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HomeMy WebLinkAboutPension General_Documentation_Tab 09_05/07/2007VILLAGE OF TEQUESTA LUMP SUM BENEFIT PAYMENT AUTHORIZATION (~ General Employees Pension Trust Fund ^ Rollover • ^ Public Safety Officers Pension Trust Fund ,E}-Distribution s~~L~;~ ~~_~ PAYEE DATA Tax Form Address ^ (same as mailing address) Mail check to: - Pa ee C Financial Institution/Direct De osit a Check if a ee is a beneficia Payee Name (Last, First, Middle) Address Address City City Reason for separation of service: ^ Normal termination _ Social Securi Number F~ Resigned Partici ant Census Information ~~ Normal retirement Date of birth : Date of hire: ~ ~ ~ ~ (~ ~ ~ ~ ~ f (~ _ ~ ~' ^ Early retirement C Death benefit from the account of: Date of entry: Date of separation of service: I-, _1'~ -0 ~ %- ~~ -c7 Direct rollover Participant has elected a direct rollover C Disability retirement 0 Direct rollover to IRA Information If yes, answer the following. ^ Yes ~ No ^ Direct rollover to qualified plan Other Amount of Rollover AUTHORIZA-SIGNATURES: Employer: c. ~- Employee: ~ i :-'' , ^^ ~/ J w w ~ Total: ~' `~` _ j ,~~~ ~, ~~ ~-- ` O ~~of Pa1't`rcipant) ~~Tirranee- ec ~~ D to Lt_ ~ `''~ `" 1 Acco er: m S~tary B d o Trustees Date t.~+ ~ ~` ~ ? ` .2 Address o financi~ljnstitution: B T s es Date ~~ /~ Distribution information prepared by: Distribution Information Benefits Em to er Em to ee Total Taxable ~~~. ~ ~~~ Non-taxable Total gross ~~~ • ~ ~~~ , 20% mandatory withholding ~, /• 5/ `'~ ~~• c I J Total check amount 375. 03 ~~~.~~ ~/ G~ ~~ Employee Signature Finance to verify bank balance amount 3-i-~ ~ Date 7 Pension Contribution Report ~e of Tequesta Date: 02/12/2007 Time:15:45:50 -tirement Code: PENS2 Interest Rate: 0.0000 Pension Pension Bal Interest Curr.Year Total Employee Name Employee ID Soc Sec Number Gross FYTD Beg of FY Beg of FY Contrib. Contrib. HEYNES, MARK 3732 $9,450.73 $0.00 $0.00 $472.54 $472.54 Total Employees $9,450.73 $0.00 $0.00 $472.54 $472.54 total Retirement Codes: 1 • C, $9,450.73 $0.00 $0.00 $472.54 $472.54 Page 1 VILLAGE OF TEQUESTA LUMP SUM BENEFIT PAYMENT AUTHORIZATION ^ General Employees Pension Trust Fund ^ Rollover • ^ Public Safety Officers Pension Trust Fund [~1-Distribution ~~ ~• L ~`'~`~' PAYEE DATA Tax Form Address ^ (same as mailing address) Mail check to: Pa ee ~ Financial Institution/Direct De osit ~ Check if a ee is a beneficiary Payee Name (Last, First, Midd Address 5 5 '~ Address City City Reason for separation of service: _ ^ Normal termination _ Social Securi Number ^ Resigned Partici ant Census Information ^ Normal retirement Date of birth : Date of hire: r~ ~ ~ ~ ~ ~ ^ Early retirement ~ / iJ Death benefit from the account of: _ Date ofe~~~~y. Date of separation of service: ~ ~`Y ~~~~,_~,~ ~;,.~ ~~'S (J2MSi~ (- 0 G~ -W ~~ ~., r.. Direct rollover Participant has elected a direct rollover ^ Disability etirement Direct rollover to IRA Information If yes, answer the following: ^ Yes ^ No ^ Direct rollover to qualified plan ^ Other Amount of Rollover AUTHORIZATION SIGNATURES: Employer: Employee: _ __ \! Total: \. ~, ;i F$O (Name of Participant) Finan~ ue for ~ to l~ Account number: S~ETsta Board f T rustee Date J // / ~G' ^/ ///7 ^/~ 7 l r.L f~' / Address of financial institution: Boa o Trustees Date ~ 3 Distribution information prepared b . ~~~ -CoCt~ 3 ~a~l~ 7 Distribution Information Benefits Em to er Em to ee Total Taxable ~,3'~r7s ~ 3 ~, ~4~7,~;~ Non-taxable Total gross ~ / ~ ~ `~, ,~ ~ ~1 3 ~ ~ o 20% mandatory withholding ~_ -~' Total check amount ~ ~ ~ 7 '~ , ~ ~ ~~ ~ ~ ~ Finance to verify bank balance amount mployee Signature Date i~ ~/~ HANSON~ PERRY S~ JENSEN, P.A, 400 ExECUnve CENTER DwvE, surrE 207 -WEST PALM BEACH, FLORIDA 33401-2922 JILL HANSON* mjhanson®hpj4w.com ~NN H. PERRY perry~hpjlaw.com BONNI SPATARA JENSEN bsjensen ~ hpjtaw.com '~~so ADMfTTED w N.Y. Jody Forsythe, Finance Director Village of Tequesta Village Hall 345 Tequesta Dr. Tequesta, Florida 33469 March 15, 2007 TELEPHONE (561)686-6550 FACSIMILE (561:) 688-2802 Re: Village of Tequesta Public Safety Pension Fund Village of Tequesta General Employees Pension Fund FRS Participant Retirement Our File Nos.: 1011.0007: 1012.0007 Dear Jody: • This letter is a follow up to and should be read in conjunction with my letter dated March 13, 2007 regarding FRS Participant Retirement. I have been informed by the Village of Tequesta that a refund of employee contributions has not been made for Russell White. Mr. White's employee contributions should be refunded. It is also my understanding that he is currently a participant in the DROP. He is therefore not eligible to participate in the Village's Pension Plan, Please contact me if you have any questions