RTK

there is no general code or erisa section outlining spouse or dependent coverage requirements for ERISA self-funded plan from coverage prespective (note there are some mandated type coverage issues, e.g. QMCSO, COBRA and HIPAA portability)

generally (for welfare plans): 1. no erisa mandate for coverage 2. no code mandate for coverage -- but could have bad tax, e.g. discriminatory self funded medical plan under 105(h); and 3. state laws mandating coverage of employees should be preempted by erisa. Thus, salary only coverage generally legit. Note though employment discrimination laws (age, sex, race, etc.) do apply to plan coverage decisions.

Is there a 204(h) issue here for 2002 considering the merger as an amendment?

Look at the termination section of the document. It should specify the method for plan termination. Resolution being the most common method. Quite frankly, I think that automatic termination provisions can present problems by providing for plan termination (and the resulting vesting and distributions) when not really intended or wanted. Assuming that the plan has not already been automatically terminated, I believe that plans generally cannot be terminated retroactively, arguing then for a current or prospective termination date . Note that plan termination raises vesting and distribution issues. Upon termination effected employees are generally required to be vested (to the extent of funding). However, the same thing is true for a partial termination, which the employer's shut down likely triggered. Also, plan termination is an event for distribution, which is not necessarily the case for a partial termination or shut down.

I can't remember any specific statement by the IRS. For what it's worth, I do know that 413 regs state failure of one employer in a multiple employer plan to satisfy qualification requirements results in disqualification of plan for all employers. Also, the substantiation guidelines of rev proc 93-42 stated the same thing for multiemployer plans, but also stated that IRS has the authority to retain qualified status of mutliemployer plan for innocent employers.

My quick comments: (1) Regarding forfeitures, my recollection is that the IRS's position is that all accounts must be 100% vested upon plan termination unless the particpant had five consecutive breaks in service or had incurred an early forfeiture event under the cash out rules. I assume the dollars in the forfeiture account are forfeitures under the 5 year rule or cash out rules, and thus, not required to be vested in participants. (2) Regarding reversion, my recollection is that is a dc plan reversion is permitted under the Code for dc plans only for amounts held in a 415 suspense account that cannot be allocated.

Defined benefit pension plan buys group term life insurance policy providing retiree death benefit coverage for retirees at a fixed dollar monthly premium per $1,000 per retiree. It is fairly clear that the cost of the life insurance coverage is taxed to retirees under 1.72-16. What is not clear is how the cost is calculated. Notice 2002-8 appears to provide that the cost is determined by the Table 2001 premiums or by insurer's lower published premium rates (satisfying the conditions of the Notice). However, one publication states that for term insurance held by a qualified plan, it is not settled whether the cost is determined by the actual premium or the Table 2001 premium. Although not stated, I think the publication was considering 1.72-16(b)(2) and 1.72-16(b)(3). 1.72-16(b)(2) states that if employer contributions or earnings are used to buy a life insurance contract, the cost of the life insurance protection is included in the gross income of the participant. It makes no reference to how the cost of the life insurance protection is calculated. 1.72-16(b)(3) states that if death proceeds exceeds cash value, the excess is considered the life insurance protection and further states that the cost of such insurance will be considered to be the net premium cost as determined by the IRS. Thus, 1.72-16(b)(3) provides that the cost of life insurance is determined by the IRS when there is a cash value, but 1.72-16(b)(2) does not. It may have been this difference that the publication was considering. I would appreciate any comments.

I have also used one time lump sum options upon plan termination (for actives, deferred vested, and/or retirees). I set it forth as part of the plan termination amendment, and condition the availability of the lump sum on the plan termination on the intended date. I have never had IRS or PBGC (on audit) object.

Thanks mbozek. That is the course we will pursue. The parties are going to battle this to the end, and it is just as well to extract the plans at this point.

