Kirk Maldonado

Randy Watson: I predict that you will eventually conclude that your very reliable sources are not so reliable, at least if they are predicting that the regs will be out very soon.

mbozek: Different people have different perspectives about whether you can use amounts in a suspense account (presumably reflecting forfeitures) to fix breaches of fiduciary responsibility. Clearly, the more conservative approach is not to do so, but I've heard some pretty convincing arguments that it should be permissible at least in some specific situations. However, hasn't the DOL taken the position that they won't allow that, at least if you are are trying to gain their approval of the correction of the breach?

I second the recommendation by four01kman. If a participant lawsuit is filed before the plan is cleaned up, the employer will lose big time, particularly if the stock price has dropped. People are usually most concerned about the penalities for non-compliance with the Internal Reveue Code and ERISA. In this situation, the penalties for noncompliance with securities laws can dwarf the worst penalties that could ever be imposed under ERISA or the Internal Revenue Code. I was involved in one case where we discovered and cleaned up the problem before anything hit the fan. If the problem hadn't been discovered until a year later, the penalties at that time would have exceeded the value of the company.

This may trigger the income in respect of a decedent rules. (I'm just raising the issue; I don't know the answer.)

My understanding is that insurance companies often impose minimum coverage rules for health insurance contracts because of underwriting concerns about "adverse selection" (meaning that only the sick people sign up for coverage).

jevd: Thanks for posting the URL for that website. It does have a lot of useful information.

mbozek: Would it be right then, under your analysis, that a person could borrow from funds that originated in a regular (i.e., not a rollover) IRA after those funds were transferred to a tax-qualified retirement plan, even though the person could not have borrowed from those fund while they were held in an IRA?

I think you need to retain competent ESOP counsel to advise you, especially regarding the applicable federal and state securities laws issues.

That was one of the all-time best posts on the Message Boards. But wouldn't it have been easier just to put your name on the Do Not Call Registry?

Dilbert

We had two very good posts here. I thought the post by GRobert was informative, well-thought out, and well-written. Comments like that what makes BenefitsLink a valuable resource to all of us. I thought that mbozek, as he often does, pointed out real problems that occur in real life. Which is very helpful because many of us (myself included) tend to focus on hyper-technical issues and fail to focus upon real-world consequences that may render the discussion of technical issues moot. Thanks to both of your for taking the time to prepare useful posts.

Steve72: I'm no HIPAA expert, so this is a sincere comment. If the employer is subject to the rigors of HIPAA with respect to the PHI it receives regarding the employee relating to its health plan, it seems anomalous that it could get the exact same information regarding the person and his or her medical condition in the context of it absence management functions without triggering the panoply of protections for the employee under HIPAA. I'm not questioning your assertion the STD plans are subject to HIPAA because I don't have a clue as to what is the right issue (and I'm not willing to spend the time researching a theoretical point). I'm just pointing out that the result seems hard to justify from a policy perspective. I've noticed that you have commented on other HIPAA questions and your posts seemed quite knowledgeable. Acccordingly, I presume that you spend a fair amount of time on HIPAA matters. (My condolences.) As a result, I would be very interested in your thoughts about these incongruous results. (It may very well be that they aren't really incongruous, it is just my absence of sufficient knowledge about HIPAA that makes them seem counter-intuititive.)

I concur in the remarks of RLL. Furthermore, trying to learn all that you need to know about ESOPs would be counter-productive if you only have one client. There is so much to learn about ESOPs that it makes no sense to try to master the area unless it is a sizeable part of your business. Most people wisely choose to either do them on a regular basis or stay away from them. There are many traps for the unwary involving ESOPs, especially because they involve securities laws issues. Extremely few ERISA practitioners have any background in securities laws matters.

JBeck: Your response made me realize that I did an exceedingly poor job of making my point. The concept that I was trying to get across is that I can't imagine that the plan wants to let each employer pick the interest rate it wants or even to bargain with each employer about what discount rate it can use. My guess is that they will pick a rate that every employer must use, to avoid wasting a lot of time negotiating this issue every time it comes up. But I'm just speculating, based on what I would tell the plan if they were my client. You should contact the plan to find out what their position is on the issue. Of course, it probably doesn't arise that frequently. Your client must be fortunate in that it can afford to pay it in a lump sum. That hasn't happened to any of my clients yet. The smallest withdrawal liability case that I've been involved in was $750,000 and that was over 20 years ago. One hotly contested case over a decade ago involved a demand for $57,000,000.

Watch out for UBTI problems.

I think that your question can be answered by posing a question for you. What do you think the plan's response would be if the employer decided to use a 48% interest rate in determining the amount of the discount to its prepayment of its withdrawal liability amount? There may be direct authority answering your question, but I can't believe that there's a plan in the country that would let the employer determine the interest rate for this purpose.

JDuns: Thanks for providing that insight as to why someone would seek a legal separation. I've spoken with many domestic relations attorneys about that topic over the years, and not one of them had ever even heard of someone seeking a legal separation. In fact, they couldn't understand why somebody would do that, because the costs of obtaining a legal separation decree as much as obtaining a divorce decree (in California at least), and when it is all over, you're still married to the person. Now I know why someone would choose the legal separation route.

What benefits are provided by that particular EAP?

ERead: Because the person has 45 days to make the entire payment, by definition, the payment isn't deficient until the end of that period. To try to argue that you can take away some of the person's statutorily mandated period in which to make the initial payment because the person paid some of it early is foolish, to say the very least. Also, remember that even if the person doesn't pay all of it, that doesn't mean you can refuse to give him the coverage. There are special rules in the regulations about what to do if the payment is short.

You need to hire a competent ERISA attorney to advise you on this point.

I don't think that the IRS views the actions by the insurance commissioners as binding on the IRS on this point. Nor can I imagine a court taking that position. Your arguments might sell well to unsophisticated listeners, but I doubt that they will be considered persuasive by most of the readers of the Message Boards.

ethompson: If the plan is not maintained pursuant to a collective bargaining agreement, it is not a multiemployer plan. Was your plan ever maintained pursuant to a CBA? That is a crucial fact that you didn't provide.

I think pro-rating leads to absurd results. For example, assume participant A elects to contribute $100 for the entire year while particapant B elects to contribution $5,000 even though participant B only can participate in the second half of the year (because B was recently hired). So under pro-ration, participant A would get an employer contribution that is twice the amount of the contribution for participant B? That result seems hard to justify.

RCK: Last time I checked, auditors were in the business of preparing and examining financial statements, not the practice of law. Determining which plan the assets belong to seems to me to be a question of law, not of accounting precepts. While your approach certainly simplifies things significantly, there are some problems under ERISA with it. I'm not sure that the Trustee of Plan A can somehow automatically become the trustee of some of the assets of Plan B were there is no contactual arrangement between the trustee of Plan A and the sponsor of Plan B. Also, my guess is that you would never be able to get the two trustees to formally agree to such an arrangement, because each trustee could become liable for the fiduciary breaches of the other. Nevertheless, in most cases, I'm sure that you could implement your approach with no problems whatsoever. But if problems did arise, I think it would be hard to reconcile your approach with the literal terms of ERISA.

My guess is that the divorce decree stated that each spouse waives any interest in the other spouse's property. Some courts have held that this effectively waives the designation of one's spouse as one's beneficiary. Other courts have disagreed with that analysis. My recommendation is that the plan retain competent ERISA (not probate) counsel to advise it on how to proceed.