comments or concerns regarding this matter. Sincerely yours, ~, Bonni S. Jense Copy to: Chairman and Secretary, GE Board Chairman and Secretary, PS Board H:1Tequesta PS 10111VillagelFinance DirectorlFRS rehire.wpd • -~` »s Merlene Reid ~om: Bonni S. Jensen [bsjensen@hpjlaw.com] nt: Monday, December 04, 2006 11:38 AM o: Merlene Reid Cc: Karen Amenita; Betty Laur; Bob Garlo; Joann Forsythe; Steve Palmquist Subject: Re: TEQUESTA RETIREES -WHITE, MORRILL & GARLO Merlene, In answer to your questions: 1. I believe that the General Employees fund makes refunds of contributions based upon the Village's records and then ratifies the refunds at the fdlTowing meeting.. Betty and/or Patrice should be able to tell you the specific policy of the Board. 2. The Village should request that the Board either: a. Account for the over-contributions in the normal course of the Fund's actuarial valuations. The removal of liability for the participants should result in an actuarial gain to the pension funds This gain can then be part of the next actuarial valuation which can be used to offset losses in the fund or will reduce the Village's contribution. b. Determine the amount of over contribution for each employee, develop that amount as an over-contribution reserve and offset the Village's contribution in the current year. The IRS has a procedure for the "refund for contributions made mistake," however, that procedure does not apply to this situation. 3. I would recommend setting a special meeting, if the Village wants to have action by the Board of Trustees before February. 9. From the PEnsion Fund perspective there is no action that the Village Council needs to address. However, the Board of Trustees may want to consider some procedures to consider "new" participants to the Fund - specifically to determine whether they are eligible to participate. If you have any questions or concerns, please contact me. On Thu, 30 Nov 2006 12:21:90 -0500 "Merlene Reid" <mreid@tequesta.org> wrote: > Hi Bonnie: > Thanks for the information on the FRS contribution rates. See official email > below from the FRS re the 3 employees involved. As discussed, the situation facing the Village is that we have 3 employees > who were not properly terminated from the FRS pension plan and were not > eligible to loin the General and the Public Safety Pension plans. Two have > resigned effective 11/27 (Bob Garlo - General Pension and Mike Morrill - > Public Safety Pension) and will automatically have their contributions > refunded to them in the normal. way. I will also stop a1.1. future > contributions by Russell White who is currently in the General Pension plan. •I spoke to Steven Palmquist who does not anticipate any complications from > his end aril expects the next valuation to reflect the associated costs. > However, I still have a few questions for you: > 1 > ]. Can Russell White's contributions be refunded based on a memo from me stating that he was not eligible to join the General plan, or does he have > to wait until the next meeting in Feb 2007 for board approval? > 2. What's the procedure recommended to request credit for the Village's • contribution to date in these pension plans for these individuals? 3. Would you recommend a special meeting of the board to resolve all issues > associated with this matter, bearing in mind that Tequesta needs to > retrieve/offset the contributions in order to pay the FRS? > 9. Finally, Betty suggested that I also ask your advice whether any action > needs to be taken by the Council members in respect of these errors that > have come to light, specifically as it relates to the pension plans.. > I am also welcoming any further suggestions that you may have in this > matter. > Merlene Reid > Human Resources Manager > Village of Tequesta 345 Tequesta Drive > Tequesta, FL 33469 > Tel (561)575-6200 > F'ax (561)575-6203 > -----Original Message----- > From: Snuggs, Andy [mailto:Andy.Snuggs@dms.myflorida.com] > Sent: Tuesday, November 2.8, 2006 11:06 AM > To: Merlene Reid > Subject: RE: TEQUESTA RETIREES - WHITE, MORRILL & GARLO > Dear Ms. Reid: > This is in reference our phone conversation regarding the three employees (Robert Garlo, Michael Morril, and Russell White) of the Village of > Tequesta who commenced receiving Florida Retirement System benefits > without terminating their employment. > To receive retirement benefits under the Florida Retirement System (FRS) > a member must be terminated from all FRS employment for a full calendar > month. If a member returns to work for any FRS employer in any capacity > during the first calendar month of retirement, a member will not be > considered to have retired. The member's application will be voided and > the member must repay all retirement