Ron Snyder

Administrators accept DROs and treat them as QDROs because ERISA does not pre-empt state law, including state court judgments, in such cases. Therefore the state court's holding is binding on the parties, including the nonvested participant. The ruling is technically not binding on the Administrator (or Employer) in most states. However, most Administrators don't wish to go to court to defend themselves as to why they ignored a order that was served upon them when it's not their money at risk. And the participant (who is a party to the case) cannot object because the court's order was binding upon him or her.

If the employer also offers a flex plan, the HRA claims should be administered by the same administrator that pays the 125 claims. This will avoid duplicate claims payments or reimbursements, as well as unnecessary duplicate claims processing. The potential advantage of having an insurance company administer the HRA is if they permitted their network or contractual discounts to be applied to the amounts below the deductible under the HDHP. Their HDHP card could easily double as a debit card for accessing the HRA. However, I have yet to see a health insurance company employing this methodology.

Of course it's possible to calculate a present value of future medical liabilities. Actuaries do not base their calculations on the assumptions described in the plan except for IRC Section 411 benefits. An employer can adopt any actuarial assumptions, reasonable or not, in the plan, while the actuary is required to use reasonable actuarial assumptions and appropriate methodologies. Section 411 calculations do not require an actuary while Section 412 calculations do. Read FAS 87 and FAS 106 for guidance on actuarial methods and assumptions, as well as the disclosures provided for thereunder. The method of computing the present value of retiree medical benefits is very close to the method used for pension calculations: the probability of each benefit is multiplied by the value of the benefit and the interest discount factor. The sum of all of these calculations is the present value of benefits.

On re-reading the publication I should amend my earlier assertion: it is possible to employ a vesting schedule in a DC plan, although fraught with problems. And it would be pointless (so far as compliance with D-B or SCA is involved), since no savings may be realized. With a DB plan it is possible to employ a vesting schedule, with the caveat that forfeitures not be used to reduce employer contributions (which is what forfeitures do by definition in a DB plan). Therefore, the benefits provided to remaining plan members should be designed based on the assumption of a part of the funding's coming from forfeitures. (This is common in union plans.)

When I researched this issue, I was convinced that the rule is that a DC plan must be 100% vested, while a DB plan may impose a vesting schedule. I remember searching the EBSA website and searching for key words to reach this conclusion. However, since ours was a DC plan, I did not save my research. Good luck.

If you can find a local TPA whose charges are comparable to the insurance company, you will likely be happier with the local service. Insurance companies are not nearly so qualified or attentive to administrative functions as TPA firms are.

The life insurance policy cannot be attached to reimburse the trust, but the Administrator's errors and omissions policy can.

Here's a suggestion: post ever message at least twice in different threads.

Sounds like a great business for you to get into. I'll refer you all of my orphaned terminations.

After the end of the plan year, we send a year-end report showing funds contributed and spent and how much they forfeited. Our forfeitures are used by the company to fund vacations for the management group, so we don't distribute any materials to participants.

I believe that you posted this in the wrong forum. Put this in Gary Lesser's forum for better responses, since he's the rollover expert. The limitations on insurance premiums apply to contributions by the employer. So the real question is, does the 403(b) money change character by being rolled over? If it becomes PS/401(k) money, it certainly could be used to buy insurance. If it is still 403(b) money, it is limited to tax-sheltered annuities or mutual funds under 403(b)(7). I believe that it is 403(b) money after rollover, but you should get others opinions about this.

Whether or not benefits are protected in bankruptcy (beyond the 90-day period) is a matter of whether under state law, the qualified plan is a "spendthrift trust". The California Supreme Court has determined that if a QP is "ERISA-qualified" it will be excluded from the bankruptcy. To be ERISA-qualified requires 3 elements: 1. That the plan comply with IRC 401(a) and other IRC requirements in form and substance. 2. That the plan be operated consistent with its documents with no operational defects. 3. That the plan cover at least one rank and file employee.

A response to Mark Whitelaw's comments: I don't consider you a heretic; I consider you another insurance peddler. The entire premium under the approach you describe will be taxed to the employee immediately, making it a fairly expensive benefit. The employee must pay tax on a benefit with funds from his own pocket, or the employer must also bonus the employee enough additional funds to pay the taxes. This is an inefficient delivery system. Once the premiums and bonus are paid, the employer has no golden handcuffs and no loyalto to the employer. I dispute that there are no written agreements applicable to such arrangement. Most executive compensation is pursuant to contract, and this must be a part of the agreement. "No employer costs"? The entire payment is a significant cost to the employer with no real return except for a temporarily happy (if the employer reimburses the taxes) executive. If the employee purchases it himself with after-tax funds, it is simply an investment that must compete with other investments available. Yes, it is tax sheltered, but so are many other investments. Yes, it includes a death benefit, but does he really need it and is this the best way to purchase it? Wouldn't the executive rather have a tax deduction for needed insurance purchased?

