Ron Snyder

The Regs. add the following clarification: "* * * (3) Among the highest paid 25 percent of all employees (including the 5 highest paid officers, but not including employees excludable under paragraph ©(2)(iii) of this section who are not participants in any self-insured medical reimbursement plan of the employer, whether or not designated as a single plan under paragraph ©(4) of this section, or in a health maintenance organization plan). The status of an employee as an officer or stockholder is determined with respect to a particular benefit on the basis of the employee's officer status or stock ownership at the time during the plan year at which the benefit is provided. In calculating the highest paid 25 percent of all employees, the number of employees included will be rounded to the next highest number. For example, if there are 5 employees, the top two are in the highest paid 25 percent. The level of an employee's compensation is determined on the basis of the employee's compensation for the plan year. For purposes of the preceding sentence, fiscal year plans may determine employee compensation on the basis of the calendar year ending within the plan year."

Not enough information. Who is your client: The Plan? The employer? The TPA firm? Under the terms of the Plan, who must execute the subrogation agreement? The covered participant? Any beneficiary? Does your state have an interpleader statute? Answers (subject to revision upon clarification of facts)... 1. What are your thoughts on this approach? Probably not good unless it is in the interest of your client (whoever that is). I suggest that your client sign a release/hold harmless if you use this approach. 2. Does the state court have subject matter jurisdiction over an action brought by the ERISA plan against the 3rd party tortfeasor? Of course. Moreover, to the extent that ERISA might apply, the state court is capable of applying ERISA using conflict of law rules. 3. Any issues or options I am missing? You might be missing an opportunity to get out of the picture altogether by using the interpleader statute, assuming one exists.

If one looks at a VEBA as a paying agent for the employer, there is no reason that an intervening VEBA trust could not provide the same benefits on the same basis as the employer/sponsor. That is the argument in favor. If one looks at a VEBA as an independent welfare benefit trust, it would seem unnatural to have provisions for making distributions on any basis other than as claims for benefits are filed by employees, dependents and beneficiaries for which they are eligible. Therefore I wonder how the VEBA would be worded. What benefits does it provide? On what basis would the HSA transfers/contributions be made? Is it optional to the employee? Would this cause the VEBA not to comply with applicable nondiscrimination rules? My informal conclusion is that it would not work. A VEBA may be used to provide certain benefits on a nondiscriminatory basis. I have a hard time envisioning the structure of a benefit that complies with both the VEBA requirements and the HSA rules.

There was 1 primary reason to separate the trusts originally: To limit the liability of each trust to separate assets, so that if one trust went broke, for example, the other benefits could still be provided to the extent of the assets. This is primarily true when one of the groups covered has collectively-bargained benefits. A minor second reason to separate the trusts is because the non-union retiree medical trust is subject to UBIT. The liquidity problem you describe is precisely the primary reason to separate the trusts. Without a plan amendment to the other trusts (at least one of which would require collective bargaining) it is NOT okay to "disregard the "fundamental purpose" and pay non-bargaining retiree medical benefits out of the other 2 VEBAs." A transfer is permissible, but would require the same level of approval: action by Board of Directors, sign off by employee representatives, etc. In short, none of the approaches you suggest would work because of the operative collective bargaining agreement. The employer should take this problem to the union to see if they are willing to permit their assets to be used for non-union employees. If not, the employer must find another solution.

You are correct: reversion is not an option. There have been a couple of PLR's from IRS that have permitted excess assets from a terminating VEBA to go to a charity after satisfaction of all of the plan's liabilities.

The DOL believes so. They have published compliance assistance for group health plans at http://www.dol.gov/ebsa/publications/top15tips.html. The VEBA itself is not a health plan but the medical expense reimbursements are. And there's more than COBRA and FMLA to address. Like HIPAA, MHPA the Newborns’ Act and the WHCRA. Many of those will not need to be addressed in the plan documents, but in the SPD and the administrative procedures, especially with respect to providing notices to terminating employees.

From the Proposed Regs. under Section 125: "A-4: The term "employees" includes present and former employees of the employer. * * * The term "employees" does not, however, include self-employed individuals described in section 401© of the Code." Revenue Ruling 91-26 clarifies that 2% shareholders are such self-employed individuals. If a deemed self-employed individual participates in the plan the premiums or reimbursements must be passed through to the 2% shareholder as taxable income. Please note, however a shareholder who owns 1% is not a 2% shareholder. The employee may participate in the 125 plan.

Since RP 2002-21 and other IRS positions make it clear that the client company (of the PEO firm) is the actual employer, a PEO plan is not a single plan but several small employer plans with a combined trust. There is no reason the actual employer cannot take the tax credit even though the plan they adopted is maintained by a PEO firm.

You are correct that the nondiscrimination requirements of 105(h) do not apply. Moreover, IRS has clarified that "comparable participating employees" means employees participating under the same high-deductible health plan or policy. In essence, a company can provide a lower deductible for rank and file employees and a higher deductible plan for the HCE(s) coupled with an HSA.

T mbozek: A review of the facts reveals that the attorney was appointed by the federal bankruptcy trustee to act as a bankruptcy trustee. The "non-profit" entity must either have been created by a federal statute or it must have been created under state law. In this case there is no evidence of either one. Moreover, they operate the entity as though it were tax-exempt although the IRS has never reviewed it.

Isn't it remarkable how KBuehler and JWilliams posted identical messages 4 weeks apart. Apparently he/she didn't care for the responses received earlier. I hope mine was the reason why! The fact pattern is suspicious by itself. The "entity" exists under federal common law? The bankruptcy trustee is a screw-up, and the potential administrator, while trying to be reasonably cautious, is afraid to go back to this potential client and break the bad news: "Your form of organization is illegal. Your plan is illegal. We won't have anything to do with you until you clean up your act." But that is what Mr/s Williams/Buelher should do.

