Kirk Maldonado

GBurns brought up a point that I would like to emphasize because it is important but I am concerned that people may not grasp the significance of his statement. Specifically, he stated that the 30 month coordination period commences when the person starts dialysis. Thus, the person cannot force his or her employer's plan to remain primary for more than 30 months by simply delaying enrolling in Medicare. The reason I am bringing up this point is because I once worked on a case where the employer's health plan paid primary coverage for a person in this situation for more than a decade because the employee never enrolled in Medicare. The only explanation that I can concoct for the plan's continued payment is that the plan and the employer's advisors apparently were unaware of this rule.

Harry O: If the amounts involved in Rev. Rul 71-52 were not wages, why did the IRS say to report them on the Form W-2 if the person was an employee in the year of the transaction?

Should those amounts be reported on the Form 5500?

My guess is that the drafter of the language used the word "if" when a more appropriate word would have been "though." That would explain away the issue you raised, which was valid and based on a very careful reading of the wording of the language. In fact, I would wager that you paid more attention to this phraseology than the original drafter (and the reviewers). I've seen people use those terms interchangeably so frequently that I automatically assumed that the author meant "though" rather than "if." Unfortunately, making assumptions about what others meant can be dangerous and can lead to embarrassing errors.

Dave Baker did one a long time ago that he posted somewhere on BenefitsLink. I'll bet if you did a search, you would find it. You would have to update it, but that would be a lot faster than starting from scratch.

Harry O: While it is true that Rev. Rul. 71-52 is technically obsolete, that is for reasons other than the rule contained therein regarding the form on which the income is to be reported. There was no discussion of why that rule would not still apply in Notice 2001-14. My prediction is that if somebody did some research, they would find a definitive answer to this question and that it would be consistent with the position espoused in Rev. Rul. 71-52 because it is logical and I'm not aware of any statutory changes that would mandate a different result. I want to emphasize that I'm not saying that there having been any such changes, I'm just saying that I'm not aware of any. I agree with your position that it should be reported on a Form W-2 if the income is attributable to a year during which the individual was an employee of the business (at some time during the year. But what if the income is attributable to a subsequent year? For example, assume that the employee unexpectedly quit on December 31, 2005 and the rollout didn't occur until during 2006? Would you still report the income on a Form W-2, even though the individual was not an employee during 2006? That doesn't seem to make sense to me, but I will confess that I've never researched the issue further after finding the guidance in Rev. Rul. 71-52.

Why take any unnecessary chances? There is probably an application form that you will need to fill out to qualify for those benefits. Read the form and the instructions (if any). That may answer your question. Even if it doesn't, it may refer to the statutory language that defines the term "pension" for this purpose. The statutory provisions regarding this issue can probably be found online. Spend some time on Google and you'll probably be able to find out what is the exact statutory language. The statute may provide some guidance on this issue. Even if it doesn't, doing this online search won't cost you any money and will probably only take a few minutes. If the statutory language isn't of any help, check to see if you can find the legislative history of the statute online. There may be some language in some committee report that explains what the state legislature meant when they referred to "pension."

You need to read up on the Medicare as Secondary Payer Rules.

Q-14. Are amounts attributable to rollover contributions that exceed $5,000 subject to the automatic rollover provisions of § 401(a)(31)(B)? A-14. Yes. Section 401(a)(31)(B) applies to the entire amount of a mandatory distribution. Thus, for example, the portion of the distribution attributable to a rollover contribution is subject to the automatic rollover requirements of § 401(a)(31)(B), even if that amount is excludable (under § 411(a)(11)(D)) from the determination of whether the present value of the nonforfeitable accrued benefit exceeds $5,000. IRS Notice 2005-5.

Did you try searching this general issue? I'm pretty sure it has been addressed before.

Inasmuch as requiring that would violate applicable law, I doubt that anybody would admit that on a public forum.

If the individual was an employee at any time during the year, issue a Form W-2. If the individual was not employee at any time during the year, issue a Form 1099. Rev. Rul. 71-52.

