Transcript Available of IRS Hearing on Multiple Employer Plan Regs

PUBLIC HEARING ON PROPOSED REGULATIONS "MULTIPLE EMPLOYER PLANS"

UNITED STATES DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE

[REG-121508-18]

Washington, D.C.

Wednesday, December 11, 2019

PARTICIPANTS:

For IRS:

STEPHEN B. TACKNEY
Deputy Associate Chief Counsel (Employee Benefits)
Office of the Associate Chief Counsel
(Employee Benefits, Exempt Organizations, and Employment Taxes)

PAMELA R. KINARD
Special Counsel
Office of the Associate Chief Counsel
(Employee Benefits, Exempt Organizations, and Employment Taxes)

JOHN T. RICOTTA
Branch Chief
Office of the Associate Chief Counsel
(Employee Benefits, Exempt Organizations, and Employment Taxes)

JAMIE L. DVORETZKY
Attorney
Office of the Associate Chief Counsel
(Employee Benefits, Exempt Organizations, and Employment Taxes)

For U.S. Department of Treasury:

HARLAN WELLER
Senior Actuary
Office of Tax Policy

BILL EVANS
Attorney-Advisor
Office of Benefits Tax Counsel

Speakers:

KENT MASON
American Benefits Council

DEB RUBIN
Transamerica Retirement Solutions

LOUIS MAZAWEY
Groom Law Group Chtd.

MARTIN PIPPINS
American Retirement Association

DERREN BURRELL
TAG Resources

* * * * *

PROCEEDINGS

(9: 58 a.m.)

MR. TACKNEY: We're going to go ahead and get started. So, good morning, and welcome to the public hearing on the proposed Treasury regulations, Multiple Employer Plans, REG-121508-18, the proposed regulations related to the tax qualification of plans maintained by more than one employer. The proposed regulations would provide an exception, if certain requirements are met, to the application of the unified plan rule for a defined contribution multiple employer plan, in the event of a failure by an employer participating in the plan to satisfy a qualification requirement, or to provide information needed to determine compliance with a qualification requirement.

I am Stephen Tackney. I am the Deputy Associate Chief Counsel for Employee Benefits in Employee Benefits, Exempt Organizations, and Employment Taxes. We call ourselves Triple E, at the Office of Chief Counsel, Internal Revenue Service. I'll have the panelists introduce themselves in a moment. There's four scheduled speakers today. Those are the scheduled speakers. The list of speakers has been handed out, and speakers will speak from the stage, in the order listed, which is the order in which their request to provide oral comments on the proposed regulations were received. There — if there is time, we will have any other speakers, who wish to speak, participate. I think there will be, based on the numbers that we have right now, but I'd say, if you want to speak from the floor, if you can, please, step out and put yourself on the list. We'll go in the order of that list, and we'll look at the time allotment when we are through with the scheduled speakers, but, yeah, we normally — I anticipate, and hopefully, we will have time from the floor.

As far as the procedural rules for speaking that govern these types of public hearings, each speaker will have 10 minutes to present their oral comments on the regulations.

This box is the timer. It will count down 10 minutes to alert, and then you will see there's a the countdown is right here. So, you'll have it right in front of you to spook you the entire time. It will count down from 10 minutes, and it will alert the speaker of how much time remains. A yellow should go on. I haven't been able to test it, but a yellow light will go on when there's one minute remaining. When the 10 minutes have concluded, and any government panelists may have asked their questions, we'll have an opportunity — we'll ask that you sum up and be respectful of people's time. If we ask questions, which we can — we might do, during your presentation, the time will stop, and all of your time, both on the question and the response and any conversation that's added won't count, and then we'll start it back up when you start your presentation again. So, you will end with the full 10 minutes of presentation time. So, the panel, itself, all of us, consist of representatives of the Treasury Department and the Office of Chief Counsel. Our general role, today, is to listen. So, we may ask questions to clarify comments. We may ask questions to get the speaker's reactions, but this isn't really the forum to provide our particular feedback or views. The hearing's going to conclude by noon. After the scheduled speakers have finished their comments, again, there are going to be an opportunity for speaking from the floor, but it will go in the order of the signups.

Some very quick mechanics. If you do need to step out, you'll need to get an — for instance, to use the restroom, you do need to get an escort. So, please, use that door. You can have water in here, but there's — no other food or refreshments are allowed in the actual auditorium. However, there is a cafeteria across the hallway. Then, thank you, again, for your participation, and we look forward to hearing everyone's comments.

Before we introduce the first speaker, I'm going to have the panelists introduce themselves, including their name, and their position, in Agency, and we'll start at the very far left, with Harlan.

MR. WELLER: I'm Harlan Weller, an Actuary with the Office of Tax Policy, at Treasury.

MR. EVANS: Hi.I'm Bill Evans, Attorney-Advisor in the Benefits Tax Counsel's Office, at Treasury.

MS. DVORETZKY: Hi. Jamie Dvoretzky, with the Office of Associate Chief Counsel, Employee Benefits, Exempt Organizations, and Employment Taxes, the IRS.

MS. KINARD: Hi. My name is Pamela Kinard. I'm a Special Counsel in the Associate Chief Counsel's Office for Triple E.

MR. RICOTTA: I'm John Ricotta. I'm a Branch Chief in Qualified Plans of Branch 3, in Triple E.

MR. TACKNEY: So, before we start, are there any procedural questions from the floor, or — All right. Hearing none, our first speaker is Kent Mason, representing the American Benefits Counsel.

MR. MASON: Thanks, Stephen. I was going to say my name is Kent Mason, but I think my originally — I was originally listed as Counsel Representative. So, I think I may go by that name, you know, at least, for a while, here. The Counsel Representative is from Davis and Harman. I'm here, representing the American Benefits Council. Thank you very much for holding this hearing, and thank you for the opportunity to testify here today.

I guess I'd like to start by saying, you know, what I've said to a few of you informally, which is I thought that the proposal was a really excellent job. You identified the right issues, in a way that was very well thought out and effective, and I think it will do a lot to help expand MEP coverage. I think that, you know, that, even though actual disqualifications of MEPs may not be likely, it is really a marketing issue, that small risk averse. Small businesses are hesitant to join, if they're told if they're — understand that they could be at risk, theoretically, for their acts of unrelated companies. So, I think this is a real major step forward.

I also want to recognize one of my fellow panelists, Deb Ruben, of Trans America, which is a Board Member of the American Benefits Counsel, and Deb and her team have tremendous expertise in this area, and the Counsel drew heavily on their expertise in developing comments. So, if there's a conflict between what we say, please, believe Deb, and that's not to say, I mean, Lou and Marty, well, you know, Darin and Terry, we look forward to their views, too.

Okay, scope of the relief, a few comments on ways we think that the scope should be a little bit broader. First, there is a prohibition covering a plan that is under examination. I guess, sort of think about the situation, where there's, you know, one non-cooperative employer and 999 compliant employers, and you happen to be submitting for a determination letter, and there's a question about a provision in the plan, and that really — that, alone, something like that, can cause the 999 to be punished for the acts of the one, you know, and I think this is really sort of what this proposal is about, is to ensure that doesn't happen, and it really just doesn't seem appropriate, even sort of when you happen to be under exam, particularly for an unrelated issue, for that to say, yes, we're still going to punish the 999.

So, we would urge you to delete the under-examination point, and I think there's an interesting incentive that's at work here, too. It's not just that fundamental point, but, if you think about it, the issue is whether you under-exam at the time of the first notice. So, what that does, it creates a tremendous pressure on the plan administrator to get that first notice out as soon as possible because, if they wait, and they get an exam notice, then, all of a sudden, they put the other 999 at risk. So, you get that incentive to get that notice out, and that notice is an adversarial. It says, well, we have to kick you out of the plan. That's not going to be well received, and it's going to sort of exacerbate sort of tensions between the administrator and the employer, and, you know, could lead to them leaving the plan, and sort of not having a plan. So, for policy, and sort of —

MR. TACKNEY: Can I ask a really —

MR. MASON: Absolutely, as long as it's on your time, Stephen.

MR. TACKNEY: Oh, and I just restarted your time. Oh, shame. Oh, no, I didn't. Okay, good.

MR. MASON: No, I can take another 10. I mean, I —

MR. TACKNEY: I just took two of your seconds, Ken. Anyways, so, procedurally, if you if we — your plan is under exam, and they discover one of these problems, as an examiner, and it comes to light, to everyone, are you saying that these multi-month procedures should be able to start in resolving through the exam, and how long, then, when — would that hold up the closing of the exam, or how would the procedures of — since these are very much also things that could come up, and we normally think of having as much flexibility as we can to resolve issue under exam, how in inter — putting the right — these types of rights into the hands of the MEP in the middle of an exam? In this process, how would that work itself out?

MR. MASON: Yeah, I mean, it's a great question, and I think I would not want to hold up the exam, but I think the idea that the exam would apply to the all 1,000 employers, and sort of the sanction that would be discussed would be with respect to all 1,000 would — seems not a necessary part of keeping the audit going. In other words, I'm not saying you should, you know, you put this thing on hold, and I also think there's a separate question, you know, use or a reference, sort of how long this process takes, and I think that most of the speakers, including me, are going to sort of comment that we'd like to see a faster process. So, that is another answer to your question, and it sort of — we think the process can be accelerated, but we're not trying to stop the audit. We really — or the exam. We are really just trying to say that exam should be focused on the bad actor, as opposed to — and the consequences. In other words, if there are negotiations, under audit cap, it should not be in the context of the 1,000 employers in the plan. It should be in the context of that one.

MR. TACKNEY: But is that a question of how we handle — how the operating division will handle MEP audits, or is that a question of giving the MEP regulatory authority to, in the middle of an audit, to begin the process of expelling an employer?

MR. MASON: Well, I think you need both. I mean, if you don't have the regulatory authority to sort of start this process, I don't see how the field can use that authority.

MR. TACKNEY: Okay.

