ERISAAPPLE

The original question was which takes precedence. It is not just a breach of contract, as MoJo suggests. It is a violation of the National Labor Relations Act. ERISA does not preempt the NLRA, so the plan will not take precedence anymore than it would take precedence over a violation of Title VII if the plan were to discriminate on the basis of race or sex. Let's put it this way. Why don't you go to the union and tell them you can't make the contribution required by the CBA because the plan document doesn't allow for the contribution. When you do, you will learn pretty quickly which takes precedence. If the plan doesn't have the correct language, the sponsor will have to fix it. That said, I am confident a good attorney could find something in the plan that could be used to avoid VCP.

I assume the CBA is better. The general rule is the CBA will control. The plan needs to be amended to conform with whatever was bargained with the union. The employer can't amend a plan - or fail to amend a plan - and then expect the union to roll over and accept it.

I don't see language in 2.07 of Appendix B that limits a retroactive amendment for significant errors through VCP to hardships and loans. In any event, I think the phrasing "may use SCP" in Section 4.05(2), when combined with the language in Section 1.03 of the Overview, suggests that the better conclusion is a retroactive amendment to correct an error listed in Section 2.07 of Appendix B that is significant can be corrected under SCP only if the retroactive amendment is adopted within the correction period described in Section 9.02.

Madison71, where do you find the guidance that says that?

I saw that example. I am still not sure. Obviously the more cautious approach is VCP.

We have a plan that has allowed all participants into the plan early for more than 20 years. Both HCEs and NHCEs were allowed in early. If the early inclusion of participants is significant (or assumed to be significant), can we adopt the retroactive amendment under SCP? Does the requirement that significant operational failures be corrected within two years apply to corrections by plan amendments? Assume there is no discrimination issue.

How far back can you go if the operational failure of allowing in employees early was significant? In this plan, everybody (both HCEs and NHCEs) was let in early since 1988. Does the rule that requires correction of significant failures within two years apply to a correction by plan amendment? I can read EPCRS both ways.

I have not researched the issue, but I would want to know if the right to make elective deferrals after the 6-month suspension is a benefit, right, or feature subject to discrimination testing. If it is not subject to testing, or if you pass the tests, then nothing stops you from doing this. You can design your plan however you want as long as you pass the qualified plan rules and ERISA rules (and of course all other laws). I am not aware of any rule that would prevent this. I agree with the commenters above though in that I am not sure why you would do this. It is easier to limit the number of hardship withdrawals if you are concerned there are too many requests.

The answer could depend on whether the termination was voluntary or involuntary. If it was voluntary, an argument could be made the employee was not employed on the 31st. If it was involuntary, that could raise an ERISA Section 510 issue, but those are always pretty easily rebutted. Ultimately this is probably a mixed question of fact and plan interpretation that should be decided by the appropriate plan fiduciary in accordance with rules and/or principles that are consistently applied for all similarly-situated participants. Among the factors to be considered could be whether the termination was voluntary or involuntary (as noted above), and how the employee/former employee was reported, paid, or treated with respect to other matters. What was reported for unemployment purposes, was he or she paid for those two days, did he or she have access to the building or IT systems, was the employee on-call, when did the employee's insurance coverage end, etc. Not all of these factors are necessarily relevant or determinative, and other factors or circumstances could be relevant.

Your question appears to be asking if you can consider the unallocated account when calculating the allowable contribution. The amount held in the unallocated account has no relationship to how much the Internal Revenue Code will allow your client to contribute. When you calculate the contribution the client can make, you do that without regard to the unallocated account. Once you decide the discrimination testing will pass and you figure out how much the client can contribute, then you can look to the unallocated account and use the money in that account to pay for the contribution, thus reducing the client's out of pocket cost needed to fund the contribution you calculated. At least that is what I think you are asking.

Why would the employee have additional taxable income if the premiums went to pay the health insurance? Is the plan self-funded and the employee highly compensated? Also, does the plan document address this? It may not, but the SPD should address it. There are lots of issues here.

