GBurns

You probably mean "loan" not "withdrawal". If your 401(k) has a loan feature, of course, you can borrow from your 401(k) for this purpose subject to the Plan restrictions and IRS stated repayment schedule. The length of time for loan repayment is max 5 years but for a primary residence can be longer. Definition of "first time buyer" might best be defined by your 401(k) SPD and Plan Document or operating practice. Your or my definition means nothing.

I have never heard of such a scheme and doubt that anyone has done this with legal advice. I suggest that you ask 1 of these companies that are supposed to be doing this for the legal rationale and support. Athough only proposed regs, the Treas Regs 1.125-1 and 1.125-2 are what most plans use as guidelines. As I see them the unused funds revert to the plan and plan participants, not to the employer. The plan is bound to operate for the benefit of the participants. Being the sponsoring employer is NOT the same as being the Plan. Making this contribution would of no benefit to either the Plan or the participants, but would be as a charitable deduction to the employer. Something benefitting the employer would not be allowed the reversion of funds to the employer is not allowed.

What is the big deal, it has been around for ages and there are variations on this type of non-qualified deferred compensation arrangement? The questions should be Whether it delivers the purported tax and other benefits promised ? and Whether the new 409A rules affect it and How?

Why do you think that higher commission reflects higher profit? Profit is net of commissions. Commissions are part of the pricing, not part of the profit. Anyhow since you sell LTCi and use the LEAP system, Why not do bufhal the favor of answering his question about the costs of delaying purchasing by using your software to do the illustration? What makes LEAP better than any other "Selling System"? Which ones have you compared it to?

Why would an HRA be subject to 419 limits. There is neither a Trust or a separate Fund etc. It is entirely an accounting entry as are most other 105 MERPS, which is all that an HRA is plus the rollover feature.

I have tried very hard to understand but seem to be having a problem. You first stated "the coverage will be obtained from an insurer but the Agency will administer the benefits" then you posted "the insurer provides admin only not the coverage." As a result I cannot determine whether you want a self-funded plan or a fully insured plan which is an important issue. There is a similar situation regarding who will get the coverage. There is also a question regarding the govermental employees, for example: You posted "one being its own employees, one being other County employees." This implies that the employees of this County Agency are not county employees, which would be a very unusual situation. Employees at County Agencies are invariably county employees. I have never seen a case where they were not. In a nutshell I cannot determine what it is that you want to offer and to whom.

What does "researching the possibilities" mean? Why not ask one of the providers of such services? I am sure that they would be happy to give you afew references.

If you pre-tax premiums for voluntary items such as STD and LTD the benefits are taxable income. Items such as Cancer and Sickness & Accident have the indemnity payments as possibly taxable and the medical expense related payments possibly tax free depending on other reimbursements or coverage. Enough grey areas to make you have to think. A good source of info is the supplier of the voluntary products. Ask them for something in writing regarding the taxation of any benefits. Which carrier are you considering using?

I assume that they employee will pay the premiums with after tax dollars and will not pre-tax under a section 125 cafeteria plan. The only thing to remember is that the employer will have to give enough of an increase to also take care of the taxes that will be paid related to the increase. The employer will also have the extra matching of FICA and an increased payroll amount that might affect Workers Comp, UC, SUTA and General Liability premiums. Still a good idea, which if communicated properly will be appreciated by the employees. If not communicated properly, the opportunity to create valuable goodwill will be lost. The value of this goodwill can offset the extra expenses.

"How would you break down the pre/post tax contributions and imputed income amounts?" You are asking about imputed income caused by the contributions to premium. That is not the main issue. The main issue is imputed income caused by the benefits recieved. If the coverage is not employer provided and/or is paid for on a pre-tax basis, it is the benefits that are now includable in gross income. It is not the $400 premium that bothers me, it is the $70,000 hospital visit that becomes taxable income. So it might be better to stop worrying about carving out the smaller premium and worry about the taxation of the larger benefits.

Remember that there are 2 different factors in the issue. The premium and the benefit. Premiums paid by either salary reduction (pre tax section 125) or by other employer contribution are a section 106 exclusion whereas the benefits received under a qualifying plan are excluded from the employee's gross income under section 105. This exclusion of the benefits is not enjoyed by domestic partners etc. Even if the premium payment turns out to not have been affected because of the election of family coverage etc, the benefits received would not be excudible from gross income, hence the imputed income of the value of the benefits. So it is the recieval of benefits that is the issue not the premium.