MR. MASON: Anyway, but — okay, second issue, 403B plans. Because 403B plans aren't subject to the 413 one bad apple rule, the relief doesn't apply. If you actually look at the 403B regulations, it is not clear, but it appears, you know, very possible that the one — a version of the one bad apple rule could apply, in situations of certain violations, like nondiscrimination violations, or ineligible employer violations, and, so, we would ask you to do one of two things. One, either clarify that the one bad apple rule does not apply to 403B, as under the writ — their own regulations, or extend the relief to 403B MEPs.

MR. TACKNEY: I have another question. Do you think we can do that, given what we have proposed, and that it is a 413C regulation? Are you saying that is a separate proposal, or are you saying it is somehow logical outgrowth, and we could do that as part of a finalization of this project that didn't specifically mention 403B?

MR. MASON: I think it's choice C.I think it is not a 413.I don't think you really I mean, I think it's a sep — it's a harder question, as to whether you read to re-propose. To me —

MR. TACKNEY: Oh, I don't think we're thinking to re-propose. It's just —

MR. MASON: No, no, but I have a separate question. No, I didn't mean on the whole thing.

MR. TACKNEY: Okay.

MR. MASON: I didn't mean on the whole thing. But I guess my reaction is that you — I think it is not an unreasonable position to say it's a natural outgrowth, to say — you know, I think a number of people have commented on this, or sort of its — and so it's not — you know, when I think a number of people comment you can sort of argue that it is a natural outgrowth if it sparked that issue. And I think that, you know, it would not be under 413C, it would either — and it essentially would have to be under 403B, because that's where the issue arises.

MR. TACKNEY: Ken, can I — sorry, Pamela, go ahead.

MS. KINARD: So my question is that in your write up you mentioned just one example. So the Unified Plan Rule doesn't — it applies to 401A, 403A plans, it's in the 413C regs. And we are providing a limited exception to the Unified Plan rule. So in order for that exception to apply, obviously the Unified Plan Rule has to apply. In your write up you say the Unified Plan rule doesn't apply.

MR. MASON: Correct.And that's —

MS. KINARD: You think it doesn't apply. But then you say give a — so the question is, it would be helpful to see exactly where do you think in the 403B regs that these —

MR. MASON: I think it's — it's in the —

MS. KINARD: It was just one example.

MR. MASON: Well, it's in the 403B regs, which it says that if you have a violation of nondiscrimination or the ineligible employer rule, that all contracts "under the plan", you know, sort of are invalid. And as I read "under the plan", if I have a 403B MEP, that would include other employers. So it is — and we totally agree, it's not a product of the 413 regs, it's a product of the 403B regs, is why I was saying with Steven that it would need sort of a 403B modification to say that reference to violations, that sort of taking all contracts under the plan would only be contracts under the plan with respect to the employer that violates. In other words, if I have 1,000 employers, 1 is ineligible and 999 are eligible, technically you can read that reg to say the 999 eligible employers are tainted, which doesn't really make any sense.

So I think it would be a clarification of the 403B regs that the reference to "under the plan" means under the plan with respect to the noncompliant employer.

MR. EVANS: Ken, I was going to ask if there are other kind of tricky issues that might come up if we got into 403Bs? I mean I think I've heard over the years questions about kind of terminating, so if — I mean the spin-off termination idea. You know, the ability to terminate say a 403 plan with custodial accounts. I think that's been sort of a topic of interest or concern over the years.

Would that be an issue that we would need to kind of get input from you think on that topic to be able to do a spin-off termination?

MR. MASON: I guess a very clear answer but it unfortunately involves hope — is that issue is squarely addressed in the secure legislation and I'm just really hoping that in the next week and a half we pass that secure legislation, and then you wouldn't need input on that. And — because that would resolve the custodial account determination issue.

You know, I understand the question in terms of if that doesn't happen. It is trickier to do the custodial accounts because there's not an established mechanism and that might take more time, but hopefully in the next week and a half we'll see SECURE and if that happened I don't think there is an issue.

MR. EVANS: Okay.

MR. MASON: Okay, I'll be — defined benefit plans, I think we would like to see this regime extended to define benefit plans. I think the preamble says well, gee, there are spin-offs, there are questions about how you do a spin-off, what do you do with the overfunding or underfunding. And I guess my reaction to that is every DB MEP that I'm aware of has a withdrawal rule where they say here's what we do in the case of a spin-off, here's how we allocate the assets. So there's nothing new, it's something that's completely standard in all 403 — in all DB MEPS, and it's not unilateral. It is very much a product of, you know, the plan document and the plan document being disclosed to the participating employers. So that is a product of, you know, mutual agreement, very standard provisions. I don't see a reason why we — there shouldn't be — extend the very fundamental principle here that compliant employers should not be punished for the actions of noncompliant employers.

And, I'm looking forward to your thoughts.

MR. WELLER: Let me ask, I understand that position with respect to employer initiated —

MR. MASON: You cost me on the two seconds there, Stephen. (Laughter)

MR. WELLER: With respect to employer initiated — I understand that position to employer initiated spin-offs, but this proposed regulation has a structure in which there is — you give the employer essentially the choice of either initiating the spin-off or having a termination. Well, that back up of having a spin-off termination is not viable if the plan isn't sufficient. And if you don't have that as an alternative, does the whole structure of sort of accelerating the MEPS fall apart?

MR. MASON: I guess I'm not sure — you're saying it's not viable because they are not enough assets in the plan? MR. WELLER: Yes.

MR. MASON: Well, I mean I think the idea that that would preclude this mechanism for situations where it is sufficient. I don't understand that. In other words, you know —

MR. WELLER: So then why — I mean in the structure right now is —

MR. MASON: You can't use it if you can't — if you can't pull it up, you can't implement, you can't use this. But if you can implement it, why should you be legally precluded from implementing it.

MR. WELLER: Okay, so you're saying a defined benefit plan for which there is sufficient assets to terminate the plan in total would be able to do that?

MR. MASON: Absolutely.

MR. WELLER: Okay.

MR. MASON: I mean, yeah, I'm not going to sort of say you should be able to terminate it when you can't terminate it.

MR. WELLER: Well, it's not — okay.

MR. MASON: But if there are sufficient assets, and that can be done in a lot of — then I don't see why there's any preclusion from — from applying this to DB Plans.

MR. TACKNEY: If there's a choice of getting DC plans out sooner versus waiting, any thoughts on that?

MR. MASON: I guess, you know, I have not talked to people about that. My own gut reaction if I had talked to people about that, it would be to get the DC guidance out as quickly as possible. I mean I think the DB thing is important, but the DC stuff is where most of the action is in the market.

Streamlining the notice regime, I think a number of the witnesses and I, you know, are going to talk about this, the one bad apple issue comes up primarily in the context of, you know, companies struggling to stay in business and ceasing to cooperate with the plan administrator. And in those situations you have a lot of turnover among your employees. The company is struggling to stay in business, people see the ship sinking, and so you're going to see, you know, people leaving. And in that situation you really can't have a pretty serious loss participant problem, which is something we're all struggling with. And so the longer the process takes, the sort of more acute that problem is. So I think we would sort of encourage you to streamline the notice regime. I think people have a lot of good ideas. I read some of the other comments. We don't have any particular sort of like this is the only way to do it, but the two suggestions we had were shorten the 90 days to 60 days and cap the number of notices at 4, because there can be 6 under some circumstances. So never have more than 4, and there are ways to implement that.

MS. KINARD: Yeah, I wanted to ask you K about that. So in this concept of going from 6 to 4, in your comments you talked about going through the potential failure and then you're doing your 3 notices, what happens is after you get the information, they finally respond, they give you the information, you finally figured out there's a known qualification failure, and the suggestion was to immediately go to the third notice.

MR. MASON: Correct.

MS. KINARD: So the third notice is the notice that goes to Department of Labor and goes to all the participants. You still want to give them the 180 days, which would have been the combination of the second notice, which said if you don't do this, this is what we're going to do, and the third notice where you do it, you would go immediately to the third notice, double the amount of the time. Don't you think what — you talked about this, these notices, you know, seemed aggressive. Don't you think that's a little aggressive? If you go from here, I responded, I gave you the information and their next communication is where you tell not just them, but their participants and the Department of Labor, you know, you messed up and we're going to terminate you?

MR. MASON: Well, I think, number one, in the situation you described, we've already notified the participants and the DOL. In other words, that's already happened. In notice 3, we have notified the participants, we have notified the DOL of a real problem. And so the DOL and participants have already been given a heads up in this example.

So all we're saying is, you know, for this particular employer, that has sort of really sort of stretched this process out enormously by not responding until the third notice, we don't want to risk the participants being lost by giving them another sort of three notice sets to sort of drag it out further.

So I really think it's a concern about the participants, that we need to protect them by not allowing this employer that has, you know, not has ignored notice one, has ignored notice two, and finally responds on notice three. We don't want to give them notice one, two, and three again.

MS. KINARD: No, I understand that. But my comment is that you were talking about immediately going to the third notice.

MR. MASON: Right.

MS. KINARD: Which is the most aggressive of all the notices.

MR. MASON: Well, but it's after the —

MS. KINARD: But double the amount of time. No, but in between that time, they responded, they gave you information.

MR. MASON: After the third notice?

MS. KINARD: After the third notice, they responded, sorry, here's the information to indicate whether or not we're top heavy. You make a determination, oh, they are top heavy, and then the next communication will be, you know, where you're sending to the DOL and the participants again?

MR. MASON: Well, because we already have sent to the DOL and —

MS. KINARD: Yeah, but you would —

MR. MASON: I would do it again because, you know, in other words, DOL and participants are already on alert and I think what we would do would be to say, you know, okay, you've finally cooperated, you now need to fix this promptly. And —

MS. KINARD: So what's the issue? Because it's not the timing, because you doubled the amount of time.