If employee contributions can be used to purchase employer stock, the sale of the stock must be registered with the SEC. If it isn't registered, you have violated the federal securities laws.

mbozek: In addition to the reasons that you mentioned for not removing employer stock as an investment option, that could make the fiduciary vulnerable to a participant lawsuit should there be a subsequent run-up in the stock price. I seem to recall that there have been one or two lawsuits where that was the basis for the lawsuit.

This doesn't relate to the blending of the two different types of plans, but it is a common mistake where employee contributions can be used to purchase employer stock. Was the sale of the employer stock to participants registered with the SEC?

rcline46: Can't you overcome that problem by skillful plan drafting?

MWeddell: You are right; I misread her posts. Wasn't that proposal something that came from Senator Barbara Boxer?

I want to first state that I'm no expert on QMCSOs; I've only worked on a few of them. Accordingly, my views are based on minimal experience and education. With that caveat, I think that I disagree with QDROphile, assuming that I have interpreted the message by mal. I interpret mal's message as saying that if the person doesn't meet the new definition of dependent, that person isn't eligible for coverage under the plan. Section 609(a)(4) of ERISA states: Thus, because the plan's definition of dependent doesn't cover individual in that particular situation, the QMCSO cannot require the plan to cover that individual. Stated in a different fashion, the QMCSO cannot amend the eligibility rules of the plan, it can only force a recalcitrant parent to enroll a dependent who otherwise satisfies the plan's eligibility conditions. Accordingly, this isn't just a "tax issue."

The informal IRS position that is cited above produces absurd results in some circumstances, as illustrated by this example. Assume that individual K works for an employer that pays all of its employees on Friday for the work that they did that week. Individual M works for a different employer that pays employees on Wednesday for the work that they did in the preceding week. Assume further that both K and M quit on Friday and want section 401(k) contributions taken out of their final paychecks. K would have section 401(k) contributions taken out of his last paycheck, because it is paid to him while he is still employed. M could not have section 401(k) contributions taken out of his last paycheck, because it is paid to following termination of employment (on Wednesday of the following week). Thus, under the IRS position, whether section 401(k) contributions can be taken out of a participant's final paycheck depends on when the paycheck is delivered. I can't come up with a policy that justifies that result.

In addition, the National Center for Employee Ownership has a lot of materials, and they are very reasonably priced. Go to http://www.nceo.org/.

JanetM: The operative rules are in section 407 of ERISA.

The DOL regulations expressly state that in your situation, the requirement that you give notice of the determination by the Social Security Administration that it has determined that you are disabled within 60 days doesn't start to begin until you are notified in writing of this requirement. The company is clearly in breach of the COBRA notice requirements. They are just dead wrong. You might want to consider contacting the local office of the U.S. Department of Labor to seek assistance. YOu should log onto their website. They have a lot of information about COBRA on it, and it is written in plain English.

GBurns: Just because your post is a "question" doesn't mean that it isn't offensive. There is a right way to ask a question, then there is the GBurns way. Here's what I'm talking about: That was a hostile tone in that question. It also made you look exceedingly stupid because it is absolutely clear that there is a security there. But looking like a fool on the message boards doesn't seem to bother you. Despite the fact that you are almost completely ignorant of the underlying law the applies in most of the threads in which you post messages, you post hostile and insulting messages. I'm tired of you bullying people, particularly since you don't know anything about the topic being discussed. You are nothing but an ignorant bully. I will make sure that your bullying will stop, if I have to delete everything you post. You can rest assured that every time you post a hostile message, I will delete it.

My recollection, from working on this issue about 15 years ago, that they only way that you get the estate tax advantages was to use a "sub-trust," and even then it wasn't 100% clear that it worked. I've not worked on this issue since then, so my knowledge could be out of date. I think that the estate tax advantages would be logically inconsistent with the position of the IRS on the income taxation of insurance policies held by qualified plans. (There is an ancient GCM discussing this point in great detail.) But my knowledge on this point is even more dated, it is more than 20 years old.

RLL: Want to you think of only having one class of stock, but having the non-ESOP shareholders waive their right to dividends?