GBurns

Huh?? Why not just ask the question in the original post?

You cannot know anything without knowing what is meant by terms such as "leased employee". The term has more than 1 meaning and the consequences of each are different. You also could not come to any rational conclusions without establishing who is the common law employer.

I think the question of what mol means by "leasing org." and "leased employee" needs to be determined first so that issues of "Who's the employer" and "multiple employer plan" are understood.

While the executive would become a debtor of the bankrupt corp, the executive would still be better off than if no loan was taken. It seems a clear case of unjust enrichment and even possibly with the use of insider knowledge and special priviliges. Definitely a SOX type and 885 issue. From a substance over form perspective, making such a loan "close" to a bankruptcy filing or reasonable knowledge of the intent or posibility of such a filing raises many questions including those of fiduciary responsibility by all whether senior employees, officers, approving Directors or Plan Trustee etc. What would happen if the Bankruptcy Court in looking back determines that the loan was an improper transfer or a transfer made during the recoverable period? A writ of replevin? What happens is a creditor brings up the issue of the loan being a fraudulent transfer? From the IRS perspective, I would expect the attitude that such loans were lacking in business purpose and were intended to evade taxation etc and to evade 885. I also wonder what would be used a collateral security for the loan? The DC account?

The plans you outlined would not be a deferred compensation plan. The reason I asked the questions was because, unless the PD and operation specifies and restricts the money to reimbursing the expenses of medical care only, it might be disallowed as serving to defer compensation, which while still not a deferred compensation plan (as noted by mbozek), is a reason for care in design, implementation and operation. If there is any other option such as a cash out or transfer to pension, the plan would be disallowed etc.

Because deferrals are different from distributions. Because there is wording that would grandfather deferrals. Because there is no wording that grandfathers "haircut" type distributions. Because the issues are not yet clear and additional guidance is to be issued, so making statements that such distributions are definitely grandfathered, are premature and not based on reason or fact.

Significant action means exactly that and nothing else. Why add words? "Treasury is going around telling people" ?? It is amusing that you place so much credibility in what misc and most likely anonymous people claim that un-nameable Treasury people say. There might have been no first comment so there might have been no second comment. Notice what you say "the new law doesn't prohibit continued usage of haircut provisions in pre 10-2004 plans in regard to deferrals" Haircut provisions are distribution related not deferral related, so comments regarding deferrals would have no relevance to distributions, would they?

While a good summary, you might want to make a few corrections. "1. An employer can "pay" the premium and employees have an exclusion from income under IRC 105 ." No, it is IRC 106 "a benefit the value of which is excluded from income because it becomes an employer provided benefit excludible under 105"Also IRC 106 Premium is IRC 106. Benefits received from the health plan is IRC 105.

So? What bearing does that have on the rest? ********* I just went and re-read the Dorsey article. Where did you see anything that even implies "the suggestion that amendments need to occur"? The article was : http://www.dorsey.com/services/service_det...pubid=172644603 The phrasing that I see used was: "employers should consult with tax and benefits counsel now so that necessary adjustments to current plans and arrangements can be implemented by year end." "All companies with deferred compensation arrangements must immediately determine how the new legislation will affect their existing executive compensation programs." I see no other relevant statements and I see nothing that implies or suggests that amendments must be made or even that significant actions must be taken.

It is a document that tries to cover the cafeteria plan and the underlying qualified benefits, in a single document, instead of having a separate PD for each. Remember a cafeteria plan is only a means of preventing constructive receipt by allowing the employee's salary reduction to be treated as an employer contribution. A cafeteria plan is not the plan that provides the health or other benefits. You might want to search these Forums for previous discussions.

Just try to non tax an employee's section 125 salary reduction instead of pre-taxing it and you will see the difference and the need for the difference. Or ask payroll of they can pre tax an employee non-taxable expense reimbursement and they will explain the big difference. Excluded means kept away from or out of being included. Pre-tax is used to denote what is reduced.

mbozek, You are confusing non taxable with pre-tax. Non-taxabkle means not included in the employees gross income. Pre-tax means reduced from the employee's gross income. Pre taxing is done on a payroll. A non taxable amount is paid to the employee in any manner not including payroll even if paid with the paycheck.

While you can follow the old rules for "old money" being contributed, I see nothing that would grandfather the distribution of the "old money". I notice that many of the alerts being put out recommend that all provisions should be reviewed and a few such as the Dorsey & Whitney mention that "haircut " provisions are now prohibited. Since "haircut" provisions are distribution related and I see no blanket grandfathering of distribution provisions, I would think that absent such explicit provisions, "haircut" provisions that are not compliant are now prohibited and are not grandfathered.