MR. MASON: Well, but I mean actually it —

MS. KINARD: Is it you don't want to send out the notices? Another notice?

MR. MASON: I think overall it's going to be — it's more time just to implement the — the spin-off. I don't think — I think if you sort of work back, it's not going to end up being more time because all I'm doing is sort of giving sort of an official recognition that once you get to the points you need to correct, that can't be done like that. You know, you say I doubled the amount of time. Well, you know, if you go back to sort of an administrator initiated spin-off, there is no time restriction on that. What that is is they're — that just needs to be on as soon as administratively practicable. And that could easily be 180 days or 270 days. So you could be in a situation where even without our change, you go through three notices, you go through six notices, and then you have 180, 250 days to — to actually implement the correction. I don't think that we're delaying the time at all. I think what we're doing is we're shortening the time and just giving official recognition that this has to be done, that we — that they need to do the correction sort of within a reasonable period of time.

MR. WELLER: Kent, let me ask from a different angle for a moment. The fact that you pointed out the 6 notices reducing and the 90 day reducing — can I infer that the basic structure of 3 notices in the single case, where you don't have the repetitive potential and known qualification failure, that that seems to work from your perspective?

MR. MASON: Well, I guess I did sort of take the occasion last night to read through some of the other comments that were suggestive of maybe notice number 1 is not as necessary. I don't think we have a particular agenda on that. I mean I think the feedback we got was this period was too — this total period was too long. So if you were to, for example, cut it back by eliminating notice 1, it's not like we're going to have an agenda item against that approach. We also are not uncomfortable with the 3 notice regime. There are different ways to address this and I don't think we would be opposed to an alternative way to address it. But our suggestion was, you know, cutting the 90 day period.

MR. WELLER: Okay.

MR. MASON: Bill, did you want to — are you just looking at me expectantly or?

MR. EVANS: Please check the time, Stephen.

MR. MASON: Okay. Oh, all right, all right. Okay. No, this next thing is permitting simultaneous spin-Off terminations. Essentially what the structure does is you have to spin-off and you actually have a plan. It may not be there for very long, but you have a plan. So you're going to have a 5500 requirement, you're going to have you could have an audit requirement, you could have notice requirements, disclosure requirements. That's an awful lot of expense for a plan that's in effect for a moment and a half. And what we're suggesting is really should be a direct termination of that portion of the MEP.

And there's legal precedent for skipping that spin-off step, if you look at the 414L regs. The 414L regs, let's suppose I have a plan to plan transfer, plan A to plan B. And you say, look, I'm just doing a transfer from plan A to plan B. Well, the regs are making it very clear that technically that's not a plan to plan transfer, it's actually a spin-off of part of plan A and then a merger of that spun off plan into plan B. That is technically what a plan to plan transfer is. But the judgment is made that is silly, we shouldn't force employers and companies and businesses to have that spin-off plan in effect for a moment. That doesn't make any sense.

And so what we say here is the same thing should apply. There's no reason to go through really material expense to have that plan in effect for a moment. You should allow a direct termination of that part of the plan and you have legal precedent for being able to ignore sort of a momentary spin-off. So I think this would really help cut costs for the people who are benefiting, the participants.

MR. EVANS: Kent, do you see — so they're going to be distributions, right?

MR. MASON: Correct.

MR. EVANS: From the terminated plan?

MR. MASON: Correct.

MR. EVANS: In the spinoff to another plan, you know, there aren't going to be distributions. I mean does that — do you find that the authority is really sort of —

MR. TACKNEY: From a — what's the authority for making distributions with that determination?

MR. MASON: Well, I think my sort of reaction is that this is a deemed determination of a deemed spun off plan. You know, we can do some deeming. You have reg authority to do deeming.

And because in the same way that you technically skip the step in the plan-to-plan transfer. In other words, there's no legal authority for you to skip that step, but you said this makes sense and we're not gonna force you to have a spun-off plan for a moment. So it seems to me to say this plan is deemed spun off and terminated. You know, I just can't imagine anymore challenging you on your authority for that.

MS. KINARD: How does it work with the vesting for these participants?

MR. MASON: I think it would be — you know, we completely agree. It should be 100 percent vested on a deemed determination.

MS. KINARD: How does it work when the statute under 411 — 413 says for vesting it's done on a plan basis as if it were a single employer.

MR. MASON: Well —

MS. KINARD: How would you solve that with your doing —

MR. MASON: Because if you're not — you're essentially determining only the deemed spun-off plan. So you're not terminating the rest of the plan so there's no trigger for vesting the rest of the plan.

So in other words, it is not service that's creating the vesting. It's the termination of the deemed plan that creates the vesting.

MS. KINARD: How does it work? How do you actually terminate them? Do you do a plan amendment to terminate that portion of the plan?

MR. MASON: It would be actually done by the upfront plan terms. In other words, this is all of this has to be, as I understand the proposal, has to be spelled out in the plan terms.

So the original plan terms would say if we give these notices and you fail to comply what we will do is we will have a deemed spin-off of your plan and a termination of that plan, and it will be 100 percent vested.

MS. KINARD: Well, no the — so what we were talking about with the procedures. The procedures will be laid out in the plan.

MR. MASON: Right.

MS. KINARD: But usually when you terminate a plan you have to have an established plan termination date. And that's usually the plan will be amended to put that date in. So how would that work?

MR. MASON: Oh, you mean sort of what's the —

MS. KINARD: Yeah, I mean — cause I mean —

MR. MASON: Well, I mean that's —

MS. KINARD: — that would violate the terms of your plan just to be saying that it's a termination without actually amending your plan to say this portion. If you can, I haven't seen anything —

MR. MASON: That's an issue under the proposal too. In the sense that —

MS. KINARD: No, because you're spinning it off.

MR. MASON: Yeah, but you have to — you're going to have sort of establish a termination date.

MS. KINARD: Yeah, that's true.

MR. MASON: So in other words, all I'm saying is it's in exactly the same situation as under the proposal. You're gonna have to —

MS. KINARD: Right.

MR. MASON: Yeah, so I — and I — so I'm not disputing that you're going to have to select through an amendment a termination date, but that is the same issue whether you do the actual spin-off or the deemed spin-off.

MS. KINARD: Well, even with the deemed spin-off with the termination, even with, like, a — especially with a defined benefit plan there's all sorts of findings you have to do. You have to get a plan actuary to file a report. So a lot of the — you say there's a lot of savings in terms of time and streamlining. Is there a lot when you're actually, even if you call it a deemed termination —

MR. MASON: Oh, I think a tremendous amount, absolutely.

MS. KINARD: Well, you have to do the plan actuarial before —

MR. MASON: Well, first of all, I've got intimations from some of my friends up here that we're not doing DBs yes.

MS. KINARD: Okay.

MR. MASON: So let's assume that that's true.

MS. KINARD: Okay.

MR. MASON: I mean, but either way in one case I have to do 5,500 benefit statements, fee disclosures, you know, lots of different notices. In one case I don't.

MS. KINARD: Mm-hmm.

MR. MASON: That's a lot of cost savings.

MS. KINARD: So when you —

MR. MASON: And —

MR. KINARD: When you take them off the roles how do you reflect that these are no longer participants? You put it on the 5,500 for the following year?

MR. MASON: Yeah. Absolutely. We're starting — well, my last point's really easy which is, you know, we do have a plan terms requirement that we have to have plan terms to reflect how we're going to do this. We'd love to get some model amendments that would help us do that more easily.

And thank you. This has been fun. MR. TACKNEY: Wait. I have another question.

MR. MASON: Oh, sure.

MR. TACKNEY: Do you see, as far as the plan terms' requirement and the fact that there existing arrangement do you see any transition issues with existing clients that —

MR. MASON: Yeah, I think there would be transition issues because this is not — doesn't exist right now. So I think there are transition issues. You know, I — it would be good and I sort of love to hear Deb's thoughts on this and the other panelists' thoughts on this as to sort of, you know, how we can avoid having to do these amendments right away so that we can use this quickly without sort of going through a formal amendment process.

And maybe the model amendments can play a big role in that, but, you know, they are going to have to be communicated to the participating employers. And that's important.

MR. KINARD: And part of our concern was that the participating employers are agreeing to this.

MR. MASON: Right, exactly.

MR. KINARD: So thoughts — and, you know, we can continue to hear thoughts and get submissions.

MR. MASON: But I —

MR. KINARD: But on how we actually implement getting your current participants to agree to this procedure would be useful.

MR. MASON: I think that's a great question and can I plead that my time is up now?

MR. KINARD: No, I mean, again —

MR. MASON: Yeah, it's a great question.

MR. KINARD: — it's the reason here is —

MR. MASON: I do think that we do need to sort of think about that. Because there's sort of a, just a fairness issue here. You should not put the employers into this regime or anybody into this regime unless they are aware of it.

So I agree with that and we should be brainstorming about how best to do that. So thank you, all.

MR. KINARD: Thank you. Alright. Our next speaker is Deb Rubin representing Transamerica.

MS. RUBIN: It's always hard to be short and having to stand behind a podium, but here goes. So good morning. My name is Deb Rubin. I am vice president and managing director of Transamerica. And I'm responsible for leading our special markets team which is a group dedicated to our multiple employer plan business. Thank you very much for holding this hearing and for the opportunity to testify.

My work for Transamerica is focused on ensuring that our business customers receive the services they need to help their employees achieve a lifetime of financial security. In this regard, we've built a unique multiple employer plan business. It's thrived because we have been able to deliver large employer quality and cost to small employers by enabling them to achieve economies of scale through multiple employer plans. Even without the open net, more than 1 million participants enjoy lower costs and better services through Transamerica's multiple employer plans programs.

So first and foremost, I want to thank you for such an excellent proposal. Because of my extensive experience with multiple employer plans and with small businesses I can tell you that your proposal would be tremendous good be eliminating a material obstacle to greater growth of MEPs and small business retirement coverage.