benefits received by the member. > After reviewing the facts of this situation, the Division of Retirement > has determined that these members may enroll in DROP retroactive to > their initial retirement dates. To accomplish this the Division will > require the Village submit a Form DP-ELE for each member. These forms > should be faxed to Doug Cherry at 850-410-2072. In addition the Village > will need to submit monthly payroll adjustments under retirement plan > code DP for each individual. If you have any questions regarding the > submission of these adjustments, please contact the Retirement > Contributions Section at 877-377-1266. > The members will not be required to return any retirement benefits > received through November 30, 2006. Once the members terminate > employment, they will be eligible to commence receiving their FRS > benefits plus any benefits in their DROP accounts. If any of the members > involved in this situation terminate 11/30/2006 and remain off all FRS > employment through December 31, 2006, the members will be eligible to > receive a December retirement check and any benefits in the DROP ~ccount. These members can participate in DROP for up to 60 months form their initial retirement date. > If you have any questions, please call me at 850-414-7055. 2 > -----Original Message----- > From: Merlene Reid [mailto:mreid@tequesta.orgJ > Seat: Tuesday, November 07, 2006 2:10 PM To: Snuggs, Andy subject: TEQUESTA RETIREES - WHITE, MORRILL & GARLO > Dear Mr. Snuggs: > It seems that we keep missing each other. I was trying to get an update > on > your division's determination in respect of the above-named employees. > Please advise on any additional information that you have since we last > spoke. > Sincerely, > Merlene Reid > Human Resources Manager > Village of Tequesta > 250 Tequesta Dr, St. 300 > Tequesta, FL 33969 > Tel (561)575-6200 > Fax (561)575-6203 Bonni S. Jensen <bsjensen@hpjlaw.com> Hanson, Perry & Jensen, P.A. 900 Executive Center Drive, Suite 207 West Palm Beach, Florida 33401 Telephone: (561)686-6550 Facsimile: (561)686-2802 FIDENTIALITY NOTICE: This communication is confidential, may be vileged and is meant only for the intended recipient. If you are not t e intended recipient, please notify the sender ASAP and delete this message from your system. IRS CIRCULAR 230 NOTICE: To the extent that this message or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. 3 HANSON, PERRY ~ JENSEN, P.A. 400 ExecunvE CENTER DRIVE, Su1rE 207 -WEST PALM BEACH, FLORIDA 33401-2922 LLHANSON* anson®hpJlaw.com NN H. PERRY aperry~hpJlaw.com BONNI SPATARA JENSEN bsJensen ®hpJlaw.com 'ueo AoMtTTEO eJ N.Y, Jody Forsythe, Finance Director Village of Tequesta Village Hall 345 Tequesta Dr. Tequesta, Florida 33469 • Dear Jody: March 13, 2007 TELEPHONE (561)686-6550 FACSIMILE (561) 686-2802 Re: Village of Tequesta Public Safety Pension Fund Village of Tequesta General Employees Pension Fund FRS Participant Retirement Our File Nos.: 1011.0007; 1012.0007 Pursuant to our telephone conversations, I have reviewed Florida Statutes §121 dealing with the Florida Retirement System ("FRS"), as well as several letters from the State of Florida Division of Retirement to determine the law regarding retirement and potential re-employment of Village of Tequesta Employees who are members of FRS. Additionally, you have asked whether the Village can remove its erroneous contributions from the Village Pension Plans to offset the contribution due to FRS. First is a discussion of the law surrounding termination from FRS and re- employment of FRS employees. Florida Statute §121.021(10) provides that the Village of Tequesta ("Village") is considered an employer covered by FRS, even though the Village has opted out of FRS far new employees. §121.021(10) "Employer" means any ...city of the state which participates in the system for the benefit of certain of its employees .. . The obligation of the Village to continue as an employer is further described in Florida Statutes §121.0511(6). (6) Following the adoption of a revocation resolution under subsection (5), all employees and officers of the municipality or special district who were • participants in the Florida Retirement System before January 1,1996, remain 19 Jody Forsythe, Finance Director • Village of Tequesta March 13, 2007 Page 2 as participants in the system for as long as they are employees or officers of the municipality ...and all rights, duties, and obligations of the municipality ..., the system, and the employees and officers remain in effect. An employee or officer who is hired or takes office on or after January 1, 1996, may not participate in the Florida Retirement System, and the revoking municipality or independent special district