jstorch

The Defense of Marriage Act, Pub. L. No. 104-199, Sept. 21, 1996, overrides state law for federal purposes. Spouses for federal tax Code (& other federal purposes) must be 1 man/1 woman. I agree, domestic partner would have to be a dependent to qualify for flex plan coverage.

The new HSAs cannot invest in life insurance contracts. Code § 223(d)(1)©. Are there group annuities out there that don't offer life insurance in which an HSA could be invested?

Kirk and WDIK both make good points. I think from a logic viewpoint, a document shouldn't summarize itself, but "executive summaries" are common. However, SPDs by law have to be furnished to participants, so the stakes are a little higher than in documents with executive summaries. Still, I haven't come to anything concluding that integrating the plan and SPD per se violates the DOL's regulations. If you're interested, I've included below how I informed the client about my concerns. (Many of the points have already been discussed here.) The client's decision was for me to create a new plan for them, with the SPD separate. "f the SPD is part of the plan, can the SPD summarize itself? Beyond merely being a brain-teaser, this raises several additional questions about potential legal liability: When the Plan issues the SPD to participants, has it satisfied the guidelines on furnishing summary plan descriptions? If the SPD is part of the Plan Document, does the Plan need to provide participants a copy of the Plan Document in addition to the SPD? If so, does the Plan Document satisfy the "plain language" requirement for SPDs? As these questions suggest, a plaintiff's attorney could attack the current Plan structure on many fronts. While I think the risk of a disputed claim turning on this issue is slight, it would be one more factor for a court to consider in deciding a case, and it does open the door to penalties for lack of providing a proper SPD should a disputed claim go against the Plan."

Kirk- I agree fully with your comment. My question is whether this is significant enough to require a plan re-write at this late stage. In theory, it could just entail 1) changing certain references to the SPD to refer to the adoption agreement, and 2) cut and paste SPD information into the plan. However, I'd estimate there are 50-75 SPD references in the plan that would have to be corrected. Since I'm not the drafter, I'd have to convince the employer and the drafter that it is necessary to do this work.

I was given the SPD and plan as separate documents. I assume participants will get only the SPD. For the employer's purpose, however, the "plan" consists of both documents (plus an adoption agreement plus a "Plan Information Summary"). The plan is set up to be used by different (unrelated) employers, but so is the SPD--the only customization of the SPD is the employer's name on the cover. (Which apparently is the only way to get to the definition of "Company" in the plan in my earlier example.) I have no problem with the plan document refering to an adoption agreement for additional terms or use with multiple employers but think it would be better practice and not too much more difficult to keep the SPD separate. However, I'm just reviewing, not drafting, the plan. While I think there is risk of incorporating the SPD in the plan (e.g., participant/administrative confusion; plaintiff's attorney arguing that a participant never received a SUMMARY plan description because if the SPD is part of the plan, how can the SPD summarize itself?), it is slight. My thought is to point out my concerns to the employer for future revisions, but not push for a rewrite at this stage.

I'm reviewing a (cafeteria) plan document (drafted by another organization) that specifically incorporates the Summary Plan Description into the plan. It goes so far to refer to the SPD for many of the definitions of plan terms. (Examples: "Company": The organization named in the SPD as the "Employer"; Participant Termination: A Participant will cease to be a Participant as of the earlier of the dates set forth in the SPD.) I think incorporating the SPD into the plan document is poor practice at best, but it's so pervasive in the document that I would have to recommend a nearly complete re-write of the plan document to correct it. Any comments as to how common this practice is? Should suggest a re-write, and if so, how strongly should I suggest it?

Any suggestions on the following fact pattern? IRA owner's spouse dies late 2001. IRA owner himself has terminal cancer, sees attorney to update estate documents. IRA owner and spouse had 3 kids, all in mid-30's. (No other spouses or children for either owner/spouse.) Attorney prepares attachment naming each child 1/3 beneficiary, to be used for IRA and other beneficiary accounts. (Will likewise names each child 1/3, and default state intestecy law would yield same 1/3 result.) In February of 2002, attorney sends change of beneficiary designation form with custom beneficiary attachment for IRA with Bank 1. IRA certificate comes due in April 2002. Intent all along was to roll over IRA to different bank. Estate planning materials (letter from attorney to IRA owner) show this intent plainly. IRA owner in fact does roll over IRA to Bank 2 in April 2002 and handles the paperwork in person, without attorney. Dies later in 2002. IRA is currently in certificate of deposit, worth about $80,000. Upon checking the IRA documents, the beneficiary attachment was not included. The space for a beneficiary designation is blank. Bank 2's position is that no beneficiary designation was made. Default under Bank 2's IRA contract is that estate is beneficiary. Bank has been provided copies of Bank 1 designation and attorney's correspondence, but is firm that without a designation saying "Bank 2", there is no valid beneficiary designation. Doesn't matter to Bank 2 that each child gets 1/3 either way but takes less of a tax hit if they are the beneficiaries of the IRA rather than the estate. Beneficiaries want to know what their options are and if they have any recourse against the bank. Assume all 3 would keep the IRA in tax deferred soloution, taking only required minimum distributions. As for options, I see the following: 1. Don't fight the bank. Let the estate get the IRA; stretch out payments as long as possible. I believe this is five years. Is this correct? If so, does the estate need to be kept open until the IRA paid out? 2. Fight the bank. Take Bank 2 to court to require it to treat them as 1/3 beneficiaries each. My concern in pursuing this option is both the likelihood of success and the cost/benefit analysis. As to the bank, I believe there is an argument that: 1. They had a duty to obtain beneficiary information and neglected to do so; or 2. They must have had the attachment but lost it. (Why else would the beneficiary designation be blank?) Either way, it appears to be a negligence case. If so, I don't collecting anything more than the tax difference between paying taxes now (or next 5 yrs) by naming the estate or paying taxes later (over the 3's life expectancy), plus any deferred growth. I'd appreciate comments on the above, and especially answers to the following: 1. Are my assumptions above (e.g., 5 yr payout for estate; amount Bank 2 could be on the hook for) correct? 2. Any other theories of liability against Bank 2? (Especially ones with award of attorneys fees available?) 3. Any idea what the relative tax hit would be if they took the $ now into the estate, rather than were able to keep as direct beneficiaries? 4. Can you suggest any other options/strategies? Thanks for any help.

Employer provides health insurance; employees pay 20% of premium, employer the remaining 80%. Employer has a Code § 125 cafeteria plan, so employees pay their share of health insurance premium pre-tax. I recently found out that if employees do not take health insurance, at the end of the year the employer pays them a "buy back" bonus (bonus is less than the amount employer would pay for the insurance). Apparently there is no official structure to this buy back program. I strongly suggested running the buy back through the cafeteria plan. Employer's plan provider said the buy back is set up as "deferred comp" (no further detail on what that means at this time) and is not able to go through the cafeteria plan. Provider's suggested alternative is that the buy back should be a stand alone program, with a separate plan document. Q: Does the provider's suggestion work? Should I insist the employer's current cafeteria plan be amended so that the buy back goes through it? Any comments or suggestions appreciated.

Does anyone have a cite supporting that plans that have terminated but that have not yet distributed all plan assets do not need to be updated for law changes in the period from termination to final distribution?

Rev. Proc. 2001-55 only specifically mentions the remedial amendment period. Is it correct that the "deadline" for filing for a GUST determination letter similarly is extended through Treas. Reg. § 1.401(B)-1(e)(3)?