Kirk Maldonado

The prior actuary's methodology for satisfing the minimum contributions or benefits was stated to be: Is that kosher? I've not encountered it before, but I must confess that I've not researched it to see if it is acceptable.

I'm not aware of any exemption either. There is another way of looking at the situation. Why should a governmental entity be allowed to provide discriminatory benefits? What is the compelling reason to allow them to discriminate in a way that is unavailable to private employers?

I recommend that you retain competent counsel to advise you on this matter.

What do the policies state are the rules that apply in these circumstances?

I think that the attorney is technically right, in that all of the assets of the trust could be used to pay the benefits under either of the plans. However, I do agree that might give the appearance that the Trust has assets worth twice its actual holdings. The way to prevent "overstating" the assets of the Trust would be to add a footnote that explains this arrangement. I think that satisfies both of your concerns. However, I must admit that I've never done this before, so I'm not promising that it works. Nor have I done any research on this point. Accordingly, if somebody finds a flaw or two in my analysis, please enlighten me (and the other persons reading this thread).

use the search feature. this topic has been discussed ad nauseum.

Treasury Regulation 54.4980B-5, Q-4 provides as follows: Q-4 Can a qualified beneficiary who elects COBRA continuation coverage ever change from the coverage received by that individual immediately before the qualifying event? A-4. (a) In general, a qualified beneficiary need only be given an opportunity to continue the coverage that she or he was receiving immediately before the qualifying event. This is true regardless of whether the coverage received by the qualified beneficiary before the qualifying event ceases to be of value to the qualified beneficiary, such as in the case of a qualified beneficiary covered under a region- specific health maintenance organization (HMO) who leaves the HMO's service region. The only situations in which a qualified beneficiary must be allowed to change from the coverage received immediately before the qualifying event are as set forth in paragraphs (b) and © of this Q&A-4 and in Q&A-1 of this section (regarding changes to or elimination of the coverage provided to similarly situated nonCOBRA beneficiaries). (b) If a qualified beneficiary participates in a region-specific benefit package (such as an HMO or an on-site clinic) that will not service her or his health needs in the area to which she or he is relocating (regardless of the reason for the relocation), the qualified beneficiary must be given, within a reasonable period after requesting other coverage, an opportunity to elect alternative coverage that the employer or employee organization makes available to active employees. If the employer or employee organization makes group health plan coverage available to similarly situated nonCOBRA beneficiaries that can be extended in the area to which the qualified beneficiary is relocating, then that coverage is the alternative coverage that must be made available to the relocating qualified beneficiary. If the employer or employee organization does not make group health plan coverage available to similarly situated nonCOBRA beneficiaries that can be extended in the area to which the qualified beneficiary is relocating but makes coverage available to other employees that can be extended in that area, then the coverage made available to those other employees must be made available to the relocating qualified beneficiary. The effective date of the alternative coverage must be not later than the date of the qualified beneficiary's relocation, or, if later, the first day of the month following the month in which the qualified beneficiary requests the alternative coverage. However, the employer or employee organization is not required to make any other coverage available to the relocating qualified beneficiary if the only coverage the employer or employee organization makes available to active employees is not available in the area to which the qualified beneficiary relocates (because all such coverage is region-specific and does not service individuals in that area).

Here are my thoughts for what they are worth. My recommendation is to contact the plan trustees and discuss this with them. My experience has been that they are much more receptive if you are proactive than if you are mounting defenses after they have already come after you. I think you have very little downside and a lot of upside if you take that approach. You will strike the plan trustees as a straight-shooter who isn't trying to get away with anything; you are just caught in a bad situation. My sense is that they have to deal with so many bad characters that you will get a decent reception if you come in as say "Look, I've got a problem. Is there something that we can work out that we can both live with?" Emphasize that you understand their concerns and explain yours to them. Try to see if you can't come up with a compromise that works for both sides. Don't take absolute positions and they won't either. Remember that they are in big enough trouble with their funding problems that they don't want to unnecessarily antagonize contributing employers by taking hard line positions in borderline situations. Let us know how it works out.

