Ron Snyder

Will do, Louise.

Does paid out mean on a cash basis only, or can it include on an accrual basis? If final distribution was accrued by 12/31/08, the net assets of the plan will be zero. So long as the distribution was made on time, no additional 5500 should be required and "Final" can be checked.

Resign

Since an HSA is a form of a MERP, you are considering having two MERPs. Why wouldn't one be sufficient?

You can call a trust a "Rabbi Trust" if you wish, but it will only be a Rabbi Trust if the trustee takes certain actions upon change of control, filing for protection from creditors, etc. There is no "applicable general trust law principle that prohibits settlors from using the funds of a trust without revoking the trust completely". The trust can be invaded by the settlor if the trust so provides. However, it will not be a Rabbi Trust any longer.

I think the employer should have his adviser ask anonymous strangers for advice on a bulletin board in order to make the decision. Or not. This is a case where the plan's legal counsel should be consulted. If the plan doesn't have legal counsel, it may as well bite the bullet now instead of waiting for the inevitable lawsuit from the participant, the child's guardian, etc. when a decision based on advice from anonymous strangers is made.

While a DB plan can offer death benefits, maintaining those after retirement is quite unusual. I have been a small-plan actuary since ERISA for hundreds of DB plans and have never seen such an animal. Moreover, there are potential ERISA and IRC violations, depending on how the benefit is structured. Perhaps a clearer and more particular statement of the facts is in order. To answer your question directly, there are no published actuarial standards, principles or guidelines for such a situation because these plans are not known to exist. If your plan genuinely provides a post-retirement death benefit, and if the plan is in compliance with ERISA and IRC rules, you may wish to look for guidance under section 79 cases and rulings, as those plans occasionally continue for life (most of them terminate by age 70). The situation you describe doesn't make sense. No insurance company would permit a provision such as you describe (the participant can later elect coverage), as it promises coverage without evidence of insurability and invites adverse selection. The only situation which I can imagine that might choose to offer such a benefit would be collectively-bargained. In that case, however, the benefit would usually be considered a welfare benefit to be provided through the welfare benefit fund rather than through a DB pension plan. Unless (thinking out loud), the union wanted a death benefit and the pension fund was overfunded * * *.

I am under the impression that American College of Employee Benefits Counsel is more of a "club" for such attorneys rather than an active, working group. I note that not only am I not in the club, but the person I consider to be the top ERISA attorney in Los Angeles (Bruce Ashton) is also not a club member. (I have been an ERISA attorney for 26 years.) When new legislation is proposed, or new Regs are contemplated, it is the Tax Section of the ABA and the working committees that have the input, even suggesting (and in some cases writing) Regs.

While there is no "ERISA bar" (Federal or state), the Employee Benefits Committee of the Tax Section of the ABA tends to act as such. While I don't know all of my fellow committee members, I do know enough of them to be able to recommend practitioners for various types of cases in various locales. Other Employee Benefits Committee members would also be able to make similar recommendations.

My experience was before 2004. There is a Rollins v. Commissioner, T.C. Memo. 2004-260, but I could not find one with the reference you provided. Moreover, the Rollins v. Commissioner was a prohibited transaction case and was decided on grounds unrelated to whether or not the case had gone though the IRS appeals process (which it had). The joint venture rules have been in the Code since 1975. Your point seems to be that IRS Appeals Officers will no longer "split the baby" because of the Rollins case. Generally, Memo cases are not much of a precedent. Court of Appeals and Supreme Court cases provide stare decisis, and District Court and Tax Court opinions provide value as precedents, but generally "Notes" and "Slip Opinions" are not cited because they are weak.

I have the "Executive Compensation Answer Book" from Aspen Publishers.

I had a similar situation years ago. The auditor was unwilling to negotiate, labeling the transaction a "circuitous" PT. The IRS Appeals Officer split the baby in half. There are multiple ways of looking at a situation. At least one of those ways sees it as a PT and at least one way sees it otherwise. This are not great facts to go to court on. Exceeding the 10% threshold is pretty damning, because that is the level that determines whether they are "joint venturers" under ERISA and therefore whether the transaction is a PT. ERISA specifically provides for administrative exemptions to the PT rules, which has led to Letter Rulings from the DoL. Do the attorneys believe that filing for such would be helpful? It may be better than ratting themselves out as participating in a PT or lying under oath when they sign the 5500 form with no PT disclosure.

