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Did they get the Neonatology message? No, they're at it again.


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Now that the Neolatology case was decided, did the promoters of such arrangement back off? No, they put their heads together and concocted a new scheme to get around the tax laws. Why don't they read the opinion. Judge Laro, who respectfully and impartially reviewed the Prime Benefit Plan in the Booth case (although correctly finding that the Plan was experience-rated), trashed the Southern California Medical (or "SCAM") VEBA, the insurance company (Interamerican, which is now defunct), the financial planners who misrepresented the information to clients and the clients who didn't even bother to do a check with their own CPAs or attorneys before they got involved.

It is obvious that Judge Laro's primary concern (and reason for throwing out deductions without even getting to an IRC section 419 analysis) was the intent of the parties. The VEBA promoters sold the plan on the basis that they had found a tricky way to use welfare benefit plan laws to get money out of a closely-held business. There was never any welfare intent, only the greed of the owners. The Judge imputed their intent and actions to categorize the payments (in excess of the current group-term life insurance premiums) as dividends.

Did they get the message? No. The group who brought you the "speciously designed" continuous group product, now called CJA and Associates, has "found" a new "loophole." They propose to modify their "Group Plus" product to provide a paid-up term insurance policy at retirement. The new product would still be a very expensive product (which Judge Laro correctly described as a combination of two policies in one), but now there would be no conversion privilege. However, since the policy is guaranteed to stay in force for life, it could be "sold" (a viatical sale) for cash.

Now the owner of the business is being encouraged to buy very expensive "group-term life" insurance policy which can be converted to a cash lump sum at retirement. Still doesn't sound like a welfare purpose to me. Will the IRS will be able to see through this? In about 30 seconds.

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