Ron Snyder

A tax-exempt nonprofit entity would not need a VEBA, and there would be little advantage to it. Remember that the nondiscrimination rules exist in IRC section 105 (pertaining to taxability of contributions to employees), so discrimination could still occur. However, with no shareholders and only those earning over $110,000 counting as highly-compensated, most such entities would be able to pass the test or, at the very least, come close enough so that HCEs would have only a very small of taxable income from the transaction. I never saw the brochure.

Your company is a perfect candidate for using a captive insurance arrangement. The enrollment forms and beneficiary forms would remain constant as they will be provided by the captive. The captive can re-shop the coverage each year and switch carriers as often as it is beneficial. In addition, the captive could shop for less expensive reinsurance with 0% retention. The negative is the cost of creating a captive, but those are relatively inexpensive these days. And the captive could provide other coverages and advantages in addition to the group life insurance.

We'll go along with whatever you decide because you "have the key to most of the buttons and levers that run the software". However: (1) It's nice of you to ask for input; (2) there should definitely be a policy related to posting of published materials; and (3) there need to be reasonable allowances when quoting another source is necessary. Seldom is more than a couple of paragraphs required.

Of course. However, the trustor/grantor should consider whether continuing with that trustee may prompt the trustee's creditors to assert claims that may tie up the trust in litigation.

The employer should first obtain advice from his legal counsel about the appropriateness of such an action.

You could notify the participant that the trustee refuses to make the distribution, even though it is apparently provided for under the plan document. Also that you are unable to make the distribution yourself. Provide a copy of the appropriate section(s) of the plan, and remind him of the ERISA claims and claims review procedures (likely detailed both in the plan and in the SPD). You probably should not recommend that he consult with his attorney (at least in writing), as it could get you sued along with the trustee/administrator.

As provided in the statute, those employees are employees of XYZ Corporation but could be excluded under the terms of the plan documents from employee benefit plans sponsored by XYZ. After 1 year of being leased employees, they are also treated as employees of XYZCP for testing purposes, ie, in determining whether or not XYZCP's plans are discriminating in operation. They are not required to be included in XYZCP's plans, although customary practice is to include failsafe language in the plan docs which would provide that "leased employees are not eligible to participate hereunder unless their coverage is necessary to avoid discrimination in operation". Moreover, the requirement to include them is mitigated by their inclusion in the XYZ benefit plans, the value of which would be used in the nondiscrimination testing. In this case, if XYZCP is really a charity, as you aver, it is unlikely that XYZCP's plans are discriminating in operation. Therefore, it is likely that the only issue really facing both XYZ and XYZCP is whether or not their documents correctly reflect what is happening.

If "funded" implies self-insured, yes. If all of the funding is through insurance contracts then no.

VEBAs are tax-exempt entities but are subject to UBIT on their investment earnings. Collectively-bargained VEBAs are not subject to UBIT.

But so many of us need relationship advice. . . .

Thank you. She used to live and practice here in Salt Lake City before she went back east.

The test isn't whether the organization is a "professional service company" but whether it is a service organization, ie, a corporation that provides services, like sales.

You seem to be asking: "We have a flex plan under Section 125. In addition to the nondiscrimination requirements under IRC section 125, do we also have to test the arrangement for compliance with section 105)h)?" If that is your question, you have now answered it yourself.

Your "facts" are somewhat confusing and inconsistent. The employer presumably can do whatever it wishes with its assets, even if those assets were formerly set aside for payment of deferred compensation. Those benefits are not "funded" or vested at this time. The transfer of the liability is a little trickier. What is the nature of that transaction? An outsourcing agreement that says we hereby give you x $ in exchange for your assuming the promise to pay the deferred compensation benefit to our employee? Just when I think I have understood the transfer of the liability, you state that the "Employer hopes to replenish its own informal funding * * *". Why would the employer do this if the liability now belonged to the holding company? IMHO, the "employer's transfer of the 'liability' to the holding company" may or may not relieve the employer of liability, depending on how it is structured. However, since the employer and the holding company seem to be a controlled group, it may not matter. Top hat plans are not subject to ERISA; they are specifically exempted. This is true both of unfunded as well as funded or partially funded programs. The question is whether or not the benefits are immediately taxable to the executive, and that depends on the executive's interest in and/or control over the fund. You haven't indicated the purpose(s) of the proposed transaction. What is the employer trying to accomplish? You ask for other issues: what about a scenario where the employer transfers both asset and liability to the holding company. Employer doesn't accumulate additional funding for the benefits. Holding company wastes the funds received on other activities. Retirement time comes for executive, and the employer/holding co. both say sorry, you're SOL. Executive sues, obtains judgment and takes controlling interest in employer.

