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403(b) Plans and ECPRS


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I am dealing with the following situation:

2 ERISA-covered 403(b) plans. One operated without a document for years. Neither plan, in the document or in operation, complied with ERISA QJSA requirements.

We are trying to decide if this can be corrected under ECPRS. I do not see how it can be a Plan Document failure if there is no Plan Document, and because Rev. Proc. 2008-50 defines Plan Document failure as a plan provision that violates 401(a) or 403(a), neither of which these plans did. I also do not see how it can be an Operational Failure, because it is not a "Qualification Failure...that arises solely from the failure to follow the terms of the plan providing for the satisfaction of the the requirements of 402(k) and 401(m).

Any thoughts?

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Consider that a plan's failure to pay or provide a benefit as required by ERISA 205 might not be a failing that the IRS has power, or a purpose, to forgive.

Rather, an ERISA-governed plan's administrator might focus on (1) causing the employer to adopt documents that specify provisions within those choices that are proper under ERISA 205, (2) administering that plan correctly for the future, and (3) evaluating what remedies are prudent concerning benefits that ought to have been provided.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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I am dealing with the following situation:

2 ERISA-covered 403(b) plans. One operated without a document for years. Neither plan, in the document or in operation, complied with ERISA QJSA requirements.

We are trying to decide if this can be corrected under ECPRS. I do not see how it can be a Plan Document failure if there is no Plan Document, and because Rev. Proc. 2008-50 defines Plan Document failure as a plan provision that violates 401(a) or 403(a), neither of which these plans did. I also do not see how it can be an Operational Failure, because it is not a "Qualification Failure...that arises solely from the failure to follow the terms of the plan providing for the satisfaction of the the requirements of 402(k) and 401(m).

Any thoughts?

Failure to provide J & S annuity is not subject to ECPRS because there is no requirement under IRC 403(b) to provide this benefit. Therefore tax exempt status of 403b contracts under the plan are not affected by failure to provide J & S annuity. J &S is only required under ERISA 205 for NP 403b plans with employer contributions. Only risk under ERISA for failure to comply is a claim by surviving spouse for benefits equal to 50% of account balance on date of distribution.

If spouse is not aware that J & S benefit was payable it is unlikey that spouse will ever file a claim for benefits under ERISA 503.

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