has no obligation to the system with respect to such employees and officers. With that background, Village FRS employees remain FRS employees (and subject to the provisions of FRS) until they have met the termination requirements of Florida Statutes Chapter 121. An employee terminates and therefore severs his/her relationship with FRS once the member has ceased all employment relationship with the Village for a period of one full calendar month. Entry into the Deferred Retirement Option Program ("DROP") is not termination, although it is considered retirement. The Village is still subject to the operations of the FRS regarding that DROP employee. Florida Statute §121.021(39) provides: (a) 'Termination" occurs, except as provided in paragraph (b), when a • member ceases all employment relationships with employers under this system, as defined in subsection (10), but in the event a member should be employed by any such employer within the next calendar month, termination shall be deemed not to have occurred. A leave of absence shall constitute a continuation of the employment relationship, except that a leave of absence without pay due to disability may constitute termination for a member, if such member makes application for and is approved for disability retirement in accordance with s. 121.091(4). The department or board may require other evidence of termination as it deems necessary. (b) "Termination" for a member electing to participate under the Deferred Retirement Option Program occurs when the Deferred Retirement Option Program participant ceases all employment relationships with employers under this system in accordance with s. 121.091(13), but in the event the Deferred Retirement Option Program participant should be employed by any such employer within the next calendar month, termination will be deemed not to have occurred, except as provided in s. 121.091(13)(b)4.c. Aleave of absence shall constitute a continuation of the employment relationship Upon meeting the definition of termination under FRS, including the one full calendar month withdrawal from employment, the Village is no longer subject to the operation ofthe FRS provisions regarding that employee. The employee however remains subject to the operation of the FRS restrictions on FRS employment after retirement • contained in Florida Statutes §121.091(9)(b). DROP employees remain subject to the Jody Forsythe, Finance Director • Village of Tequesta March 13, 2007 Page 3 operation of FRS generally and the DROP provisions specifically. An FRS DROP member cannot also be a member of the Village's retirement plans. Should a former FRS employee properly terminate employment with the Village (terminated for one calendar month), the member may subsequently return to employment with the Village in accordance with Florida Statutes §121.091(9)(a). Attorney General Opinion 2003-10 is instructive in this area. The opinion is directed to the City of Live Oak who also opted out of FRS. The then Live Oak administrator was in the DROP and wanted to terminate his employment for the full calendar month and then return to employment with Live Oak. Attached is a copy of that opinion. It is important to note that, in the Live Oak situation, the Division of Retirement required a "true termination" and questioned whether a termination was "true" if the continued employment of the terminated member was assured through an informal agreement of re-employment. Recently, there were three Village employees who did not terminate in accordance with the provisions of FRS (Robert Garlo, Michael Morrill, and Russell White). To rectify the situation, FRS agreed to retroactively enroll the employees in the FRS DROP program. As a result, the Village owes DROP contributions to FRS for these employees. • Additionally, for the period that the employees were retroactively enrolled in the DROP, they were also members of the Village Retirement Plans. As mentioned above an employee cannot simultaneously be a part of the FRS (including DROP) and the Village's Retirement Plans. During the employees' participation in the Village Retirement Plans, employer and employee contributions were made to the Plans. The employee contribution have been returned to Garlo, Morrill and White from the Plans. This leads to the Village's second question -whether the employer contributions which were made to the Public Safety and General Employees plans can be returned. The Florida Statutes contain no provision or process for a return of employer contributions which have been made improperly. The IRS has a procedure for recovering de minimus excess contributions. In order for this procedure to apply, the contributions must have been made by a mistake of fact and must be