The perception that a small business could be penalized for a violation of others is a material impediment for wider adoption of MEPs. I'll be talking about how to possibly improve on the proposal, but I want to emphasize that you started with an excellent product.

In my testimony today, I'd like to briefly discuss six topics. First, MEPs provide opportunities for expanding retirement plan coverage. Number two, removing disincentives to employers to join in a MEP will increase coverage. Three, the procedures for complying with the notice requirements of the exception should be simplified, and the notice period should be modified.

Four, the procedures for complying with the spin-off and termination requirements of a plan with a known qualification failure should be simplified. Five, the IRS's proposed exemption from liability for a MET should be extended to 403(b) METs. And, six, it would be very helpful for the IRS to publish model amendments the plans could use to satisfy the proposed plan terms' requirement.

I'll be starting with topic number one. Multiple employer plans provide opportunities for expanding retirement plan coverage.

Employer-provided plans are very effective in improving retirement security. According to research from the nonprofit Transamerica Center for Retirement Studies which I'll call TCRS, 89 percent of workers who are offered a 401k or similar plan are saving for retirement either through the plan and/or outside of work compared to just 49 percent of workers who are not offered such a plan.

In this context, the TCRS 18th annual retirement survey of employers found that only 59 percent of small companies with five to 99 employees offer a retirement plan. However, an encouraging indicator is that 25 percent of those small companies that said they were not likely to offer a plan said they would consider joining a multiple employer plan offered by a vendor who handles many of the fiduciary and administrative duties at a reasonable cost. In short, multiple employer plans make a difference and your proposal addresses a major concern regarding MEPs.

Topic two, removing disincentive to employers to join in a MEP will increase coverage. Turning to that concern, despite the advantages of MEPs many employers are reluctant to join a MEP for fear that even if they fully comply with the MEP requirements they'll still be liable for any acts or omissions of another employer in the MEP over which they have no control.

While the incident of one employer's actions causing the entire MEP to be disqualified is rare that, unfortunately, is not conforming to many small business owners who every understandably don't want to incur any risk attributed to unrelated employers. Your proposal directly addresses this concern.

Topic three, the procedures for complying with the notice requirements for the exemption should be modified in two ways. We propose reducing the 90 day period to 60 days and reducing the number of notice periods. Reduction of the 90 day period to 60 days. First, we recommend that each of the three 90 day periods after the first, second, and third notices be shortened to 60 days.

Our concern is based on the fact that so many of the compliance issues in the MEP relate to struggling companies that are facing survival issues. And because of those issues they cease communicating with the MEP administrator. In that context, the longer a MEP administrator has to wait to deliver benefits to participants the greater the risk that the participants can't be found and won't receive their benefits. Reducing the 90 day periods to 60 days would help materially in this regard.

We believe that six notices is too many. Transamerica believes that no more than four notices should be required. Under the proposal, if a potential qualification failure becomes a known qualification failure after three notices than up to three more notices are required for a total of six. This seems an unnecessary burden being put on the MEP sponsor, and would also exacerbate the lost participant issue I just mentioned. Transamerica urges the IRS to require no more than four notices so that in the above situation only one final or fourth notice would be required.

I want to add —

MR. TACKNEY: Because you have so much experience, so in the basic case where the MEP from a participating cooperative employer gets information and then doesn't either understand it, it's incomplete, you know, are you saying that your average small employer 60 days will be enough to request for their information, get the information, and analyze it as far as being able to get to the second notice or not get to the second notice or subsequent notice?

MS. RUBIN: In our world, there's lots of support for the small business that's participating in a multiple employer. They have a number of different service providers and they certainly have the ability to leverage compliance and all sorts of supports to help them comply with what they get.

I was just going to mention that one of my big concerns about this very long-time period is also an issue impacting the MEPs sponsor themselves. In that with the concept of turnover you might have somebody who's working for the MEP sponsor who's responsible for getting all these notices out, and what's the chance that that person's going to be employed in that specific role two years later or two and a half years later? I think for continuity there's infrastructure and support to support the small business owner. And then if we go too long there's all sorts of potential complications that could happen down the road.

MR. TACKNEY: Okay.

MS. KINARD: I have a question.

MS. RUBIN: Yes.

MS. KINARD: In your comment, you talked about 120 days. So built-in between the first to second, and the second to third there's a 90 day period and then there's a 30 day period that a plan administrator — up to a 30 day period to provide the next notice. Are you saying that that's not needed? Because it's not required. We're not saying you have to wait 30 days. We're saying you have up to 30 days.

It's sort of meant to say that if you — if the 90 day period ended you don't have to send it right away. Otherwise, you get kicked out. So it's meant to give the plan administrator flexibility.

MS. RUBIN: I think that giving the plan in practice, when you see how these programs are run and the needs both the sponsor and the adopters creating some room for, you know, time to leverage administrative — whatever administrative duties they have will be helpful.

I think for a lot of MEP sponsors my personal feeling is that they, if they had this relief, they would move as quickly as possible to get the next notice done because they don't want something hanging over them for a very, very long time.

MS. KINARD: So you're saying that's not — that 30 days is not needed then or —

MS. RUBIN: I think having the 30 —

MS. KINARD: — cutting that down?

MS. RUBIN: I think that having up to 30 days — look, do I think it's absolutely needed, no.

MS. KINARD: Okay.

MS. RUBIN: But I think it would be something nice. It's an accommodation. Nice to have is what I would say.

Okay. So I already said this, but I'll just restate it quickly. I want to add one more consideration. The current proposal could create a process that might drag on for well over a year, possibly even close to two years. During that time, the person charged with this project at the MEP sponsor could leave or change roles, and the continuity of the entire project could be impacted. A shorter overall timeframe would reduce that possibility.

Topic number four, the procedures for complying with the spin-off and termination requirements for a plan with a non-qualification failure should be simplified. Very similar, actually, to Kim's comment. Transamerica urges the IRS to permit the spin-off and termination of a plan with a non-qualification failure in one step rather than two.

The requirement for the 413c administrator to first spin-off the plan with a non-qualification failure in order to terminate the plan is not necessary and that its cost and complexity of complying with the exemption. The spin-off termination can be done in one step by simply terminating the portion of the plan attributed to the unresponsive employer. In such a situation, there is a spin-off, so that portion of the MEP could not be terminated without being spun off first.

Topic number five —

MR. TACKNEY: I have a quick question.

MS. RUBIN: Yes.

MR. TACKNEY: One concern had been if there is a separate spun-off plan we could audit that. The IRS could audit that plan. How would you, if there were similar concerns as to the actual distribution process and, for instance, whether there should be eligible rollover distributions would you have them audit the MEP? Or how would you have them address that concern without an actual spinoff?

MS. RUBIN: It's interesting. In today's world with such great access to record-keeping and data I'm not a compliance person. I'm not a lawyer. If there was an audit on that specific piece the data would be made available, access would be there. And so I don't know how all of the rules work from an audit perspective, but you could zoom in on that one employer that's being spun out or deemed terminated as part of a review process.

Data is great today. And you have access to data in — you can slice it and dice it any different way that you need it, up to daily. So you can really get whatever you need to do an audit.

MR. EVANS: Could I ask a question? You might not be the right person to ask, but so I think I understand the appeal of the deemed termination idea, and I think you kind of have a sense for what some potential issues with that might be.

So just for the sake of argument, you know, we don't go down the deemed termination route, but we are interested in, like, any ideas for simplifying and reducing the costs of doing the spin-off termination. I mean, do you have a sense for kind of what the top — like, what the most expensive, most burdensome things might be? And, like, what would be kind of the most helpful if we could figure out some way to kind of simplify and streamline things, including I could imagine, you know, trying to get — I mean, a lot of things aren't really IRS things. They might be DOL requirements.

You know, whether, you know, there might be coordination possible? Who knows with DOL. Like, do you have a sense for what the kind of the most important or most helpful things would be? The most promising ideas for simplifying?

MS. RUBIN: Well, I'll tell you that any way to simplify helps, obviously, the small employer, allows them to move more quickly and allows them to incur less expense. So what we find is, you know, paperwork is hard for a lot of small employers. Getting things done is actually very, very challenging.

So any kind of, I'll call it pre-packaged plan documents, pre-packaged notices, anything that could be utilized with, I'll say this, without a lot of customization to allow the process to move as quickly as possible would be helpful. Kent brought up some excellent things before talking about benefits statements and audits and all sorts of other things.

Look, the goal for a small employer who, I'm gonna say this, is being kicked out of a plan is going to be to get — is to finish the process as quickly as possible. And for the plan sponsor, plan sponsors are very, very focused on cost. And if you look at the vast majority of plan sponsors in the multiple employer space cost is key. And so keeping costs to a minimum and not having the entire plan incur a lot of heavy costs will be a benefit for everybody who is both involved in the plan ongoing, and for that sponsor that is being, I'm going to use the word kicked out.

So anything that could be provided that's pre-packaged and simplified I think would be very helpful. It's a great question. One I would like to run by some of our compliance people.

MS. KINARD: We received some comments. There's a concern about kicking people out of the plan. There's going to be participants that are getting their benefits and then, you know, they might spend it and it doesn't really increase retirement security for them. So there were some comments about instead of actually terminating them doing — maybe spinning them off and keeping them in a separate portion of the plan. Would that help to streamline some of your things if you instead of actually going through the cost and the burdens of terminating is to separate them off into a portion of the MEP?

MS. RUBIN: That's an excellent question. Anything we can do to keep in savings is something that benefits all. I have not thought through that particular suggestion, but I actually think it's an excellent one. If there's a way to create IRAs for participants or a way to maintain the accounts in such a way that it doesn't impact the overall MEP.

Because, clearly, the MEP sponsor is not going to want to incur additional administrative oversight responsibilities. They're not going to want to have sponsor responsibilities. They're not going to want to be liable for benefits that are not really connected any longer to the plan, but I love that idea. I think it's a great idea.

