GBurns

A simple Google search very often gets the answers to many questions very easily: http://evans-legal.com/dan/afr.html However, it is always good to post the question because quite often there are others who find the answer useful.

Do not get hung up on the term No-load, as the SEC and others keep trying to point out that: A Word About "No-Load" Funds Some funds call themselves "no-load." As the name implies, this means that the fund does not charge any type of sales load. But, as discussed above, not every type of shareholder fee is a "sales load." A no-load fund may charge fees that are not sales loads, such as purchase fees, redemption fees, exchange fees, and account fees. No-load funds will also have operating expenses. In other words no-load does not mean low fees or low expenses and vice versa: "Be sure to review carefully the fee tables of any funds you're considering, including no-load funds. Even small differences in fees can translate into large differences in returns over time." I suggest that you do some research so as to better understand the issues. A good place to start is: http://www.sec.gov/investor/pubs/inwsmf.htm http://www.sec.gov/investor/pubs/mfperform.htm Heed the warnings posted and stay away from Variable Annuities and middlemen. Also stay away from salesmen who cannot or will not explain so that you can understand or who try to sell you on the basis of how much commission they make. If you use an advisor make sure it is someone who sells you that which is best for you and not just what they have to sell. Having more than 1 mutual fund would likely not be diversification of your investment portfolio and any advisor worth their salt should know that.

I am sorry that I might seem touchy about the subject, but I am. I have seen too many plan participants get "ripped off" and many times the employees who did the paperwork just never realized the consequences to the employee, ex-employee or beneficiary much less the potential for litigation etc. They very often were just following orders from superiors who had not a clue that any laws might be involved. I still remember my "awakening" to pension rip off which occured back in 1967. Since then I have seen numerous instances and am somewhat thankful that the courts have eventually come to realize that such complaints are not frivolous. Maybe one day the DOL will become really effective in this area too. In this case, I guess you could not have done that which you did not know needed doing.

All plans, health and retirement etc, are supposed to have a Plan Document which will explain what is provided, how, when etc etc. The retiree benefits program has to have some written document or agreement, whether legislation, employment contract, collective bargaining agreement or all of these so that what is being provided is known. Service providers such as Aetna would operate under a contract which would have been bid trhough an RFP or similar process. These documents together will tell you what is to be provided and how, along with operating procedures, responsibilities etc. Nothing would be done by word of mouth. The answers to all of your questions are in the Plan Documents. What you should do is get a copy of every one of these documents and read them, rather than speculate or go by what people think. To prevent disqualification plans have to operate as directed by their Plan Documents and assuming that applicable laws are complied with. By the way, What is it that you are trying to accomplish?

Ken, You asked " ..can you give a basis for your statement that a pre-tax FSA may not be offered outside the cafeteria plan rules?" in response to a post that pointed you to the Proposed Treas Regs and both mbozek's and QDROphile's explanations of the IRC and the same Regs. What else could you have been doing but questioning that it cannot be done, thereby meaning that you think that it can be done since the basis for QDROphile's statement was already given, namely the Proposed Treasury Regs and the IRC?

The inclusion of "Does he forfeit the benefit?" caught my interest and I wondered what the thought process behind this might be. If you are going to entertain even a cursory thought of a forfeiture, I would suggest that you think of the possibility of an operational failure of the plan and the possible consequences. To wit, the Plan did not distribute the benefit as per its PD nor did it do so within the statutory time frame which mbozek gives as being 5 years. What happens to a plan that does not operate as per its own PD or as required by law? Disallowance?? I suggest you do as suggested by mbozek and do not run the risk of unintended consequences. The forfeiture is not large enough to have warranted the thought.

I more think that it is you, Ken, who should state why you think that salary reduction (for this purpose) can be done without a cafeteria plan since you are the one questioning the established albeit only Proposed Regs, long standing tradition etc and the response by mbozek. mbozek points out there is some grey involved regarding the exclusivity of 125. Cases such as Express Oil Change etc do not resolve the issue. So unless you want to also challenge the IRS regarding this issue 1.125-1 and 1.125-2 are what we go by. So while 1.125-2 Q&A7 shows that there can be an FSA outside a Cafeteria Plan, there is nothing that allows pre-tax funding of such an FSA, which leaves us with employer only funding or after-tax funding of an FSA that is outside of a cafeteria plan.

A section 125 plan is a cafeteria plan and a cafeteria plan is only and always a section 125 plan. The only cafeteria plan that is not a section 125 plan would be one related to your lunchroom (a cafeteria for food). You can have a health FSA that is outside a cafeteria plan but only if there are no employee salary reduction contributions.

The same as applies to an FSA within a Cafeteria PLan, namely, Proposed Treas Regs 1.125-1 and 1.125-2 etc. In particular 1.125-2 Q&A 7.

Doesn't Federal Law, SS Law in particular, also prohibit the use of a SS# for such a purpose?

Where did you see a "recent memo where IRS thought plans were giving too much to low paid employees" ?

To hear that people think of their compensation in terms of it being a "package" reminds me of the vast number of people who have been deliberately underpaid by their employers under the guise of them being "Managers" and "Salaried Exempt". All are "con jobs" perpetrated for the sole purpose of uderpaying the employees. Who did the "selling" of the illusion? Wasn't it done through HR? Who should have known better? HR? Who had easy access to and should have awareness of employment and labor laws? ??

