Kirk Maldonado

NiceGuyMike: It's funny, but I prefer electronic subscriptions for the exact same reasons why you like paper subscriptions. I find them very easy to search. I find that if the results are too many or two few, I simply change a few words. Similarly, I find it even easier to send copies of the relevant provisions to clients. I simply copy them and paste them into an e-mail message. Using that approach, the client would receive the e-mail message before I could even walk over to the copier (if I wanted to manually copy something and fax or mail it to the client).

Not as hard a conclusion to draw as some of the opinions concluding that aggrressive tax shelters actually work!

Wasn't the "insurable interest" issue part of the recent litigation regarding Walmart buying COLI on behalf of all of its employees? (I must admit that I only read the headlines on the case.)

Robin Wolf: Here is a copy of that provision, which I just downloaded from RIA Checkpoint. If this is the current version, I don't with your interpretation of it. Specifically, I think 7 days notice is sufficient in the case of hand-delivery: When the notice referred to in paragraph (o)(3)(xiv) of this section is given by posting or in person, such notice must be given not less than 7 days nor more than 21 days prior to the date that application for a determination is made. When the notice is given by mailing, it should be given not less than 10 days nor more than 24 days prior to the date the application for a determination is made.

Your question wasn't as precise as it could have been, but if I am understanding you correctly, you might want to look at IRS Publication 502, which, I believe, is on the IRS website.

You need to research this, but my guess is you don't have a 457 plan (yet). I'll bet the regulations say that you can't have a 457 plan without a document. Thus, you may have sserious (adverse) tax consequences. My advice would be to hire competent tax counsel.

There was at least one prior message thread that discussed this topic.

k man: I don't quite agree with your application of fiduciary/settlor dichotomy in this scenario. The test isn't whether the employer should bear the expense; it is whether the plan should bear the expense. I think that if would be helpful if I expand the facts in the hypothetical. Assume that some of the investment advice is completely unrelated to any type of investments that could ever be utilized in the retirement plan. In that case, it is my belief that the costs of providing that advice cannot be borne by the plan. In the original submission, it was stated that the employer would bear that cost. While I agree that the cost would be more appropriately borne by the employee in his or her individual capacity, if the choice is between the plan and the employer, then I believe the employer is the better party.

What does the plan say?

KJohnson: Do you think that the plan sponsor and plan administrator would have standing to bring such a Section 502 claim?

I haven't researched this for a long, long time, but I thought that the bond was for the protection of the plan, not the trustees. Thus, I don't think that the amount of the protection can be divided by the number of the trustees.

I think that the DOL would not be pleased with a fiduciary that entered into such a contract. I would advise the fiduciary not to enter into such an agreement.

Expanding a bit upon what JerseyGirl said, if there was a plan amendment, it is important to see what was the effective date of the change.

Never to make any more New Years resolutions.

Remember that in addition to determining whether the (re)purchase of the shares is authorized by the plan document (as quite correctly pointed out by RLL), the fiduciaries need to determine that the repurchase is consistent with the fiduciary responsibility principles of ERISA.

Yes. Keep digging.

Did you research to see if the IRS has addresed this point in the private letter ruling?

If the employer has shut its doors already, this may be of some (limited) value to you: http://www.dol.gov/ebsa/newsroom/fsorphanplans.html

I think that the promulgation of the following guidance answers your question: AdvRev Proc 2003-86

Similarly, calculations need to be done if the spouse is disabled.