So if there would be a way, I'm not a compliance guru by any means, but if there would be a way to spin those balances into IRAs, for example, I think that would be something very interesting to explore.

Okay, I just have two more comments. The IRS proposed exemption from liability for (inaudible) should be extended to 403 (inaudible), for 403(b) (inaudible) for the same policy reasons supporting the proposed release for (inaudible) TransAmerica recommends that the Treasury and IRS either one, clarify that one bad apple rule does not under any circumstance apply to 403(b) (inaudible), or two, expand the scope of its proposed relief to offer similar relief to 403(b) (inaudible). There is no reason why charities and public education institutions should not receive the same equitable treatment as taxable employers. It would be very helpful for the IRS to publish amendments, the plans, both preapproved and individually designed could use to satisfy the requirements that the planned acumen must describe the procedures to be taken if there is a participating employer failure. Such modern amendments would promote compliance, remove uncertainty and eliminate unnecessary burdens, and of course, would help keep costs down. My conclusion and I want to say thank you for allowing me to testify and I'd be happy to answer any other questions.

MR. TACKNEY: Thank you so much.

MS. RUBIN: Thank you.

MR. TACKNEY: Our next speaker will be Lou Mazawey from Groom Law Group.

MR. MAZAWEY: Hi everyone. Yeah, thanks for the opportunity to testify. This was a really great product I think and my perspective on it, you know, Groom represents several, a number of large multiple employer plans and some of them are association plans and some of them have been around for a long time, like one, that we work with, we've been working with them for 35 years. They've been around longer than that. And the good news is they haven't had that many bad apples. I mean, they've (laughter) they have had some, you know, and so this is what the focus of the, of the proposed regulation is and we appreciate that. So, I'll just, you know, we basically, we submitted a letter with half a dozen points. We're going to focus on a few. Several have already been commented on by Kent and Debbie and so, this, we won't dwell on the shorting of the notice periods. There are lots of notices and 90 days is a long time. I mean, again, the concern is that, you know, with these deadlines that you could just inadvertently miss one of the deadlines and does that mean the whole, you know, bad apple removal process doesn't apply or, you know, there's sort of — it raises issues like that. And where I sit — my concern, I know model language is always helpful but, you know, putting it — I think looking at this (inaudible) and then you could see pages and pages of planned language to incorporate this and, you know, I'm not honestly in defense with what the servers think we need to do, that's fine, but, I would prefer to see maybe more flexibility in terms where the procedures are set out. For example, so of the plans we work with have, you know, beyond the planned document, policy manuals and they have, you know, for example, procedures for delinquent employers, you know, who are not delinquent in contributions and so, we're thinking another — more flexibility in terms of where the rule, the process is documented would be helpful.

MR. TACKNEY: Could I ask a question?

MR. MAZAWEY: Oh sure.

MR. TACKNEY: I guess I could imagine that, I could have asked for more, kind of two points of view on this topic — click.

MR. MAZAWEY: Yeah.

MR. TACKNEY: But, one preview that, would be, you know, this is likely to be, you know, this may well be, a transaction of friction this year when you spin off the bad apple. And you might kind of want to have, you know, pretty detailed rules about that in the planned document in order to kind of decrease the opportunities for disagreement and misunderstanding about kind of what's going to happen. I could imagine, on the other hand, kind of like a sort of what you're saying maybe of, you know, my not going into a lot of detail because of, you know, it wouldn't take up all the space in the plan that isn't going to apply that often. I can imagine — do you have any kind of thoughts about —

MR. MAZAWEY: Well, I think your point is a good one, you know, the more — and there's a lot of value built, you know, to having to be able when you're dealing with, you know — this plan has hundreds of employers and so, they're going to say, you know — we say, well, you know, we think you've got, you know, a compliance problem and you need to fix it or we're going to terminate you under this and then, and start giving these notices and they're going to ask where is this — when? So, right now, the plan is we work with basically just, sort of reserve the right and the planned administrator to take steps to terminate delinquent employers, non-compliant employer and like I said, there haven't been that many, but that has, you know, we haven't run into that issue so far and it's been awhile.

MR. TACKNEY: So, your suggestion would be to kind of have a short, have something short, as far as Plan A or cash?

MR. MAZAWEY: Yes, and maybe you know there are no laws about incorporation by reference, but maybe this would be a good situation for the final regulations to allow incorporations by reference of release that the notices —

MR. TACKNEY: Would there be another way that participating employers would be notified of the process?

MR. MAZAWEY: Yes, they would be and I admit that that could be a backup too Stephen as that —

MR. TACKNEY: What I'm — my worry is that they see a plan document incorporates by reference that Treasury regulation and they never —

MR. MAZAWEY: Yes.

MR. TACKNEY: — read it, and they will have no idea —

MR. MAZAWEY: Yes, well, the plan could be required to give that, to furnish the regulation, and I think too, would be another approach. You know, we noted in our comments too, we thoroughly agree with at a minimum, shorting the notice from 90 to 60 and maybe fewer notices, but we might also think there is a lot to be said just saying the plan has to have reasonable procedures to address, you know, non-compliant or uncooperative employers and, you know, we do that, you know, or the other area is right when the code and the regulation — the guidance talks about established practices and procedures and so, you

know, I know that is a long way from the detail scheme that is in the proposed regulations, but I just through her out there as another option.

MS. KINARD: Is that a little risky for the plan, because if, you know, we're not going to (inaudible) the procedures and if so, they decide that their procedures are reasonable —

MR. MAZAWEY: Yes.

MS. KINARD: — and if they get on audit and then say, these are not reasonable procedures, therefore your plan is, you know, you do not have an exception from the Unified Plan Rule —

MR. MAZAWEY: Yes, that's, and that —

MS KINARD: — and that is a risk —

MR. MAZAWEY: — yes, and that's excellent point Pam, and I think that is a risk.

MS. KINARD: Okay.

MR. MAZAWEY: So, I think that's — there's always — and that's why I think our letter said to make the notices a safe harbor and then that for plans that want to take the risk, you know, could just go with the reasonable practices and procedures type approach, but — MR. TACKNEY: The question becomes if we allow reasonable practices and procedures and then we find them to be unreasonable, but then you put in place what do we — I mean, they've been —

MR. MAZAWEY: Yes, I know that's a concern and our plan that the risk there is that the plan cannot take advantage of this relief, so that's, you know, that's not a great scenario, I agree.

MR. EVANS: My — I'm also thinking about this model amendments because we'll have to create an (inaudible) because I might be interested in doing this, so we would have to kind of think about actually doing it. So, initially your — use your insights on this. So, your idea would be just be kind of short, fairly short plan document, maybe incorporation by reference would be —

MR. MAZAWEY: I think that would be things like the notices, you know —

MR. EVANS: Allowing what you would — sort of rely on the procedures, procedural model (inaudible) to not maybe (inaudible) tell about it and make, or you haven't not kind of a cross referencing the procedural manual and the plan document, or, sort of the idea. We would rather be looking to us for language on, you know, what goes in the procedures manual. So, I think also that we need that much, like the model, you know, may be wouldn't be that complicated. You would have flexibility to kind of flush out the details in your procedures manual that you wouldn't have any particular, like an okay from IRS Treasure on that. It's all sort of the —

MR. MAZAWEY: Yes, I —

MR. EVANS: — model, the vision of that.

MR. MAZAWEY: — you know, we would be comfortable with that Bill. I mean, I know folks, you know, other folks may not be, but I think we would be. That's all I can say, you know.

MR. EVANS: Okay, thank you.

MR. MAZAWEY: So, then anything else on that, we can — the spin off termination is a big issue and, you know, part of this goes to the fact that multiple employer plans, you really cannot, you know, when an employer goes out of business, or, unless they set up their own plan, and then terminate it, and this what the proposed regulation recognizes. It's kind of a (inaudible) with 413C and similar and so, we understand why the concept was put in doing a spin off and a termination, but, you know, I think — one question that we had and a number of folks, you know, can — and Debbie mentions some issues with this, but that, you know, the idea of setting up an orphan trust, I mean, and in fact, the plan administrator has to be, you know, maybe would have to be the sponsor of this mini plan of this, you know, segment, the non-compliant portion and then in order to terminate it and adopt the paperwork to terminate it and I'm not sure for example, the recordkeeper, the ones, the plan, I mean, the out, external one, would — I don't know how they would, you know, we ought to explore that with, is that something, how would they address that. Right now though, we have a multiple employer that deals with one plan administrator and now we're saying, you know, we're going to move one that's non-compliant segment into a separate plan and then terminate it and the concern is that, you know, implementing apart from the compliance issues Kent mentioned, you know, it is, you know, just dealing with third parties that are part of that process could be challenging.

MS. KINARD: And so, the question, because this one step process —

MR. MAZAWEY: Right, we call it the termination.

MS. KINARD: Yes, because, so the idea, because we talked about 414L and that was mentioned. There is a team spin off, but there is an actual merger of a plan. Here, there is no spin off and a deemed termination, so what's the actual step? Is it just paying out the benefits, because it doesn't seem like there is an actual termination?

MR. MAZAWEY: Right.

MS. KINARD: And there's clearly no spin off, so, it's not quite parallel to the deemed spin off and the actual mergers situation, so, I'm trying to understand. It's still confusing.

MR. MAZAWEY: Well, what happens now, and this is not, you know, because this the proposed regulation would be a different type of solution to this. What happens now, in the plans we work with is, you know, the employer that's not complying just wants to get out of the — you know, walk away. And many times, not always, but if they do we still have the folks accounts and the plan, right, we have the participants. And so, they've been notified that they can't make any new contributions, of course, there is no employer, you know, no compensation. We tell them their accounts are frozen. But the plan administrator continues to administer the plan, you know, that's going reviewing the, you know, give them benefit statements, modify, let them, you know, notify them about — fewer investment option, so, I mean, it kind of goes on for them. Right now —

MR. WELLER: Let me ask about —

MR. MAZAWEY: We can't just terminate them, you know, (inaudible) benefit.

