J Simmons

Life insurance proceeds in excess of a policy's cash surrender value are excluded from income under Sec. 101(a) (Sec. 72(m)(3)©; Regs. Sec. 1.72-16©(2)(ii)). Those proceeds would be excluded from income of the death beneficiary for the life insurance, the Plan Trust--which is already exempt from taxation. Then when the Plan Trust in turn pays those proceeds to the death beneficiary for Plan benefits, that payment is taxable income to the death beneficiary for Plan benefits. I think that is what jpod is getting at when suggesting that naming the Plan Trust as the death beneficiary of the life insurance loses the income tax exemption that would apply if the death beneficiary of the life insurance as owned by the Plan Trust were the employee's survivor rather than the Plan Trust. Perhaps the Plan trustees could require a Plan death beneficiary designation that would would specify that it does not apply to Plan benefits to the extent of death benefits from life insurance held by the Plan Trust on the life of the employee and also only applies if either the life insurance death beneficiary is the employee's 'surviving spouse' or that surviving spouse has waived/waives timely the QPSA and QJSA forms of benefit.

I agree with SLuskin.

There is no nondiscrimination requirement in IRC section 106, which is what keeps the value of the insurance coverage paid by the ER out of the taxable incomes of the EEs. Ergo, the ER can discriminate in this way. This could be a problem if the payment of premiums by the ER is embedded int he POP document language, rather than leaving the POP only for employees to use to pay premiums the ER does not pay aside from the POP.

Your employer would place its entire 403b plan in jeopardy. You are plotting the re-hire before the termination. So where's the reality in the termination of employment as a trigger allowing you to withdraw your benefits? If the IRS were to discover the pre-arranged re-hire, the 403b plan could be disqualified from favorable tax treatment.

I agree with Sieve. Consent implies participation 'at the pleasure' of the sponsoring employer.

I agree with vebaguru: we would all like to see the brochure. I'm curious as to how indepth it analyzes Treas Reg §1.105-11(b)(3)(i) and (iii). Treas Reg §1.105-11(b)(3)(i) provides Treas Reg §1.105-11(b)(3)(iii) provides These two provisions suggest to me that for 105(h) nondiscrimination purposes, 1-retirees would be as a group tested separately from the active employee group 2-the type of benefits provided must be the same for all retirees for them to be nondiscriminatory as to those retirees who were highly compensated individuals (HCIs) 3-the dollar amount of benefits provided must be the same for all retirees for them to be nondiscriminatory as to those retirees who were HCIs. It seems to me that proposition #3, that the dollar amount of benefits provided must be the same for all retirees, could provide promise or be problematic for the VEBA described in the OP. This provision does suggest that for nondiscrimination purposes, the comparative measure should be of benefits provided in retirement, not of the amounts contributed to an HRA funded through a VEBA trust. Differences in the contributions would seem irrelevant. However, proposition #3 could be problematic in that the amount of benefits provided in retirement for a retiree that received contributions over 20 years as compared to a retiree that received contributions over 30 years. They would have different dollar amounts of benefits provided to retirees. However, this regulation was drafted and issued long before 2002, when 105(h) self-insured plans were viewed as a defined benefit. The HRA rulings in 2002 infused a defined contribution concept into 105(h)--allowing an employee to carry over unused benefits from one year to the next. This in turn allows for differences in the maximum amounts reimbursable in the 2nd and later years of a plan depending on how much each employee carried into the current year from prior years. The carryover allowed by the 2002 HRA rulings suggests that for retirees too, those with more years of benefit accrual ought to be permitted greater maximums of benefits provided in retirement than those with fewer years of benefit accrual. Like Oh so, I would like the assurance of an IRS ruling. Like vebaguru, I hope it is only a matter of time until the IRS approves it in some form.

The only comment that I have on this VEBA promotion is the example given is more like age-weighting than new comparability. So I find the terminology 'new comparability' misleading. Don Levit-- Is that reduction to maximum that can be contributed for "regular" retirement plans a provision from 415 or 401(h)?

My understanding is that for a management ASG, the management service provider must derive more than 50% of its revenues from just one recipient organization, and if so the ASG is composed of just that recipient and provider organizations. Since the I would think there would be no management ASG unless of those 4 recipients, those that provide on a combined basis more than 50% of the management service provider's revenues are themselves a controlled group or ASG.

I agree ... if the life insurance company is yet in business. I've been asked to help a couple of 412i victims and when we investigated, found that the insurance companies were no longer in business. In other instances where the insurance company is yet in business, with some legal pushing they have, like you said, 'made the client whole'.

