Kirk Maldonado

You might want to try contacting the Self-Insurance Institute of America. Their website is: http://www.siia.org/site_index.cfml.

I have to disagree with Janet M. Treasury Regulation Section 1.411(d)-4, Q&A-1(d) provides as follows: (d) Benefits that are not section 411(d)(6) protected benefits. The following benefits are examples of items that are not section 411(d)(6) protected benefits: * * * (8) the allocation dates for contributions, forfeitures, and earnings, the time for making contributions (but not the conditions for receiving an allocation of contributions or forfeitures for a plan year after such conditions have been satisfied) Thus, because the plan apparently does not condition the participant's right to receive an allocation upon being employed on the last day of the plan year and/or performing at least 1,000 hours of service, the participant's right to matching contributions accrues at the time he or she contributes to the plan. Accordingly, the right to the amount of matching contributions that had accrued as of the date of the plan amendment is a protected benefit so the rate of matching contributions with respect to those prior contributions cannot be decreased by a plan amendment.

The answer to the question about a call option (referred to above as a "buyback") is pretty straight-forward. Treasury Regulation 54.4975-7(b)(4) provides as follows: [N]o security acquired with the proceeds of an exempt loan may be subject to a put, call, or other option, or buy-sell or similar arrangement while held by and when distributed from a plan, whether or not the plan is then an ESOP. Thus, if the shares held by the ESOP were purchased in a leveraged transaction, they can't be made subject to a call option.

AshleyL: In case you aren't well-versed in the nuances of partnership taxation, the bottom line of what Lori said is that the premium payments on behalf of that individual are taxable income to the partner.

I've got to side with GBurns on this one. Responding to the original post, I've had clients that expressly stated in their medical plan that it wouldn't cover any costs that arose from having cosmetic surgery done simply for esthetic purposes (including any complications caused by that surgery). I realize that the original post related to STD, but this is an example of an extension of that policy decision.

I'm pretty sure the name of the song was "Me and Mrs. Jones."

The letter that Becky referred to is ERISA Opinion 79-87A, which was issued Jim Carey of Kindel & Anderson (which was a law firm based in Los Angeles that no longer exists). However, I didn't see any reference to the plans being aggregated for tax-qualfication purposes in the DOL's discussion of the issue. Rather, the DOL focused upon whether the plan's provisions contemplated that all of the component plans be treated as a single entity. But, inasmuch as that letter was issued more than 25 years ago, I think that it is completely understandable that Becky Miller's memory was a little bit off. Hell, I'm impressed that she even remembered it! In any event, here is that letter: ERISA Opinion Letter 79-87A , 12/13/1979 Mr. James F. Carey Kindel & Anderson Twenty-Sixty Floor 555 South Flower Street Los Angeles, California 90071 Dear Mr. Carey: This is in response to your request for an advisory opinion regarding the interpretation of 29 CFR 2520.104-46 , under which the requirement set forth in section 103(a)(3)(A) of the Employee Retirement Income Security Act of 1974 (ERISA) that an accountant's opinion be included in the annual report is waived for plans with less than 100 participants. We regret the delay in responding to your request. The following is a summary of the representations contained in your letter and material provisions of the documents submitted therewith. A document encaptioned “1976 Amendment and Restatement of Metal Surfaces, Inc. Employee Profit Sharing Plan” (the Plan) was adopted by Metal Surfaces, Inc. (the Company) and one of four of its subsidiary corporations. The Plan provides that any corporation which is or may become an 80% or more owned subsidiary of the Company may become a “Participating Employer”. The other three subsidiaries of the Company thereafter adopted the Plan and became Participating Employers. Contributions by Participating Employers and by employees are held in a trust maintained in connection with these profit sharing programs (the Trust). Under the Plan document, the board of directors of each Participating Employer determines the amount, if any, to be contributed by that Participating Employer on behalf of its employees. A separate account is maintained for each employee who is a participant in one of the profit sharing programs maintained pursuant to the Plan document, and the participant's share of Participating Employer contributions, forfeitures, and gains and losses on assets held in the Trust are credited to the participant's account. Contributions to the Trust by each Participating Employer are generally allocated only to the accounts of that Employer's employees. Under §5.01 of the Plan document, however, it appears that if the profits of one of the Participating Employers are not sufficient to enable that Employer to make contributions, other Participating Employers may make contributions on behalf of that Employer's employees. Forfeitures from the account of a former participant are allocated only among eligible participants employed by the Participating Employer who employed the former participant. For investment purposes, it appears that all the assets in the Trust are pooled. Gains and losses on the pooled assets are allocated among participants' accounts on the basis of the ratio of each participant's account balance to the sum of the account balances of all participants. Only the Company may terminate the Plan. A Participating Employer may withdraw from participation in the Plan only with the approval of the Company's board of directors. The Company may amend the Plan without approval of the Participating Employers. Upon termination of the Plan, each participant becomes fully vested in his or her account. Thus, in the event of termination, the assets contributed by a Participating Employer for its employees will generally not be used to provide benefits for participants employed by another Participating Employer, except to the extent of contributions by a Participating Employer on behalf of the employees of a Participating Employer with insufficient profits, as described above. On the basis of these facts, your letter raises the question whether, in determining the number of participants for purposes of 29 CFR §2520.104-46 , the profit sharing program maintained by each Participating Employer should be treated as a plan separate from the programs maintained by the other Participating Employers, or whether all the programs should be treated as a single plan. In our view, under the circumstances described in your letter, and in the materials that accompanied it, the profit sharing programs maintained by the five Participating Employers under the Plan should be treated as a single plan in applying 29 CFR §2520.104-46 . The provisions of the Plan, taken as a whole, contemplate that the profit sharing programs of the Participating Employers would form part of a single plan for the purposes of the Company. The Company reserved to itself the sole right to amend and terminate the Plan, and to approve withdrawals of Participating Employers from the Plan. Further, the Plan provides that if the profits of a Participating Employer should be insufficient to make a contribution which such Employer is required to make to the Plan, other Participating Employers may make such contribution. Because the Plan provides for the pooling of all the assets in the Trust, and for allocation to each participant's account of a proportionate share of the gains and losses on such pooled assets, the financial information with respect to which an accountant's opinion would be required under section 103(a)(3)(A) of ERISA is relevant to all the participants. Given the provisions of the Plan, which contemplate that the profit sharing programs of the Participating Employers and the Company were meant to be treated as a single entity for corporate purposes, it is our opinion that the participants of each of the profit sharing programs should be aggregated for purposes of §2520.104-46. This letter constitutes an advisory opinion under ERISA Procedure 76-1 . Accordingly, this letter is issued subject to the provisions of the procedure, including section 10 thereunder relating to the effect of advisory opinions. We have considered your request for a conference under section 8 of the procedure and have decided that a conference is not necessary in providing this advisory opinion. Sincerely, Ian D. Lanoff Administrator of Pension and Welfare Benefit Programs

