Ron Snyder

Yes you are. Agreed. Since it has no assets, I don't believe that a 5500 is required. However, I never said that no plan document was required. Our plan document is about 30 pages.

I have considerable experience with both DoL and state regulatoin of MEWAs, but none specifically on point. I believe your inference is correct with respect to the DoL. You should contact the regulator at the state insurance department to know their view of such a situation. I don't believe that they will give you a problem unless the plan is being offered to new people, rather than in process of being closed down or restructured to a single-employer plan.

Yes By being formally adopted by the sponsor in written form, either as a part of the plan or as an amendment to the plan. Yes Yes, unless there is a delegation of powers to corporate officers.

I disagree with the prior posted responses. You may be looking at a multiple-employer trust with individual employer adopted retirement plans. This is the usual arrangement for PEOs and trade associations. In such a situation, even though the plan document is standardized and provided by the sponsoring PEO / association / ???, the adoption of the plan still results in a single-employer plan. The commonality of the trust fund does not impact whether or not it is a SEP. The relationship of the employer to the sponsor is determinative. If the adopting employers are legally unrelated to each other or to the sponsor, the plans, of necessity, are single-employer plans and require separate 5500s.

Yes. However, it is possible that it only works for a "C" corporation and not for an "S" corporation. It depends upon whether or not it is a health reimbursement arrangement or a medical expense reimbursement arrangement. HRA-amount must be sent, but may carry over to subsequent years; MERP-total reimbursement may be provided, but does not carry over. Perhaps your client could adopt a combination of the two plans so that complete reimbursement is provided through the MERP, and HRA funds are strictly for the purpose of funding future (post-retirement?) medical costs. Of course such an arrangment would require an actuarial determination under IRC 419A©. Yes. I doubt that there is an economical way to establish such a plan unless your client is going to contribute $30,000 per year or more. We set them up but charge $2,500 plus $1,000 per year to administer. If you're still interested, contact me off board.

Governmental plans: No Non-profit entity plans: Yes

The question did not involve bankruptcy. Retirement plan assets are exempt from claims of creditors, although such exemption does not apply to any amounts loaned by the plan to the participant. Since that Patterson v Shumate decision, several states have ruled on the application of state bankruptcy statutes to ERISA benefits. In general, the test is whether under the state bankruptcy statute ERISA plans are "spendthrift trusts". Some states (like Texas) make IRAs exempt from bankruptcy, but not qualified plan monies, while other states (like California) exempt qualified plan monies but not IRAs. Some exempt both. It is possible to file bankruptcy in either federal or state court, and for a different result on this issue based on choice of forum. A client would be wise to retain a law firm with expertise both in bankruptcy as well as in ERISA under such circumstances.

Are you referring to a governmental 414(h) "pick-up" plan? If not, what type of plan are you referrring to? In any event, the plan document may permit refunding the excess contributions made by the employer. Review the doc.

Current IRC Section 414(k): "(k) Certain plans A defined benefit plan which provides a benefit derived from employer contributions which is based partly on the balance of the separate account of a participant shall-- (1) for purposes of section 410 (relating to minimum participation standards), be treated as a defined contribution plan. (2) for purposes of sections 72(d) (relating to treatment of employee contributions as separate contract), 411(a)(7)(A) (relating to minimum vesting standards), 415 (relating to limitations on benefits and contributions under qualified plans), and 401(m) (relating to nondiscrimination tests for matching requirements and employee contributions), be treated as consisting of a defined contribution plan to the extent benefits are based on the separate account of a participant and as a defined benefit plan with respect to the remaining portion of benefits under the plan, and (3) for purposes of section 4975 (relating to tax on prohibited transactions), be treated as a defined benefit plan."

Two of us already asked what is a "group HRA". You re-used the term without explaining. Is the $25,000 per employee, per covered individual or for a group of employees? And what does the coverage level have to do with an HRA? As previously noted, HRAs are employer funded, and cannot be an "employee-pay-all plan". The participants may submit their out-of-pocket unreimbursed medical expenses for reimbursement from their individual health reimbursement account. What is an employer's liability in an "employee-pay-all" plan? Your whole example makes no sense. Employee funds may not be carried over from year to year since they are part of a flexible benefits plan election. I think you ought to hire a consultant who understands health plans and the laws that apply to them for guidance.

The word is "rescission". The answer is "yes". However, you may be required to give employees an opportunity to change their elections.

IRS Guidance regarding: RR 2002-41 Notice 2002-45 Notice 2002-45 Also review Regs. 1.105, particularly 1.105-11. You might also wish to review RRs 2003-43 and 2004-45.

What does the plan say about loan default and deemed distributions? Nothing in the law prohibits what you propose.

This doesn't conform to usual HRA or HSA design. Are both plans being funded currently? If so, the HSA cannot cover the same expenses as the HRA. Your situation apparently conforms to this model in that the HRA is established to fund the gap between the HSA account balance and the deductible. This causes several problems: 1. The gap could be 100% since employees are not required to leave money in their HSAs. 2. How do you know what the HSA balance is? 3. Where does the HRA kick in? 4. Can you cap an HSA, a form of IRA? 5. What is a "group HRA"? The design you describe sounds more like a medical expense reimbursement plan than an HRA. 6. You mention a "deductible" and a "catastrophic deductible". What is the difference? 7. You mention using the HRA to fund the gap and then talk about funding the gap with reinsurance. Which is it?

