GBurns

I thought that is was already well settled that the giving of tax advice, tax planning and opinions on the IRC and Treas Regs, was not the practice of law. I did not think that it mattered what qualification the individual had. However, it could be that there are Bar rules apply to lawyers regarding tax matters even if other rules do not. In this case there is the additional issue of the document/contract which could create 2 separate issues. 1 issue being the document review itself and the other being the tax aspect. The document aspect might fall under the practice of law even if the tax advice does not.

Because someone calls something an investment does not make it so. An insurance agent and an insurance company, who are the people who provide MECs, are both prohibited by the insurance and other laws of almost every state from referring to a MEC or any other insurance product as being an investment because it does not meet the definitions etc. How then can it be an investment? Yes the insurance industry very often disagrees with the NASD but this is not one of those issues. The NASD is and always has been very clear that insurance products, even VAs and VL are not investments. That is why I gave the link to the NASD item where they warn against doing so in the same manner that Insurance Depts do. I noticed that you did not cite the IRC or Treas Regs in stating your interpretation that there are three statuses.

The OP did not state that the school district was a public school district.

Doesn't the employer getting involved in determining choice of or limiting investment providers etc create an ERISA governed situation? If so, have they been complying?

See Revenue Ruling 2002-3 which addresses the issue of whether or not premium that was deducted on a pre-tax basis is reimburseable. I think that the RR also gives some other cites. It could be that Revenue Ruling 2002-80 might also be applicable, if the HRA is funded with the intention of reimbursing premium.

Aside from the inclusion issue that mjb points out, the arithmetic still does not seem right.

Mike, While waiting to see how vebaguru answers your question, I have to wonder why you seem to think otherwise. You posted " ..I'm curious what the source of the first sentence is. We might *LIKE* it if we could advise our clients of such entitlement, but I'm not aware of one." It seems to me that since this is obviously an ERISA governed plan, the Plan Admistrator would be more observant to and be more concerned with complying with ERISA rather than state law unless it was an obvious and generally known as settled issue to which state law applies. I noted that mjb refers to Federal Court cases in NY and NJ and not to state court cases. While it most likely is that the state has a "slayer" or "unjust enrichment" law that would be applicable, I do not think that that is what vebaguru is saying. In my opinion, he is saying that pre-emption is not automatic so that thorough consideration of all aspects is needed, most likely resulting in interpleader. So to me it is more Can you show why the Plan Admistrator is NOT entitled to ERISA reliance?

That is the problem. To become a MEC the item has to fail being insurance as per IRC 7702 etc. Which raises the question of the original intent for making the purcvhase. Was it purchased to cover an insurable risk then because of either over-funding or higher than expected returns, failed to maintain the corridor and so became a MEC, or was it intentionaly purchased as a MEC? If intentionally set up/purchased as a MEC, that raises issues of suitability and product selection etc. Life insurance, by state insurance law, NAIC and NASD cannot be referred to or sold as an investment and contributions must be referred to and treated as premiumns and nothing else. As a result life insurance cannot be an investment product. This applies even to Variable life etc with investment components: http://www.nasd.com/web/groups/rules_regs/...asdw_004016.pdf Also since it is a MEC, that means that the death benefit has been overshadowed by the cash value component, so Why would this be the product used to insure the losses incurred by the premature death of the insured, which is the purpose of insurance.? All of the above raises fiduciary and suitability issues regarding what was purchased,and why etc. If it is not insurance and not an investment, How do the proceeds etc get treated?

But would a MEC be treated as an investment in the first place even assuming that there is no issue of "insurable interest"?

Why don't you visit sites such as www.freeerisa.com and look up a few of the F5500s filed by others who have the same situation and see how they do it?

You are an accountant, but are you THE accountant who made the decision to prepare the Trust financials in that manner? Does it really matter that another accountant thinks that it should be different, even if it does not seem to matter to the IRS/DoL? Is the fact that the figures are different any different a situation from that which occurs between figures for tax accounting versus figures for financial reporting and accounting? Do we not actually keep 2 different sets of books?