returned to the employer within one year after it is made. The amount of the non-deductible contributions must be less than $25,000 and the terms of the plan must specifically allow for the return of contributions to the employer. In my opinion, since the Village Plans do not contain a provision for the refund of contributions to the employer, this IRS procedure is not available. Attached is an excerpt from the Commerce Clearinghouse Pension Plan Guide ¶3217 discussing Return of Contributions Made by Mistake. However, a procedure which has been employed by other funds throughout the • state and which has been accepted by the State in the past is to either: Jody Forsythe, Finance Director • Village of Tequesta March 13, 2007 Page 4 a. Request the Boards to account for the over-contributions in the normal course of the Fund's actuarial valuations; or b. Request the Boards to determine the amount of over contribution for each employee, develop that amount as an aver-contribution reserve and offset the Village's contribution in the current year by a like amount. This procedure should have results similar to the direct refund of contributions. In the future, Village FRS employees should not be rehired in the Village until the employee has been terminated for at least one full calendar month. The employee should only be rehired through the normal channels for employment with the Village -there should be no implicit or explicit agreement that the employee will be hired at the end of the termination period. Members of the Village Retirement Plans will not be in a similar situation as there is no provision under the Village Plans for a member to be rehired after retirement. Please contact me if you have any questions comments or concerns regarding this • matter. Sincerely yours, ~,.~. i ~'~ Bonni S. Jensen Copy to: Chairman and Secretary, GE Board Chairman and Secretary, PS Board H:1Tequesta PS 1t)111Village\Flnance DirectorlFRS rehire.wpd • - - - a a v ~ 1-- J---"-' 1 4~1d 1 V 1 J Florida Attorney General Advisory Legal Opinion Number: AGO 2003-10 Date: March 26, 2003 Subject: Drop program, re-employment Mr. Ernest A. Sellers 105 North Ohio Avenue Live Oak, Florida 32064 RE: PUBLIC EMPLOYEES--RETIREMENT--MUNICIPALITIES--re-employment of employee in DROP. ss. 121.021 and 121.091, Fla. Stat. Dear Mr. Sellers: On behalf of the City of Live Oak, you ask substantially the following question: Under what conditions may the city manager continue employment with the city after he has participated in the Deferred Retirement Option • Program? You state that the City of Live Oak revoked its election to participate in the Florida Retirement System (FRS) in 1995, but approximately 45 percent of the city's employees remain members. The city council recently voted to take steps to obtain coverage for its firefighters, police officers and all other employees not currently part of the system. The present city administrator is a member of FRS and has entered the Deferred Retirement Option Program (DROP). His DROP termination date is June 30, 2003, but he wishes to continue his employment with the city beyond that date. You have been advised by the Division of Retirement that the administrator may retire and receive his DROP payment and be eligible for rehiring if he has a 31-day break in service and then reapplies for employment. There are several other conditions of such re-employment that will be discussed below. However, in deference to the jurisdiction of the Division of Retirement, this office concurs with the conclusions of that agency regarding this issue. Section 121.091(13), Florida Statutes, establishes DROP, a program in which eligible members of FRS may defer receipt of retirement • benefits while continuing to work far their FRS employer. The deferred monthly benefits accrue in the system's trust fund on behalf http://myfloridalegal.com/ago.nsf/printview/.A.AlBA472E6A014D185256CF60056A500 3/5/207 of the participant, with interest compounded monthly for the specified period of the DROP participation. Upon termination of employment, the participant receives the total DROP benefits and • begins to receive the previously determined normal retirement benefits. An eligible employee must make a written election to participate in DROP, selecting participation and termination dates, with the termination date contained in a binding letter of resignation. [1] Prior to an employee's receiving DROP benefits, the Division of Retirement must receive verification from the employer that the participant has terminated employment as prescribed in section 121.021(39), Florida Statutes, as follows: "a member electing to participate under the [DROP] occurs when the [DROP] participant ceases all employment relationships