MR. WELLER: Does the plan administrator continues to administrate these accounts?

MR. MAZAWEY: It does.

MR. WELLER: But how is it going to determine whether a person has terminated in front, has separated from the service so they're entitled to a distribution under the 401K rules when there no (inaudible) with the employer anymore?

MR. MAZAWEY: And that's a good — however, I can't answer that specifically how a client deals with that. I mean, they could still go back to that employer if they're around.

MR. WELLER: But it's — the plan is shown to the plan administer who is going to be uncooperative.

MR. MAZAWEY: Now, I understand that is a practical question. I mean, and maybe they just accept.

MR. TACKNEY: I think that is also and authority question, so it would be great if you eventually could address it. And that these are (inaudible) —

MR. WELLER: Yes, exactly, mm-hmm.

MR. TACKNEY: — on turning on and off whether this will be treated as a single plan or a separate plan. But you are asking us to waive some of the distribution requirements that are under other code sections and that don't necessarily get waived merely by turning off the unified plan.

MR. MAZAWEY: If I may ask of you — we're saying — I think the solution of deemed termination, which kind of deals with, you know, we don't have to wait for a separation from service, it's a deemed plan termination.

MR. TACKNEY: But does 413C give us the right to deem a plan termination for the requirements of other code producers?

MR. MAZAWEY: I mean that's —

MR. TACKNEY: Because what this — all this is is turning on and off the unified plan rules —

MR. MAZAWEY: Right and understood. I see the problem, right and I think we can give that some more thought.

MR. EVANS: Lou, can I ask the same question I asked about kind if you know about you're saying that the, again, the deal and stuff doesn't end up working.

MR. MAZAWEY: Right.

MR. EVANS: But if we're interested in reducing cost in terms of simplifying what kind of jointly like top, you know, what would be the top things that seem most promising and helpful if something could be simplified to have particular ideas?

MR. MAZAWEY: You know, we can give that some thought, I think, yeah, in terms of priorities and stuff. But some of it, you know, Kent mentioned some of the DOL rules and, you know, how they get and that, you know, that involves another layer as, you know, coordinating with the department. But we can give that some thought and follow up on it.

So, the third point I guess is on, you know, we've — a number of these situations we've had. They have been legitimate issues about whether there is a qualification — and I'll give you an example, a real life example. The plan administrator does audits of the employers in the plan. Not everything but periodic, you know, payroll type things. And so, they identified a situation where the compensation by the employer was taken into account was not permitted under the plan document.

And so, it became and the bottom line, you know, it got into a whole scrutinous error thing. The employer said well, that was a, you know, there was — it should have been counted and we got into a facts and circumstances. So, what we did there, so there, you know, we didn't terminate them right away because there was a legitimate — and I think the point here is that regs maybe needs to recognize there can be legitimate situations where the employer is not necessarily uncooperative but there's a disagreement.

So, there we applied for an EPCRS blessing and that employer actually, it took a long time. But we persuaded the IRS that there was no qualification issue there. So, you know, the employer as it turned out was in compliance after all. So, I mean I think, you know, they haven't come up a lot but they do come up. And I think if there is some way to provide a safety valve in the regs from all the notice, you know, for it to deal with that situation — and I know this a big biting off a lot. So, if some expedited EPCRS procedure where multiple should go for a more timely resolution while this situation goes on.

MR. TACKNEY: How would we justify that to every other kind of plan?

MR. MAZAWEY: Well, I know, Stephen.

But I think the idea is that there are all these other folks, employers who are potentially risking their plans qualification unless the issue is, you know, addressed. So, maybe there's just more people at stake.

MS. KINARD: Isn't there the — EPCRS is always available to a MEP —

MR. MAZAWEY: It is.

MS. KINARD: — and compliance.

MR. MAZAWEY: Correct.

MS. KINARD: And if there is a concern to them, then maybe this is just a tool and a multiple levels of tools to get to compliance.

MR. MAZAWEY: Right.

MS. KINARD: So, maybe EPCRS is a better route for the MEPS sponsor to work with them and with a plan sponsor that's cooperating and to go through and actually get a correction done and not go through this. So, this is just a tool in when you don't have a level of cooperation.

MR. MAZAWEY: Right.

MS. KINARD: But I think even from some of the comments, it seems like it's either it's this is the way to go. Which our feeling is this is just one tool, probably a last resort tool that would be used when it's going to be very difficult to get into compliance. But if you have someone that's communicating and maybe there's a legitimate agreement then maybe just going through EPCRS would be the better way to do it.

MR. MAZAWEY: Yeah, I guess maybe. I see that's a great point, Pam. And I think, so maybe just to recognize that somewhere that, you know, in appropriate cases or, you know, the parties maybe resolving. And, you know, this is not intended to apply or create implications.

MR. TACKNEY: We would actually prefer people correct to keep everyone in compliance —

MR. MAZAWEY: Yeah, no it's a lot better.

MR. TACKNEY: — and be compliant.

MR. MAZAWEY: Right, absolutely.

MR. TACKNEY: The target of this was not easing compliance from MEPS by allowing them to easily push people out when they find an issue. That was not really the —

MR. MAZAWEY: Right, I understand, right.

MR. EVANS: — understanding about kind of the relationship between EPCRS and this procedure that we were thinking of describing a little bit more in the preamble. But it seems like, so would it be fair to describe like if we were to describe in the preamble, you know, the disputes about the, you know, whether there is an issue or not. We understand from the clients that EPCRS has been, you know, a method of resolving those disputes.

MR. MAZAWEY: That probably would be enough, Bill, I think just to have that in there, I think. We have one, I'll tell you, we have one now where the employer just blew to, you know, it reduced the accrual rate. It was a money purchased plan so it was DC plan. And they just blew, they didn't give a 204H notice. It was an inadvertent thing.

So, we've applied, you know, using, you know, EPCRS. You know, Pam mentioned there's a little paragraph in there about multiples going for — it's been in there now like a year. We haven't heard a word. You know, it's been — it's just taken a long. So, I guess presumably, I mean, there's a qualification issue there for sure, nobody is disagreeing that. And presumably, the plan is qualified because it's taking steps to address it, you know, the employer is going for to go to get a, you know, go through the sanction process and the like. But, I mean, it's just, it is a real life — obviously a situation, so.

So, then the final point, another favorite here today. I know the applying the unified plan rule to DB plans. And I think, you know, again, if you were to accept the deem spinoff or the deem determination approach, we think it could apply to defined benefit plans as well. It's obviously, they are more complicated.

It's, I think Kent mentioned, you know, the plans that we — the DB plans that we work with do have withdraw liability procedures. They are pretty complicated and they're not always, you know, accepted, you know, by there's a room for dispute just like any withdraw liability. But the point is the plans do have them and so it's not like by allowing this that the regs would be opening up, you know, an area that's unchartered so. And there's, you know, more to that too. We can certainly address the DB issues further.

And maybe it makes it, well I don't think, you know, I was saying there are some multiple DB's that are single plan for funding purposes under, you know, in one funding account. And there are other ones, the post 88 ones that are an aggregate of separate plans for funding purposes. And so, maybe there's a distinction there. Because the plan that we work with that has the withdraw liability is a single plan. So, it makes one calculation of the plan liabilities and it allocates — and it's not fully funded either.

So, I mean, there is the withdraw liability. If an employer was to try to walk away for non-compliance or just because it wants to walk away, then there's a withdraw liability process in the plan. And if it's a single plan, there's one formula. You don't have, you know, it's simpler in that sense then perhaps than dealing with that employer as a separate plan. I think that may be right but, you know, I think that's probably — that area would be worth more if you were going to go that route.

But, you know, in a way it's sort of a here's this elaborate reg for DC plans that prevents the unified plan for applying. But meanwhile, if you had a bad apple in a DB plan it's still at risk under the unified plan. And that's the, you know, the unsatisfying, you know, legally part of it, I think so. So, I think, look at that, we ended up right on time. I didn't have to deduct anything for questions they way Kent did, you know.

MR. TACKENY: Thank you very much.

MR. MAZAWEY: Yeah, thank you folks.

MR. TACKNEY: And our next speaker will be Martin L. Pippins otherwise known as Marty from the American Retirement Association.

MR. PIPPINS: Good morning. I'm Martin Pippins, the Executive Director of the ASPR College of Pension Actuaries and Director of Regulatory Policy at American Retirement Association. So I very much appreciate the opportunity to be able to give you some comments on the Unified Plan Rule Exception in the proposed rules. We think this is a great proposed regulation, and we think the one bad apple rule has been in some cases a disincentive for plans to join a multiple employer plan.

ARA submitted a comment letter on the proposed regulations, added several points in there; I want to focus on two of those points and then raise a third point that was not in our earlier letter. First and most important, as many of the other speakers today have commented on the notice requirements, we also believe those are unnecessarily long and complex. They involve much of the same information in each notice. They're sent out over a period of nine months to a year; and they can be burdensome and expensive for the plan administrator to follow.

So, I don't have a particular recommendation as to how to go about shortening the notices or cutting down on the number of notices, but we think that it would help to shorten or eliminate some of the notices; and that you can consider, you know, how to do this in a reasonable manner without removing any of the opportunity for an employer to be responsive and compliant.

In addition, we have seen situations where the delivery of notices to unresponsive employers would be clearly futile. For example, a business owner may be incarcerated; the business may be completely shut down, and out of business; completely ceased all operations. It seems reasonable that in this sort of situation, you know, multiple notices over a period of, you know, up to a year will not really have any affect. So, we've seen this situation, and we think that in some sort of clearly futile standard if that was met then the MEP administrator could only send out, perhaps, just one notice.