If an employer decides that it can no longer afford a particular level of benefits, and so decides to discontinue it in 90 days, but then finds out that there is a way to pay for most of it if it is modified a little and so shortly afterwards announces with "huge fanfare" the availability of the new modified benefit, Why should this be regarded as a "deliberate attempt at manipulating mass psychology" and have its legality etc questioned? I guess once the entitlement "gimme" mentality sets in, rational behaviour goes.

I must be missing something here. How could money from the IRA be debt financed? Or did you mean the CRT? But if the CRT, isn't that always debt financed? Can an IRA purchase securities or make investments etc that are not registered in the US, as are most CRTs?

What allows this separate type of "premium payment FSA"? Does 1.125 -1 or 1.125-2 etc apply, if not what does? On what payroll would you pre-tax COBRA premium for this separate FSA?

Why would you refer to a Canadian Royalty Trust as being an MLP? What does your prior purchase of MLPs have to do with CRTs? While there are a few CRTs that are listed on NYSE etc, the question that mbozek posed still remains the problem. Is there a Custodian who will accept this for an IRA?

In adminstering an HRA there is the monitoring of eligibility, the accounting of contributions and the adjudication of claims. There is no such thing as "deductible only" since an HRA has no deductible. Aside from software, there is hardware, personnel and legal issues. You need adequate software running on adequate hardware operated by knowledgeable people in a firm that has legal resources (for research and counsel) and which firm has adequate fiduciary liability etc coverage. It is possible that your firm needs to raise its knowledge level quite a bit before considering the move.

The problem with reading an SPD is the inclination of the "unknowledgeable" or "unprepared" reader, to accept what is in it as being true and acceptable. For example, an SPD that says that the employer can deposit salary deferrals whenever they choose etc might give frogman the idea that this is acceptable and that there is nothing wrong nor anything that can be done. So before reading the SPD or Plan Document etc, frogman would be well advised to do some research first starting with the links given by pax then moving on to sites that can be found using Google such as : www.401khelpcenter.com

Maybe you should check and see whether or not being a CPA makes a person a tax specialist. The answer will surpirise you.

Since salary deferrals etc are deposited in an investment account, How come you did not get any statements from the investment vehicle during this period?

As vebaguru pointed out clarification is needed. If the Drs had no income the Drs could not be deferring because deferrals are deducted from their income. However, it could have been that the deferrals were being made from what were really "Partnership Draws". Now that the LLC turns out to have a loss there is nothing to offset the "Draws" and the "Match" was not earned. You would have to do the reversal as previously stated. However, the whole thing seems spurious anyhow. If any amount existed in the LLC that was available to be set aside in "a suspense/holding account " it means that there was revenue. Revenue being made available for this purpose would seem to indicate that there was a "profit"/earnings for the year. If there was "profit"/earnings for the year it had to be distributed to the partners. If there is a distribution to the partners, How can there be no income? Paying the Drs personal expense as being business expenses so as to be able to report no income, serves very little purpose in the overall scheme of things.

While it is possible in theory, to use an HRA to fill the gap between an HSA and the medical plan deductible, it seems impractical to do what you want to bo in the manner you describe. It should be impractical to administer etc. Why would anyone want to go to all this trouble when a standard section 105 medical reimbursement plan would do the job very simply? What is a group HRA? The purpose of BOTH HRAs and HSAs is to fund the deductible. Why would the employee accept the higher deductible of the catastrophic plan then set aside less than that amount in the HSA so as to leave an amount for which the HRA would be needed? HRAs are employer funded and have no employee contributions and could not be self funded by the employee anyhow. As far as I know the employer must contribute equally to every eligible employee and therefore should not be able to select the few as you identified. If the employer has to contribute to every employee, then there would be no purpose for or benefit from your plan design. Reinsurance of the gap seems pointless and should be impossible to get, not only because of the small amount involved, assuming that it is even possible to identify an amount of potential liability, but also because of the difficulty in claims adjudication. Since the HSA is the employee's own private information and not under employer control and so the HSA account balance is not known, How would you know when to "kick in" the HRA?

As far as the 1000 hours service requirement goes: What are you paying this employee for, if not for services rendered which according to most payrolls is time worked? Will you be withholding income taxes and FICA? Will you be paying the employer matching FICA? If you are, What is the authority for doing so, Is it not that the payment was wages/compensation for services? If you are paying for services, Why would this service not meet the service requirement? Why would this be treated differently to any other authorized paid leave of absence?

An employer usually implements employer sponsored plans that are in the interest of the employer. While an employer might forego its own interest in favor of something that is in the interest of its employees, that raises the question of whether an HSA would be of any benefit to the employees. For many employers an HSA might not be in the best interests of its employees when the overall picture is considered and even without assuming that it is of any benefit to the employer. If it is determined after evaluation by the employer that an HSA is of no worthwhile benefit, Why should it be implemented?

Why would there be a need for such a thing as an after tax 401(k)? You can contribute all you want to an investment vehicle of your choice with no need for PD, plan administration, investment choice restrictions etc etc. So ,Why the need for the "shell" or whatever? The vast majority of employers have also not installed Health Savings Accounts. Some because they are waiting for the dust to settle, some are waiting for HSA QHDHP to be available in their area, some have decided that there is just no benefit. There are many reasons why these employers have not put in an HSA and there are reasons why many will never do so. Why do you think that your university or any employer needs to have an HSA?