GBurns

pandy Do both a Google search and a search of these Forums for "ruling 61-146" and "revenue ruling 61-146". The results will provide you with previous discussions etc on this same issue.

The major product suppliers all have good summaries/overviews. Collect a few from each category and you should have what you need. Pru, Pacific life, Hartford, Mass Mutual, ManuLife come to mind first.

What about the voting rights?

Yes. It is called changing your mind. Read the articles and look up more detailed articles on each mentioned case and you will see that almost all did not involve bankruptcy. The plans allowed for changes and the change was to either do something that would cause the retirees to drop coverage because of affordability, accessibility or otherwise, or just eliminate the coverage. Also look up more articles for more cases such as Visteon. There are dozens. I think Hewitt did a survey and reported the large numbers. I think this was mentioned in the AARP article. See also the AARP action against EEOC for another aspect.

Don You are once again being confusing. You wrote : "I am curious if an employer who could not legally make these type of changes, was given an okay by a federal court." Why would a court okay an illegal activity? Have you ever seen that happen?

Here is one of many articles which names some companies who have terminated or changed retiree health benefits. You can find the court cases at your leisure. I do not know why you would think that they all have to be Federal cases, many are not, but here it is, see what you find. If you need more names, Google works very well. http://www.aarp.org/bulletin/yourmoney/broken_promises.html http://protectseniors.org/Lost-retiree-Healthcare_news.htm

Don At $50,000 per family (and presumably less per individuals) it does not seem to make any sense. Aside from statutory caputal requirements, set up costs, and ongoing administrative costs etc, it does not seem to be worth the effort for a small group. Mini-med or limited benefits plans should be a much more feasible way to go. I doubt that you will find any regulatory body who would exercise the "discretion" that you allude to, and not properly apply the statutory capital, reserves and other laws and requirements that apply. The capital requirements alone should be enough to kill your idea. If not the MEWA prohibitions should. There are probably a number of Association plans that have already been estalished and which have already overcome other obstacles. It does not seem worthwhile to "re-invent the wheel" in this manner, just to have a VEBA/MEWA. An insurer (aside from capital and reserve requirements etc) does not have lower liabilities based on whether it is a commercial or a non-commercial insurer. Liabilities are a function of amount at risk. Also, as a general rule the larger the risk pool, the lower the risk, so a larger insurer gets to spread the risk or have better experience simply because of volume. Volume also carries the possibility of better operating margins and free cash flow etc.

I have found that the communications have to developed around the "buzz" issues that apply to your particular situation and location. Sometimes this can be taken from the news media, but sometimes the "buzz" has to be created. In any case it has to be handled appropriately. In general, you have to get them to understand and sympathise with the employer. The communications have to point out that costs are increasing and the company can no longer afford to bear the full burden. While doing this you, at the same time, allude to the unsavory choices that the company might have to make if no way is found to reduce the company's burden. These include reduction in benefits, reduction in overtime and even some layoffs. If properly handled the employees will easily accept the fact that some will now have to pay a share. Make sure that you tout the great help that the employer provided section 125 cafeteria plan will be to the employees in reducing the impact of their new share. Paycheck comparisons will be a great help.

What "excepted benefits" are you referring to? What ERISA section covers these "excepted benefits"? How does the employee pay the premium? Through the cafeteria plan under an SRA?

Don That discussion does not deal with VEBAs even indirectly. You keep going in circles and never answering the questions: When and where did the IRS ever say that VEBAs are non-commercial insurers? Aside from that Which VEBAs do you know of that sell anything and To whom? And once again you are back talking about VEBAs and "innovative plan designs". So once again, Which VEBAs offer or have these innovative plan designs?

Don If a cafeteria Plan, and its incorporated benefits, are established, endorsed, adopted, maintained, vendor selected, TPA selected and employer funded or partially funded, by the employer, How can a portion be treated differently than another portion?

Don It is very very rare for an employer to allow an employee to "bring" anything for many reasons. There is a practical or functional liimit on the number of payroll slots (hence number of disbursement checks) that any payroll system or payroll department can handle. Not many of the insurance companies will accept payments from sources other than as set up with the policy application and provisions. Not many will accept third party payments. Many will not list bill. Etc ETC. It is just impractical to allow more than a few employees to randomly provide insurance policies. And even then it probably is not worth the risk and effort to do it through a cafeteria plan under the current laws and in use regs. This could possibly change in a few years if the new 125 Proposed Regs come into play and cause condusive ERISA guidelines to be issued. Then there is the issue of the setting up of the 125 cafeteria plan. Not only is it an employer provided plan, but it is selected, endorsed and adopted etc by the employer who also selects the TPA and quite often controls the funding. I cannot imagine a cafeteria plan, especially with benefits credits, flex or FSA, that is not an ERISA plan.

