Kirk Maldonado

Bill Berke: I can't understand why you think that the proposed legislation would result in the termination of Section 401(k) plans. There has been a lot of legislation and regulatory developments adverse to defined benefit plans, and look at how that has caused them to flourish. I mean, nobody has ever terminated one in recent memory, and virtually every new employer has set one up, sometimes setting up multiple defined benefit plans.

Jon: I think that in some cases, day trading may make sense. I have a personal friend that ran up $200,000 into over $20,000,000 in about two years. Now there are extenuating circumstances, in that he is incredibily bright and devotes all his spare time to it, but there are some rare circumstances where it makes sense. That being said, I've read where the typical day trader loses, rather than makes money on those activities.

They reportedly dropped it because they went to a safe harbor plan. I generally question the wisdom of that approach, but they may have unusual facts that make it an appropriate decision.

Before you spend any more time debating this issue, you may want to look at DOL Reg. 2550.408b-2(e).

Bob Parks: Are you aware of any other sites that are comparable to FREEERISA? It's the only one that I've heard of.

I don't think that you can advise people whether or not something is sillly unless you know the cost of compliance. If the cost of Section 404© compliance is $100 dollars, I would agree with you. On the other hand, if the cost is $100,000, I don't think that expense is justified.

My prediction is that if a plan permits participant directed investments with a suitable number and kind of choices and ability to change investments daily, the likelihood of any successful lawsuit is truly minimal, whether or not the plan complies with all of the literal requirements of the Section 404© regulations. Having read the entire text or summaries of thousands of cases, one thing that I have discerned is a distaste among judges to delve into the intricacies of such an arcane area of the law. Thus, although many individuals make a lot of money in fees arguing that employers will lose all of their assets in lawsuits if they don't literally comply with every last aspect of the Section 404© regulations, that isn't borne out by the cases.

What did the disclosure document (given to prospective investors) say about this issue?

Actually, the "I" in IRA stands for Ira. The retirement vehicle was named IRA after Ira Cohen, who was an actuary at the IRS who was one of the principal drafters of ERISA.

Yes.

Have you personally read the regs?

Read Rev. Rul. 89-87, 1989-2 CB 81.

The DOL position was stated in response to a question posed by the ABA association a number of years ago. Unfortunately, the DOL responses are "informal," so that they can't be cited as authority. I am very familiar with this issue because I am the one that submitted the question.

Jon: I can't bail you out (nor can anybody else), because AndyH is right.

What does the plan say?

Thank you for sharing this valuable information with us.

I handle this situation (in the context of a nongovernmental plan) by providing that if the person is reemployed by the employer at the time the distribution is due to be made, the person is not entitled to receive the distribution.

If you are really upset about the employer not treating you the way you think you deserve, then bitch a lot. That will convince your employer that the plan is more trouble than it is work so it will terminate the plan. Then all your problems will go away.

The DOL has informally stated that an employer cannot enforce a waiver of COBRA rights.

There have been articles on this topic in the Orange County Register and the Los Angeles Times.

A participant whose prior service cannot be disregarded must recommence participation immediately, even if before the next entry date. Treasury Regulation Section 1.410(a)-4((B)(2), Example 3.

As to the registration issue, my personal view is that as long as the amounts are attributable to employer contributions, the right to diversify does not raise any registration issues. As to any potential Section 16 issues, the SEC has informally indicated that expanding the class of persons eligible to diversify causes the loss of the Rule 16b-3 exemption. If you aren't familiar with these two concepts, you might want to review Tax Management Portfolio # 362, Securities Laws Aspects of Employee Benefit Plans. In the interests of full disclosure, I must admit that I am the author.

I seem to recall looking at this issue many years ago, and I have a vague recollection that both items were included in the corporation's AMT calculations.

What does the plan say?

Revenue Ruling 80-155, 1980-1 C.B. 84.