Kirk Maldonado

GBurns: Since the speaker didn't elaborate as to what he meant, I don't think that I can definitively say what he had in mind. My point is that I'm not aware of any insurmountable obstacles contained in the statutory language or the notice that would preclude such an arrangement. It might be that future guidance will clarify why the government doesn't think that they work, but I don't see any obvious reasons why you couldn't make one work. If somebody can see an inherent and insurmountable conflict, please identify it or them.

I disagree slightly with Mbozek, in that I would advise you to put in writing that you think that the arrangement might not be acceptable, but that you will follow their instructions. I see little downside to documenting the fact that you have notified them that you have concerns with the change.

The speaker stated that there are two problems with these "wrap-around plans:" the timing rules and the amount rules. I think that they can both be overcome if the wrap-around plan is properly drafted. My guess is that the person who stated that these plans are dead probably isn't intimately familiar with how they operate and/or doesn't realize that they could be designed to avoid those rules. My hope is that somebody will prepare a thoughtful analysis of this situation and get them to reverse that position.

I think that they are wrong about "wrap-around" or "cash back" plans. I believe that it should be capable of designing them so that they should be considered to comply with section 409A.

While not to denigrate the importance of the issues raised in the prior posts, I think that there are a lot of "political" issues here that may very well be the driving force or forces. Unfortunately, those issues are generally not capable of being resolved by in-depth analysis of the applicable law. Unfortunately, that is simply how the real world operates. Thus, taking a somewhat pessimistic but (I belive) realistic assessment of the situation, even if all of the experts were able to resolve the legal issues involved with cash balance plans, that unfortunately may have little or no effect on the ultimate resolution of the issue.

There is one issue that has always troubled me about this topic. I'm not aware of any specific guidance on this point, so if anybody does, please post it. The issue is whether there is any imputed income to the employee because of the addition of a domestic partner (or someone in a similar cateogory) where the employee had already elected family coverage, so that the premium does not increase as a result of adding the additional person. The official guidance seems to indicate that there would be imputed income, but that makes no sense because there is no increase in the premium. On the other hand, it seems somewhat illogical for the taxation of the coverage provided to the additional person to vary, depending on the coverage previously elected by the employee.

mbozek: Thanks for clarifying that. I had this issue confused with when the IRS will rule that a plan amendment eliminating a contribution does not violate section 411(d)(6).

Carefully?

mbozek: You said: If my memory serves me right, and it often doesn't, that guidance involved a plan where the participant had to be employed on the last day of the plan year to get an allocation. Accordingly, it is possible that the same result might not apply if the plan does not have that limitation.

Thanks for the feedback. I always wondered what clients actually do in those circumstances.

What do you do if the student decides not to return to school (following the completion of the current semester) and you don't find that out until the beginning of the new semester? For example, assume that the student finished the prior semester that ended in May, but decided not to return to school the following September. Consistent with the terms of the plan, do you terminate the coverage retroactively to the last day of the month in which the prior semester ended (which would be May)? But if you do that, then aren't you automatically late in giving notice to the student of his or her (1) right to elect COBRA and (2) Creditable Coverage under HIPAA?

Fortunately, their aim is often pretty bad.

Alf: You forgot to mention that they are also under-paid.

Treasury Regulation Section 1.410(b)-1©(1) provides as follows: Under section 410(b)(2)(A) and this paragraph, there may be excluded from consideration employees not included in the plan who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if the Internal Revenue Service finds that retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers. For purposes of determining whether such bargaining occurred, it is not material that such employees are not covered by another plan or that the plan was not considered in such bargaining. The emphasized phrase is often overlooked.

Yes.

ERISA section 410(b)(1) provides as follows: (b) Nothing in this subpart [part] shall preclude— (1) a plan from purchasing insurance for its fiduciaries or for itself to cover liability or losses occurring by reason of the act or omission of a fiduciary, if such insurance permits recourse by the insurer against the fiduciary in the case of a breach of a fiduciary obligation by such fiduciary;

Just Me: I think that the "pink sheets" are part of Nasdaq. But they aren't part of the National Market System of Nasdaq ("NMS"). NMS is the highest level of Nasdaq. Pink Sheets are a lower tier. By the way, they formally stopped used "NASDAQ (in all capitals) a number of years ago.

No.

Just Me: I don't think that Nasdaq is technically a "stock exchange."

Was the participant under age 59-1/2 when the distributions commenced?

mbozek: I agree that there must be some evidence of the existence of a marriage for there to be a "colorable claim." Other than a copy of the marriage license (which obviously isn't available), what would be something that you think would consitute acceptable evidence? I don't think that her taking his name would suffice, because that would only be proof that they think that they are married; not proof that they were actually married.

mbozek: You said that only a participant or bene can commence an action in state ct for ERISA benefits. Wouldn't the alleged spouse have at least a colorable claim of beneficiary status?

I left the IRS in 1981 and he was still there then.

If my memory serves me right (and it often doesn't), you may find some useful guidance in DOL Advisory Opinion 75-147.

I've been told he has retired and is living in Florida.