That something gets treated in a certain manner by the IRC, for satisfying a specific peculiarity, has nothing to do with the DoL and its regulations.

Don I am paid at a very high rate for explanations and advice etc. But even then, I cannot read documents for people. You will have to understand the basic subject matter, then read the documents to determine applicability and relevance to each particular issue. I think that someone else recently made a similar suggestion to you also.

With regard to Peachtree in particular, How can it be between the individual and the vendor, when the product is being sold to the business ? I cannot recall seeing any of these leveraged and/or finaced products that were not targeted at the business just like the Peachtree LBP SERP Rescue.

I am surprised that a company large or sophisticated enough to have both a VEBA and retiree life issues, does not also have 409A issues. Although I know a few F500 companies where either or both the head of the Tax Dept and the head of Benefits did not know either, even though mentoned as an issue in their own 2006 and 2007 Annual Reports. Do you have things such as a Deferred Compensation Plan, a Supplemental Executive Retirement Plan, an Executive Severance Plan, a Stock Option Plan or anything other than the basic employee benefits?

As someone said recently, Huh ? Both of the EO papers that you reference are irrelevant to both my questions and the issues at hand. The GCM in particular. Additionally, has it not dawned on you that there must be a reason why there are no VEBAs with these innovate plans and operations that you keep alluding to ? Constantly alluding to something that does not exist seems futile.

Don What VEBA regulation would be affected by using these accounts for other than medical expenses? Where do you get this non-commercial insurer hang up from? Also which VEBAs have these "innovative plans and operations" that you keep alluding to ?

While the facts and circumstances of each case has to be considered for a rational opinion, in general, growth (and I assume this is interest or investment related) would probably be UBTI and subject to some sort of taxation. The purpose of the limitations etc is not to deal with excessive reserves. They are there for abusive reserves, whether excessive or not. There could be a business reason for accumulating reserves that have nothing to do with "reason for existence" but have to do with ability to continue operations. For example, Would it be prudent for a VEBA to accumulate funds with the purpose of using these funds to purchase a building in which to house its Operations Center etc because the current premises are sub-leased from the employer who possibly will soon give up the lease as part of a corporate downsizing effort? The limits were set so as to restrict abuse, not to stop accumulations for valid business reasons. A VEBA like all trusts are business entities also, and must operate in a profitable and "business" like manner in order to have continuity. The law allows this.

Not only could I not find any such claim in the article, but it was not really relevant.

In the cases that I dealt with, all the Rxs were from either an MD or an Orthopedic Surgeon. I am not sure what sort of prescriptions DC can write. It could be that while a DC does not write Rxs for medicines, they can write for MRis etc, but I really do not know, so you might want to check.

If overfunding is not deductible, How can it be tax avoidance ? Even then, What's wrong with tax avoidance? Isn't that the purpose of tax planning and a major reason for most of these machinations? But, as you do so often with other things, you could be confusing "tax avoidance" with "tax evasion". What does excess reserves have to do with providing insurance or anything else?

I had it accepted as deductible during an audit by the IRS. Although not done through an FSA it was done under a C Corp section 105 MERP for multiple years. I also know of more than one case where it was allowed on 1040. So I cannot imagine why it would not be allowed under an FSA especially with an explicit Rx.

Why would overfunding, to any extent, cause a loss of tax exempt status?

Don Maybe the IRS can explain 512(a)(3)(E) better: http://www.irs.ustreas.gov/irm/part7/ch12s05.html You might also want to look at Treas Regs 1.512(a)-5T which shuld still be valid, but even if not, it gives an explanation and some clarification of the issues. ***************** Also, I get the impression that I do not understand what you mean by "individual accounts" and how they work as related to the application of the IRC and Treas Regs. To me, in the context of this discussion, "individual accounts" are record keeping facilitators and have no connection to UBTI, qualified asset accounts, asset accumulation, or deductibility etc. What do you mean?