This is an interesting issue and the thread has been good to follow. I searched the internet and found a plethora of articles that agreed with JSimmons and mbozek. However I did find the following on Self Directed IRA website So, at the very least, someone agrees with jpod. And if the report is correct, the law firm named is willing to give a tax opinion on the subject. My guess is that they will either hedge if contacted, or will quote an exorbitant price (north of $50,000) for such an opinion.

As the VEBA Guru whose name was taken in vain a few posts ago, I know what I have done to obtain representation in cases in which I have been involved as a party. There is no "best ERISA attorney in the U.S." There are many excellent ERISA attorneys and ERISA litigators. The top law firms all have very adequate ERISA counsel and tax litigators. I have done as David Rigby suggests, above. 1. Narrow your search to a specific area of the law. Since you indicated it involves IRS, which Section or sections of the IRC does it involve? 401(a)-qualified plans? 409A-non-qualified plans? 419/419A-welfare benefit plans? 2. If it involves qualified plans, does the issue arise under 404 (deduction), 412 (actuarial), 415 (maximum benefit/contribution limitations), 411 (benefit accrual), 414 (controlled group and affiliated service group), etc. 3. Narrow your search to a specific geographic area, either the location of the client who needs to meet with the attorney or the locality where the IRS office is located. From this point on the search becomes serious: you either need to be referred to an attorney that meets the criteria, or you can select blindly from peer ratings. Most personal referrals are to practitioners known to the referrer rather than to specialists who can best represent you. Responsible attorneys who know the local bar members will refer you on to someone better suited to the task. For a cold beginning point, I recommend doing a search on Martindale.com Look for attorneys in firms that have both tax controversy and ERISA attorneys. Read their websites to ascertain the focus of their practices. Select at least 3 who are AV-rated ("A" meaning-top level competence, "V" meaning ethical). Call all of them to determine whether you are comfortable with their personality, with the focus of their practice and how closely it matches your needs, and with their price structure. If possible, meet them briefly to assess your comfort level. Then make your decision based on all input you have. Good luck.

It is legal but may result in discrimination and imputation of taxable income to highly compensated employees. For example, a company has 4 10-hour workdays for hourly employees, but they get a half-hour break, resulting in working only 37.5 hours per week. Managers and officers are salaried and are paid as though they work 40 hours although they don't punch a time clock. In this scenario the plan would discriminate in favor of the highly-compensated and to the extent that it does so, the excess portion (the percentage of compensation over the non-HCEs percentage) would be imputed as taxable and listed as compensation on for W-2 at the end of the year.

Post #1. You joined the board to ask this question? Why would it solve participation issues? By giving the employer an excuse to sack cheap or broke employees who cannot afford to pay their share of premiums because they live hand to mouth? Do you really mean nondiscrimination issues? Or what types of participation issues? Too many participants are under the employer's plan? The employer wants employees to participate in their spouses' plans rather than its plan? As any good group health insurance broker knows, every employer can decide the level of its commitment to a health plan, including: 1. No plan at all. 2. A buy-in plan where employees pay 100% of the premiums. 3. A plan where the employer pays some of the employee's premium and the employee pays the balance. 4. A plan where the employer pays 100% of the employee's premium and the employee pays for dependent coverage. 5. A plan where the employer pays 100% of employee and dependent coverage. 6. Variations on the above. My firm selected #4.

You're welcome. Also, J Simmons made a good point on the VEBA termination thread: Be sure to check the plan/trust document(s) to see what provisions they contain relative to termination. It may be advisable to follow those provisions. If not, the document(s) need(s) amended to reflect whatever treatment is decided upon.

