DreamJob

Literally just advised a client on essentially the same sort of issue but involving Louisiana succession law. Participant died unmarried and without designating a beneficiary. Plan says that beneficiary is participant's estate under these circumstances. Purported sibling completed small succession affidavit and demanded that the plan distribute the deceased participant's account balance to him. Louisiana law says payors and others may rely on the affidavit. However, there's no court or administrative inquiry into the validity of statements made on such an affidavit. As long as it's signed and notarized, the parish court clerk's office just records the thing. I strongly advised my client to decline to give effect to the affidavit as if it was evidence of the existence of an estate or the equivalent thereof under state law or that the sibling was an executor or administrator of the deceased participant's estate. I don't think Louisiana state law is going to help a plan fiduciary who so loosely interprets express plan provisions.

I'm looking at this issue now too. Seems odd that there's no IRS guidance addressing whether "of the employer" contemplates a union plan to which the employer remits contributions since the 2004 proposed regulations effectively eliminated the exclusion for collectively bargained employees that had been provided under Notice 89-23. Have you thought any more about this, Belgarath?

But what would the correction be and, as a practical matter, how would correction be possible? The money is in the plan, the amounts were not reported as income for any years, and the participant (presumably) hasn't made a peep ... even after having rolled over the whole account. Is the employer's failure to implement the participant's election to have amounts withheld and contributed as Roth an operational (qualification) failure if the participant essentially acquiesces to the tax treatment of his or her contributions by failing to notice that his or her Forms W-2 and plan statements reflect pre-tax contributions? Is the procedure for electing Roth vs pre-tax spelled out in the plan or incorporated by reference in the plan? In other words, perhaps there's a reasonable basis for arguing that there's no operational failure in a case like this.

Remember that, for a self-insured plan, discrimination in favor of HCEs is not prohibited. It just has a tax consequence for the HCEs. Thus, the answer to the original question about whether you can have a different eligibility rule for a different group is yes.