ERISAAPPLE

Yes. The insurance company will always be glad to take the premiums from an eligible individual. If the plan is self-insured, at a minimum this can be a matter of internal accounting. As for discrimination issues, I assume the employee will be taxed on the severance and can do whatever he or she wants with the money. As for taxation, a cafeteria plan is allowed to cover former employees who receive taxable compensation from the plan sponsor (provided the plan is not primarily for former employees). Based on that I'm pretty sure you can pay for post-employment health coverage with pre-tax premiums paid during employment. I have honestly never looked at that issue, but it seems to me if the participant can pay it after employment then payment during employment should be allowed. As a final matter, as QDROphile mentioned, check the plan document.

I want to make sure you saw my edit. Look at what they did last year. That is your answer.

The whole purpose of a wrap document is to take different plans and wrap them into one plan, with one plan year, one plan number, one plan document, one SPD, etc. It seems to defeat the purpose to have benefits with different plan years bundled up into one wrap document. This is true even if different component benefits have different contract years. The contract year under the insurance policy is not the same as the plan year. In other words, if you only file one 5500, then you only have one plan, and there should be only one plan year. Many (though not necessarily all) wrap documents have a cafeteria plan. The plan year of the wrap document will often be the same as the plan year for the cafeteria plan. I've seen it both ways, but usually I see the cafeteria plan and wrap plan have the same plan year. You need to go back to whomever wrote the wrap document and have them fix it. The answer, of course, is what did they do last year.

I've had several clients do this, but you are right. Those clients didn't have cash flow issues. I guess it is one of those when it rains it pours situations.

Cash flow is always an issue. Distribute the stock, give him the put, and pay with the note. When his claim is ripe, tell him to get in line with the other company creditors. That's the best you can do, isn't it?

This is going to depend on the legislation that authorizes the plan (if any) or just contract law based on the terms of the contract with the employee, with a possible overlay of governmental employee rights, such as constitutional rights. It also could involve the applicability of the Federal Arbitration Act to state employees or whether and to what extent the state arbitration act (if any, but I think every state has one) applies. How's that non-answer answer?

This plan is subject to the PBGC and is being turned over in a distress termination. It is more complicated than just charging admin fees. Thanks.

ASGs are completely different animals. You just have to go through the analysis.

I can get there with every plan "to which this part applies." See Section 103. If the plan has assets, then "this part applies." It would be nice to have something for directly on point. Are you sure 101(c) is talking about the 5500? Not every plan files a final 5500 with the PBGC, and 101(c) would suggest they must if 101(c) is talking about the annual report.

Is anyone aware of a cite that says the 5500 must continue to be filed until all assets are distributed? I see it in the 5500 instructions, but I don't see it any the regs or any advisory opinion. I did find a PLR, but I would like a DOL cite.

I think it depends on which plan you are testing. I have looked at this and I have concluded that if a company is not in a controlled group with another company, that's it. I understand the different positions, but I don't agree with the idea that the IRS can just say it is so. If you look at 1.414(c)-2(e), Example (4), it says X, Y, and Z are in a controlled group. It also says GHI, X, and Z are in a controlled group. Then it says Y is not a member of the GHI, X, and Z group. If you automatically combine overlapping groups, Y would be in the GHI, X, and Z group, because Y is in the X, Y, and Z group, and X and Z are in the GHI, X, and Z group. In light of that Example (4), I can't see how, when testing the GHI plan, the IRS could argue the GHI plan has to count Y's employees. Using the example above, if D is not in a controlled group with A (under the rules in 414, not under the IRS "because we said so" rules), then if you are testing A's plan, you don't count D's employees. In your example above, it seems to me that, when testing C's plan, you have two choices. One is count all of A, B, C, and D's employees, because all of those employees work for a company that is in a controlled group with C, even if they are different groups. The analysis would be that, when testing C's plans, you ask "what companies are in a controlled group with C," and by that I mean "what companies are in any controlled group with C." The alternative would be to test C's plan twice: once with ABC to see if the plan of that "employer" passes, and a second time with CD to see if the plan of that "employer" passes. If CD passes but ABC fails, for example 410(b), you would not fix the ABC plan by adding more D employees. I don't have any citations for my analysis (except as described above and of course the statute itself).

