Kirk Maldonado

If your plan document provides for such an offset (even though the SPD does not), you could possibly prevail, but it would be a real long shot.

MWeddell: You are right; I had misread your post.

I think it is permissible. See this DOL pronouncement: http://www.dol.gov/dol/allcfr/EBSA/Title_2...FR2509.75-4.htm

MWeddell: What is your authority for the proposition that allocations under an ESOP cannot be taken into account as a QNEC in a Section 401(k) plan that is part of the ESOP?

Are you comfortable that allowing employees of unrelated companies to (continue to) participate in the plan does not raise any multiple employer plan questions? It seems like it shouldn't be a problem, because it is well-accepted that past service credits don't raise this issue. However, this situation is arguably different, and I must admit that I've never really thought through this issue.

I have had some experience on this matter with Exec-U-Care out of Iowa. (But not the other insurers listed by GBurns.) Their product that I reviewed many of years ago I thought clearly didn't work, because the amount of the premium was simply a percentage of the claims. Thus, there was zero risk-shifting, which is essential to a finding that there is "insurance." However, they have revised their product to introduce some risk-shifting. While it is isn't nearly as much as most insurance products, this is enough risk-shifting to be able to make an argument that the arrangement should qualify as insurance. While I can't say that I've spent enough time on this issue to feel comfortable concluding that it is insurance, it is a lot closer question than the first generation of their policies.

Yes. You need to get securities counsel involved, hopefully one that also understands something about tax-qualified retirement plans.

I did make that mistake.

JoeDuka: Does your plan allow investments in employer securities? The recently enacted blackout period rules only apply if the plan allows employees to sell employer stock that is acquired under the plan.

mroberts: COBRA is generally, but not always, less expensive than individual coverage. I've had a few clients over the years that had such bad claims experience that COBRA was more than individual coverage.

My recollection, which is somewhat fuzzy, is that the courts have split on this point. If somebody has a more definitive answer, I'd like to know it.

Try looking at Announcement 91-4 and Notice 87-16. I'm out of the office, so I'm just relying on some notes on my computer, which may not be right.

I think that there should be at least one independent fiduciary involved in this situation.

JPod: My guess is that the IRS wouldn't let you get around the "irrevocable election" rule by the simple artifice of a plan amendment, particularly in these circumstances.

I think jaemmons is right. Although the total account balance is taken into account in determining how much you can borrow, only half of it is pledged as security for the loan.

You might be thinking about one of the equivalencies. For example, under one of them, if you work (at least) one hour during the month you are treated as if you worked at least 190 hours that month.

Appleby: I think that Trirod is raising a very fine point. (Putting words in Trirod's mouth.) I think Trirod is asking whether distributions to the shareholders of a S Corporation are treated as contributions for purposes of the active participant rule. My guess is that it is not, because those amounts are not treated as employer contributions for purposes of the IRC provisions relating to retirement plans. However, I've never researched this specific issue.

Where is the constructive receipt issue? Specifically, how does the transfer of the "service credits" cause a constructive receipt issue? Unless the employee has a choice of cashing out the amount rather than the amount being transferred to the other employer, I don't see a constructive receipt issue here.

The IRS has extremely stringent standards for determining what qualifies as a "mistake of fact." Very few things qualify. What was the mistake of fact?

Mbozek: My assumption was that it required a single lump sum payment (upfront) to provide coverage for the next 10 years. Otherwise, how could you enforce the requirement to pay premiums for 10 years?

I don't think that a cafeteria plan can permit the purchase of insurance, the coverage of which extends beyond the current plan year; I think that violates the prohibition against deferred compensation in a cafeteria plan (other than a Section 401(k) plan).

I agree with MBozek's comments; if the investment does not make economic sense, there is no reason to get counsel involved. However, in my experience, the persons involved in these arrangements typically have expectations that they will earn much, much more than they actully make. But a belief that they will earn a huge rate of return skews their analysis of the economics.

MBozek: Thanks for the clarification. It sounds like other states have much more flexible rules for legal separation than California.

My strong recommendation is to get an independent fiduciary (with separate counsel) involved. That is the best "insurance policy" that you can buy against DOL audits or participant lawsuits. Believe me, having been involved as counsel in some truly ugly agency investigations and lawsuits, you will spend many times more money defending the action than you would spend getting an independent fiduciary involved.

I think you can get a copy of a prior determination letter by calling 1-877-829-5500.