Christine Roberts

California employer wants to allow employees to "donate" unused paid time off/vacation pay to fellow employees who experience a catastrophic event (death, illness) for which they are financially ill prepared. Donated hours are converted to cash if the donee employee's immediate need is cash rather than time away from work. Here is the California employer's dilemma: 1) to avoid donating employees' experiencing constructive receipt for federal income tax purposes, the employer must impose a "substantial restriction or limitation" at the time accrued, unused hours are donated to the program. On the assumption that a 25% "haircut" is a "substantial" restriction or limitation, many plans therefore discount the hours by 25% at the time of donation. 2) under California labor law (see Labor Code Sec. 227.3), forfeitures of accrued, unused vacation time are prohibited. The "haircut" is by its very nature a forfeiture. Are any California benefits or tax practitioners aware of a way to accommodate these conflicting tenets? I would appreciate any and all comments.

Can a self-funded plan expressly and indefinitely ban a healthcare provider from its group of providers eligible for direct payment or reimbursement under the plan? Is this accomplished by listing the banned provider in the SPD, by name? Would this possibly subject the plan administrator to a defamation claim? Would ERISA preempt? Provider in question was successfully sued for defrauding the plan and barred from list of approved providers. 10 years later, the plan receives a claim based on treatment by the same dentist.

Yes, I have seen that website. Still looking for information on the ERISA preemption challenge (e.g., where is case filed, what is its status, who is funding it, can amicus briefs be filed, etc.)

Is anyone tracking a lawsuit challenging California Senate Bill 2 on the grounds of ERISA preemption? The Bill requires employers of 20 or more employees to provide group health coverage for employees, or pay into a state system that will subsidize employee health care. Its my understanding that there is both an ERISA challenge, and state level litigation on the basis that the bill was not enacted with the 2/3 majority vote needed for measures that impose taxes or fees on Californians. There is also a voter initiative on the Nov. '04 ballot to repeal the bill, but I am primarily interested in the ERISA preemption challenge.

Private non-profit foundation in the senior housing business employs 9 individuals as property managers, 4 of whom are at or near retirement age. No formal retirement plan is in place, but active employees and one partially retired individual receive group health or Medigap coverage, no-cost housing and car (both needed for job), in addition to salaries. Employer now wants to establish formal retirement arrangement. Presuming a Section 403(b) plan is established, or nonqualified annuities purchased, can employer continue to provide no-cost housing and/or car to retirees who no longer perform services for the Foundation?

This is a good suggestion - you don't suppose there is any argument, on behalf of the foreign nationals, that their right to participate in the 401(k) has essentially "vested" and cannot be cut back because they theoretically were eligible to defer under the acquiring company's plan, as soon as the acquisition closed?

Employer adopted a prototype 401(k) plan and did not check the right box on the adoption agreement so as to exclude from participation foreign nationals with no US-source income. The employer was unaware that a subsidiary it had recently acquired employs about 4 or 5 French citizens residing in France. Would it be possible to justify excluding the French nationals if, for instance, the plan defined compensation as W-2 compensation, and the adopting employer did not provide W-2 compensation to the French nationals? If the employer were ultimately required to retroactively include the French citizens in the plan by contributing the equivalent of average salary deferrals and matching contributions on their behalf, exactly how would this be accomplished? Where would the money go and how would it be reported? Its my understanding that, absent a tax treaty provision to the contrary, the money would be taxed to the French citizens upon contribution to the Plan, and upon withdrawal, as well.

Bonus plan calls for distribution of cash value of bonus by December 31 of each year, however company CEO reserves the right to defer bonus for up to 3 years. Forfeiture during that time occurs if employee leaves employment or violates confidentiality and non-solicitation clauses of employment agreement. If deferrals is wholly within CEO's discretion, is employee still required to enter into a deferral election with respect to the bonus?

Yes, to answer my own question - the other available coverage (e.g., PPO option) need only be made available not later than the date of the qualified beneficiary's relocation, or, if later, the first day of the month after the month in which the qualified beneficiary requests the other coverage.

Employee on HMO declines COBRA, moves out of HMO service area, incurs medical bills, and then decides she needs coverage, after all. At the very end of the 60 day election period, she elects coverage and notifies employer of her move. Employer informs her she will need PPO coverage going forward, and she demands the employer and insurer reinstate PPO coverage retroactive to her date of resignation. Insurer refuses to reinstate coverage. Am I correct in surmising that Treas. Reg. Sec. 54.4980B-5 Q&A 4 only requires PROSPECTIVE conversion to indemnity/PPO coverage, not retroactive?

