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Compliance issues with a 501c3 Hospital, that is a member of a multip


Guest Jim D. Duncan

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Guest Jim D. Duncan

I need help. I have a Hospital that is a 501c3 with a frozen dc plan. All assets are pooled in a multiple employer trust administrated by a regional bank. This trust assoc. is for municipalities and hospitals owned by governments. Frozen assets are in one account (balanced fund). What are the compliance issues for the Hospital, it's board memebers and ee issues with 404 c regs.? Who is the plan fiduciary? Who owns the assets? No disclosure for adm. fees, asset fees, etc. Is this employer subject to ERISA? Thank you in advance.

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The plan will be subject to ERISA unless the hospital is a governmental or church entity as well as being a 501©(3) organization. And if it is subject to ERISA, you've undoubtedly got some pretty massive compliance issues if, as seems likely, no one realized that it was a nongovernmental plan. You can click here for a list of the Internal Revenue Code qualification rules which are different for governmental plans than for ERISA-covered plans -- and that list does not even include ERISA rules such as 404© which do not have counterparts in the qualification rules.

The hospital is going to need to consult an attorney, pronto -- both to fix the plan and trust documents for the future, and to make decisions as to whether to participate in IRS and/or Department of Labor corrective programs. This is way too big an issue to be resolved through this board, but there are corrective programs which can at least cut down on the penalties.

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The opinions of my postings are my own and do not necessarily represent my law firm's position, strategies, or opinions. The contents of my postings are offered for informational purposes only and should not be construed as legal advice. A visit to this board or an exchange of information through this board does not create an attorney-client relationship. You should consult directly with an attorney for individual advice regarding your particular situation. I am not your lawyer under any circumstances.

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Guest Ralph Amadio

Jim, I would need to know a little more about the client and whether it currently is now or has been a governmental plan, and whether or not state law chooses to treat its plans as governmental. As you have discovered this is not a simple issue. Most of the issues you are concerned about hinge on the governmental plan position. Also, if you are aware of governmental plan status, check to see if your state has "mirrored" 404©. In California, I spearheaded legislation to allow government plans to have 404© layoff, otherwise the plan sponsor would be responsible for employee choices. Check your state and local statutes. No ERISA coverage for governmental plans unless the plan elects to qualify under ERISA, which would be highly unusual.

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