If as you say the plan document is silent, I think that the ER would need to allow the term'd EE to make periodic payments over the remainder of the loan repayment schedule. Granted, payroll withholding is required--but now there's no payroll to withhold from. So that provision is now a nullity. If the term'd EE makes the payments on time, the loan would not be in default due to late payments. So what provision of the applicable documents would allow for acceleration?

If Social Security payments might deflate, as widely reported earlier this week, why not the 402g limits too?

The IRS has been very clear about what the abusive tax shelters are. The IRS has made clear what uses of 412i are abusive. The IRS has made clear what uses of 419A are abusive. That there are advisors that continue, in the face of these warnings, to promote to employers, unsuspecting and otherwise, these abusive tax shelters is in my opinion the outrage. These charlatans have left a slash-and-burn wake out of which employers fear legitimate employee benefit plans, sometimes terminating their legitimate 401a and 401k plans, 125 cafeteria plans, etc. Other charlatans, for their own gain, then engender fear among legitimate advisors.

You might begin with the discussion in this thread

I would think the accuracy related penalty, IRC sec 6662(a).

That approach with the client whose plan you are currently dealing does make sense to me. As for the others, are those DB plans prototype plans? If so, you might be able to make a PFEA amendment through EPCRS at the prototype sponsor level--I'm not sure if PFEA required employers to make certain selections or was basically boilerplate, the same applicable to all. If you do deal with the issue through EGTRRA restatements, when submitting for a d-letter, make sure to flag it and include the VCP application, or else you might face stiffer penalties. And then there's the possible chance of audit exposure in the meantime--which would result in higher penalties to fix as well.

Some people are rather upfront, accommodating and willing to sign accurate statements once it is shown to them such is in fact accurate. If you want to avoid the possibility of litigation, it's worth asking, isn't it? If I asked W1 to sign and she refused, that indicates to me that if I go ahead without a court order and pay the benefits to W2, I might later face a claim from W1--in court or otherwise. I wouldn't want to have to pay the benefits 2x. It would be worth the time and cost (depending on the lawyer/law firm you hire--rates vary greatly). But once the interpleader complaint is drawn up, filed and served on W1 and W2, you sit back and watch W1 and W2 duke it out in court. You just wait for the court to issue an order telling you whether to pay the benefits to W1 or W2.

If that provision in the designation does not offend terms of the plan, then it should be honored. The naming of W1 in essence was contingent on a condition subsequent--EE not having remarried before he died. Before paying the death benefits, you would want proof of a valid marriage certificate from W2, and then ask W1 to sign a statement that (a) EE had remarried before his death, and (b) W1 is not entitled to any death benefits. Actually, the best way to assure that the plan does not have to pay the same benefits twice is a form of litigation called interpleader. That's where the plan informs the court that it has benefits it is holding and that perhaps both W1 and W2 have claims to it, and that the court should sort it out and decide which W is to receive the benefits.

For the interim amendment failure only application, probably about 2 hours total time, given that you have already identified each interim amendment for which there is no document.

The coincidence is that Lance Wallach uses this board to advertise the fear mongering and there has been a recent flurry by him in such posts here, and rene having such an issue--right now. Quite the coincidence.

I would suggest that you adopt an amendment that spells out how forfeitures at time of 403b plan termination will be handled, and follow that. You might consider specifying in that amendment an allocation among current plan participants as being a final plan year employer contribution (i.e., allocates per formula in the plan for employer contributions). You would likely be permitted alternatively to specify in that amendment that it will be allocated in proportion to account balances at time of termination.

I vote for #001 (due to the EIN of Co B being different than the EIN of Co A), and you yet appear to be sane.

How does one retroactively ring a bell that never rang? EPCRS has a metaphysical answer for when it was the 401k elective deferral opportunity in the plan that was not advertised to eligible employees, and then there's the interim document and restatement failures for which the IRS will turn a blind eye for a fee. But I don't know how you 'restore' a retirement option retroactively, as the OP mentioned.

I for one, a smoke blower, nominate this for quote of the year on BenefitsLink. Thanks, Bird, for this delightful prose.

Plan document failure, VCP. Rev Proc 2008-50, section 12.03. Interim amendment failure only, $375.

Actually, that's more of a divorce law issue than a benefits law issue. Nevertheless, you will most likely have to get a QDRO signed in state and county of divorce.