with employers under this system in accordance with s. 121.091(13), but in the event the [DROP] participant should be employed by any such employer within the next calendar month, termination will be deemed not to have occurred ." [2] A DROP participant who fails to terminate employment as defined in section 121.021(39)(b), Florida Statutes, is deemed not to be retired and the DROP election is deemed to be null and void. Such employee's membership in the Florida Retirement System is reinstated • retroactively to the date of commencement of the DROP and each employer with whom the employee continues employment is required to pay the system trust fund the difference between the DROP contributions paid under the law and the contributions required for the employee's class under the FRS for the period the employee participated in DROP, plus 6.5 percent interest compounded annually. (3] Thus, the statutes governing participation in DROP require termination from employment, as that term is statutorily defined, in order for an employee participant to receive the lump sum payment. A participant in DROP may not return to work within the next calendar month following his or her retirement. For such purposes, the effective date of retirement occurs on the first day of the month in which benefit payments begin to accrue. [4] Moreover, a retiree who returns to work under the FRS after the appropriate lapse of time may not receive both a salary and retirement benefits for twelve months after his or her effective retirement date. [5] Tf a retiree returns to work, the Division of Retirement must be informed and retirement benefits will be suspended for the months of employment during the 12-month period. [6] Tn the materials you have provided, concerns have been raised .regarding the re-employment of the city manager in such a manner that while he would have the appropriate break in service, his continued http:/Imyfloridalegal.com/ago.nsf/printview/AA1BA472EbA014D185256CF60056A500 3/5/2007 employment would be assured through an informal agreement with the city council. The Division of Retirement has advised you that this may be considered to not constitute a true termination, such that the • city manager and the city may be liable for repayment of DROP payments. Whether such an agreement for continued employment would be viewed as circumventing a true termination is a mixed question of law and fact that may not be answered by this office. Again, this office would defer to the opinion of the Division of Retirement and advise the city to heed such advice. Accordingly, it is my opinion that in order for the city manager to be employed by the city after receiving a DROP payment, he must have terminated employment with the city and not be re-employed during the calendar month following his retirement. Moreover, it would be advisable for the city to comply with the direction of the Division of Retirement in its consideration of the city manager for re- employment to avoid potential liability for refunding improperly paid DROP benefits. Sincerely, Charlie Crist Attorney General • CC/t1s [1] Section 121.091(13)(b)2., Fla. Stat. [2] Section 121.021(39)(b), Fla. Stat. [3] Section 121.091(13)(c)5.d., Fla. Stat. [4] Section 121.021(41), Fla. Stat. [5] Section 121.091 (9) (b) 1. , Fla. Stat. [6] Section 121.091 (9) (b) 2 . , Fla. Stat. http://myfloridalegal.com/ago.nsf/printview/AAlBA472E6A014D18S2S6CF600S6AS00 3/5!2007 CCH-EXP, PENSION-PLAN-GUIDE ¶3217, Return of Contributions Made by Mistake • Return of Contributions Made by Mistake The anti-diversion rule of ERISA is not violated if a contribution made by an employer to a plan other than a mulriemployer plan through a mistake of fact is returned to the employer within one year after it is made (.02 ). The IRS provides guidelines for determining the types and amounts of reversions covered (.03 ). • Return of de rrrininris contributions The IRS has established a procedure for recovering de minimis excess contributions to a qualified defined benefit plan that were conditioned on deductibility (.OS ). An employer's excess contributions to a defined benefit plan that aze conditioned on deductibility may be recovered without a ruling from the IRS if: 1. the amount of the nondeductible contnl~utions is less than $25,000, and 2. the terms of the plan specifically allow for the return of contributions to the employer if the IRS determines them to be nondeductible. The contributions must be specifically conditioned on deductibility in writing either to the plan or in the plan in combination with a certified corporate board resolution before or at the same time that the nondeductible contributions are made to the plan. Actuarial certificate jrrstifying return of