Rev. Rul. 63-91, 1963-1 C.B. 54 IRS Headnote Amounts paid for medical services rendered by practitioners, such as chiropractors, psychotherapists, and others rendering similar type services, constitute expenses for `medical care' within the provisions of section 213 of the Internal Revenue Code of 1954, even though the practitioners who perform the services are not required by law to be, or are not (even though required by law) licensed, certified, or otherwise qualified to perform such services. I.T. 3598, C.B. 1943, 157; Revenue Ruling 143, C.B. 1953-2, 129; and Revenue Ruling 55-261, C.B. 1955-1, 307 modified. Full Text Rev. Rul. 63-91 Advice has been requested whether amounts paid for medical services to practitioners, such as, chiropractors, psychotherapists, and others rendering similar type services, constitute expenses for `medical care' within the provisions of section 213 of the Internal Revenue Code of 1954(1) where there is no law requiring such practitioners to be licensed or (2) where they are not licensed, even though required to be by law. Under section 213 of the Code, a deduction in computing taxable income is allowable for expenses paid during the taxable year, not compensated for by insurance or otherwise, for medical care of the taxpayer, his spouse, or a dependent, subject to certain limitations. Section 213(e)(1) of the Code defines the term `medical care' as amounts paid- (A) for the diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting any structure of function of the body (including amounts paid for accident or health insurance), or (B) for transportation primarily for and essential to medical care referred to in subparagraph (A). Section 1.213-1(e)(ii) of the Income Tax Regulations provides, in part, `Amounts expended for illegal operations or treatments are not deductible.' Revenue Ruling 55-261, C.B. 1955-1, 307, states that medical expenses include payments for services rendered by physicians, surgeons, dentists, optometrists, chiropractors, osteopaths, qualified psychiatrists and psychologists, and authorized Christian Science practitioners. Revenue Ruling 143, C.B. 1953-2, 129, holds that amounts paid to psychologists, who are qualified and authorized under state law, for the rendition of medical services constitute expenses paid for medical care. I.T. 3598, C.B. 1943, 157, holds that amounts paid for services rendered by licensed chiropractors and osteopaths constitute expenses paid for medical care. The sentence in the regulation quoted above, regarding the deductibility of amounts expended for illegal operations or treatments, is intended to be applied to operations or treatments which are illegal regardless of whether they are rendered by licensed or unlicensed practitioners. The sentence was not intended to imply that amounts paid to unlicensed practitioners are not expenses for `medical care.' The determination of what is medical care depends on the nature of the services rendered, not on the experience, qualifications, or title of the person rendering them. See George B. Wendell v. Commissioner , 12 T.C. 161, at 163 (1949). The requirements for the licensing of practitioners vary with state laws. In many cases, treatments or services rendered by unlicensed practitioners are not illegal even though such treatments or services constitute the practice of medicine and the persons rendering them are required to obtain certificates or licenses from the state in which they practice. In such cases, patients are not paying for illegal medical care or treatments notwithstanding that the practitioners rendering the care or treatments are not authorized or licensed by the state to render medical services. The Code and the regulations do not require a taxpayer to ascertain whether a practitioner is qualified, is authorized under state law, or is licensed to practice, before obtaining his services or claiming a medical expense deduction. Where it can be shown that an individual paid an amount for a purpose defined in the Code as `medical care,' such amount qualifies as a medical expense. Accordingly, it is held that amounts paid for medical services rendered by practitioners, such as chiropractors, psychotherapists, and others rendering similar type services, constitute expenses for `medical care' within the provisions of section 213 of the Code, even though the practitioners who perform the services are not required by law to be, or are not (even though required by law) licensed, certified, or otherwise qualified to perform such services. I.T. 3598, C.B. 1943, 157; Revenue Ruling 143, C.B. 1953-2, 129; and Revenue Ruling 55-261, C.B. 1955-1, 307, are modified to remove the implication that amounts paid only to persons, who are licensed, qualified, or authorized under state law to practice, constitute `medical care.'

Kevin: My case arose more than five years ago in California, so Keen v. Weaver wasn't of any help.

Here's a truly ugly situation that I've seen before (more than once, unfortuately): i. a married person designates his or her spouse as the beneficiary ii. the couple gets divorced iii. the divorce decree says that each waive all interest in the other’s property iv. the beneficiary designation is never revoked v. the participant dies (before getting remarried) This one has a great potential to generate litigation.

I agree with Jon Chambers that it is important to retain competent investment advisors. One of the best ways in which I fiduciary can demonstrate that he or she executed his or her duties under ERISA with respect to the plan is by engaging competent advisors.

Daniel Clark: Thank you for your thoughtful posting and for attaching your article. You mentioned what you think that the participants should do. What are your commendations that the fiduciaries of the plan should do, in light of the recent mutual fund debacles? I would also like to pose that same question to Jon Chambers, and to any other knowledgeable investment professional who is willing to share their views.