Kirk Maldonado

b2kates: What is your assessment of Travis?

You might find the information in this thread useful: http://www.benefitslink.com/boards/index.p...t=0entry58052

I want to thank the people that have posted information on this thread. There has been some very enlightening (at least for me) messages.

MWeddell: Could you explain why the ratios vary according to the size of the plan? It doesn't seem intutive to me that the expense ratios would be overstated for medium and large plans.

Here's a definition of an actuary that may help. An actuary is a person who passes as an expert on the basis of his prolific ability to produce an infinite variety of incomprehensible figures calculated with micrometric precision from the vaguest of assumptions based on debatable and problematical evidence from inconclusive data derived by persons of doubtful reliability and questionable mentality for the avowed purpose of annoying, confusing, and confounding a hopelessly befuddled group of key personnel who never read the statistics anyway.

If you post the same question in more than one place, an acknowledgement of that fact (at the end of the posting) would be helpful.

The answer should depend on the spinoff agreement. A well-drafted agreement should expressly address this issue.

I hate to state the obvious, but have you considered reading Section 125?

erisafried: You espoused my sentiments exactly.

Lame Duck: How do you reconcile your answer with the provisions of Section 414(m)(5)?

I had the same situation, except that the dollar amounts were much larger. I wasn't able to immediately come up with a good solution, and I lost the client when the attorney that was the primary contact at the client left the firm where I was working at that time. Because the original investment occured 10 or 20 years before, we determined that having the TPA redo the recomputations for all of those years would have cost more than the amount of the investment. Also, the dollar amounts were many multiples the amount of the annual administrative costs of the plan. However, you might see if you can come up with something creative along those lines for your situation. I'd be interested in hearing if anybody else has been able to devise a solution for this problem that would work.

A PLR is not required. Few 457 plans get one. But getting one certainly is prudent.

Are you talking about getting a PLR on whether the plan satisfies the Section 457 requirements? If so, at the beginning of each year, the IRS issues a revenue procedure that lays out all of the relevant details. (I don't know the number of this year's procedure.)

I don't get a royalty, but thanks for the plug. I didn't mention the portfolios just because I wrote one. A number of them contain in-depth discussions of many issues. The depth of analysis is often much greater than the other secondary sources. However, it is hit-or-miss, because sometimes you will run across issues that aren't addressed in the portfolios. Thus, I think that the loose-leaf services tend to cover more issues, whereas the portfolios cover fewer issues, but more in-depth.

Remember the standards used in the PLRs are only important if you want to get a PLR. You may feel comfortable operating such a wrap-around plan on a different basis. However, you should consider getting advice of ERISA counsel prior to doing so.

Tax Management Portfolios are also very useful.

Section 1372(a) provides as follows: For purposes of applying the provisions of this subtitle which relate to employee fringe benefits— (1) the S corporation shall be treated as a partnership, and (2) any 2-percent shareholder of the S corporation shall be treated as a partner of such partnership.

The requirement of recurring contributions applies whether or not the plan is an ESOP.

That plan would also be subject to the full extent of ERISA.

Here is a copy of that opinion letter: Opinion Letter 90-6 October 31, 1990 I write in response to your request for a determination regarding whether the above-captioned pension plan (the "Plan") is covered by Title IV of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1301-1461 (1988). You state that, from its inception, the Plan covered three employees, one of whom was the 100% owner of the Plan sponsor. However, the two other Plan participants who held no ownership in the Plan sponsor retired during 1988. Each of these participants was paid the benefit that he accrued under the Plan. Thus, the Plan now covers only the 100% owner of the Plan sponsor. Section 4021(b)(9) of ERISA, 29 U.S.C. § 1321(b)(9), excludes from coverage any plan "which is established and maintained exclusively for substantial owners . . . ." A substantial owner is defined as an individual who "in the case of a corporation, owns, directly or indirectly, more than 10% in value of either the voting stock of that corporation or all the stock of that corporation." ERISA section 4022(b)(5)(A)(iii), 29 U.S.C. § 1322(b)(5)(A)(iii). Therefore, while the plan was not "established" exclusively for substantial owners, it is presently so "maintained." The PBGC has declined to interpret the conjunction of the terms "established and maintained" strictly in the context of the exemption from Title IV coverage for governmental plans, ERISA section 4021(b)(2), 29 U.S.C. § 1321(b)(2), because doing so would frustrate the intent of Congress in providing the exemption. See PBGC Op. Ltr. 75-44. In that context, the court in Rose v. Long Island R.R. Pension Plan, 828 F.2d 910 (2nd Cir. 1987), sanctioned the PBGC's "sensible" approach, recognizing that "the status of the entity which currently maintains a particular pension plan bears more relation to Congress' goals in enacting ERISA and its various exemptions than does the status of the entity which established the plan." The same principle applies to plans maintained exclusively for substantial owners. Substantial owners have greater control over the level of, and funding for, plan benefits than do other plan participants, and are thus less in need of the protections of Title IV. Consequently, in the present case, where the Plan is maintained exclusively for a substantial owner, and there are no longer any other participants in the Plan, the PBGC has determined that the Plan is exempt from Title IV coverage under Section 4021(b)(9) of ERISA. The PBGC notes, however, that if the current status of the Plan should change at any time, this determination may no longer apply. This letter constitutes an initial determination subject to appeal under 29 C.F.R. Part 2606, Rules for Administrative Review of Agency Determinations (a copy of which is enclosed). Anyone who is an "aggrieved person" (as defined in § 2606.2 of the regulation) may file an appeal addressed to: Appeals Board, Pension Benefit Guaranty Corporation, 2020 K Street N.W., Suite 2500, Washington, D.C. 20006-1806. Appeals must be filed within 45 days after the date of this letter. 29 C.F.R. § 2606.53. Any such appeal must: (a) be in writing; (b) be clearly designated as an appeal; © contain a statement of the grounds for appeal and the relief sought; (d) reference all pertinent information already in the possession of the PBGC and include any additional information believed to be relevant; (e) state whether the appellant desires to appear in person or through a representative before the Appeals Board; and (f) state whether the appellant desires to present witnesses to the Appeals Board, and how such witnesses will further the decision making process. If you should have any questions regarding this matter, feel free to contact Sara B. Eagle at (202) 778-8824. Jeanne K. Beck Deputy General Counsel

I haven't researched that issue, but I thought that if you prepaid the premium but terminate employment before the entire period of the coverage had expired, the plan was required to refund the unused portion of the premium.

Blinky: I always thought that advising clients regarding the interpretation of statutes constitutes the practice of law. What leads you to conclude that an actuary is more competent to practice law than an attorney? Based on 25 years of experience, I don't think it is a fair assumption to presume that an actuary is necessarily more familiar with the intricacies of Title IV than an ERISA attorney.

The DOL has taken inconsistent positions (at different times) regarding whether "co-investing" is per se prohibited or per se permissible.

The fiduciaries will be in much better shape vis-a-vis the DOL if the consulted with legal counsel regarding the proper disposition of the demutualization proceeds. In one case that I was involved in, the DOL said that was the deciding factor.

I agree with Mike Preston. In fact, I think that there is some ancient DOL guidance on this (or a related) point.