Rafael

Hello. I was wondering if anyone had heard of any guidance with respect to a participant who is an "eligible participant" for purposes of the 401(a)(17) limits who was terminated and was then later rehired by the same employer. Under Treas. Reg. 1.401(a)(17)-1(d)(4)(B), an "eligible participant" for purposes of the grandfathered limits is "an individual who first became a participant in the plan prior to the first day of the first plan year beginning after the earlier of - (1) The last day of the plan year by which a plan amendment to reflect the amendments made by section 13212 of OBRA '93 is both adopted and effective; or (2) December 31, 1995." (emphasis added). Based on the use of the word "first," I would believe there is an argument that an individual who was an "eligible participant," terminated employment, and was later rehired and became a participant again would still qualify as an "eligible participant" since that individual "first" became a participant during the appropriate deadline. However, I was hoping to see if anyone on the Board had heard any different or had alternate thoughts. The Preambles to the reg are not helpful Thanks!

Sorry to revive this long dead thread, but I just wanted to see some of your additional thoughts on the following. 1. It appears that the EOB is referring to Publication 6389. I believe the relevant language is in Section VII. Line b which in relevant part reads as follows: ". . . Although each participant’s nonforfeitable percentage, as of the amendment’s adoption or effective date, may not be less under the new schedule than it would have been under the old schedule (see a., above), the new schedule may provide for lower nonforfeitable percentages in future years. For example, if a plan replaced a 3 year cliff vesting schedule with a 2 to 6 year vesting schedule, a participant with two years of service on the date of the change could have 20 percent vesting after the change rather than the 0 percent vesting before the change. However, when the participant earned a third year of service, the participant’s vesting would only be 40 percent under the new schedule whereas it would have been 100 percent under the old schedule. If this reduction in future vesting can occur, the plan must provide that each participant who has completed 3 years of service with the employer and whose nonforfeitable percentage is determined under the new vesting schedule may elect to have the nonforfeitable percentage determined under the old vesting schedule." Tripodi may read this to mean such a participant must continue to be vested in his/her account balance, including the portion of the account balance attributable to contributions allocated after the effective date, [under the old more favorable schedule] until his/her vesting percentage increases under the amended schedule. But is the IRS guidance really saying that? Or am I just looking in the wrong place? 2. Consider the following note in the current IRS website page titled "Issue Snapshot - Change in Retirement Plan Vesting Schedules." At the very end, after an example, the IRS notes: "All post-amendment contributions (accruals) will vest under the new vesting schedule, as Participant G was 0% vested and only had one year of vesting service. See IRC Section 411(a)(10)." Granted, this leaves open the issue of what if, under the example, the Participant was 20% vested. Or does it? If we are looking at the right place in Publication 6389, then it does not matter because the participant had less than 3 years of service. Any thoughts are appreciated.

Nevermind on my above question. Just saw this discussion:

Rev. Rul. 2010-27 does allow the distribution in the scenario described provided the Plan has the "extraordinary and unforeseeable circumstance" language. "The facts in Situation 2 also do not fit within any of the specific examples that are listed in § 1.457-6(c)(2)(i) or Plan Y as constituting an unforeseeable emergency. The need to pay for funeral expenses of a spouse or dependent is one of the examples that is listed in the regulation and the plan document as constituting an unforeseeable emergency, but the facts in Situation 2 involve the death of an adult son who is not a dependent (as defined in § 152(a)) of the participant. Nevertheless, § 1.457-6(c)(2)(i) and Plan Y also authorize payment in other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the participant. The need to pay for the funeral expenses of a non-dependent adult son is an extraordinary and unforeseeable circumstance that arises as a result of events beyond the control of the participant and that is substantially similar to the need to pay for the funeral expenses of a dependent." On a different note has anyone looked closer at the unforeseeable emergency dealing with prescription drugs? More specifically what if the prescription drugs are a monthly prescription? I haven't found much and am leaning on requiring a monthly request given that on any given month the future drugs' cost is not an emergency.

Take a look at Ch. 4, Sec. IV Part E.2.b in the EOB. See also IRC 411(a)(4)(A).

Thanks! For future reference (for myself and in case the question comes up again): https://www.sec.gov/corpfin/cf-manual/topic-15

That is my current interpretation of how it should be treated given it is not a discretionary action or expense and that any benefit the employer receives is incidental. However, there may be an argument that since the 11-K relates to securities held in the plan issued by the company, the ultimate benefit of the annual filing is for the company and not the plan. I just want to make sure there is no obvious SEC guidance on the issue that has passed by.

Hello, I was wondering if anyone knew of any SEC guidance concerning whether filings such as the Form 11-K could be paid with plan assets. There is some scant DOL guidance on the issue of paying for expenses that benefit the employer from plan assets, but none that specifically mention SEC filings.

It would seem that based on that requirement, that it would not be possible to "split the baby" since the correct deferrals would never be paid within two years of the year of the plan failure. However, it would be interesting to see what your attorney has to say.

From Michael J. Canan's § 16:2.Employee Plans Compliance Resolution System (EPCRS)—SCP, VCP, and audit CAP: Note the last sentence of the second paragraph. Maybe one can read that according to their biases.

Hello, While the issue does not come up exactly in the context of an ESOP, the administration of the Plan/Fund is similar enough to ask the question here. Can a Plan Administrator reallocate the unvested shares of an employee who has currently left the employ of the company to other participants before a "forfeiture" event (i.e. 5-year break in service or distribution)? The idea is to keep the account "open" and accounted for, but have the shares reallocated. In the event the employee comes back before a forfeiture event, the shares would be reissued/contributed/reallocated to the returning employee. The Volume Submitter Plan this fund is based off of states that the Plan Administrator will continue to hold the undistributed, non-vested portion of the account of a participant until a forfeiture event, so I believe that as the plan is written, the stock would need to remain in the account and not be reallocated. However, can the plan be amended to state that only the account will remain "on file" but allow for the stock to be redistributed? On a similar note, can a plan be amended to shorten or do away with the 5-year break in service requirement (other than by allowing a distribution)? I am pretty certain that one cannot because the ERISA Outline Book (2016) makes no mention of it; because seems IRC Sec. 411 requires a 5 year period; and because of the issues of cost basis and the deduction of additional contributions (to make up for growth-or is growth even accounted for during the break in service period?), but my assigning attorney is pretty certain that the Plan can be amended to shorten the time before forfeiture. Full Disclosure: I am a summer associate, but I intend to work in the Benefits practice and have found this forum helpful. I would appreciate some guidance as to additional resources I can look at. Thanks!