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Cafeteria Plan Documents


Guest PensionPerson
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Guest PensionPerson

Does anyone have any reference to recent court cases involving cafeteria plan documents set up by accounting or TPA firms and how lawsuits have occurred due the presumed practice of law by such firms?

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I dont understand how accounting firms could be charged with the practice of law in a 125 plan which is soley a creature of tax law which all accounting firms are permitted to practice. Limiting the preparation of tax documents to lawyers would be considered an illegal monoply. Accounting firms provide clients with documents which comply with various provisons of the tax code as part of their professional functions which are covered under professional malractice policies.

mjb

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  • 2 years later...
Guest David Lacy
I dont understand how accounting firms could be charged with the practice of law in a 125 plan which is soley a creature of tax law which all accounting firms are permitted to practice. Limiting the preparation of tax documents to lawyers would be considered an illegal monoply. Accounting firms provide clients with documents which comply with various provisons of the tax code as part of their professional functions which are covered under professional malractice policies.

I disagree completely with your assumptions. How can you say "Limiting the preparation of tax documents to lawyers would be considered an illegal monoply." First the Section 125 cafeteria plan is much more than just "tax documents" it involves many other legal issues. But everything about restricting certain activities to either accountants and lawyers is a monoploy. You might as well say that restricting filing cavities in teeth to dentists is an illegal monopoly.

As for the original question, yes, there is a great deal of tension between lawyers and accountants on what each can and can not do. At one point the State Bar of Texas was going to sue one of the Big 4 accounting firms for illegal practice of law. Someone have given the Bar a copy of the firm's internal form book with everything from Wills to Articles of Incorporation in it. In particular, the issue grows murky when big accounting firms hire CPA/tax attorneys. For a while some Big 4 firms were using employees who were both CPAs and tax attorneys to represent clients in Tax Court. I think they have backed off of that. In any case, there are some gray areas that definitely will be fought over during the coming years.

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About 10 yrs the FLA bar association tried to have the FLA ct of appeals restrict providing advice on employee retirement benefits, including plan administration, to attorneys but the Ct declined to issue such an order. Many benefit consutling co/ accounting firms prepare plan documents/trusts and act as attorneys/ accountants/actuaries under a power of attorney representing the plan before the IRS for a favorable determination letter. The anti trust laws prohibit a private organization (bar association) from attempting to restrict competitors from offering tax services to clients. Only the state can restrict such practices either by passing laws or a judical order from a ct.

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  • 2 weeks later...

Administeration of a cafeteria plan by a TPA/Accounting firm vs. issuing a Legal Plan Document by a TPA or accounting firm is the issue.

I'm not aware of any recent litigation, however it's common practice for TPA/Accounts to use a proto-type document written by their legal representatives. When the proto-type PD is issued, the TPA/Account comminicate the need for reviewe by the plan sponsor's attorney, with disclaimer that no liability is assumed until approved by an attorney.

I'm not at all sure how much protection the disclaimer provides. if litigated the outcome may not be favorable to TPAs/Accountants.

Not all TPAs/Accountants require an attorney to review the PD or include a disclaimer.

Many plan sponsor's don't forward the PD for review even when recommended with a disclaimer, often to avoid legal fees.

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