Lame Duck: You topped me. Your post was even more sick and twisted than mine! Keep up the good work. Lori: Thanks for the kind words.

Don: What impresses me is coming up with a line on this topic better than what I've posted; not a comment that you don't appreciate my sense of humor. Anybody can critique, but few people can perform. Let's see if you can top my line. If you can't top my line, then I suggest you cease criticizing my sense of humor. It makes you look pitiful. Why would you care if we are posting something that you don't think is funny or appropriate, other than the fact that you know that you couldn't duplicate what I did, which was to come up with something extemporaneous that was right on point and funny (to some people). You were jealous because I did something that you knew you couldn't do, so you took a cheap shot at me. Flaunting your insecurities on the Message Boards doesn't paint a very flattering picture of you. That reminds me of my favorite line from Mark Twain: It is better to remain silent and be thought a fool than to open one's mouth and remove all doubt.

I have researched this issue extensively and there is no definitive guidance on this point (that I could find).

Question: What is the most common name of the one-legged women that work at Ihop? Answer: Eileen

mjb: While I didn't mention it, I had assumed that the offset only applied against the particular participant. I agree that applying it against other family members is problematical.

Randy: Is this a fully-insured plan? I'm asking you that because you stated: If it is fully-insured, how are you going to be able to unilaterally effect the desired change? Wouldn't that require, at a minimum, the insurance policy be re-written, which might conceivably require the consent of the applicable state insurance commissioner? Of course, if the plan is fully insured, then you could implement this change easily. But it does make your references to insured and insurer out of place. As MJB pointed out to me in a message a few months ago, offsets like the ones you propose are permissible with respect to the benefits under a tax-qualified retirement plan so that your proposed solution should be acceptable.

GBurns: Thanks for the citations. That saves the rest of us a lot of research time.

In addition to the issues that GBurns mentioned, you need to consider what the plan document (if one exists) and/or the summary plan description require. If they conflict with the insurance contract, then you have a real problem on your hands. I've never researched this issue, but having read summaries of a number of cases, my recollection is that the courts have not been uniform in the way that they have handled this issue. If anybody can provide a more definitive answer on this point, please jump in.

Bill: Could you expand your answer to give a bit more detail? It is too cryptic for me to follow.

To overlay another level of concern, the IRS has been focusing upon the levels of compensation paid to the executives of tax-exempt organizations, including, but not limited to, the applicability of the section 4958 taxes on excess benefit transactions. I'm not saying that this level of compensation is excessive. There aren't enough facts presented to much such a determination. Furthermore, I don't have sufficient expertise. I'm just suggesting that somebody should look at this issue to see whether or not there is reason to be concerned. It may very well be a non-issue, but it is better if you look at it now, than having it raised for the first time by the IRS upon an audit.

The applicable rules are found in Treasury Regulation Section 1.72-16.

For the convenience of others, here are the relevant portions of section 4062(e): If an employer ceases operations at a facility in any location and, as a result of such cessation of operations, more than 20 percent of the total number of his employees who are participants under a plan established and maintained by him are separated from employment, the employer shall be treated with respect to that plan as if he were a substantial employer under a [multiple employer plan] * * *.

BeckyMiller: Inasmuch as those rules are for ESOPs and we apparently don't have one here, do you think that the 409 rules would be binding on the employer?

There was an abusive tax shelter that had some unusual twist to it, something like a one day plan year or some other similar modification to the plan year. You should check out the IRS pronouncements on that shelter, to see if they apply to your situation.

Maybe I'm off-base here, but I thought that the joint trustees requirement only applied to multiemployer plans and we have a single employer plan here.

Gburns: You must have been the person that Mark Twain had in mind when he said: It is far better to remain silent and be thought a fool than to open one's mouth and remove all doubt. All your posts do is to confirm to the rest of the people that read the Message Boards that you know nothing about the topics, but that doesn't stop you from wasting everybody's time with your ill-informed posts.

Do the regulations address this issue?