Dave Baker

Here's a "letter to the editor" received by BenefitsLink: --------------- July 15, 2003 Dear Editor: Hate to be picky, but the [July 14, 2003 BenefitsLink welfare plans] newsletter description of the 5th Cir. opinion in the Schlumberger case is very misleading. Far from adopting the "serious consideration" test, the court rejected that test as a bright-line test for determining whether the employer had breached its fiduciary duties. Instead, the court adopted a fact-specific analysis of whether the information, or lack of it, was material to the employee's decision. In addition, the court held that employer's do not have a fiduciary duty to affirmatively disclose that they are considering a plan amendment. Hope you find this useful. Overall, your newsletters are a great source of info on a wide variety of topics. I find them very useful! Bill Brown wbrown6@wi.rr.com

John Koresko asked me to post this to the site -- it's a letter he wrote to another attorney. He has written various other articles in support of the use of multiple employer trusts for the funding of employee benefits: see http://pennmont.com/html_pages/veba_articles.html -- Dave Baker ------------------------------------ Dear Steve, I saw your alert yesterday. As my testimony and written comments on November 11, 2002 indicated, these regs are invalid and unenforceable as a matter of law. It is a pity you devoted so much work to explaining a nullity and work of intellectual dishonesty. The regs as issued do not establish any standard anyone could possibly use to unequivocally design a plan that "complies with the rules." By Treasury's own admission, plans with so-called "bad characteristics" can demonstrate they are not experience-rated, and plans with all Treasury's "good characteristics" can fail. You probably remember the void for vagueness doctrine. "The responsibility to promulgate clear and unambiguous standards is upon the Secretary." Director, Office of Workers' Compensation Programs, U.S. Dept. of Labor v. Eastern Associated Coal Corp., 54 F.3d 141, 147 (3d Cir. 1995) (internal quotation marks omitted). Notice that the Treasury/IRS brain trust, most of whom refused to engage me or even look me in the eye when I testified, responded directly to my comments, wherein I reminded them that the Supreme Court and Tax Court had definied "experience rating" quite specifically in American Bar Endowment v. U.S. and Sears Roebuck v. Com'r., respectively. Treasury called these precedents not conclusive, although they refused to say so in public when that ridiculous comment could be debated against experts. Justice Scalia and company have time and time again advised agencies they are not free to disregard the plain meaning of statutory language. Weller, Holland, Clary and company do not care -- for now. In reviewing an agency's construction of a statute which it administers, a court must consider the Supreme Court's opinion in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, reh'g. denied, 468 U.S. 1227 (1984). Under Chevron, the reviewing court or body must first ask "whether Congress has directly spoken to the precise question at issue." Id. at 842. If Congress' intent is clear from the plain language of the statute, then inquiry ends there. Id. If the reviewing body concludes, however, that Congress has not directly addressed the precise question at issue or that the statute is silent or ambiguous regarding the issue, then one must determine whether the agency's interpretation "is based on a permissible construction of the statute." Id. at 843. "When [a] 'statute's language is plain, the sole function for the courts' - at least where the disposition required by the text is not absurd - 'is to enforce it according to its terms.'" Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 520 U.S. 1, 6 (2000) (quoting United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989) (quotation omitted)). Regulations may construe, interpret or implement an ambiguous, doubtful or general provision of the Code. However regulations cannot amend the unambiguous language of a Code section by adding to it a proviso to the effect that expenses shall not be deducted by a taxpayer even though they are ordinary and necessary in its business. It is settled that the law cannot thus be amended by regulation. Koshland v. Helvering, 298 U.S. 441, 56 S. Ct. 767, 80 L. Ed. 1268, 105 A.L.R. 756; Manhattan General Equipment Co. v. Commissioner, 297 U.S. 129, 56 S. Ct. 397, 80 L. Ed. 528. The Treasury folks also stated an outright lie by stating in the preamble that the legislative history indicated that experience rating was supposed to be interpreted in the broadest possible fashion. I challenge them or anyone to show me the words that say so, because they are not in either the House or Senate Report on DEFRA. Perhaps there is a secret legislative history because there is absolutely nothing that indicates Congressional intention to create new and expansive definitions of a term the Supreme Court also described in American Bar Endowment. Treasury has no power to expand the definition of experience rating as they have done. "Where Congress uses terms that have accumulated settled meaning under . . . the common law, a court must infer, unless the statute otherwise dictates, that