I have established several similar plans and will attempt to answer your questions: Q1. How would you go about terminating this type of plan and have each employee who contributed to it (indirectly) be treated equitably? You have varying categories of employees based on their age, how long they’ve “contributed” to the plan, and whether they’ve retired or not and starting receiving benefits. The plan has also had significant investment losses in the last couple of years. A1. Despite your question, the issue is not how to terminate the plan and treat employees equitably. The issue is whether the plan can be terminated and assets distributed at all (at least without incurring a huge tax penalty and liability). See IRS Notice 2007-84. To answer your question directly, the primary concern about treating employees "equitably" is that the amounts distributed not be discriminatory. Q2. Could the assets be “split” and allocated to some type of account for each retiree and pre-retiree based on age and how much went into the plan for their benefit? A2. Along with other methods this would appear not to be discriminatory. Q3. If so, could some type of individual account be set up for each employee to manage on their own? A3. The plan/trust could be amended to provide as described. The account should be labelled as an health reimbursement account and should comply with the HRA Regs. issued by IRS. Q4. Any way any of these assets could be transferred into a qualified plan for the employees? A4. No. However, they may be able to be transferred to health savings accounts (HSAs, a form of IRAs permitting payment of medical expenses tax-free) for each of the employees. This treatment is referred to in the 409A Regs. but it is not clear if the employees must be covered under a high-deductible health plan in order to obtain this treatment. Q5. What type of plan is this ?!? A5. This is a welfare benefit plan. See IRS Notices 95-34 and 2007-84 for information about their concerns with such plans. They have generally not had concerns when the plans are collectively bargained (since DOL has primary jurisdiction. However, since 409A was added to the Internal Revenue Code, IRS is in the position to call this a nonqualified deferred compensation plan which is not in compliance with 409A and assess a 20% excise tax on the distributions (in addition to FICA, Medicare and income taxes). Hope this helps.

Was this a plan that provided for participant direction of investments? Or was is a plan where the bank was the fiduciary managing the investments and the participant or employer indicated a preference? Of course there may be some liability. If under the terms of the trust documents the bank was to have followed the investment direction given, the bank would be liable to make up losses which occurred as a result of that failure. However, generally a statute of limitations would limit recovery to 3 years from the date of discovery of the failure. Your client will be put in the uncomfortable position of having to admit that he didn't look at the bank's performance reports for 10 years, which may impact his credibility.

I believe that this PT Exemption was granted many years ago at the request of the American Council of Life Insurance. However, it would be very easy to get around in any event. Simply retain and refuse to pay commissions rather than paying them to themselves. What difference would it make? And why do you seem incensed at the prospect?

L335pwner5: What a clever name; you are not likely to be confused with anyone else. I have to agree with SoCal. Although I consider a US corporation (or a non-US entity that qualifies to do business within the US) that owns non-US assets to be adequate for other types of investments, I'm not so sure about individual parcels of real estate. Gary: Remember that Congress put the investment restrictions (fiduciary liability and prohibited transaction rules) both into ERISA and into the Internal Revenue Code, creating parallel enforcement and separate duties with respect to each set of requirements.

I think that the court is probably wrong. I would want to know what the Plan's SPD said during the time the documents were in error. And how many requests for actual plan document were received and plan documents provided to employees. In other words, did any employees actually rely on the wording of the plan documents or are they simply playing gotcha in hopes of getting something for nothing. How many of the employees would even understand the difference in the language of a step rate plan and an integrated plan so that they could reasonably rely on it. It is most likely that all that was relied upon were the annual benefit statements which were done in the way intended.

Foreign securities can be withheld inside the US and be subject to the jurisdiction of the courts here. Real estate is fundamentally different. Subject matter jurisdiction will always be in the foreign court where the property is located. The only hope of having non-US real estate in a US court would be personal jurisdiction. And that would be correct if we were only concerned about the trustee. However, other parties who have no ties to the US may attempt to acquire title by adverse possession, filing of liens, fraudulent conveyances, or other real-estate related actions (such as quiet title) and the plan participants, whose interest was to be protected by ERISA) may never even become aware of the situation. I cannot think of a way to guarantee that the participants property interest would be guaranteed enforceable by a US court with an individual piece of real estate located outside the US.

The article has nothing to do with the heading "swiss annuity vs IRS". Most Swiss annuities are compliant with US tax laws. And since they provide tax-deferred inside buildup, there is no taxable income to disclose to IRS until the contract is surrendered or withdrawals are taken. This article should be deleted since you posted it on another thread already.

This is certainly a plan of deferred compensation and would fall under Section 409A unless a formal plan document is drawn up in a form that complies with 401(a). 409A treatment would mean that it is not deductible to the employer until the employee vests, at which time it is taxable to the employee and deductible to the employer. Is this really what they intended? Clearly, in any event, the Employee Handbook needs to be revised. It should reference the SPD (not simply the plan documents) for the qualified plan, and the plan description or plan documents for the non-qualified plan.