spartytax

Hi All, I'm looking for solutions on how to deal with FSA account balances of employees whose employer is being merged into a different entity as of 1/1/19. The surviving entity has its own FSA, so the merged entity's FSA is being terminated effective as of the end of the CY (creating a stub year because the plan year was originally FY 6/30). Other than amending the soon-to-be-terminated plan to provide a 2.5 month grace period, is there any other way to protect these employees from losing their account balances? Thanks in advance.

Looking for thoughts as to how the constructive industry exemption would apply in the context of a corporate transaction. Specifically, seller is selling the assets of one of its entities to an unrelated buyer. Buyer would be acquiring those assets and some of the employees and operating a similar but not same business in the same jurisdiction. Seller won't be operating in that industry/area anymore. Would the construction industry exemption preclude the application of withdrawal liability in this instance?

Has anyone had success in challenging these after the initial response date?

Is anyone aware of specific cases addressing claims for monetary damages relating to the exclusion of eligible employees in a 401(k) plan - sponsor has already followed EPCRS correction guidance and made QNEC? Thanks in advance.

Thanks to you both for this reply. One offline suggestion I received is to have the Seller extend the coverage of its plan to these employees (and have such extension of coverage run contemporaneously with the COBRA period). Buyer and Seller would simply enter into a reimbursement arrangement whereby Buyer would pay for the cost of coverage. My concern is how this arrangement would affect Buyer's obligation to offer affordable coverage. I guess one other option is an integrated HRA - but that seems like a hassle for a 7 month period.

Company acquires sub of seller via an asset purchase transaction and decides to employ certain of the sub's employees following close of the transaction. Buyer is an ALE. There will be a lag time until Buyer gets plans in place for the acquired employees (it's putting separate plan in place for the acquired employees). Buyer is considering paying for acquired employees' COBRA under Seller's plan on a tax-free basis. Any thoughts as to whether this will work, or what issues it may raise? What about the ACA concerns? Thanks in advance.

Any thoughts as to the actual proper correction? Thanks and Happy Holidays.

Has anyone considered what, if any, type of correction would be corrected for failure to properly map participant's accounts to certain investments when switching service providers? The accounts were supposed to be mapped to the same investments in which they were already invested prior to the transition, but it was discovered that at least participant account was improperly invested and suffered a loss as a result of the improper mapping. The employer/TPA intends to make the participant whole, but I was wondering what, if any, any other corrective action must be taken?

I'm reposting a question posted a few years ago - because the same issue has now arisen for one of my clients: Company A participates in a multiple employer plan. Company A will be merged into unrelated Company B, and its employees will participate in Company B's 401(k) plan after the merger date. If Company A withdraws from the multiple employer plan on the day prior to the merger, will that be considered a "plan termination" so that its employees can receive distributions from the multiple employer plan under the "plan termination" exception of 401(k)(10)? Would Company A have to do the following to effect the plan termination: (i) withdraw from the multiple employer plan and spin off the assets in a new plan established for this purpose and then (ii) terminate that newly established plan and distribute the money to participants. Does this violate the permanency requirement? Any qualification concerns about eventually rolling over the account balances from Company A's plan into the acquiring company's plan? Any insight would be appreciated.

George Chimento, was this issue ever resolved? What about the last question relating to the permanency requirement? I have essentially the same exact fact pattern and any insight would be helpful.

Has anyone been successful at correcting a 401(k) plan for violating the contingent benefit rule? If so, what was the applicable correction?

Was this resolved? What correction did you come up with?

The shareholders of a closely held entity want to become the assignee of a deferred compensation arrangement with respect to one individual (they would be on the hook for satisfying all obligations under the arrangement). I have not found anything in the 409A regs that would prevent this, am I missing anything? Who would be responsible for the tax reporting/withholding?

Would a service provider run afoul of 409A rules if he/she opted to forfeit all or any portion of his/her deferred compensation payment (the arrangement is currently in repayment as installments, treated as a single payment). No other benefits would be paid in exchange - he/she would just receive a lesser amount, payable over the same time period. There are obviously other tax considerations. What if the service provider agreed to take a lesser amount but the amount would be paid over a specified period of time rather than life - I believe this would be subject to the subsequent deferral rules, is that correct? And if a series of installment payments (treated as a single payment) had already begun, then a subsequent election may not be made. Is this correct?