MR. TACKNEY: It would be great if folks could think of how — I don't know if we just put it's futile standard — that's kind of in the eye of the beholder — if there're specific common fact patterns that would be great to know. For instance, we somewhat have had these same issue popup with missing participants. Do I need to mail something when I know it's clearly futile; it won't be received? But that's, again, being in the eye of the beholder can lead to conflict and controversy. So, if there're specific common facts and circumstance patterns — for instance, similar to what we did with the 60-day rollover waiver — that's easier for us to make sure we're all in agreement.

MR. PIPPINS: Yeah; we're thinking it's a pretty high bar to reach that clearly futile standard; but jail and complete shutdown would be a good starting point.

MR. TACKNEY: See, I thought you could get mail in jail. I don't know.

MR. PIPPINS: Yes, I think you can.

MR. TACKNEY: I'm hoping nobody here knows particularly, but; yes.

MR. PIPPINS: I won't get into any names of businesses or individuals. Second thing I wanted to mention is with respect to expanding the unified plan rule exception to defined benefit plans. Here, I'm not so much in agreement with earlier speakers. We just note that this was not in the proposed regs; you did ask for comments on this. The proposed regs only apply to defined contribution plans. There is pending legislation such as the Secure Act, overwhelming by partisan vote there in the House, that only deals with defined contribution plan MEPs; and there's no proposed legislation that I know of that is dealing with defined benefit plan MEPS at this point.

So, anyway, you did ask for comments on this. I did want to refer back to the Department of Labor and some statistics they reported in their 2018 Proposed Regulations on multiple employer plans; and, I think, some of this is in your proposed regulation as well; but based on 2015 research file of 450, 500 filings, DUL had calculated there was 242 defined benefit multiple employer plans with 1.5 million total participants of which 600,000 are active participants, total assets is $132 billion. In the same year there was $232 billion in assets reported in defined contribution MEPS. So, you know, pretty — sort of in the same ballpark — a significant amount of assets in these plans.

American Retirement Association strongly opposes an expansion of the proposed rule to deal with a defined benefit plan, multiple employer plans would not recommend a future regulation on this at this point. A legislative solution possibly, could work; but we think that the operation of defined benefit plan MEPs is stable and working well to support those folks' secure retirement benefits.

The basic reason we're thinking this is to do with risk for one bad apple that has more favorable demographics with respect to the benefits for their participants in the plan, for their employees. So, we think there are funding risks to the good employers left in the plan if the one bad apple employer left and just had an unfavorable 40/44 allocation based on the one bad apple employer, employees having higher priority category benefits in a spin-off termination situation. That could be very uneven, unfair, and with detrimental consequences to those remaining employers.

And knowing this going into the situation, an employer considering joining a MEP would be looking at, you know, might be looking at their own demographics and saying, wait. If I get into this, this other employer out here that I don't trust or that I don't know enough about to trust, they may have a more mature population that is higher priority categories and that could impact my own employees' retirement security. So, I just think there's some risks there that might be too great to plunge into a new rule for defined benefit plan MEPS.

MR. WELLER: Marty, is that risk ameliorated if this was limited to plans which were fully funded on a termination basis?

MR. PIPPINS: Yes. Well, I think it will be to a great extent. I was coming at it from the point of view where you have an underfunded plan, and you have a one bad apple employer that then could maybe be in a situation where they're 100 percent funded, if you will, for those employees of the one bad apple employer and leaving the other employees even worse off. So, it is different if you have fully-funded plan or an overfunded plan. But the risk, I think, is much greater where that's not the case.

MR. WELLER: So, the risk that you're identifying is that you have a plan that overall doesn't have 100 cents on the dollar and when you have a spinoff in an allocation of assets based on termination liability they spun off, employer may have yet 100 cents on the dollar, essentially; and thereby reduce the benefit security of remaining employers.

MR. PIPPINS: Yeah. To put it roughly, the plan can be 80 percent funded overall for everyone, and then spinoff termination happens, one bad apple employers' employees walk away with 100 percent of their benefits and the remaining employers are now at 60 percent funded — just to show the balance of what could happen. So, there is some risk to that situation. So, if you did put some controls on there where this was only allowed for certain plans at certain funding levels that would ameliorate that potential result.

MR. WELLER: Okay.

MR. PIPPINS: The third thing I want to mention — this was not in our comment letter from earlier, but we have noted that other commenters have also recommended expanding the proposed rule to cover 403(b) plans and we agree with that expansion to cover 403(b) plans. Section 413(c) of the Code does not include 403(b) plans, so it's a question of, you know, whether there is sufficient statutory authority, regulatory authority for the IRS and Treasury to expand to include 403(b) plans. I agree with what Kent was saying earlier that, you know, that would be good to say if that is the case; however, if you think that there is no statutory authority for 403(b) multiple employer plans having this rule, then please say so. Clarity is what the recommendation is here, one way or the other, would be helpful. So, we are in agreement with the other commenters as far as expanding this rule for 403(b) plans.

MR. EVANS: Marty, can I ask you question? I'm not quite sure if I'm understanding so, there're sort of two questions as I understand it. One, whether kind of the unified plan rule, applies to MEPS; and then whether the exception to the unified plan rule applies for MEPS?

MR. PIPPINS: I think it's a reasonable reading to say that the unified plan rule does apply to 403(b) MEPS.

MR. EVANS: So, you're really looking for an exception?

MR. TACKNEY: Are you saying a unified plan rule applies that's not necessarily 413(c); or are you saying the 413(c) rule applies?

MR. PIPPINS: I'm not sure where the authority comes from. You know, just looking at the — you know, you had this 413(c) regulation in 1979, and then the 403(b) final regulations were I don't know, 10, 12 years ago, roughly — and so, I think, there could be some syncing up of those in clarification of how they fit together. I think there are arguments either way. I think that the statute not having, as Pamela was saying earlier, just referencing 401(a) and 403(a), there's an argument that this does not really apply to 403(b) plans. It was not meant to apply to 403(b) plans but it's really not clear so just urging clarification.

MR. EVANS: Did you have any particular are there any kind of tricky — if we were to say yeah, let's do expand the exception to 403(b) plans. Are there any kind of tricky things about that that we should —

MR. PIPPINS: The analyses are too long. (laughter) I think the same concerns would apply in the 403(b) arena as the 401(k) arena.

MR. TACKNEY: Alright, thank you. I believe we had at least a couple of folks signed up to speak from the floor. Can folks raise their hands who endure the — because I thought we had two. Have you agreed on order or do we want a cage match or rock, paper, scissors or — okay, we have a half an hour so we will just do the regular 10 minutes. I think we can — we will try to keep our questions down to less than that.

MR. POWER: Great, thank you. My name is Terry Power and I am the President of the Platinum 401(k) out of Clearwater, Florida. We are a third party administration firm. We have been working with multiple employer player clients since the late 1980s. The PEO industry, which after 2002 exclusively uses 413(c) plans was kind of born in the Tampa Bay area. If I look back in the 1980s so we became experts by proximity based on our location down there and we currently service several large multiple employer plans for PEOs across the country.

On behalf of everybody I've heard this morning, I also want to say thank you for doing this. The one bad apple, although I have never seen that actually disqualify multiple employer plans in the 38 years I have been in the business, if (inaudible) issue that comes up usually by folks that are trying to sell against multiple employer plans. The benefits that are outlined under the secure act, MEPs make a lot of sense in the small to medium size business without a doubt. (inaudible) supports the proposed relief and we do believe it will help expand, determine a plan coverage, by removing the barriers one of the barriers that exist in the current multiple employer plan regulations.

As some previous commenters have mentioned, we would like the expansion of the proposed relief to include language that specifically addresses and promotes 403(b), multiple employer plans. Our legal counsel tells us we don't have any guidance in 413(c) to establish such a program. There were questions about 413(c) versus 403(b) and maybe there just needs to be some consolidation of those rules to allow that. The 403(b) market is a very underserved market in terms of competitive products and I think an expansion on that and also allowing the protection for the one bad apple rule, if I plan a rule under those kinds of programs, it makes a lot of sense.

Previous commenters have also mentioned the (inaudible) requirements. We are in agreeance that the 180 day period probably needs to be shortened down to 60 days and the six notices down to maybe as few as four. We think that is an issue. But our concern, apart from the expense associated with (inaudible) notices and the confusion deals with the lost participants. If we are going to extend a determination and an eventual spinoff to as much as — close to two years, we are going to lose people and that's going to be an issue.

There's a good chance that the employer that's not compliant may have some bigger problems or he or she is in jail, it sounds like or possibly some other issues associated with the plan. In terms of what to do with those non-compliant employers. I know there's been talk about the one step rule, the determination. As a TPA, I don't know that that's the best move only because I think you do a spinoff and then you address the issues with a single employer plan prior to paying anybody out. I don't think the best thing is to have forced distributions. I think finding a way to have a plan, having it structured and maybe doing a plan to plan transfer into a successor map.

I think the SECURE Act would actually allow a pooled plan provider to establish a pooled plan that could be the home for the wayward plans, if you would. This is how they see it, as having the misfit toys. Well here are the misfit adaptors and they might all go into a distribution map or some sort of consolidation map that would protect the planned assets of those employees as opposed to forcing them out because many of them would actually spend the money which probably doesn't serve their best interests either.

MR. TACKNEY: So who is taking over then as the sponsor and the fiduciary and how is all — I thought we had heard that the MEPs don't want to do that.

MR. POWER: The MEP that has the plan that may be transferred to a different MEP, for instance. If there is an opportunity, possibly, down the road, if the SECURE Act ever gets passed that there could be a niche in the marketplace for people that are willing to take on those types of adapting employers. It could be.

MR. TACKNEY: I see.

