Kirk Maldonado

If you revoke an irrevocable election, then the election wasn't irrevocable. Thus, the original election would be invalid, causing horrendous problems.

What action do you think would be consistent with Section 404© in those circumstances? Absent a default election, it would seem like the only other choice is for the amounts to be uninvested.

The requirement that the percentage be stated in the plan is found in the Conference Committee Report to ERISA.

There are a number of law firms that are C Corporations; I've worked at two different law firms that were C Corporations.

Try this: http://www.house.gov/jct/x-29-02.pdf

I thought that the coverage of COLI was helpful. There hasn't been that much written on the topic lately.

It seems to me that forfeiting benefits does not work in the case of a terminating plan. If the participant shows up years later, the participant would get a payment from the employer, not from the plan. Thus, that payment would not qualify for favorable tax treatment (e.g., it couldn't be rolled over into an IRA or another tax-qualified retirement plan).

Could you provide a brief description of the difference between a Rabbicular Trust and your Secured Trust?

I agree with K Man.

The DOL has informally stated that nobody can rely on those prior rulings it issued.

The former employees lose the ability to rollover their benefits tax-free into an IRA or other qualified plan if you implement the 100% withholding.

Unfortunately, the only thing that I know works (because it is in the statute) is continued employment. Needless to say, that doesn't work too well in this situation.

I ran across this concept a number of years ago. What it was basically an arrangement that converted a Rabbi Trust into a Secular Trust automatically when something happened that threatened the financial viability of the company. Sometimes these arrangements are referred to as a "Rabbicular Trust." My understanding is that the IRS does not believe that these arrangements work. Specifically, the IRS thinks that employees are subject income taxation on the amounts at the time that they are first contributed to the trust.

This is not the most aggressive technique used with respect to VEBAs. There was a consultant in San Diego that was promoting using VEBAs as a means to fund nonqualified deferrred compensation plans that were limited to senior executives.

I've been told that workers' compensation premium payments are reduced in California where the employees make pre-tax contributions through a cafeteria plan. However, I've never seen that in print anywhere, and I've never done the research.

My recommendation would be to hire competent ERISA counsel to advise you on that matter. Competent counsel would help you deal with the question of whether you should be of using an independent fidiuciary, and who would be a good independent fiduciary to use, should you decide to use one.

I had an extended discussion with a senior DOL official on this point. He basically said that they set up this program so that they don't have to get into individual negotiations with each employer. It is basically "one size fits all" approach. He indicated that it would be very difficult to get them to cut you any slack on this issue. I should point out that this call involved what I consider to be an extremely sympathetic situation, yet that did not carry any weight with the DOL official.

MBozek: I read the case, and it does stand for the proposition that you cite it for. Also, IRAs are a completely different situation than tax-qualified retirement plans.

MBozek: I haven't read that case, but if that is what it holds, it is just wrong. The plan's assets are not the assets of the employer.

BeckyMiller: Having worked at the IRS, I can verify that the IRS has input on the content of the Blue Book.

MBozrk: I disagree with your second conclusion. An employer cannot pledge the assets of a plan as collateral for a loan that the employer enters into.

I agree with BeckyMiller. I seem to recall some ancient IRS guidance regarding the taxation of dividends in these circumstances that says that they are treated as distributions from the plan, so that the favorable tax treatment afforded de minimis amounts of dividends received unrelated to a plan would not apply.

RCK: I think that the message boards should automatically make the first reply be "What does the plan document say?" That would be an appropriate response at least 90% of the time.

My recollection is that DOL Advisory Opinion 94-27A holds that New York's state laws regarding payroll withholding are preempted.

My recollection is that the employee must buy the insurance policy out of his or her own funds or the arrangement does not work.