Don Levit

waid 10: Are you saying the employer wishes to divide the group into 2 classes of workers; those who are salaried and those who are hourly? He then wishes to provide benefits only for the salaried workers? I understand an HRA need not have a corresponding catastrophic plan. You may be confusing this with an HSA. IMO, you do not need an HRA, other than for accounting purposes, if each employee has their own individual account. This basically sounds like the employer wishes a limited benefits type of self-funded plan. If so, he can do so apart from state regulation. Don Levit

budman: I think we should explore a bit further the MERP concept. Unfortunately, I do not have expertise in this area. The general problem of discrimination that we are discusing here, is due mainly to the plan's structure: it is a "defined benefits" health plan. Typically, in this arrangement, premiums cannot be higher for individuals due to health factors. Premiums are paid monthly. There is no cash build up, obviously. There is no build up, period. Contrast this plan design with a "defined contributions" plan, in which coverage builds monthly. Benefits are determined, in proportion to premiums paid, and claims made. Just as a defined contribution plan balance would be lower, if withdrawals are made; so, too, would the balance in a "defined contribution" health plan be lower if claims are made. Don Levit

Go to the Nebraska Department of Insurance web site. They should have a list of licensed carriers. If no luck there, simply call them. Don Levit

waid 10: You are really too small to do self funding, unless you are looking at a minimum benefits plan. Will your boss consider combining with other businesses, in the same line of business? Don Levit

ipod: Could this be designed as a single employer plan, because it is retirement benefits, and not health benefits? Don Levit

slk: Is there a $1,500 cap, because the deductible on the group plan is $1,500? If so, would the employer be willing to consider different HRA balances for each employee, thus "rewarding" the lower-claims users with lower group premiums, due to higher deductibles? If this was the case, would there be "discrimination" in assessing different premiums, based on participants' various HRA balances? Don Levit

vebaguru: Are the other statements true, in particular the part about defined benefits plans accruing much of the employer's liabilities between the hypothetical participant's ages of 55 and 65? Also, the part about comparing defined contribution plan totals with 3 different defined benefit plan totals? Don Levit

Everett: Thanks for the posting. I will look up that regulation. A good primer on VEBAs can be found from the IRS at http://www.irs.gov/irm/part7/ch10s12.html. Don Levit

Budman: What state are you located in? Does your state have a high risk pool? Don Levit

Becky: Thanks for providing this case. Although ERISA is based on the law of trusts, I believe, the ERISA trust is very different from the more traditional trust. The more traditional trust is similar to gifts, from the grantor to the beneficiaries. The ERISA trust is more of a "business-type" trust, in which the employer, typically, has a different outlook than the grantor of the traditional trust. Thus, the tension between the beneficiaries of an ERISA plan, and the "business" purposes for the ERISA's plan creation and maintenance. Don Levit

George: The presumption is against vesting of medical benefits. It must be stated very clearly in the documents that benefits cannot be changed. There have been many court cases, in which the term "lifetme" medical benefits were ruled as temporary. Don Levit

cjt: You may want to be more acquainted about VEBAs by looking over this IRS link. Go to: http://www.irs.gov/irm/part7/ch10s12.html. Don Levit

ERISA Litigator: Can you provide a bit more information on the Coates case, such as the other party, which circuit, etc.? What was the subject matter of the case? Don Levit

ipod: Good question. It seems like the employer is not funding this obligation. Would seem to me he could be in a heap of trouble, with these new FASB and GASB proposals. Can you provide some of the wording, so we can see how much of a "guarantee" this is. Typically, medical benefits do not vest, unless specifically provided for in the documents. Don Levit

Mike and Belgarath: I guess we are crying wolf, one too many times. If you go to my posting, you will find this is a REAL case. I E-mailed one of the attorneys, Andrew Hartley, regarding his writ of certiorari before the REAL Supreme Court. This is a "realer deal" than Evander Holyfield. No levity from this Levit! Don Levit

ERISA Litigator: You may have read this article posted on Benefits Link today. It speaks directly to this issue. For you, and others, go to: http://lawprofessors.typepad.com/laborprof...tesPetition.pdf. Don Levit

So.Cal.Actuary: That does seem like weird accounting. What happens to the paymernts made to the PBGC, less the tax deduction? How is that accounted for? You mentioned our tax birden is reasonably related to GNP? Are you referring to our deficit this year? I assume you are aware that the deficit does not include Social Security and Medicare. Also, whenever I hear the pundits talk about the deficit being only 4% of GNP, they do not speak of the accumulated deficits over the years. I believe the accumulated deficits are higher than our GNP. You know, rarely did Muhammad Ali knock out an opponent with one punch. It was more likely an accumulation of punches. Don Levit

SoCalActuary: I agree with you that Congress could raise taxes to pay for these benefits, in order that the federal government would not default. Do you think that a (federal-type) government has never defaulted before? It sounds like you feel the U.S. is immune from this possibility. Don Levit

Folks: Are you saying that there is no benefit to the plan being held to a higher degree of protection than the individual? It is a basic premise in ERISA that the fiduciary is to look out for the best interests of all plan participants. If the fiduciary errs, he is to err on the side of the plan as a whole. While this case is an exagerration (and may actually be a fantasy), it does drive home a valid point for protection for the plan as a whole. While this (fantasy) person may hire an attorney to attempt to retrieve the money, he is in his legal rights to do so, for the attorney is to defend his client to the best of his ability. That means the attorney need not lose sleep over how his actions may affect the plan; he need only be concerned how his actions affect his client. How is that thinking any better than the ERISA protection for the plan over the individual? Don Levit

So Cal: You seem to believe that "the full faith and credit of the U.S. government" means a lot. At what point will we have to descend to where it means a lot less? Apparently, Moody's is considering downgrading the risk of U.S. Traesury bonds. Don Levit

So. Cal. Actuary: It seems like you feel it is unlikele the PBGC will go bankrupt. Do you have any figures to back up your premise? What are the chances, in your opinion, of the federal government bailing out the states, if needed? Don Levit

mjb: What you said I understand to be correct. I have spoken with several people in different states, and they all confirmed what you said about the state's inability to change benefits, including retiree health benefits! They mentioned that, regarding health benefits, there is more flexibility regarding the premiums the retirees would have to pay, though. Of course, whether or not the states can meet their responsibilities is another question. I have some interesting material on San Diego, that provides details on the "amendments" made to the plan, enhancing benefits, when the city was having trouble meeting its unenhanced promises. I will be happy to E-mail to those who are interested. Don Levit

mjb: I understand what you are saying. The same claims were made in the report I read by some people associated with the public pension system. The same claims were made by the GASB. You and I both know that the taxpayers are pretty much up to the limits of what they can bear. The federal government can, legally, run deficits, while the state governments cannot. Both the federal and state debts will be passed to the taxpayers. Regardless of the paper guarantees of the courts and the constitutions, I cannot envision the full faith and credit of the states being more valuable than that of the federal government. Don Levit

mjb: Wow, you seem to be on top of this issue! In your opinion, are these benefits any safer than defined benefit federal pensions, or even Social Security and Medicare? Don Levit

mjb: I was not aware that the assets of the PBGC are not in the budget. I guess that includes its liabilities also, which, apparently, exceed the assets. I read a report recently from some national association of public pension administrators that said public defined benefit pensions are safer than private defined benefit pensions, even considering the PBGC. It went on to state the reasons were that public pensions are backed by the state constitions, as well as the state's taxpayers. Any thoughts? Don Levit