Be careful as to how you calculate 2%.

leevena I apologize, you did state plan not employer. That is why I asked the OP for clarification as to whose funds these were so as to see if DBRA non-forfeiture and no vesting applies. One of the reasons that DoL and PW entities have a problem even with reversion to the Plan is that in the past it was very prevalent to have plans designed and operated with the sole purpose of having the forfeitures be allocated to the remaining plan participants, in reality lone surviving participant. Guess who this was? Many of these are still around and there still are many administrators and providers who subscribe to this. I think only because they do not have enough plans administering to need to either get into the finer details or to get blasted in an audit. Enforcement is also weak in many areas and especially among contractors who do not do many jobs.

It is a basic tenet of Davis Bacon that money taken from an employee's wages cannot revert to the employer. leeevena I spent more than 6 years and my administrator was the largest. I sold/or serviced more than 20 plans and went through many more than 3 DoL and state/county audits of those plans and audits of others. I would not have posted any of this mainly because it is irrelevant. I know people with vastly more time in the industry who can still hardly manage to find their car in a parking lot.

How can you have ineligibility if the health benefit that is provided is part of the employee's wages that could have been paid in cash and is part of the Prevailing Wage as per the Wage Determination for that job by the DoL? Or are you only referring to an employer amount over and above that taken from the wage redirection?

Don't you first need to clarify both "own" and "operate" as those terms apply to these individuals and the non-profit in order to determine if there can be a 457 Plan ? If they do own, as in have all the stock, then it might not even be a non-profit. If they do not but really operate, they might not even be employees but might be the senior Board members or something else.

As I clearly said in my first post "I have no answer for you. " regarding what can/should be done. Reasons beings that I do not know enough of the facts such as wording of the Salary Reduction Agreement, Plan Document provisions on this issue (if any), employer/employee relations, amount of money involved etc. Where do I get this stuff ""stated period" - "authorized period" ? Just read a few Salary Reduction Agreements and you should see where. They are not usually indefinite.

I asked about statewide and about number of employers in response to your use of both terms. You responded about number of insureds and nothing about statewide. I was not being argumentative, I was pointing out that you were looking at the wrong thing again and that you did not answer the question that was asked.

They agreed to the conditions stated in the Salary Reduction Agreement, BUT. The salary reduction agreement states its specific purpose, and that is not what was done. Additionally many are worded with a time frame such as being for the plan or calendar year. Taking money that is not going to the Plan but is for reimbursing the employer would not be consistent with its stated purpose. Taking the reductions after the stated period would also not be valid since the authorized period has already expired.

A Form 5500 does not state not imply any geographical coverage area nor is it necessarily an accurate reflection on number of lives covered at any particular date, especially by coverage type. Also the Number of insureds does not mean the number of employers.

How do you collect "de facto" loans from employees who do not agree to salary deductions or any other repayment method? How much money is involved versus the cost of legal counsel, "redoing" the payroll, plus amending tax returns etc?

What does the filing of a Form 5500 have to do with any of the issues? You are off on another tangent that has no relevance.

You cannot have just 1 plan, you have at the least 2 plans. Plan #1 is the health insurance plan and Plan #2 is the POP which is a section 125 Cafeteria Plan which provides the employee share of the premium for Plan #1. The POP is not the health insurance plan it is only a premium paying mechanism. If you also have premiums being deducted for other items such as Vision and Dental, those are additional plans.

Now that I think about it, I remember 2 local employers, 1 private 1 public, who 1 year both took until about July or August to fix the errors in withholding that were reported after the first bi-weekly payroll in January. They both were under union pressure to correct and it involved over 5% of the employees in each case. So it is not too much of a stretch for me to think that these employees could have dutifully reported the error in February right after the January payroll, but the employer just never got around to fixing the problem.

It must be something in the water. There is a thread on the 401(k) Forum that has almost the exact same situation.