Thank you for wearing your beanie. It helps us keep things in perspective.

Several competent vendors sell 125 plan documents for as little as $99. You might search through Benefits Link vendor site the Benefits Link directory. Contact vendors first to make sure that their documents are up to date.

In your post, you described these amounts as FSAs, which are governed by Section 125, not 105. Had you asked about HRA amounts set aside for payment of benefits, then 105(h) would have been the applicable Code section and the answer would have been different. But so would the facts. The issue with contributions coming from the employer is whether or not they are tax deductible to the employer, and the 105(h) test applies. However, this employer does not need tax-deductibility. The issue with contributions coming from the employees is whether or not they reduct the employees' taxable income and the 125 test is required.

What part of Mexico?

1. a) Yes, they are now ineligible to do so. Even though they are still participants with account balances, they are no longer employees of the employer which adopted the plan. Salary deferrals must come from compensation from the employer, and they have received none since the transfer. b) The company will now need to consult their ERISA attorney for guidance with respect to this issue. I don't practice law over the internet, and this is tax advice subject to the requirements of Circular 230. 2. The answer is that they may or may not, depending on the remedy selected. That is why consulting with a specialist is necessary. 3. It is possible to convert the plan and trust to multiple-employer status. However, all testing will then need to be done: first, separately for each adopting employer, and then for the plan itself.

If a church adopts a qualified plan, it must live by (albeit somewhat relaxed) qualified plan rules. But the church doesn't need the tax deduction. The reason for adopting a qualified plan is to be able to provide vested (protected) benefits without the amounts becoming taxable to the employees. Similarly, if a church adopts a flex plan, it must live by flex plan rules. In this case, however, the reason for complying with the 125 rules is so that the employee salary deferrals are, in fact, tax deductible. As a nonprofit, the church could find other ways of paying such benefits that would not be taxable, just as above the church could provide nonqualified benefits rather than qualified benefits. However, given that the church wants the employees to fund the accounts from their paychecks, compliance is not optional.

I use National Advisors Trust Company, a Federal Savings Bank with trust powers, located in Overland Park, KS. They offer 2 platforms, including a trading window. They only work through the financial advisors who are in their network (generally shareholders of NAT), and those are listed on the website.

While I agree that the term "leased employee" is frequently misunderstood, I do not agree that there is any legal difference between Spherion and Kelly or any other PEO. If an employee is leased to an employer for more than 1 year (1000+ hours), he/she must be taken into account for purposes of benefit testing. This is just as true of Kelly/Spherion workers as of any other PEO.

Investopedia includes the following: What Does Hedge Fund Mean? An aggressively managed portfolio of investments that uses advanced investment strategies such as leveraged, long, short and derivative positions in both domestic and international markets with the goal of generating high returns (either in an absolute sense or over a specified market benchmark). Legally, hedge funds are most often set up as private investment partnerships that are open to a limited number of investors and require a very large initial minimum investment. Investments in hedge funds are illiquid as they often require investors keep their money in the fund for at least one year. Investopedia explains Hedge Fund For the most part, hedge funds (unlike mutual funds) are unregulated because they cater to sophisticated investors. In the U.S., laws require that the majority of investors in the fund be accredited. That is, they must earn a minimum amount of money annually and have a net worth of more than $1 million, along with a significant amount of investment knowledge. You can think of hedge funds as mutual funds for the super rich. They are similar to mutual funds in that investments are pooled and professionally managed, but differ in that the fund has far more flexibility in its investment strategies. It is important to note that hedging is actually the practice of attempting to reduce risk, but the goal of most hedge funds is to maximize return on investment. The name is mostly historical, as the first hedge funds tried to hedge against the downside risk of a bear market by shorting the market (mutual funds generally can't enter into short positions as one of their primary goals). Nowadays, hedge funds use dozens of different strategies, so it isn't accurate to say that hedge funds just "hedge risk". In fact, because hedge fund managers make speculative investments, these funds can carry more risk than the overall market.

As an actuary who has worked with DB plans for 39 years (yes I am old), I seldom had any input into clients investment choices. However, I noted that clients tended to either want stock market investments, fixed investments or real estate (less common the past couple of years) as their primary investment strategy. It now seems that I am being bombarded with information about hedge funds. While hedge funds are no panacea, they offer the potential for investment returns not subject to stock market ups and downs. I would like to know if your experience is similar. What percentage of your DB clients are considering such hedge fund investments?

The "pros" are the people who get paid for what they do. The "cons" are the people who got caught doing something illegal. Are they subject to an audit requirement? If so, it would be a lot easier to document transactions for the auditors if all of the funds were initially received by the trust and then transmitted on. If not, the cash flow could go either way, as the direct payment can still be shown in the trust recordkeeping by journal entry.