Congress means to incorporate the established meaning of these terms. . . ." Nationwide Mutual Ins. v. Darden , 503 U.S. 318 (1992) The regulations fail a fundamental test of the real legislative intent expressed by Congress in both 1984 and 1986. Sec. 419 was enacted to prevent PREMATURE DEDUCTIONS. After the first set of temp. regs. in 1985, Congress made clear the following in the 1986 amendments to sec. 419: payments for the shifting of risk are not premature deductions. In other words, Insurance premiums are not premature deductions. That's one of the reasons insurance premiums are qualified direct costs. Congress never sought to limit payments to third parties. Sec. 419 and 419A were specifically directed at self-funded severance payments. Deference is ordinarily owing to the agency construction if one can conclude that the regulation "[implements] the congressional mandate in some reasonable manner." United States v. Correll, 389 U.S. 299, 307 (1967). But this general principle of deference, while fundamental, only sets "the framework for judicial analysis; it does not displace it." United States v. Cartwright, 411 U.S. 546, 550 (1973). The Proposed Regulations suggest that the Commissioner promulgated the interpretion of section 419A(f)(6) under his general authority to "prescribe all needful rules and regulations." 26 U. S. C. § 7805(a). Accordingly, the interpretation is owed less deference than a regulation issued under a specific grant of authority to define a statutory term or prescribe a method of executing a statutory provision." United States v. Vogel Fertilizer Co., 455 U.S. 16, 102 S. Ct. 821, 70 L. Ed. 2d 792, 50 U.S.L.W. 4137 (1982); Rowan Cos. v. United States, 452 U.S. 247, 253 (1981). The Supreme Court has firmly rejected the suggestion that a regulation is to be sustained simply because it is not "technically inconsistent" with the statutory language, when that regulation is fundamentally at odds with the manifest congressional design. United States v. Cartwright, supra, at 557. A challenged Regulation is not a reasonable statutory interpretation unless it harmonizes with the statute's "origin and purpose." National Muffler Dealers Assn., Inc. v. United States, 440 U.S. 472, 477 (1979). A regulation that purports to do no more than add a clarifying gloss on a term --like “insurance company” or “experience rating" -- that has already been defined with considerable specificity by Congress or the courts is not entitled to automatic deference. United States v. Vogel Fertilizer Co., 455 U.S. 16, 102 S. Ct. 821, 70 L. Ed. 2d 792, 50 U.S.L.W. 4137 (1982). “The Commissioner's authority is consequently more circumscribed than would be the case if Congress had used a term "'so general . . . as to render an interpretive regulation appropriate.'" Vogel Fertiziler, supra; citing National Muffler Dealers Assn., Inc. v. United States, supra, at 488 (1979). A court should not give deference to the IRS's interpretation when it amounts to no more than a self-serving litigating position. See Bowen v. Georgetown University Hospital, 488 U.S. 204, 213 (1988). Congress clearly and specifically declared in 1984 that a plan that looks more like an insurance company than like a fund is not to be considered an experience-rating arrangment or subjected to the restrictions of Subpart D. Congress further clearly and specifically stated in 1986 that Treasury regulations are not to include typical group insurance arrangements in the definition of a fund. Congress clearly specified that insurance premiums are to be permitted as currently deductible qualified direct costs, even if insurance contracts are held by an organization that could be considered a fund. Therefore, the Secretary of the Treasury is without power by regulatory amendment to add a provision interfering with any aspect of these declarations of Congress, whether directly or indirectly through an arbitrary and capricious redefinition of the term “experience rating arrangement.” See Commissioner of Internal Revenue v. Textile Mills Securities Corporation., 117 F.2d 62 (3rd Cir. 1940)(MARIS, Circuit Judge, dissenting in part)’The Treasury Department has also ignored compliance with the Regulatory Flexibility Act and the Small Business Regulatory Fairness Enforecement Act. My comments to the Office of Management and Budget echo this in great detail. Contrary to their outlandish drivel, the effect on small business is significant. Over $50 billion of death benefits have been effected. As the draftsmen of the regs. have inserted opinions without clear standards, the Regs are nothing more than distortions and opinion meant to achieve an end without statutory support-- i.e., propaganda. The term means the same today as when then Judge (now Justice) Scalia wrote the following: "[T]he statute's definition of "political propaganda" . . . includes communication that is simply "reasonably adapted to . . . prevail upon, indoctrinate, convert, induce, or in any other way influence a recipient or any section of the public . . . . This definition is in accord with dictionary definitions of the term "propaganda" -- e.g., "ideas, facts, or allegations spread deliberately to further one's cause or to damage an opposing cause," WEBSTER'S NINTH NEW COLLEGIATE DICTIONARY 942 (1983); "information or ideas methodically spread to promote or injure a cause, group, nation, etc.," THE RANDOM HOUSE COLLEGE DICTIONARY 1060 (1982). "It seems to us not quite true that, as asserted in a district court opinion involving the same provision at issue here (with whose holding we disagree) "'political propaganda' is ordinarily and commonly understood to mean material that contains half-truths, distortions, and omissions." Keene v. Smith 569 F. Supp. 1513, 1520 (E.D. Cal. 1983) (granting preliminary injunction): see also Keene v. Meese, 619 F. Supp. 1111 (E.D. Cal. 1985) (granting plaintiffs' motion for summary judgment), probable jurisdiction noted, 475 U.S. 1117, 106 S. Ct. 1632, 90 L. Ed. 2d 178. It is understood to mean precisely the type of political speech the dictionary definitions quoted above describe (and which no other English word accurately describes) -- which type of speech is, in turn, generally regarded as more likely than other speech to contain "half-truths, distortions, and omissions." Block v. Meese, 1986.CDC.204 (http://www.versuslaw.com) (D.C. Cir. 1986). The Regulations therefore violate the Treasury-Postal Appropriations Act of 2002, which in two separate sections barred the Treasury Dept. from using any Congressional appropriation for the advancement of propaganda. These bureaucrats have committed an illegal act by using tax money to advance their ridiculous opinions. You have probably seen the law review article Ms. Martin and I had published at 32 Southwestern Law Review 1 (2003). The arguments contained therein and here will some day find their way into an opinion from a court of law, not a collection of bureaucrats. I have already told Bill Sweetnam and Finance Committee Counsel Ed McClelland that my clients are not going to comply with these or the 1.6011-4 regulations that rely on broad innuendo instead of law for their effect. The line in the sand has been drawn. The regs are for show and for scare tactics. As I told that gang on Nov. 11, they have done a great job scaring people and companies. In the meantime, their own lawyers conceded in Booth that a fully-insured death benefit plan is not experience rated as a matter of law. (Memorandum of Issues, page 9, by Ann Durning, IRS Counsel.) Notice they kind of left that admission out of the preamble or text of the "regulations." Legal positions of the IRS expressed in new regulations that are inconsistent with prior positions deserve no deference by a court. Harco Holdings, Inc. v. United States, 977 F.2d 1027 (7th Cir. 1992) Why doesn't anyone talk about the obvious? 419A(f)(6) is nothing but a deduction acceleration statute. It does not create any deduction. Amounts in excess of 419 limits (if they apply) are carried forward perpetually. As IRS admitted in its own VEBA Awareness continuing education manual, "the taxpayer will eventually be allowed a deduction for its contributions....The only question is in which period." Wells Fargo confirms that a deduction for any benefit expected to last into retirement years, including permanent insurance is deductible on a level basis over the expected working life of the employee - both as qualifiied direct cost and qualified asset addition. See also, GCM 39440. The regs are one Tax Court case too late. As I stated in my testimony, these regulations are not about the deduction. They are a cover for IRS' inability to cure the employer deduction / employee inclusion mismatch that results when the economic value of compensatory life insurance is less than the premium paid by an employer. See, GCM 39440 (IRS created administrative prohibitions to try to match deductions by an employer with income by an employee). Remember the Third Circuit's declaration in Neonatology: "Beyond peradventure, employee benefits like life insurance are a form of compensation deductible by the employer. [FN 8] See Treas. Reg. S 1.162-10(a); see also Joel A. Schneider, M.D., S.C. v. Comm’r, 1992 T.C. Memo. 1992-24, 63 T.C.M. (C.C.H.) 1787"Neonatology Assoc. PA v. Com'r, ___F.3d ___ (3rd Cir. 2002). See also, Anesthesia Med. Surg. Assoc. v. U.S. __ F. 2d. __ (9th Cir. 199__) (Employee insurance premiums are either deductible as welfare plan contributions under Reg. sec. 1.162-10(a) or simple insurance costs under Reg. sec. 1.162-1). If that reality is so self-evident to some of the most knowledgeable Courts in this country, why is it lost on so many people who are supposed to know better? Finally, it is settled that regs that are not contemporaneous interpretations of a statute are not entitled to deference. See National Muffler Dealers Ass'n v. United States, 440 U.S. 472, 59 L. Ed. 2d 519, 99 S. Ct. 1304 (1979), Water Quality Assn. v. U.S., __ F.2d __ (7th Cir. 1992) (VEBA regs held invalid). These regs are about 18 years too late -- a post hoc reaction to legal market behavior that certain IRS people do not like rather than a valid, contemporaneous interpretation issued when the intentions of Congress were fresh. But that also reminds me -- in 1986, Congress stated without equivocation that Treasury's first round of regulations did not implement Congressional intent and purpose. There seems to be a pattern here. If a man lives in fear, he cannot have any faith in the law, or anything else. Have a great day. John Koresko