MR. POWER: And not available under current law. As a matter of structure in terms of how this all goes down because there are some questions about notice and such. When we have a new adapting employer come aboard in a multiple employer plan, apart from just adapting the plan with the plan provisions, they will also initial the fact that they understand all about top heavy, which they will forget probably after the first year or two until we tell them they are top heavy and the other part explains that we have the ability to spin your plan off for any reason. We don't put a bar saying you must do this or this. We actually say we have the ability to go ahead and spin you out to a single employer plan and pass the costs on to you. You will be — it explains who the new trustee, the new plan administrator will be and they give us that authority and (inaudible) to those existing adaption agreements that incorporates the new unified plan rule, I believe would satisfy notice requirements just making sure they were aware of it and initial off saying this is what will happen if we get to take action so I'll leave that for the attorneys and such but there is a way of doing that, either in the base document or better yet, the adoption agreement level where the employers would actually be able to have that right in front of them.

A little bit soft as far as the unified plan rule was previously stated is very good news for this industry. I think a lot of folks that are here today, these are leaders in the multiple employer plan industry and certainly in this area and not only provides benefits for individual employers but now the wake of the department of labor's final role, that was issued in July 29th, opening up the doors even more for association plans and for chambers of commerce to sponsor plans for their members.

The elimination of the one bad apple rule is going to be a very significant positive step to expand the whole marketplace. That's all we have.

MR. TACKNEY: Thank you very much.

MR. POWER: Thank you.

MR. BURRELL: All right, thank you very much again for the opportunity to come over here and talk about our comments. I'm Darren Burrell, I'm the Chief Operating Officer of TAG Resources. And before I commence with our formal comments, as a quick introduction, I'd like to go ahead and talk about the — very similar to what Terry just did in the real world applicability of the bad apple.

Because TAG has a strong history in the administration of multiple employer plans. Also, like Terry, and even their cousin the multiple employer aggregated plans. In our 18 year history has basically seen us manage over a $1.5 billion in assets across 1800 plans. And as the COO of the company for the past four years, since my transition to the private sector from the military, our firm has more than doubled in size and scale working exclusively in these pooled structures.

So again, throughout our history, the way that we have ever come across the bad apple rule has rarely, if ever, has been used in terms of the administration of the plan. Obviously, Terry mentioned the fact that it is often used by those who don't play in this space as you don't want to get into that multiple employer plan because of the potential of you getting spun out. But in our 18 year history, I think we've done that once.

So, it's just — it is something to be recognized and we appreciate what you all have done in this proposed regs. But the applicability of it is pretty rare, I think we can agree on that.

So, concerning the proposed reg, TAG Resources supports the IRS's efforts to provide multiple employer plans with the relief from the application of the unit by plan rule. And we appreciate, again, the opportunity to publicly comment on this.

I am representing Mr. Tisue, the President of TAG. And throughout TAG's history, we've sought innovative methods to promote access to retirement savings for employees of small and mid-sized companies. Owning to the efficiencies of scale and reduced administrative costs, MEPS are proven vehicles for delivering retirement savings for employees of small and mid-sized firms.

However, the risk of employer liability for acts or emissions of federal members of a MEP do present the potential for a barrier for the MEP reaching the full potential in terms of serving America's workers. Accordingly, TAG does support the Treasury's issue of proposed rules which would prevent the disqualification of a MEP under code section 413 should a single member of the MEP act in a way which would otherwise disqualify the plan.

We would like to offer testimony in to how the proposed regulations would be made more effective and have significantly greater impact by permitting corrections under the unified plan rule under both VCP and audit CAP programs under EPCRS. Bill, I think you mentioned something about this that maybe it's just a clarification needed.

So, under the VCP piece, if I can, the MEP participating employer errors which cause disqualification generally can be corrected through the VCP program. However, circumstances may be such that the bad acting employer which is the source of the problem may be unwilling or unable to either correct the program as folks have talked about or pay the cost of correction.

When this occurs, the lead sponsor can address this issue by prospectively exercising its authority to remove such participating employers in accordance with the terms outlined in the plan doc as Terry mentioned it. What he does is what we do as well.

An employer following the plan procedures for disgorgement should be able to apply for protection for the rest of the MEP under the VCP program as long as it can establish in its submission the nature and extent of the failure.

The efforts to convince the participating employer to correct the failure and the evidence that the employer's refusal or inability to act in a description of the lead sponsors procedures to disgorge the bad actor and information related to the bad actor itself.

So, when that happens, the IRS would then have the ability to determine the adequacy and appropriateness of the lead employers' actions through the VCP's review process. And to negotiate terms of disgorgement which, in the IRS's view, would properly balance the competing needs of the MEP participating employers and of plan participants.

This type of oversight and flexibility will address the issues arising from the inflexibility of the process in the proposed regulation and give the IRS the ability to take further action against the bad actor. So, essentially because this is somewhat of a rare occurrence, it would allow — if it was an extremely, happened all the time kind of thing, then this might be considered burdensome to do that individual negotiation. But because it's not then it does give you all more flexibility in how you handle the situation.

So, and in regards to the CAP, we also recommend that the unified plan failures also be addressed in the CAP program. And the definition of the max payment about for the purposes in negotiating a settlement under CAP should be modified so that it is computed solely with reference to the assets of the plan related to the bad acting employer. And the actual sanctions should only take into account the bad actors plan.

Further, each participating employer is currently a co-sponsor of the MEP. EPCRS section 13 should be amended to provide that the CAP penalty would be the liability of that bad acting employer and that the MEP would be relieved of liability provided that it demonstrated its own diligence in operating the plan and followed the plan terms in disgorging the bad acting plan from the MEP.

MR. TACKNEY: Thank you. The question I have about corrections in EPCRS's idea is we have an employer who wants to correct and whatever they've done, sometimes they can't fully correct or, you know, we work that out. Are you saying that should be expanded to bad actors who are unwilling to correct?

MR. BURRELL: As a lead sponsor, yes, the MEP sponsor could do that.

MR. TACKNEY: Okay.

MS. KINARD: So, are you saying that the lead sponsor is trying to get the bad apple to correct. They're not communicating or whatever so the lead sponsor will go to EPCRS and they will get involved with this? Are you trying to be a mediator?

MR. BURRELL: In a sense. The plan administrator, whoever that would be —

MS. KINARD: Right.

MR. BURRELL: — would be actually going through that process, yes, to of course spin out that particular plan utilizing the existing regulatory guidance and the self-correction program of ECP.

MS. KINARD: Well, I mean, the spinoff doesn't solve the qualification issue. EPCRS is about correction. So, I can see — there's one ideal that if you're saying they go to EPCRS to mediate the correction like they have different agreements. I think like Lou said like I think it should be corrected this way and the other said the participating employer says no, it should be corrected this way. I see that but if the whole idea is you spin them off and you're not going to

there's no correction going on, how does EPCRS play a role in that?

MR. BURRELL: Yeah. So, I guess I need to clarify that process.

MS. KINARD: Yeah.

MR. BURRELL: If there's just two different acts there, if we're trying to correct within the MEP itself or if we're going to go ahead and as if we talked about earlier, you know, spin them out first and then treat them as a single employer plan to do those corrections. So, in the self-directed program, it could be a really small thing, right, lost earnings or something like that that takes place and we're just helping them get right. As opposed to something on a greater scale that would require interaction within the EPCRS program. I think that process just needs to be done on a more tailored individual schedule. Does that make sense? Because I'm not the compliance guy. Any of you lawyers out here want to help me out that'd be great.

MR. TACKNEY: Well, I think we had always thought if the MEP is actually trying to correct and even a participating employer is trying to correct, that's EPCRS. But what we heard was there was fear of the MEP wanting to not apply the rule where we can't get this employer to correct. But we always thought that's a bit of a square peg in a round hole to push that situation into a program that both the statutory authority and its mission is to ultimately reach compliance

and continue on a going forward basis.

But we also wanted to be able to give the predictability of that through these regs of how to deal with it completely non-compliant, non-communicative. I can't go through EPCRS because I can't resolve it. Are you saying —

MR. BURRELL: So, you're saying the way you all wrote it allows for that what I just described. You can use an addition to —

MR. TACKNEY: You can go to EPCRS can go as an —

MS. KINARD: You can always go —

MR. TACKNEY: — actually think.

MR. BURRELL: Well, then it sounds like it compliments each other, right?

MR. TACKNEY: But I'm also wondering, are you wanting — we haven't really thought about, I don't know if we've thought about it. Are you wanting some type of compliance statement on following the reg? In other words, do you think MEPS are going to want to know, I did this in compliance, therefore I can represent to everybody still in the plan that this was a good —

MR. BURRELL: Right.

MR. TACKNEY: Okay. That's a slightly different issue.

MS. KINARD: I think it's important to note that in these cases where there is either a voluntary spinoff, the failure goes with that plan and it stays with the that plan. And if the IRS wanted to look at that plan, it would have a disqualifying issue. In the case of the involuntary spinoff and termination, there's still a — we're not saying the defect goes away.

But there's still a failure, it's with a spinoff and now terminated plan. And if the IRS wants to go after that plan for that defect it will go after that plan for that defect. So, there's no correction in either case going on there so there's no like, you don't have a failure, there's still a failure. EPCRS is the only one where you correct it and then the failure goes away.

MR. BURRELL: That makes sense.

MR. TACKNEY: One small rephrase, we don't go after.

MS. KINARD: I don't mean go after.

MR. TACKNEY: The real issue with that plan is are these, for instance, are they eligible rollover distributions because have they come out of disqualified or a qualified plan in the termination.

MR. BURRELL: Right, okay.

MR. TACKNEY: And so, we've been looking at that as really at the end game of the spinoff termination.

MR. BURRELL: That makes sense. And again, it was an idea of probably after hearing some of the other comments and what you all were talking about, it's more or less clarification as opposed to contradiction.

MR. TACKNEY: Yeah. It sounds like we may want to talk about all the types of issues and MEP space and where this fits and may be helpful.

MR. BURRELL: Right. Okay, well thank you.

MR. TACKNEY: Thank you very much. All right, do we have any further folks who want to speak from the floor? All righty with that, this ends the hearing on proposed regulations Multiple Employer Plans REG 121508-18. Thank you very much everyone, very much appreciated.

(Whereupon, at 11: 51 a.m., the HEARING was adjourned.)