Since agents do not get a cut of the insurance company's profits and do not even know much about the profit structure, it is illogical to think that " agents love to sell because the it is a product stacked in the favor of the insurance companies". Agents probably try to sell LTCi because they are either afraid of discussing death benefits or are trying to sell something that has less competition. They also try to sell it as Long Term Care, leaving off the insurance in case there is a stigma or reluctance to sit down with an insurance agent. Some conjure images of Woody Allen.

The law is clear. It is what some companies think that they can do with the law that is not clear. That is why many of these cases have different issues. mbozek, That was an excellent reminder that the devil is in the details. Too many people think that the restraints are caused by narrow sections of the IRC not realizing that very little stands alone and much is indirectly related.

forohonek Have a happy holiday!

mbozek, Your post seems to have contradictions. The cost of coverage for non-employees is either excluded or included, it cannot be both. Your first sentence versus your last sentence with some of the second thrown in. Christine, What happened to the members of the public? What does "administer the benefits" mean in an insured health plan?

What is the relevance of "employer" regarding members of the public? Members of the public are not even necessarily non-Agency governmental employees, they might not even be employed. What is the mandate of the state statute that allows this health care plan to be set up? The problem might more be that the offering of coverage to the employees has to be done as an employer, whereas members of the public, not being employees, would not be able to participate in an employer sponsored plan. I do not think that even a state staute can change this requirement of the IRC. Not meeting the IRC requirements should create tax liabilities for the plan participants. There might be no 106 or 105 exclusions available.

"I re-read the book's concept today and see that I mis-presented it here to an extent" This is what I warned you about on December 16th. What you think the promoter means might not be what the promoter really means nor how the scheme operates. The term/word "disregarded" is a legal concept and is not restricted to the IRS. It is also the result of "piercing the corporate veil", which can be done by any court for any litigant, whether regulator or private entity. "Piercing the corporate veil" means that the corporate form and protections are set aside and disregarded. RE: "Item #1 The State LLC law (all 50 States have it) that prohibits an LLC for doing acts for which it is not authorized to do pursuant to its articles of organization." That has nothing to do with your statement that "the two business operations "can not" (by state law) be combined ". It was to that statement to which I responded asking Which state law? Your response about State LLC law is irrelevant. As regards your statements regarding PLRs, I will leave that to someone else, if anyone is inclined to correct your statements.

Representatives/agents of any sort (whether fee based planner, full commission sales rep, enroller etc) has the purpose of making a sale. That is their whole reason for being. As such they are not a source for information that can be relied on, but to be taken and evaluated. That is why even your TSA brochure etc tells you that only what is in the contract is binding. The company does not even want to stand behind what their own agents might tell their prospective clients. Why should you take what is said any differently? How did you verify his "knowledge and judgement"? The sales rep is not part of the employer's payroll staff. How can that sales rep makes representations about payroll processing? Why did you think that he could speak for the payroll dept and disregard what the employer has printed on the forms and documents? It has more than once been published that the IRS telephone people have a high rate of giving wrong answers. What reason is there to first believe that the answer that you got was correct? What reason was there to even believe that the person understood you? Those were my main reasons for "dumping" on you. The TSA world has had volumes of publicity about its questionable products and sales activities, so it was rather surprising that someone who has acumen and intelligence, after getting into this situation, decided to "dump" on the employer regarding being "enthusiastic".

What state law prohibits the combining of two business operations by either the state or the courts? What state law prohibits the "setting aside" or the disregarding a business operation by the state or a court? What state law prohibits the piercing of a corporate veil? Any state will do.