This is not an issue of semantics. RR 61-146 does not permit "the direct payment by the employer to the ins co of the premiums on a pre tax basis". It has nothing to do with pre-tax. It has to do with non-taxable and excluded income. There is a big and important difference and the implementation of each is different. The question was about what we thought of his 2 suggestions and how to implement. The only way to "provide pre tax payments for health ins premiums now paid by employees on an after tax basis" is through a cafeteria plan. In other words convert the employee's after tac deduction or payment to a pre-tax salary reduuction. However, this would make the premium non-reimburseable on a non-taxable basis by the employer. Under 61-146 the employees would continue after tax premium payments but the employer reimbursement, if monitored properly, would not be taxable income. No pre-taxing of any premium is under 61-146.

What is the plan year? What does the Plan Document say?

q8r A premium payment account is the essence of all cafeteria plans, What does that have to do with this issue? ***** Rev Ruling 61-146 has nothing to do with pre-tax premiums or premium reimbursement, but it did have to do with non-taxable reimbursement of premiums that were paid after tax. But the original post wanted to "set up a pretax means of reimbursing managers" as a possible solution. The other solution to "at least set up a pretax means for managers to pay the premiums themselves" would be to set up a cafeteria plan.

It depends. COBRA applies to the underlying benefits not to the Cafeteria Plan per se. Each of the underlying plans, if subject to COBRA, must be amended as necessary. If however, they are covered under 1 of these Wrap documents, then that document has to be amended as necessary.

Jimmy, What did you mean by "haircut provisions"?

For what other purposes, other than health benefits, can the accumulated funds be used? Who determines or verifies that the funds are used for health benefits?

Why would the absence of a statute (Slayer or otherwise) in NY be relevant to the question posed? If the "event" falls under 1 of the 42 states with "Slayer Statutes", it does not matter what NY has, it matters what applies in that particular state. It also matters if, as in the Ohio case, case law allows preemption by ERISA. Julie, Although I know that your parent company is in Ohio, I still have to ask, Do you know what state would govern?

You are correct, it depends on the SCHIP option/options that the particular state uses.

Is this a DoL filed ERISA MEWA or is it a state regulated MEWA? If it is a state regulated MEWA, does the state have special state "COBRA" like mini-COBRA in CA? For there to be recent or any change in regulations there first has to be existing regulations. What are the regulations, that currently apply, to which you are alluding?

It depends on what you ask for. An exemption of a practice/principle or an exemption for a 1 time transaction. A 1 time transaction is expected to be done within a reasonable time. What is a reasonable time? That depends. Logically in a 1 time transaction if you wait too long the facts, circumstances, law and names etc might change, thereby possibly voiding the PTE. So if it is not proposed to do the transaction as soon as the PTE is issued, Why ask for it as yet?

ptpnthr, Wow! Where have you been all this time? From the wording of the post, this seems like a regular employee not a partner or co-owner. There is also no mention of that ex-employee being also on the hook in the lawsuit, so I read no equity nor Officer status. How would a regular employee become joint tort feasor? Regular employees are not party to the contract for services etc between a corporate entity and its customers. And under the agency concept, the principal is responsible for the actions of the agent (employee). I also question the possibility of being a co-fiduciary under ERISA. How do you see this?

Mary C, To whom is the Social Security Admin law applicable? What makes it applicable to this employee and/or dependent? The link that you gave is to the requirements placed on the design of the state's plan that is submitted for approval. It was not to the requirements the state places on the applicant for eligibility. How the state meets the Federal requirements to get approval of their plan has nothing to do with the issue. Florida's eligibility for KidCare is available if the cost of the child coverage in an employer group health plan exceeds 5% of the family income. See the 2nd Q. This is also subject to other factors and consideration which are handled by competent enrollers: http://www.floridakidcare.org/families/eligibility2.html MediKids and Healthy Kids, which are also part of the Folrida SCHIP program have other eligibility requirements. In any case Federal Social Security law would not pre-empt any state Medicaid law. which doesn't matter since the Florida and other state programs are approved by CMS and as anyone can see Florida allows enrollment in SCHIP programs even if an employer group plan is available, but subject to conditions. So the IRS says Yes and Florida SCHIP says Yes, but with conditions. georgia, Yes, that is so. As I pointed out twice, each state has to choose 1 of the 3 options. Georgia chose the separate program option, Florida and most others did not.