47. So we don't have to come up with all 50 of these reasons.

Taking the time to create one involves so much work and time, that I'd be surprised if anybody would give it away for free. The Final Four accounting firms charge very substantial fees to do those computations, so my guess is that anybody who has done the work to create the spreadsheet to do the computations would keep it as a revenue source for himself or herself. Also, I'd be somewhat concerned about whether the computations were done correctly in something that you got for free. You know the saying about getting what you paid for. You'd have to know the golden parachute rules pretty well to be able to check to see that the formulae in them are right. You'd also have to have a good working knowledge of spreadsheets. If you know those rules that well and are that computer proficient, you could create those spreadsheets yourself. Finally, these computations are done for the most senior executives, so that the focus is upon making sure that they are done correctly, not cheaply. I wouldn't worry about trying to save a company some money, particularly because the computations are done when the company is being acquired, so that it will generally have the cash to pay to have the computations done. Those fees are just considered to be part of the costs of doing the deal. Bottom line. This isn't a good area for people to dabble in, because large dollars can be at stake and the computations are generally done for very senior executives. You don't want to make a mistake in computing the amount of taxes that the CEO owes. For example, there are many attorneys at high-powered law firms that are extremely knowledgeable about the golden parachute rules, but refuse to do those computations. If they don't feel comfortable performing them, do you think it would be prudent for you to do them?

There is a definite cutoff in how far you have to go back. Before a specific date (which I can't recall) the DOL lacked statutory authority to impose a monetary sanction for the failure to file.

Very carefully?

AshleyL: Sorry but I can't help you on that front; I've never had to deal with those facts.

Don't you mean size counts? (Pun intended.) Sorry about that, but it is hard to inject humor into some postings by number-crunchers. Or tax lawyers, for that matter.

And the difference between a "consultant" and a consultant.

Ashley L: Fortunately, in the situation that I described previously, there hadn't been any filings for any of the plans covered by the wrap document. Because of that, I didn't have to face the issue confronting you. But I think that you have to do a filing with respect to the EAP. The reason for that is because if you don't, yet you treat both plans as having been covered by the Form 5500 for the medical plan for those prior years, then those Form 5500s could be rejected by the DOL because they contained nothing about the EAP. Thus, treating the wrap as being retroactive in these circumstances doesn't solve the problem.

jaemmons: Treasury has taken the position for at least 10 or 15 years that those transfers don't work; the participant must be taxed on the distribution of the amounts out of the plan or there is no correction of the ADP test.

Ashley L: I did the same thing for one of my client recently, although the failures to file didn't go back quite that far. I got no objection from the DOL.

My understanding is that California allows self-funding (or at least did in the past), but imposed some pretty rigid funding requirements. As a result, I've been told that you have to be a very good sized employer (implying thousands of employees) for self-funding to make any sense.

There is an issue as to whether those contributions can be made to a medical expense reimbursement account that is part of a cafeteria plan. I had a client get audited by the DOL on this point, but I switched law firms before it got resolved, so I never knew how it came out. The DOL argued that because the person would only get reimbursed if they incurred the expense, there might be an impermissible forfeiture. I had two counter-arguments: 1. Based on the underlying theory of the reimbursement accounts announced by the IRS, the contribution to the accounts was analogous to the purchase of insurance. Nobody (other than maybe the DOL) would argue that there is a forfeiture if you buy insurance but don't have any claims. 2. As a practical matter, people can always come up with ways to spend the money in their reimbursement accounts. My analogy to the DOL was that if you tell people you have $100 to spend, but you must spend that money in the next two months or you will lose it, most people will figure out a way to spend those dollars. Does anybody know if this issue was ever resolved?

carsonv: Have you considered the possibility that by only having a length of service requirement, but no hours component, that the plan is using the elapsed time method of crediting service, rather than the 1000 hours method? This is a problem that I've seen many times (where the plan only has the 1000 hours method language contained in it).

erisafried: Did you know that there is a Q&A column on BenefitsLink devoted to Davis-Bacon Act? There are some questions there that might be worth reading.

JanetM: Don't worry, you'll adjust to the altitude here in Denver. It only took me about 18 months to adjust. Pretty soon nobody will be able to telllllllllllllllllllllllllllllllllllllllllllllllllllllllll.

I have only a few top-heavy plans, which is why my clients opt for the bottom's up approach. Yours is a very different scenario.

Be sure that the company gets advice on the securities laws aspects of having company stock in the plan by somebody that also understands qualified plans.

Lori: Be careful of that drug use; look what happened to Blinky!