contributions. In order to recover de rninimis nondeductible • contributions, the plan administrator or sponsor must obtain an actuarial certificate that a return of the nondeductible contribution is appropriate. A copy of the actuarial certificate with the applicable plan language or board resolution must be attached to Schedule B of the Farm 5500 annual report that is filed for the plan rear in which the nondeductible contribution was made. Nor:deductible contributions According to the IRS, de minimis nondeductible contributions made by a tax-exempt organization attributable to unrelated business taxable income could not be returned to the contributing employer (.07 ). Excess contributions that are not de minimis must be effectively disallowed by the IRS by obtaining a ruling before the nondeductible contributions may be returned to the employer. • Amounts that can be returned The amount that may be returned to the employer is the excess of 1. the amount contributed over 2. the amount that would have been contributed if a mistake of fact (or an error in determining the deduction) had not occurred (,10 ). • Multiemployer plans A multiemployer fund is not required to refund overpayments. However, under ERISA and the Internal Revenue Code, a multiemployer plan may return employer contributions made under a mistake of law or fact (.12 ). The contribution must be returned within 6 months after a determination by the plan administrator that the contribution or liability payment was made in error. An employer may not reach plan • assets unless the plan makes a determination that the contribution was in error (.15 ). In addition, an employer may not recover contributions or payments made under a mistake relating to whether the plan Copyright ©2006, CCHINCORPORATED, All rights rese~7~ed. was qualified or the trust was tax-exempt (.20 ). • Amount of reftutd limited to excess conb•ibutiorr or overpayrt:ent. IRS rules provide that the amount to be returned to the employer is limited to the excess of the amount contributed or paid over the amount that would have been contributed or paid had no mistake been made (.21 ). Earnings and losses. Generally, any interest or earnings attributable to the excess contribution may not be returned to the employer. In addition, the amount returned to the employer must be reduced by any losses attributable to the excess contribution (.22 ). Refiutd Wray not reduce participant account balances. A refund of excess contributions may not result in the reduction of a participant's account balance in a defined contribution plan to an amount that is less than the amount that would have been in the participant's account had the mistake not occurred (.23 ). Accordingly, an employer would not be entitled to a refund of an excess contribution if the refund would reduce a participant's account balance. Excess contribution or overpayment included in err:ployer's gross income. An excess contribution or overpayment that resulted in a tax benefit for the employer in a prior year must be included in the employer's gross income (.24 ). D The rules governing the refund of overpayments of withdrawal liability are discussed at ¶7175 and ¶7177. No rig/it to refintd or set off. Note, that payments made under a mistake of fact need not necessarily be returned (.25 ). Refunds in excess of that authorized by the fund's refund policy may not be awarded unless the refund policy is arbitrary and capricious and the equities favor restitution (.30 ). Accordingly, an employer was not entitled under ERISA or federal common law to set off delinquent multiemployer health • plan contn~burions by prior overpayments (.35 ). D An employer's right of action under ERISA for the return of mistaken contributions is discussed at ~• .02 E.RISA Sec. 403L)(2)(A)(i). .03 Rev. Rul. 77-200. 1977-1 CB 98. .OS Rev. Proc. 90-49, 1990-2 CB 620, superseding Rev. Proc. 89-35, 1989-1 CB 917. .07 It3S Letter Rulin 9304033, 11-6-92. .10 Martin v. Hanril artd Btctler, CA-7 (1979), 608 F2d 725, 1 EBC 1699. .12 ER1SA Sec. 403(c)(2)(A); Code Sec. 40l(a)(2); IRS Rem§1.401(x)(2 -1 bl(1). .15 Hardy v. National Kinney of California, brc. d/b/a Kinney National Management, DC Cal (1983), 571 FSupp 1310. .20 ER1SA Sec. 403(c)(2)(A)(ii); Code Sec. 40l (a)(~); IRS Red;. & l .401(a)(2)-] (b)(1). .21 iRS Re~,~1.401(a)(2~ 1(b)(2)(ii)(A). • .221bid. Copyright ®2006, CCHINCORPORATED. ,411 rights resen~ett. • .23lbid. .24 IRS Reg_ ~ 1.401(a)(27-1(~. .25 Datmac Forestay Seruices, Inc. v. bzternatio~zal Brotherhood ofElect~•ical Workers, CA-2 (1987), 814 F2d 79, 8 EBC 1773. .30 Ibid. .3S Brown v. Health Care and Retirement Copp. of.4merica, CA-2 (1994), 25 Fad 90, 18 EBC 1252. • Copyright ©2006, CCH INCORPORATED..411 rights resewed.