Hewitt翰威特咨询给美国某大机构的HR法律咨询案

1、Problems and Issues with Nondiscrimination Rules - Case StudiesMarch 18, 2003To protect the confidential and proprietary information included in this material, it may not be disclosed or provided to any third parties without the approval of your organization and Hewitt Associates LLC1AgendaControlle

2、d Group IssuesPlan Aggregation IssuesDetermination ofHCEsDetermination of MostValuableAccrualRates2Controlled Group Issues 3GroupstoIncludeWhoknowsthe group?Arethereleased employees?Arethereaffiliatedservice group relations?Arethereacquisitions?4Issue1:Whoknowsthe controlledgroup?Essentialtoinvolvel

3、egalcounselHRcontactsmaynot knowwhether or notthey haveaparentorsubpercentage of ownershipifthey dothat foreignparent ownsotherU.S.companieswhether business relationshipsconstituteanaffiliated servicegrouporleasingarrangementRequiresinterpretationsofcorporate lawWEDONOTPRACTICELAW5Issue1:Whoknowsthe

4、 controlledgroup?ABCDEFGHKJIUSAUSAUSAUSAUSAUSAUSAUSAFranceFranceCanadaAcquires80%100%80%40%40%50%50%-acquiredprioryear85%0%-Leasinggrp0%-MgtSvcsonly0%-SvcsonlyExercise:Identifycontrolledgroupsinyears0,1,and 2, assuming acquisitionsadmittedtocontrolled group at endoftransition period6Issue1:Whoknowst

5、he controlledgroup?Situation: Companywithforeign ownershipFamily, Inc.family companyownerretiringSellstoNewDad,Inc.,a large European companysochildrendonttakeoverFamily, Inc.checks andfindsotherUScompaniesownedbyNew Dadtoinclude in testingLaterFamily, Inc.findsthatNewDadsCanadiansubsidiaryalso ownsa

6、dditionalUSentitiestoinclude in testing, butwonders about findingothers7Issue1:Whoknowsthe controlledgroup?Situation: HoldingcompanyAllAloneCompanyisacquiredbya holdingcompany(HoldMyHand ButPretend ImNotHere,Inc.)AllAloneishappyitstillgetstomaintainitsown plans,payroll,doitsown filingsBut, nowAllAlo

7、nemustfigureout whoelse HoldMyHandowns andhowtocollectdata fromwho in order to do itstesting8Issue2:Arethereleased employees?Leasing arrangementsConsidered leasedemployeeifprovide services pursuant to an agreementservicesperformedsubstantiallyfull timefor at least ayearservicesprovidedunderdirection

8、ofrecipient employernotcoveredbya safeharbor retirementplan9Issue2:Arethereleased employees?Situation: TypicalleasingarrangementsInNDTplanningmeeting,Who Me,Lease?Co. statesthey haveonly3 leasedemployeesjokespassing asmallgroupinthe hallthatwehadjustpassedall their leasedemployeesAfterreviewingaleas

9、edemployeechecklist,WhoMeLeasecallsbackwith 200leasedemployeessincethecontrolledgrouphadonly2000NHCEsbefore, the75%ratiotestchanges to 68%andnow requires an averagebenefitpercentage test10Issue2:Arethereleased employees?Situation: Companyemployees workatJVDivisionJ is owned by BiggerFish CompanyBigg

10、erFishCompany spins offDivisionJ to formajointventureDivisionJ employeesbecomeemployees of theJVBiggerFishCompany alsohas afew employeeswhoremain BigFish,butworkattheJVtheseemployeesare testedasemployeesbyBigger Fish, butalso mustbeincludedasleased employeesbytheJV11Issue2:Arethereleased employees?S

11、ituation: CompanyacquiresemployeesWeDoEverything,Inc. acquires theofficestaff, their portionofthe retirementplan,and thewholebuildingoftheWeDontDoFloors Co.Theprofessional staff of We Dont continuestowork in thebuilding& controlthe workofthe officestaffWeDoteststheoffice staff as employeesWeDontincl

12、udestheoffice staff as leasedaggregates officeplan as if itsown12Issue3:Arethereaffiliatedservice groups?Affiliated ServiceGroupsNoownershipinvolved, based in partonregularprovisionofservicesormanagementservicesbya serviceorganizationDontforgetaffiliatedservice groupsofaffiliated servicegroupsIRSwil