Sorry for the delay in posting a response - life got really busy for a while. QDROphile, I do rely on the DOL advisory opinion letter and generally presume that qdros issued by the state court are made pursuant to state domestic relations law, relate to marital property rights, etc. The alternative of researching each qdro's compliance with state domestic relations law is ugly. I also generally do not care how a qdro comes about or the amount assigned, again relying on the presumption of compliance with state domestic relations law. I also understand what you are saying "in respect of" and that death benefits are "in respect of the participant". For example then, for my few remaining db plans with a refund of contribution death benefit, I permit a QDRO to assign not only a participant's accrued benefit to an alternate payee, but also the related refund of contribution death benefit. This is in accord with the DOL's position in opinion letter 2000-09A. However, if the assignment by qdro (or at least, the settlement or order that is to be enforced by a later property settlement) does not occur before a participant's death, I am not sure whether I can get over the hurdle that there is no benefit to assign where plan terms provide for payment to a beneficiary. I guess I view it this way: 1. Before death, "benefits payable with respect to participant" include more than the "benefit payable to the participant" so as to allow an assignment of a death benefit in addition to the accrued benefit. 2. Upon death, there is no longer "benefits payable with respect to a participant," but instead is now a "benefit payable with respect to a beneficiary." My case is different than the nunc pro tunc cases. At least in a nunc pro tunc case, a state court determines that assignment relates back to a date before death. In that case, I could assume a valid state domestic relations order and give full faith and credit. Of course, even this not settled given the Samaroo case in the 3rd Circuit and the recent Patton v Denver Post case in the 10th Circuit. Also, that still leaves open the issue of whether a "vested" beneficiary or spouse can be divested by a qdro (nunc pro tunc or otherwise). The DOL noted in footnote 5 of opinion letter 2000-09A that a domestic relations order could not be deemed to be qualified if it assigned benefits that have already been paid or validly waived. The courts seem to hint at the same. If so, I think this should be extended to death benefits payable, and not just paid. If beneficiaries can be divested, you set up a race between the beneficiary's application for benefits and the receipt of a qdro. In fact, in such case, any beneficiary of formerly married participant would want to apply for benefits as soon as possible. Actually, as noted by Kirk, we are considering an interpleader action because of the parties involved, and I am going to explore this option with the litigation folks. I would not mind having the courts make the call on this one, since it is likely going to result in a litigation in any case. I can't promise a correct decision, whatever that might be.

IRC 125 itself defines cafeteria plan as "a written plan." 129, though, defines DCAP as a "separate written plan of an employer." I have never been sure how these provisions relate to the single ERISA welfare plan concept, or for that matter, a single 125 plan, i.e, do you really need a separate plan and/or separate plan document. In practice, I have included the benefits in a single plan with a single document and specifying something similar to the following in the applicable article: To the extent required by the Code, this Article shall be considered a separate written plan providing for the reimbursement of medical expenses, with the relevant other provisions of the Plan incorporated by reference.

QDROphile, thank you for considered response. The Plan at issue is a defined contribution plan. And the equitable distribution order assigning the ex-spouse the account was handed down after the participant's death. If done before death, I would be a little more comfortable in qualifying the QDRO based on a Tise type argument (even though I am in the 3rd circuit). The ex-spouse's attorney's argument seems to be that the familly law court retained jurisdiction over the economic issues after the divorce, and the court should still be able to address the marital assets after death. My concern is the question that, once participant dies, is there a benefit payable with respect to a participant to assign because the plan terms provide for payment of the plan account to the beneficiary upon a participant's death. Or viewed another way, did the death benefit vest in the beneficiary (ala Hopkins even though Hopkins addressed a spouse's statutory benefits). In this regard, the proposed QDRO attempts a current assignment, and not a nunc pro tunc assignment. This whole mess could end up in federal court once the state court actions are done. (And I did not even mention the battle over the welfare plan death benefits.) By the way, the participant's "current and last known address" is the executor of the estate at the attorney's office address.

Participant designated mother as beneficiary on March 9, 2002 (five days after the divorce). Spouse was the prior designated beneficiary. Attorney for ex-spouse claims that this designation violated an earlier July 21, 2000 family court order that prohibited participant from removing spouse as "beneficiary of any life insurance owned by him or by any entity on his behalf." On this basis then, attorney is seeking 100% of account for ex-spouse under QDRO, instead of the 65% awarded as part of the equitable distribution. The Plan was not provided with a copy of the July 21, 2000 order, which I believe would not bind the Plan under ERISA in any case.