http://www.techrepublic.com/download_item....m&fromtm=e103-1 "Don't wait for users to ask for advice; be proactive and help them improve their Word skills with this compilation of Word tips. This download contains over 100 pages of invaluable Word advice."

"[M]embers of Congress, don't ever apologize for your values." http://www.opinionjournal.com/extra/?id=110003758

http://www.sciencemag.org/feature/data/crow/index.html "In the experiments, a captive female crow, confronted with a task that required a curved tool (retrieving a food-containing bucket from a vertical pipe), spontaneously bent a piece of straight wire into a hooked shape -- and then repeated the behavior in nine out of ten subsequent trials." Target page includes link to downloadable video clip. Amazin'.

No, sure don't. I tried searching under "power pack" at the target site, but no luck. Nothing comes up under google either.

I found this well-written article inspiring and interesting but strangely disturbing: "If At First You Don't Succeed" - http://www.inc.com/magazine/20030701/25659.html

http://donotcall.gov

"A gene that may have the power to halt ovarian cancer has been discovered by UK scientists. The gene, called OPCML, was found to be inactivated in 90 per cent of ovarian cancers examined by researchers. But when the fully activated gene was inserted into ovarian cancer cells in the lab, the growth of the tumour cells was stopped." http://www.newscientist.com/news/news.jsp?...p?id=ns99993859

Here are entries from a Photoshop contest; participants used the Photoshop image software to create 'what-if' shots of Martha Stewart's potential jail cell if she's convicted ... http://www.worth1000.com/cache/contest/con...otoshop#entries

Nice utility from Microsoft that speeds up the Windows XP boot-up process: http://www.microsoft.com/whdc/hwdev/platfo...ot/BootVis.mspx Start it up, then use the Trace -> Optimize System command. Worked well for me!

Anybody used this software? <a href='http://www.divorcesoftware.com/products/product_pro_pension.htm'>http://www.divorcesoftware.com/products/pr...pro_pension.htm</a>

I don't know of any. Has anybody input the new notice as a new Word or other sort of word processor document? If so, could you upload it here? You just post a "reply" into this message thread, and you'll see a "file attachments" box that will be just below the part where you enter the text of your "reply" (which might be as simple as "Here it is, folks." You can click the "Browse" button next to the "file attachments" box -- that will allow you to find and then select the file on your hard drive. Double-click on the file name when you find it. That'll drop the complete "path" and filename into the box. Then you click the "Add Reply" button at the bottom. Thanks!