So that it is not what I alone think, Here is an explanation that is better worded than mine : Note the last question: http://advisor.morningstar.com/advisor/doc...32,3629,00.html Note that this interpretation is dated 05-14-04 thereby pre-dating PLR 20045057 by many months and therefore is not as a result of this PLR but as a result of what the authors (including B Picker) saw as existing law and precedent. The cites given which include 1.408-8 A7 that mbozek referred to, and also includes: Rollover to IRA in decedent's name: IRC § 402©, Treas. Regs. § 1.402©(2), A-12, § 1.408-8, A-7. PLRs 9418034 (spouse-beneficiary allowed to roll decedent's profit sharing plan and IRA benefits, by means of trustee-to-trustee transfers, to an IRA in decedent's name); 9608042 (same, regarding decedent's money purchase pension plan); 9842058 (same, regarding decedent's IRA). Note that PLR 9418034 etc pre date PLR 20045057. The wording that is in PLR 20045057 that was referred to by mbozek as being from Treas Regs 1.408-8 A-7 is on page 3 2nd to last paragraph of PLR 20045057, but also note the last paragraph of the PLR. Note should also be taken of A-5 and others. I trust that these are enough cites to satisfy those who wanted cites.

Rude? Where? That is not rude, that is just advice as to how not to have a problem next time. What do you suggest that he do to correct the situation that has occurred and how not to have it happen again? Or do you think that is is the employer's fault for not processing the salary reduction in the 7 working days before the date of payroll (without giving any allowance for close off dates and processing time and assuming that it was handed in immediately)? Or do you think that the employer should have taken the salary reduction anyhow regardless of the fact that there was not enough money? Have you ever seen a negative paycheck? Or do you think that the employer should have stopped the payroll processing, called his wife and asked what should be done, then finish the payroll? Or the employer should use the guidance in the Rev Proc even if it might not be applicable, but just because the employee's spouse says so? Or do you think that the employer should be berated for not being enthusiastic?

If 3 entities have merged, there should now be only 1 entity, shouldn't there? If there is now only 1 entity, I do not understand "each entity would like to maintain current investment options/provider ". What do you mean "each entity"? Divisions? Anyhow, as austin3515 points out, you should offer all 3 to all participants if you can keep the plan as described.

But still the question goes unanswered.. What is the name of the book? In any case, you have fallen into the trap used by most tax shelter and scheme promoters. You are trying to get an answer to what you see as the questionable areas. You will never get the correct answers because all you have are your own answers to your own questions. Your questions are based on what you percieve as being the issues. What you see as being the issues might not be the issues. What you are doing is seeing issues and answering your own questions which might not even be relevant to what the scheme really is all about. What you think the promoter means might not really be so. Only the promoter knows what the promoter means and how the scheme is supposed to work. You cannot have a valid answer based on your own speculation of what the scheme is and how it works. If you come back with negatives All the promoter has to do is to state that you did not look at the right things because you did not understand. The end result is that since you did not find anything wrong then it must be right. It is for the promoter to provide understandable proof, not excerpted cites. It is for the promoter to show to the last detail why it works and how it complies. It is for the promoter to answer the questions that have been raised and then it is for you to verify that the answers are correct.

As far as I see the Rev Proc applies to corrections related to operational failures. What you have described is not an operational failure in my opinion. If you look at your wife's Salary Reduction Agreement, there is most likely a disclaimer or wording that states that the deduction is not guaranteed nor is timely dedcution. It is also unreasonable to have expected it do have been done so soon anyhow, payroll changes take time and definitely Nov 27th was asking too much. Additionally, regardless of what the IRS person might tell you there are laws and even CBAs that prevent reducing an employees salary below minimum wage, which is what might have happened here. There are also the questions of whether or not the payroll software would allow a reduction that large and also of the payroll software priority of deductions logic. If the software takes out mandated and/or previously agree deductions first, then of course there would not be enough left, so no TSA reduction. The problem is not in getting the employer enthusiastic or making timely corrections. The problem is making late changes, too late tax planning, inconsiderate requesting of a deduction and trying to force what might be inapplicable. Next time do things in a timely fashion.

Why do I get the feeling that we are being used by the plan promoter as a sounding board from which to get ideas that will be used to answer questions and to explain the scheme to potential clients and their advisors? I get the impression that someone came up with the basic scheme but could not tie the pieces together themselves, not unlike some of the "double dipping" "419 VEBA" "132 Transportation" "COBRA" "BOSS""Split Dollar" etc etc schemes. The pieces work individually but not together. I noticed that we still cannot get disclosure of the name of the book etc. Is someone afraid that someone reading the Forum might have specific input, comment or knowledge about the scheme which if identified might cause some embarrassing disclosure?