Participant and spouse divorce in 2002. It is a bifurcated divorce where the equitable distribution of marital property follows the divorce. Under the divorce decree, the court retained jurisdiction of any claims raised by the divorce action for which a final order had not yet been entered. An equitable distribution trial is held after the divorce. Participant dies before equitable distribution order is issued. After the participant's death, the court issues equitable distribution order awarding ex-spouse 65% (or 100%) of the Participant's profit sharing plan account. The participant was not married at death, and his designated beneficiary was his mother. The ex-spouse is now seeking a QDRO for distribution of the participant's account. Question: Would this be a valid QDRO? I have read a number of the nunc pro tunc and posthumous QDRO cases. There seems to be some basic trends. A pre-death equitable award and/or pre-death notice to plan will often result in a valid QDRO holding. A second spouse with statutory mandated death benefit often will result in an invalid QDRO holding. A QDRO requiring increased benefits for defined benefit plans will generally be invalid. None of these clearly applies in my instance. So I go back to the statute. A QDRO is an order which creates or recognizes an alternate payee' right to, or assigns to an alternate payee the right to, receive all or part of benefits payable with respect to a participant under a plan. The basic question then I think is whether there are benefits payable with respect to a participant under the plan once the participant dies, from the perspective that as provided by the plan terms, upon death, the participant's account became payable to the designated beneficiary. Thus, after death, there would be no benefit payable with respect to the participant to assign, and I do not think that the QDRO should be able to divest the beneficiary of the death benefit to create the benefit to be assigned. But, as usual, I am not sure. Any thoughts? And, would it make any difference if the court retains jurisdiction over economic issues?

The IRS's postion is that a db feature is itself a protected benefit that cannot be eliminated. Thus, even if Title IV does not apply, how can a conversion eliminate the db feature without running afoul of the protected benefit rules?

To your basic question, I do not know of any prohibition in the Code or ERISA against a waiver of participation . I read the regulation you cite as saying that a cash and deferred election does not include the one-time irrevocable election, but not as actually prohibiting the waiver. As already noted in the thread, a waiver would require that the cash or deferred arrangment issue and nondiscriminatory coverage issue be reviewed. If you do proceed, you should make sure that the plan document permits the waiver and a good waiver form is signed.

Plan sponsor of typical multiemployer health and welfare plan is board of trustees.

Assuming the security for the loan is the balance of the account borrowed, I don't think participant must rollover any cash (unless that is a plan requirement for the rollover). I view it this way. Participant with $30k account borrows $15k and pledges borrowed $15k as security for the loan. After the loan, participant has $30k account, consisting of $15k cash and $15k loan. Participant then defaults and plan forecloses on $15k loan balance. Participant would then have a $15k account, consisting of $15k cash. Thus, in that scenario, the $15 cash is not needed as security for the loan. A rollover should not change that.

Spousal consent would be required for beneficiary designations under the ps and qpsa waiver under mp (for non-spouse beneficiary). I have never seen anything specifically address steps the participant must follow to demonstrate that spouse cannot be located. I would think typical lost participant steps should suffice. However, I will add in the one missing spouse case I was asked about, the father of the participant was going to Thailand to look for the spouse. I will have to follow up on that some day.

My recollection is that you do not need a resolution before year end, nor do you need to communicate the amount to the participants. If my memory is correct all is needed for tax deduction is communication to the plan administrator of the year or proper administrative treatment of the contributions. Try Rev. Rul. 76-28.

My take is as follows: The plan must provide a deferred annuity with all protected benefits, including the lump sum option, at plan termination. For participants receiving annuity benefits, the plan must also provide an immediate annuity providing for the annuity benefits. The plan can offer an (optional) immediate lump sum at plan termination in lieu of the purchase of the deferred annuity, if the plan also offers an immediate J&S as an option. The plan can also offer an immediate lump sum at plan termination in lieu of the purchase of an immediate annuity. The termination amendment must provide for this and the notice and spousal consent requirements must be followed.

Tough question without specific provisions in the plan document. Although I cannot think of any specific guidance off the top of my head (and I have not seen the ERISA outline), I think forfeiture are more like employer contributions than investment earnings. (For example, an allocation of forfeitures, like an employer contribution, is a 415 annual addition, while an allocation of earnings is not.) Thus, my vote would be to allocate the forfeitures in accordance with the plan's provisions for the allocation of employer contributions.

AndyH, yes, benefits are required to vest upon partial termination only to the extent funded. erisafried, you should carefully consider the participants required to be taken into account for a partial termination determination - e.g., I believe that only employer-initated terminations need to be included in numerator (excluding then voluntary termination of employment, etc.)

The section for j&s plans is 205©(6), which has been interpreted by the 9th circuit in Hearns v Teamsters Fund, 68 F.3d 301. The solution for a non j&s plan may be to write into the plan document a similar discharge of the plan's liability for payment made on reasonable reliance on the participant's application and representation.

Well, I have seen one plan. Without spousal consent, account would be held until required beginning date or death.