13、lrule viaForm 5300filing whetheranaffiliatedservice group relationshipexists13Issue3:Arethereaffiliatedservice groups?Situation: Companyacquiresemployees -2WeDoWindows,Inc. acquires theofficestaff, their portionofthe retirementplan,and thewholebuildingoftheWeDontDoWindowsCo.Theprofessional staff of

14、We Dont continuestowork in thebuilding& controlthe workofthe officestaffAnaffiliated servicegrouprelationship existsWeDoandWeDontare testedasonecontrolledgroup14Issue3:Arethereaffiliatedservice groups?Situation: AttorneysdisagreeWeDoEverything,Inc. nowacquiresWeDoWindows,Inc.Theaffiliatedservice gro

15、up relationshipiscausing itsplan to failunderthe newcontrolled groupTheattorneyfor We Do Windowsthinks it shouldpass since theyfeeltherelationship withWeDontDoFloors shouldalso be an affiliatedservicegroupTheattorneyfor We Do Everythingdisagrees15Issue4:What about acquisitions?Transition ruleapplica

16、tionNotmuchguidanceGenerallyagreed thetransition rulecantberelied on to avoid testingindefinitely if frequent M&Asome attorneyssuggest testingthe companyand itsacquisitionasseparatecontrolled groupsuntiltheend of thetransition periodsome suggesttestingthecompanyonly withoutits acquisition until thee

17、ndofthe transitionperiodsome ignorethetransitionrule16Issue4:What about acquisitions?Situation: Separate testingduring transitionAllTogetherNow,Inc. acquires NotQuiteTogetherYet, Inc.and instructsNotQuiteTogethertocontinuetestingasusualuntiltransition endsNotQuiteTogethertestsits multiple employer p

18、lanplan provides cutstoHCEsAftertransition,AllTogetherNow attorney getsinvolvedintestinganddeterminesthereisa singleemployer,not multiple employers17GroupstoExcludeAretheremultipleemployerplans?Aretherejointventures?What about thetax-exempt exclusion?18Issue1:Anymultipleemployerplans?Multipleemploye

19、rplansEach employer adopting amultipleemployerplanmust testseparatelyfrom other adopting employersHowever,failing resultsfor oneadoptingemployeraffectthe qualifiedstatusofall in theplan19Issue1:Anymultipleemployerplans?Situation: Planhas adopting employersWild BlueCompanysponsorsa profitsharing plan

20、and LimpaLot, Inc.and ComeFly WithMe, Inc.alsochoosetoadoptthe plan.Come Flyuses the“top 20%”electionforHCEs.Limp aLot dissolves,but ComeFly hires manyofthe LimpaLotemployees.Come Flyincludesitsnew employeesfortesting,but ignoresthemforHCE determination.20Issue1:Anymultipleemployerplans?Situation: C

21、ontinuesbenefitsaftersaleWild BlueCompanysellsitsFlapYour Wings division,butallows theemployeestocontinueinits plans foroneyear.Thenew FlapYourWingsCompany becomesanotheradoptingemployerforthe year.TheWildBlue Companywilltest includingFlap YourWingsemployees/benefits up to saleFlap YourWingswilldoit

22、sown testingofthe planfromthesaledate until benefits cease21Issue2:What happenswithJVs?JointVenturesWhen there is notan80%ownership relationshipforajointventure,each group becomesaseparatecontrolled groupAsstatedpreviously,theremay be someemployees included in testingfor both, as aleased employee in

23、 oneentity22Issue2:What happenswithJVs?Situation: ContinuesbenefitsafterJVYouCompleteMe, Inc.and Ditto,Inc. eachspinoffdivisions to formajointventure.Theemployees fromeachcompany remainintheirrespective plans andtheJVbecomesanadoptingemployerofboth plans.Neither planpasses testingwithrespect to theJ

24、V23Issue3:What about tax-exemptexclusions?Tax-exempt exclusionOnly allowedfor 401(k)plan testingRequiresnotax-exempt employeesbenefiting in 401(k)Requires95%coverageofnon tax-exemptemployees in the401(k)planIfrequirementsmet,401(k)plantesting for410(b)can excludetax-exemptsfromthecontrolledgroup24Is

25、sue3:What about tax-exemptexclusions?Situation: ForProfits haveown 401(k)plansYouKeepItCompany is “notfor profit”and acquires Well TakeIt, Corp.,a “forprofit”companySmaller Well TakeIthas fourdivisions,each withits own401(k)planEven aggregated, 401(k)plansfail 410(b)nootheremployeeslefttooffer401(k)