"Non-profit" is a state law designation that pertains to the form of the entity. "Tax-exempt" is a federal law term used to describe entities that under Federal tax laws are exempt from federal income taxes. Non-profit entities are not exempt from 5500 filing requirements. Tax-exempt entities may be excluded from the filing requirement if they are governmental or church entities. IRS' instructions for filing form 5500 are clear with respect to who must file a return.

The legal has to be run under a separate plan. See Code section 120. The discount card premium will be considered a medical expense to the extent that it is used to incur (or reduce) section 213(d) medical expenses. Is it a "premium" or a reimbursable medical expense? While it is arguable that medical premiums to insurance companies or health plans generally include a charge for using their network, the discount card should be legally incorporated into the employer's health plan for its employees in order for it to be called premium.

From Temp Regs 1.125-2T: "Thus, a cafeteria plan may offer coverage under a group-term life insurance plan of up to $50,000 (section 79) * * * . In addition, a cafeteria plan may offer group-term life insurance coverage which is includable in gross income only because it is in excess of $50,000 or is on the lives of the participant's spouse and/or children. In addition, a cafeteria plan may offer participants the opportunity to purchase, with after-tax employee contributions, coverage under a group-term life insurance plan (section 79) * * *.

Didn't notice your post earlier. A plan document is required. If you don't have a document, take a flex document and make the necessary changes: 1. Specify that contributions are by the employer, and the basis for them. 2. Remove the use it or lose it language. 3. Add vesting or forfeiture provisions. 4. Replace 125 nondiscrimination rules with 105(h) nondiscrimination rules. Or simply bite the bullett and pay a firm that provides such plans and documents for them to put the plan together.

Regulations section 2560.503 (http://www.dol.gov/ebsa/regs/fedreg/final/2000029766.pdf) are issued under Sections 503 and 505 of ERISA (29 USC 1133 and 1135) and apply to "every employee benefit plan described in section 4(a) and not exempted under section 4(b) of the Act".

MetLife is big in 457. Also VALIC. (Both are top 10) Ameritas is smaller but more flexible with their 457 annuity. I am not sure that the living benefit rider has been filed for anyone's 457 plan. The following website lists companies with living benefit riders: http://www.annuityfyi.com/website/ca1e_living_benefit.html Companies listed include: ING (ES II, DVA Plus, Landmark, Premium Plus) EQUITABLE (Accumulator, Accumulator Plus, Elite, Select) METLIFE (Series VA, Series XC, Series L, Series C) SCUDDER (Wealthmark, Wealthmark ML3) AMERICAN SKANDIA (ASAP 2, XT-6, APEX, ASL) MANULIFE (Venture, Venture Vantage, Venture III) To the best of my knowledge, none of the annuities listed are available through 457 plans. You may also try Fidelity. Perhaps someone from NAVA can help you. http://www.navanet.org/

Your suppositions are too convoluted for me to respond to. Ask me about fiduciary duty and liability issues, but find a real expert on HIPAA privacy issues for an answer.

The employer certainly could provide travel accident insurance. Otherwise, what additional liability is there? While it may be true that people who travel more are sicker, I have never seen studies that show it. So the only quantifiable "risk" you are referring to is the fact that the co-pay may be higher if I travel away from the network? But the policy should address this, and they generally provide that if there is not a network handy, the plan will work like traditional health insurance rather than like a PPO, HMO or POS plan. (Of course this only applies within the US. Travel outside the US is generally excluded, but can be purchased for short-term coverage.)

I have seen situations where using the employer's EIN resulted in problems with reconciling the employer's monthly/quarterly tax deposits. IMHO, the safest option is to send a copy of the original 945 (employer's EIN) and the "amended and corrected" 945 (Trust ID no.) to IRS with an explanation that the EIN was incorrect on the form files and requesting that they properly show the funds as being deposited under the Trust EIN. You may call their taxpayer assistance line for help.

Under the rules applicable to qualified plans: 1. The death benefit must either be paid out within 5 years or payments must begin within 12 months over the spouse's or beneficiary's lifetime; 2. The plan must terminate within a year unless another sponsor assumes responsibility for it; 3. The deceased's benefit will be paid to the surviving spouse unless the spouse has consented to appointment of a non-spouse beneficiary. A solution that takes into account each of the foregoing requirements may permit payments to be made over the beneficiary's lifetime.

Apparently the taxpayer is filing an amended return. Is that correct? Will the financial institution be reporting the change, or simply the taxpayer? Why are you sending the explanation? This sounds like a taxpayer trying to justify undoing a Roth IRA, rather than a taxpayer who adopted and funded a Roth IRA for which he was not eligible. Nicht var? (No es cierto?) Without more facts it is impossible to tell what you are describing and respond to your query.

You "transferred existing whole life policies" into a 401(k) plan? That would be a prohibited transaction no matter which way you slice it. Moreover, I have a hard time believing unsubstanted assertion from someone who would engage in prohibited transactions in their retirement plan. You sound more like an insurance salesman than like the sponsor of a 401(k) plan.

Don't forget IRC Section 414(t): "(t) Application of controlled group rules to certain employee benefits (1) In general All employees who are treated as employed by a single employer under subsection (b), ©, or (m) shall be treated as employed by a single employer for purposes of an applicable section. The provisions of subsection (o) shall apply with respect to the requirements of an applicable section. (2) Applicable section For purposes of this subsection, the term "applicable section" means section 79, 106, 117(d), 120, 125, 127, 129, 132, 137, 274(j), 505, or 4980B."

Partners can received guaranteed payments, and the total of guaranteed payments and net profit from the LLC may be used for testing.