card

In the third note on this thread I said the materials were prepared by a major consulting firm. This is inaccurate. The material was prepared by an insurance agency that goes by a name very similar to a major consulting group. rob

I've seen the simplified program overview of the Healthcare Incentive Plan written by one of the major consulting groups. Was asked by a client to review. I noticed in your (GBurns) 4/1 note you suggested this was the most supportable of the three programs you listed. However, the overview is just that- and it is impossible to tell the legal analysis behind their proposal. The plan is basically a method of saving FICA taxes by reallocating the payment of health insurance premiums to the employee, and offsetting this additional cost by an "incentive payment." It is this incentive payment that is most ambiguous in the materials. rob

The thread originally begun by Garnett in January has been closed. Garnett- were you able to find out any additional information about these arrangements? I've seen similar marketing materials, and they do imply a double dipping if the intent is to reimburse the employee for the insurance premiums they've paid on a pre-tax basis. Are they instead suggesting the employer reimburse for other medical expenses? thanks. rob

An employer maintained an (ERISA) insured long term disability plan. As usual the employer had only an insurance contract. There was no separate ERISA plan document. Employee A was aware of the plan. Employee A terminated employment and was rehired within several months. However, unbeknownst to employee A or any other employees the employer had, prior to A's separation, decided to cancel the LTD coverage. There was never a formal notice to employees. Two years after A was rehired he became disabled and attempted to file a claim under the LTD plan. Of course, he was then told the plan was no longer in existence. What cause of action might A have against the employer? Estoppel would require a showing of a misrepresentation by the employer, and that may be difficult here. There may be a breach of fiduciary duty, but does that duty survive termination of the plan? And what would be the remedy? Benefits under a nonexistent plan? What would be the employee's best argument? Thanks- rob.

Thanks. I agree constructive receipt should not be an issue if there is a substantial restriction on the withdrawal and I agree 10% is a comfortable level. However, the question I'm posing is slightly different- does the ability to withdraw funds at any time, even with a haircut, defeat creditors, thereby making the benefit "secured" and risking tax under section 83 and/or the economic benefits theory? The Brisendine article addresses this only obliquely. rob

If a NQDCP informally funded with a rabbi trust allows employee directed in-service withdrawals with a haircut (10-15%), is there a risk of plan benefits being taxed under the economic benefit rule, at least with respect to the top executives who might have the financial knowledge to foresee the employer's potential financial difficulties? Ie, would this render the plan "secured" for tax purposes since, it would be argued, there would no longer be an insolvency risk? Thanks- Rob [Edited by card on 09-24-2000 at 06:51 PM]

A haircut is a provision in a deferred comp plan that typically permits the participant to request an in service distribution for any reason (ie, hardship not required), but with a penalty. The penalty is typically 10% or so "off the top" (ie the haircut). This 10% is forfeited. The theory is that the right to withdraw is subject to significant limitations, thereby avoiding constructive receipt.

Does anyone have a citation for the taxation of VEBA's in Massachusetts? Thanks- rob

May as well answer this too. Notice 97-6 at Q&A C-3 clearly indicates employee can defer to multiple plans (SIMPLE, 401(k), etc.) subject only to the overall 402(g) deferral limit. r.

Are SEP's required to be restated prior to December 31, 1999 (for SBJPA, etc.)? Thanks- rob

If an employee participates in two separate Simple IRA plans of unrelated employers, my reading of the rules is that the employee can defer up to $10,000, with no more than $6,000 going to either plan. If anyone's still here, is this accurate? thanks- rob