It is not quite clear in your post whether it is the Plan or the PLLC that will be reporting no earned income. Query: how did they defer income if they had none? If the Drs. had no earned income, they cannot contribute, nor can there be a match. Does the plan document permit refunding undeducted employer contributions (look under "prohibition against reversions")? Such contributions could be considered as being made under a "mistake of fact", but such language would have to be in the doc. Moreover, I believe that a careful reading of such language would indicate that it applies to employer contributions, not employee contributions. I believe that the employee contributions should be considered as excess deferrals and refunded and reported next year as such.

If the 40 "franchisees" are truly separate and independent of each other, their use of the same document would not make the plan(s) a MEP. However, the plan language might. Likewise, filing separate 5500s (which has to cost more than an audit anyway) does not make these individual plans. The facts and circumstances will make the determination. To verify the existence of separate plans or a MEP, obtain answers to the following: Did they adopt by separate adoption agreements or by adopting the plan as is in their minutes? Do all employers have the same plan provisions (eligibility, contributions, investments, retirement eligibility, vesting, payout forms, etc.)?

A reasonable period of time should be given to the surviving spouse to prove the relationship. Beyond that time the plan is holding a benefit that it owes to someone. You would not file a "declaratory action". Most states have interpleader statutes. The plan could file using the interpleader statute under the probate action and permit the putative spouse to prove her case there.

oota: Can a welfare plan borrow money from a pension plan? Me: If the plans are legally related (same employer), the loan would probably be a prohibited transaction. Pax: (a) Can a pension plan (not clear if it is a qualified plan) lend money to another plan? (b) Why would it do so? © Why would a welfare plan need to borrow money? (d) How can a welfare plan repay a loan? Me: (a) Yes, of course. They can loan money to any unrelated party so long as the loan is a prudent investment. (b) To earn interest. © For liquidity purposes or to maximize investment return. (d) With future cash flows.

The facts do not preclude the partners from participating in the 125 plan if they are bona fide employees of the C corporation. The plan document should specifically exclude 2% owners of the parnership, but include employees of the C corporation.

The arrangement cannot be a severance pay plan since it is paid over more than 2 years from the date of termination. Whether it is a qualified deferred compensation plan, or a nonqualified DC plan would depend on the facts, the terms of the plan and the plan documents. The attorney who drafts the plan document should answer this question for you. It will be obvious if the benefit is provided as an amendment to a 401(a) plan, a 457 plan or otherwise.

Not for profits are not inherently tax-exempt or charitable entities. They are simply entities created in a form that typically has a Board of Trustees or a Board of Governors rather than a Board of Directors, an executive director rather than a president or CEO and members rather than shareholders. The controlled group and affiliated service group rules are relatively clear, and do not apply only to for-profit entities. You must go through the analysis of the facts and circumstances tests. If the entities are not corporations, the test is not percentage of ownership but profits interests, participation interests, membership interests or control, as applicable.

As a former law student myself, I wonder how you got tricked into such an impossible task. While I am not neutral as to the election, neither party's approach to health care makes any sense. Bush's plan: (1) Health Savings Accounts (HSA)- does nothing to extend coverage or to control costs. My rich clients love having another IRA that they can get money out of tax-free, but it does nothing. (2) Community and rural health centers- have not even kept up with providing medical care for urban and rural poor. Worth continuing, but no solution. (3) Medicaid waivers- moves money from one pocket to another. Does not address real problems. (4) Encouraging generic drugs-this is meaningless unless it is possible also to allow competition by allowing importation or reimportation of drugs from Canada, etc. (5) Medicare Prescription Drug Benefit- This unfunded benefit does nothing and costs little today, but will become another federal boondoggle like Medicare itself. It should be repealed or replaced with a wider solution addressing unconsionable practices by the drug industry. (6) Tort Reform- Having the Federal government pre-empt state regulation of malpractice awards is unnecessary and unwise. Many states have already reformed, and others will do so as necessary. Kerry's plan: (1) Cut Premiums- Government subsidy, not matter how funded, will cost more than we can afford. Bad idea. (2) Mandatory Coverage- Whether this is done through the government or through employers (they are assuming a combination of both), it will cost a lot and eliminate jobs. Not a good idea, and would be obviated by a "living wage" law. (3) Cut the Cost of Prescription Drugs through re-importation, etc. Good idea; needs to be passed. (4) Cut Waste And Inefficiency- While this is a good idea, another federal iniative will do less than competition to accomplish this objective. The marketplace is a better place to improve efficiencies. There is my short, "neutral" analysis. There are already many insurance companies competing in the marketplace to provide affordable health care. A living wage (as some communities have passed) would go a long way toward allowing all people to afford health coverage. Health care is going up because a lot of money is spent on R&D, because people are living longer, because our cultural values have changed to create an unrealistic expectation that life is worth preserving at all costs, because we don't exercise enough, because we don't eat healthy food and are obese as a nation. Neither candidate is interested in addressing the fundamental problems facing us. Rationing is a fact of life in every health care financing and delivery system. Our economically-based approach is just as rational and fair as any other system. I'm voting for Kerry, but only because I believe that he'll never get his plan through Congress.

Thanks for the info. I had heard that he wouldn't sign it until it was too late to use against him in the election. Do you have a link to the final text of the bill that is being signed?

Stephen's answer should have been "not necessarily". It depends on (1) the documentation of the merger, and (2) the facts and circumstances (partial termination, curtailment) surrounding the plan merger. As to what to tell the client, I would look him right in the eye and assure him that your E&O is up to date.

They did not write the old Regs, and they may not write the upcoming Regs (if there are any). But when I met with them I was impressed with their mastery of the issues. And they can refer to others as well.