight). The IRS officially does not have a position on this issue. Their former position that kindergarten expenses couldn't be covered was contained in a Publication, but that position has been dropped in subsequent editions of the Publication.] I think that the IRS position is wrong. They can't change a regulation by means of a private letter ruling or even a revenue ruling. They have to amend the regulation, which would require reproposing the regulation in the Federal Register.

I have a related question for you. Do the groupies constitute a fringe benefit under Section 132?

I agree that the terms "frozen plan" and "wasting trust" are synonymous. However, the term "wasting trust" is going out of favor.

MBozek: I thought that the one year suspension didn't apply if the target company terminated its plan the day before the consummation of the transaction.

My understanding of what is a "wasting trust" is very different than MBozek. His definition is what I typically hear referred to as an "orphan plan." A "wasting trust" isn't exactly the same thing. It is a plan to which no more contributions are made. That may occur with respect to an existing employer, when it adopts a new type of plan but does not terminate the old plan. Wasting trusts used to be popular until the IRS "clarified" that they must continue to satisfy all of the qualification requirements (e.g., amendments to comply with new legislation). I haven't seen one in almost 10 years.

I'm not sure if this is what you are referring to, but I think that Private Letter Ruling 9137001 also reaches that result.

There is a special exemption from the registration requirement under federal securities laws that applies to single employer plans but not to multiple employer plans. Thus, multiple employer plans can't use that exemption, even if the plan's administrative committee directed all of the investments.

MBozek: Assuming that (1) the participant directed the plan to take out the policy loan and (2) the proceeds of that loan are invested as directed by the participant, are you comfortable that it would not be treated as a loan to the participant. In that regard, note the following language from Section 72(p)(5): any amount received as a loan under a contract purchased under a qualified employer plan (and any assignment or pledge with respect to such a contract) shall be treated as a loan under such employer plan. I'm not convinced that there is a loan here, but I wanted to raise the issue.

Isn't there a 30% withholding requirement for payments made to nonresident aliens? (I realize that this is a bit of a stretch.)

I agree with MBozek. There are some rulings in analogous situations that seem to support that conclusion.

Mike350: You win the prize for longest description of a thread possibly ever recorded on BenefitsLink! (That isn't a criticism; it is helpful for the readers to know precisely what the thread is about. Generic titles like "401(k)" aren't terribly helpful.)

Be aware that if you get demutualization proceeds, you may very well get audited by the DOL (so that they can see how you treated those amounts). Accordingly, you may want to take that into account in determining how to allocate the funds.

Merlin: Are you suggesting that Sal Tripodi's outline takes precedence over the statute and the regulations? I'd like to see you try to convince either the IRS or the courts of that point. I think that Congress wouldn't be pleased at that result.

Merlin: You last posting could be interpreted as meaning that there is no limitation on assignments of benefits that are not currently payable. I don't know whether or not that is what you meant. In any event, here is the relevant portion of Code Section 401(a)(13): "For purposes of the preceding sentence, there shall not be taken into account any voluntary and revocable assignment of not to exceed 10 percent of any benefit payment made by any participant who is receiving benefits under the plan." Treasury Regulation Section 1.401(a)-13 expands upon this point a bit: "a plan may provide that once a participant or beneficiary begins receiving benefits under the plan, the participant or beneficiary may assign or alienate the right to future benefit payments provided that the provision is limited to assignments or alienations which-- (i) Are voluntary and revocable; (ii) Do not in the aggregate exceed 10 percent of any benefit payment; and (iii) Are neither for the purpose, nor have the effect, of defraying plan administration costs." Thus, no assignments may be entered into before the benefits are payable, and the maximum portion of any payment that can be assigned is 10%.

merlin: Isn't the voluntary assignment limited to 10% of the participant's account balance?

Why would you presume that it would have to remain in a money market fund? Is there some contractual language to that effect?

I concur in your reasoning, but I doubt that we will see any guidance on this point from the SEC. Part of that is due to the fact that the SEC really doesn't understand how split dollar works, as evidenced by their rules relating to the disclosure of these arrangements in the executive compensation part of the proxy rules.

Although I wouldn't have phrased it in the same manner as MBozek, I concur in his reasoning.

The existence of the PTE is completely irrelevant. The issue is whether the participant received a distribution from a plan. If the benefit is paid out of the company's checking account, then, by definition, it isn't being paid out of a plan. If it isn't paid out of a plan, it can't be rolled over into an IRA or otherwise qualify for favorable income tax treatment. The simple solution is for the employer to lend the plan the money and have the plan use those funds to pay the participant.

The event that causes a party to become a disqualified person is not a prohibited transaction.

The fact that some plan sponsors do something does not make it right. Hell, some employers steal money from plans, and that doesn't make it right.

The bonding requirements are found in ERISA Section 412.