Art Marrapese

Off the top of my head: I'm thinking that the value of the coverage would be taxable if he chooses the insurance because he could have received cash under an arrangement that does not meet 125 nondiscrimination rules.

Larry: Just something to consider. With all of the focus on plan expenses you would want to be sure that what you do doesn't increase costs for participants. For example, you would want to know in advance whether splitting the assets would increase internal investment expense ratios (e.g., if the plan would no longer qualify for institutionally priced investments). Just something to consider.

Have you considered the fiduciary issues associated with a split? Will the administrative, recordkeeping, and investment costs borne by the plan's participants and beneficiaries increase because of the split? Who would pay the audit fees - the plan or the employer? You may be able to argue that the decision to split the plans is a settlor function, but the implementation of a settlor decision is not. I wouldn't do a split if it would disadvantage the plan's participants.