An employer can unilaterally cease future benefit accruals unless there is a collective bargaining agreement or other contractual agreement not pre-empted by ERISA. A simple way to remove the liability would be to terminate the plan outright. That causes a myriad of employee relations problems. Read the IBM case on a unilateral conversion to a cash balance plan for an example of "bad facts make bad law". I would suggest an approach patterned after the DB to 401(k) conversions pulled off between 1985 and 1993 by more than half of the Fortune 500 companies. Employees must receive something perceived to be of equivalent value when a benefit is lost, or all hell may break loose. I suggest the use of a conversion from the current DB retiree health plan to a funded HRA retiree health plan, with the actuarial equivalent of the accrued benefit being funded into the plan. Such a conversion can be spun in such a way as to create perception of value. A "wearaway" choice may be offered to those within 10 years of their NRD, that converts only their future contributions to the HRA and freezes the liability at the current level. Another method of "removing" the liability from the financial statements is to fund it. I recently assisted a company in establishing a VEBA trust with a $30 million contribution to fund their retiree medical benefits. This did not eliminate the liability, but it did "remove" it from their financial statements (at least for recognition though not for disclosure purposes).

I believe that Panel Publishers is willing to share their checklist to subscribers. CCH also has something. Try Plan Administrators Guide for an online resource.

Sworn in already but not sworn at yet? On IRS's website I found only one reference to LTIP: IRS Audit Guide LTIP is simply a form of executive compensation. The limit on the amount is a limit imposed under IRC Section 162(m), that it be ordinary and necessary. For public corporations, the total compensation in all forms may not exceed $1,000,000. IRS informally imposes a similar limitation on compensation from non-public corporations (as noted in the citation).

Yes. The matching feature could be a contribution into a 401(a) plan.

Check with the financial institution acting as trustee or custodian of the HSA. An HSA is a form of IRA, and any disclosure would be similar to that available for IRAs.

While its arguable that under an HSA the responsibility for documentation lies with the participant who would have to report any uncovered withdrawals as taxable income, such would not be the case with an HRA. With such a situation, it would seem to be questionable to use a medical debit card for such transactions. Perhaps a medical credit card would be more appropriate where the TPA could receive the documentation and could request needed materials to adjudcate the claim so that it could be peid personally rather then by the HRA charge if it was ineligible. Yes, the plan itself would be at risk.

1. I question your assertion that the benefits are severely restricted under IRC 415. Do your calculations reflect the special DB limits available under IRC 415(b)(10) for "state and local government plans"? Or the special limit under IRC 415(b)(2)(g) for "qualified police or firefighters"? Or 415(b)(11) for "governmental or multiemployer plans"? 2. Have you read IRC 415(m) about "qualified governmental excess benefit arrangements"? (This is referred to in IRC 457(f) as an exception to the requirement for inclusion in immediate income. This would seem to be the logical way to go.

I have read a few states' insurance codes also (AZ, HI, CA, IN, NV, TX, UT). Usually they delegate a certain amount of authority to the Commissioner. All policies have to be submitted to the Insurance Department and approved before they may be offered (except in Notification states, in which case they may have to be withdrawn within 30 days). Despite the authoridy delegated to the Commissioner, it would surprise me to see more than one or two Commissioners anywhere in the US that would approve a health plan that did not contain benefits mandated by the legislature. It is simply not an appropriate exercise of their discretionary authority unless conforming policies are simply not available in the state.

(1) No (2) Yes (3) Yes

No, I don't believe so. However, other privacy laws may prevent the information from being sold.

The original adoption agreement can be replaced and destroyed to eliminate all evidence. However, you cannot advocate such an action, as it would be unethical. Obviously under these circumstances, employees are entitled to what they can get a court to say. They should go to the financial institution for a copy of the plan documents (which will not be destroyed). The employer cannot rely on his intent. The statute of frauds denies the employer the ability to disclaim the written instrument that replaced his stated desire to have things done differently. Let's hope the broker is not judgment proof! Because if the employer has to pony up, he can go after the broker.

Welfare benefit plan administration is the poor step-child, compared to retirement plan administration. So many retirement plan issues are addressed in regulations, rulings and instructions are not addressed with respect to WB plans. I presume that you mean "in accordance with the limitations of 419(e) and 419A". Otherwise the entire premium would not be deductible. In the absence of instructions to the contrary, I believe that your interpretation is correct (report on p. 3, Part II).