26、toimproveresultsNodivisions 401(k)plan covers95%ofWellTakeItemployeestoexcludetax-exempts25When to AggregatePlans 26Issue1:CantPass NCT?Situation: Twoplanswith differentBRFsCompany hastwoplanswithidenticalformulasOneplanisdiscriminatoryalone,sodesirestoaggregatewithsecondplanBRFsaredifferent,butthe

27、secondplansBRFsaremoregenerous,socan be aggregatedwithfirstplansBRFstopassFrequentrequeststoimprove first planbenefitsandBRFsaremonitored to ensuretesting compliance27Issue1:CantPass NCT?Situation: Plans amendedtobeidenticalWeAreAll Individuals,Inc. hasa discriminatory planTheplanaggregates withasec

28、ondplanFirstplan requires cutstoHCEstoensurepassingandcan eliminate401(a)(4)cutsifaggregated planissafeharborFirstplan wont giveupaccrualsfor terminations,and companyinsistsonlast-dayforsecond plan28Issue2:AggregatingtoAvoidABT?Situation:29Issue2:AggregatingDBandDC?Situation: DB/DC plancantpassgatew

29、aysPSplan forOver There division employeesanddefinedbenefit planfor OverHeredivisionOver There PS provides 6% to rankand file, 3% to executives(rankand fileincludessomeHCEs)Over Hereisadiscriminatorygroupprovidingdefinedbenefit planwith1%ofpayformulaHighest HCEallocation is aDBparticipantwith38%Aver

30、age NHCErateforDBis2.5%30Issue2:AggregatingDBandDC?Situation: DB/DC plancantpassgatewaysDB/DCplan fails MinimumAllocationGateway1/3of38% 2.5%2.5% 7.5%DB/DCplan fails PrimarilyDBGatewayDBgroupcouldntpass NCT,sowonthave50%NHCEsDB/DCplan fails BroadlyAvailable Separate PlansifDBgroupcouldpass theNCT, t

31、here would be no reasontoaggregate31Issue2:AggregatingDBandDC?Situation: DB/DC plancantpassgatewaysConsiderimplicationsunderproposedcashbalance regulations if DB planconverted to acashbalance planwith6%/3%allocationsasinPS,butprovidedDB/CBchoicetoall in DB planprovided“greaterof”formulatoallinDBplan

32、providedCBwith frozenDBminimum to allinDBplan32Issue3:Aggregatingvs.Merger?Situation: MergeroftargetplanandMPPSafe harbortargetplanparticipation wasfrozenseveralyearsagoAllemployees hired since thenparticipateinasafe harbormoneypurchaseplanTosave money,trustswerecombined,plansmergedTargetand MPPtest

33、edbyrestructuringuntilcross-testingregulationsnowissupposedtopassGatewayswithout restructure33Issue4:DifferentplanyearsinABT?Situation: Oneemployee,two planyearsNotreally an aggregation issueEmployeebenefitsina calendar year401(k) planand in a4/1 planyearMPPplanEmployeeisHCEfor 2003testingofthe401(k

34、) planNotesting donefor theMPPsincenoHCEsbenefitwouldhave beenNHCEforplanyear ending3/31/2003Average benefittestrequiredfor401(k) plan34DeterminingHCEs 35Issue1:AcquiringHCEs?Situation: NewmemberofcontrolledgroupBuyCoacquiresNewCoassetsonNovember1,2002NewCoemployeesimmediatelyjoinBuyCosDBplanAspart

35、of transaction,certain seniorNewCoexecswill losetheirjobsinearly2003CantheBuyCoDBplan providethe execs withannual normalretirement pensions equal $16,000?36Issue2:Collecting therightpay?Situation: Averagebenefitstestwith differentplan yearsPlan Aisbeingtested forits12/31/2002plan yearPlan B(10/31pye

36、) is alsointhe testinggroupHCEsforthe ABTareeither PlanA(12/31/2002)orPlanB (10/31/2002)HCEsDoes PlanAkeep track of fiscal10/31employeecompensation? Or PlanB12/31?37Issue3:When aresnapshotsnot enough?Situation: Required to cross-testadefined contributionplanMinimum allocationgatewayrequireseach NHCE

37、toreceiveanallocation at least 1/3ofthelargestHCEallocationThehighestallocation rateislikely to belongtoanHCEwithpartial yearofpaySnapshottesting identifiesHCEsonthesnapshotdate,socouldmissHCEswholeavemid-year38DeterminingMost Valuable AccrualRates 39Issue1:DontforgettoclosewindowsSituation: Planoffers an early retirementwindowWindowbenefitsar