JPOD, You do understand the question. Thank your for your answer. The approach you suggest is the same one I suggested, and is the one I think I will recommend. I'm not positive it is the correct approach because I can't find any guidance. As long as the IRS gets all the taxes it is owed, I don't think it would care, though the beneficiaries might. The reason the beneficiaries would not be paid out by 2018 is because that was only a hypothetical example. Of course, all of this will go away if the client submits this for VCP and the IRS waives the excise tax, so the question may become moot.

How do you allocate the RMD after a participant's death among multiple beneficiaries, when no beneficiary is an individual (no designated beneficiary)? Is it proportionate? Is there guidance? This is an individual account plan. Example: Participant P dies in 2018. His RMD for 2018 was $200,000. He took out $100,000 in 2018 before he died, so $100,000 remains due. He has three beneficiaries who each receive $20,000 each and then a 4th beneficiary who will receive the rest. Assume that, based on the total account balance, $20,000 represents 5% of the account and the amount that represents the 4th beneficiary's interest is 85% of the account. Assume the remaining RMD of $100,000 is not paid by the end of the year. Would the three owe $2,500 in excise taxes (50% of 5% multiplied by $100,000) and the 4th owe $42,500?

See Edwards v Equitable Life Assur. Soc. (1944) 296 Ky 448, 177 SW2d 574, where the court held that a participant who left work and then committed suicide did not terminate his employment.

Some employers have not been careful to separate their retiree health plan from their active health plan. For example, they may put both in one wrap plan and file one 5500. If enough money is involved, and if the facts are right, you might be able to argue the retiree health plan and the active plan are one and the same, and thus the retiree health plan would be subject to the ACA.

I represent a spouse going through a divorce. His wife has a FERS benefit and he is getting half. He wants a survivor annuity (he insists he will live longer than his wife - his call not mine). To make sure he gets the maximum should I give him 1/2 of the gross annuity, self-only annuity, or net annuity? It seems to me the gross annuity is the self-only annuity minus the cost of the survivor annuity, so those two choices are effectively the same here. I'm not sure though if the net annuity would be larger. I don't think it is, but I'm not sure. Any thoughts? Does it depend on other factors?

Even with Husband and Wife plan, there are lots of ways to handle this. It really depends on the goals of the client and the surrounding facts and circumstances. I still don't think disqualification is the answer.

What is an H&W DB plan? Is that a DB plan with a 401(h) account? If so, there are lots of good ways to handle this. I don't think plan disqualification is one of them.

You might want to file a complaint with the national office or the taxpayer's advocate office. This doesn't seem right to me.

I don't think a vested or unvested accrued benefit is relevant to re-entry. Re-entry is an eligibility concept. If a participant terminates before the entry date, but has a year of service, the participant enters in the plan on the first entry date on or after the date of re-hire, unless the participant was gone for five years and the plan excludes the pre-break eligibility service. This is true whether or not the participant had a vested benefit.

Thank you everyone.

Most of the time people would correct it under SCP if that is available.

We have a client with a plan document that defines Earned Income as "net earnings from self-employment with respect to which the Plan is established, for which personal services of the individual are a material income producing factor." The plan is sponsored by ABC, LLC. Owner O owns 100% of ABC. O also owns 100% of XYZ, LLC. XYZ has no employees. O has net earnings from self-employment from XYZ that he would like to use to support his compensation in the plan. My question is whether XYZ must adopt the plan as a participating employer in order for O to rely on the NESE from XYZ. My thought is that it couldn't hurt, so why not.

Yes, but that doesn't answer the question. Before you get to the lump sum, the participant would have to waive the QJSA, and the spouse would have to consent to that waiver, if the QJSA rules apply.

We have an individually-designed safe harbor plan that has 100% vesting for all accounts, including the profit sharing and discretionary match. Is the plan required to adopt an interim amendment to provide that QNECs/QMACs will be vested when allocated? I can't imagine they would.