Is there any duty under HIPAA to disclose to group health plan participants the identity of business associates, for example a third party administrator maintaining a Web-based claims information center? More specifically, does the covered entity (plan sponsor) have to disclose the fact that it does not maintain the claims info center, that is otherwise designed and "branded" to appear that it is maintained by the plan sponsor alone.

Thank you for your input. What they (the insurers, custodians, etc.) can require is a divorce decree, so where the parties only have a marital settlement agreement and no formal court order of dissolution, the insurer/custodian can hold off on dividing the account. (The problem still remains that they are not distinquishing bewteen a simple divorce decree, and the term of art "QDRO.")

I am dividing two individual retirement annuities with two different insurance companies. Both insurance companies are requiring "QDROs" to divide the accounts. Their phone reps have never heard of Code Section 408(d)(6) and I am finding myself having to educate them as to what the Code requires for IRA divisions, versus divorce distributions from qualified plans. Is anyone else experiencing this phenomenon?

Can I interpret Rev Rul 2003-102 to allow reimbursement under a medical FSA of over the counter remedies use to alleviate or treat dental injuries or illnesses, such as a numbing agent?

Chuck, thanks for the very helpful gloss on this topic. Is it safe to say that, if a 501©(3) organization has only one prospective retiree, it can provide the post-retirement payments without concern for nondiscrimination rules, so long as that person remains the sole retiree? Then, if another person retired after, say, three years of payments to the original retiree, the organization could either (a) discontinue post-retirement payments to the original retiree or (b) continue post-retirement payments to the original retiree and make contributions to the new retiree as well.

The EGTRRA change to Section 403(b)(3) to permit employer contributions for up to 5 years after retirement is not limited to school districts, is it? I know that the provision was designed with K-12 teachers in mind, but it is equally available to employees of private charitable orgs., is it not?

Now that both the DOL and the IRS have sanctioned allocating certain plan administration expenses (such as QDRO preparation) to individual participant accounts, I would like to update some 403(b) plan documents accordingly. From a practical perspective, however, how would this work if the plan assets are held in multiple individual TDAs, rather than in a group annuity environment? What if some TDAs permit allocation of expenses, but others don't? I am presuming the new plan language would defer to conflicting language in individual TDAs, but am open to all comments and suggestions.

Any information out there as to whether estate planning documents, such as Powers of Attorney, Living Wills, Revocable Living trusts, and Medical Directives need to be amended for HIPAA (to authorize disclosure of PHI)? I am seeing commentary out there that previously-executed and new documents of these types must take HIPAA requirements into account, or will be "rendered useless."

Has anyone explored the notion that an employee's abuse of the universal availability rule in a medical flexible spending account (e.g., obtaining maximum reimbursement and then terminating employment) could constitute health care fraud under HIPAA? I think it probably doesn't fall squarely within HIPAA's fraud, theft & embezzlement provisions but I would be interested if there were any discussions out there...

Self funded group health plan processes claims and appeals in-house; claim appeal process is three step: appeal is first reviewed by claim manager, then by committee consisting of senior benefit managers, then by president of company. Claim manager and committee can deny claims before passing them on to the next level. However no subsequent appeal can be made. This is a single-level appeal process, yes? My understanding is that a two-step appeal process requires a complete second shot at claim approval, following one unsuccessful appeal. And is it appropriate (necessary) to spell out the three-step process in the SPD?

So we are dealing with a faultily - drafted limited partnership agreement?

Technically, the partnership agreement says that all costs, expenses, etc. of the partnership shall be paid from partnership income, then capital, then by individual limited partners.

A 401(k) plan with self-directed accounts is switching from a corporate bank trustee to self-trusteeship, with a corporate custodian of assets. The custodian refuses to take on one of the participant's investment interest in a real estate limited partnership (RELP), due to the fact that the liability of the limited partners can exceed their contributions to the partnership. The RELP is essentially defunct and the participant's interest has no value. Can he roll the investment out of the plan to an IRA? He is not yet 59 1/2 but wouldn't the "tax" on the transfer be equal to 20% + 10% x zero? Any comments welcome.

Is a 10% plus (but less than 50%) partner in a partnership always an "employer" in relation to the partnership's qualified retirement plan, as "employer" is defined for prohibited transaction purposes (e.g., "any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan.")?

This is an unusual situation - I would appreciate any comments: Not for profit employer maintains an ERISA 403(b) plan, and a 401(a) plan (money purchase). Terminating employee wants to roll 401(a) money over to the 403(b) plan. There is no group annuity, just individual annuities/custodial accounts, on the 403(b) side. 401(a) plan permits rollovers TO a 403(b) plan; 403(b) plan does not currently permit rollovers FROM any source other than a 403(b) plan or account. Can post-term rollover from 401(a) to 403(b) happen (presuming 403(b) is amended to allow it)?