Thank you both of you.

I searched prior Q&As on this board but didn't find an answer. I have a client with a top-heavy plan that has the 3% Safe Harbor QNEC. The plan year and limitation year are the calendar year. If the client properly terminates the plan mid-year in 2018 (e.g, plan passes ADP etc.), would the top heavy contribution be required on compensation accrued up until the date of the plan termination or compensation paid for the entire 2018 calendar year?

The courthouse should have a copy. The plan should give you one too. I would ask the plan first. That is going to be your first step. In fact, I would ask the plan for a copy of the QDRO and all correspondence to you that it may still have regarding the QDRO.

I agree with Luke and the other posts. It sounds like this is not a late deferral issue. Rather, it sounds like a fiduciary duty issue with the investment. What happened to the money once it hit the trust? Was it invested or did it just sit in the account in cash?

Peter, those are the provisions of the statute I was thinking of when I posted my comment about the fiduciary standard.

Is the plan required to give an accrual for employees employed on the last day of the year, even if they don't have 1,000 hours?

ERISA's fiduciary standard is more process driven, whereas it seems a reasonable conclusion standard is results oriented.

The documents say the participant satisfies the accrual requirement if the participant completes 1,000 hours or is employed on the last day of the plan year. That effectively imposes a last day of the plan year requirement on participants who are credited with fewer than 1,000 hours.

I don't know about higher. It is different. If you satisfy ERISA's fiduciary standards and make a mistake (e.g., pay the wrong person), the plan is still in the clear. If you satisfy the reasonable conclusion standard and make a mistake, the plan is not in the clear unless satisfying that reasonable conclusion standard also satisfies ERISA's fiduciary standards. (I use "pay the wrong person" only as an example. I recognize it would be difficult to satisfy ERISA's fiduciary standards and still pay the wrong person.)

I have seen more than a few Cash Balance Plans that require either 1,000 hours of service or employment on last day of the plan year to receive an accrual for that year. I can't think of any plans I have seen that require both 1,000 hours and last day of the PY. Is that permissible in a CB plan? Can a CB plan just require last day of PY with no hours requirement? I am not aware of any rule that says a plan can't do this, but for some reason doubt is creeping in.

It seems to me the standard is whether the plan administrator satisfied ERISA's fiduciary standards in accepting the order.

It annoys me when I submit the original order that I received from the court and the plan asks for a court-certified copy. How can a copy be better than the original? Also, as an attorney, I am an officer of the court. A plan should be willing to accept my word that the order is what it purports to me. It gets even worse when someone at the plan says something like, "how do we know you didn't change it?" That is effectively accusing an attorney, who is an officer of the court, of falsifying a court document. That said, I understand why they do it. In the long run it is easier to follow their rules than try to buck the system.

That is the more cautious approach.

Consider this. Assume the sponsor amends the plan mid-year to suspend all SH contributions for everyone. I believe (though I admit I could be wrong) if the sponsor does that, the IRS would say the plan is not safe harbor for the year and the top-heavy rules apply for that year. See Kevin C's reference to the requirement to provide the safe harbor the entire year, pursuant to 1.401(k)-3(e). Up until the suspension, the plan has received nothing but SH contributions (or at least assume that it has). My thinking is that the plan amendment retroactively causes the contributions that were intended to be SH contributions not to be SH contributions, and thus for that year the plan's contributions are not solely SH contributions. Since the contributions were not "solely" SH contributions, the top heavy rules apply. We can carry that same analysis of retroactively recharacterizing the contributions to a situation where the SH is suspended only for the HCEs. In that case, since the HCEs did not get a SH contribution for the entire year, those contributions could be recharacterized retroactively as not being SH contributions. That said, I personally believe an argument can be made that suspending the safe harbor mid-year for HCEs only does not cause the plan to lose its exemption from top heavy. I do feel, however, that the more cautious approach, if the plan would in fact be top heavy, is not to suspend the SH contributions for the HCEs only in the absence of some clear guidance. Again, I don't know the answer, which I guess is why I am asking the question.