This is a continuation of the discussion at http://www.benefitslink.com/boards/index.p...&f=4&t=19623&s=

Cellphone companies lose: http://story.news.yahoo.com/news?tmpl=stor...phone_numbers_3

Very nasty Windows virus going around: W32/Bugbear.b@MM Be sure your virus definition files are up-to-date. More info and a cleaning program are available from Symantec: http://securityresponse.symantec.com/avcen...gbear.b@mm.html "This is a complex worm that contains many different elements: Mass-mailer Network Share Propagator Keylogger Remote Access Trojan Polymorphic Parasitic File Infector Security Software Terminator" McAfee link: http://vil.mcafee.com/dispVirus.asp?virus_k=100358

"I am Mr. Laurent Mpeti Kabila, a senior assistant leader of the Revolutionary United Front of Sierra Leone. I present to you an urgent and confidential request: I request your attendance at The 3rd Annual Nigerian EMail Conference. This is an excellent opportunity to meet your distinguished colleagues, learn new marketing techniques, and spend your hard-earned money. Attending this conference demands the highest trust, security and confidentiality between us." http://j-walk.com/blog/docs/conference.htm

"The spread of cancers through the body could be halted by targeting a protein that helps cells latch on to each other, reveals a new study." http://www.newscientist.com/news/news.jsp?...p?id=ns99993801 "The modified protein more than halved the number of mice that developed metastatic tumours. Cancer implanted into the mice spread to the lymph nodes or other organs in 11 of the 20 control mice given sham injections, but only four of the 20 mice given the truncated protein."

Don't have any for the message boards, but the "buzz" items have 'em: http://www.benefitslink.com/rdf/

Would it be a good idea to split this message board into 3 boards -- health plans generally, COBRA, and HIPAA? Dave Baker

New Hampshire's 'Old Man' Falls from the Mountain New Hampshire's famous landmark, the Old Man of the Mountain, collapses in a landslide. The series of granite ledges resembled a human face in profile. The image was used on state road signs and even the back of the New Hampshire quarter. Hear NPR's Lynn Neary and museum volunteer Cathy Nelson. (May 3, 2003) http://www.npr.org/dmg/dmg.php?prgCode=ATC...y-2003&segNum=6 (audio file)

Especially useful shortcuts for Internet Explorer, from the May 6, 2003 issue of PC magazine: Ctrl-W: Close the current window (this is especially helpful for foiling pop-ups). Ctrl-D: Bookmark the current page. Ctrl-N: Open a new browser window. F5: Refresh the page. Ctrl-F5: Fully refresh the page, regardless of caching. Alt-<Left/Right Arrow>: Go back/forward a page. Alt-Home: Jump to the home page. Ctrl-<mouse wheel>: Increase/decrease the default font size. Shift-<mouse wheel>: Go forward/back a page. Shift-<left mouse click>: Open a link in a new browser window. Right mouse button: Open a context-sensitive menu for a link or picture.

From the Ziff-Davis WHAT'S NEW NOW email newsletter: NASTY BUG IN LATEST XP UPDATE SLOWS SYSTEMS DOWN While rushing to get Server 2003 out the door, the Windows team made a major blunder with its latest interim release of Windows XP, which is automatically downloaded using the Windows Update feature. Reports from all over the Web verify that this latest version actually slows many systems to a crawl. Ouch! We've got details on which XP version to watch out for and how to get it off your system. http://www.microsoft-watch.com/article2/0,...,1037305,00.asp (This happened to my XP machine a few days ago when I installed the update, and I had noticed the slowdown ... I uninstalled the update today and my computer is back up to speed again. -- Dave Baker)

http://www.sciencedaily.com//releases/2003...30421084227.htm Excerpt: " Could the gentle firefly turn out to be a potent weapon against cancer? In a new study, researchers from London inserted the firefly gene that activates bioluminescent light into modified cancer cells, hoping to set off a chain of events that has a proven track record at fighting the disease. This light source, known as Luciferin, caused the modified cancer cells to glow much like it does with the firefly. When a photosensitizing agent was added, the combination proved lethal."

"General Motors' Destruction of California Transit Systems" is at http://www.trainweb.org/mts/ctc/ctc06.html