Kirk Maldonado

I think that Harry O is right that the special disaggregation rule for ESOPs does not apply for purposes of the ABT.

Chip: What is your authority for saying that an outstanding option is disregarded if it isn't vested?

Have you verified that local (i.e., that state's) law would not preclude such an amendment? Remember that governmental plans are not subject to ERISA's preemption of state law.

The test is whether the amounts are expended "for the diagnosis, cure, mitigation, treatment or prevention of disease." The practitioners need not be licensed by a State authority. The test is the nature of the services rendered, not the experience, qualifications, or title of the person rendering them. See Rev. Rul. 63-91, 1963-1 C.B. 54. I have had an extensive recent discussion with the National Office of the IRS on this very point, and they have confirmed their approval of the analysis contained in Rev. Rul. 63-91.

ESOPs cannot be aggregated with other plans. Treas. Reg. Section 1.410(B)-7©(2).

I think that you need to read IRC Section 408(m). http://www4.law.cornell.edu/uscode/26/408.html [Edited by Dave Baker on 07-12-2000 at 12:05 AM]

While I don't disagree with KHaskell, there are some functions regarding termination of the plan that are "settlor" functions and others that are "fiduciary" functions. There is a DOL Advisory Opinion that was issued several years ago that attempts to specify which functions are which in the context of the termination of a defined benefit plan.

That smells bad to me. Remember that the DOL promulgated a prohibited transaction class exemption for IRA custodians that were giving away small gifts (e.g., toasters) to persons establishing IRAs. If that violated the prohibited transaction rules, this case seems even worse.

Is the LLC taxed as a partnership or as a corporation?

You might want to check the regulations under Section 44 (I think that is the right section). They might clarify this question, and they are stronger authority than the publication.

BeckyMiller is right. In order to get a refund, it has to be something like you thought the check was to pay the rent. This mistake would not permit a refund. Also, you cannot hold the amounts in a suspense account for allocation next year. You can't have a suspense account except for Section 415 violations.

You can't change the COBRA rates more than once a year, but I'm not aware of any other restriction. Of course, employers making those changes needs to take into account the cafeteria plan rules regarding changing election amounts.

I disagree with Ray. If you make an exception this time, you will need to make it everytime in the future. If you waive the condition once, there is a risk thatyou can never enforce it again. I wouldn't recommend a client start down that slippery slope.

Look at Section 318(a)(2)(B)(i).

RLL: Would your answer change depending on when the participant completed 10 years of service? For example, what if the participant did not complete 10 years of service until reaching age 63? Assume further that the participant reached normal retirement age at 65 and retired (at that time). If the participant was rehired at 67, would the participant be entitled to diversification elections following rehire? [This message has been edited by Kirk Maldonado (edited 06-28-2000).]

Try Corley v. Hecht Co., 530 F Supp 1155 (D DC 1982) and Ruocco v. Bateman, Eichler, Hill, Richards, Inc., 12 EBC 1557 (9th Cir. 1990). [This message has been edited by Kirk Maldonado (edited 06-27-2000).]

Are you certain you can't get a PLR on that issue? Our firm got one on this exact point, although I must admit it was pre-ERISA.

The "other investments" account in an ESOP is aptly named; it is for investments other than employer stock. Thus, employer stock should never be allocated to the "other investments" account.

Jeff Kropp: There are at least two articles on this topic. (I think one of them was in Compensation Planning Journal, and it was worth reading, although I seem to recall that the author definitely had some strong views on the topic.) You can find citations to them in some prior message threads (on BenefitsLink).

R Snyder: That is a very good question. I think the answer will depend on the terms of the plan. If the plan says that such an event automatically entitles the participant to a distribution, you may have a problem. However, most plans don't read that way; they simply say that a participant cannot receive a distribution until one of the enumerated events occur. In those cases, I don't think that the failure to make a distribution would be a Section 411(d)(6) violation, but I'm not sure. On one hand, it could be argued that is the impermissible use of employer's discretion to preclude distributions. On the other hand, the employer (sponsoring the plan) could argue that the buyer of the business didn't want to allow any distributions, so that the choice wasn't that of the employer sponsoring the plan. I'd be interested in hearing the views of other people on this topic.

LCARUSI: Would you take the same position if the participant rolled the stock back into the same plan from which it was distributed (i.e., the participant is rehired by the same employer and recontributes the amount back to the same plan)? [This message has been edited by Kirk Maldonado (edited 06-26-2000).] [This message has been edited by Kirk Maldonado (edited 06-27-2000).]

It is contained in Section 162(m) of the Internal Revenue Code. Be sure to read the regulations, that's where all of the detail is located.

It seems to me that this is somewhat analogous to the disposition of the proceeds received from the demutualization of the insurer. There have been some articles on that lately.

I'm saying you need to take into account applicable state securities laws regarding the very design and implementation of a call option.

Would the call option expire if the employer went public? In that regard, it would seem that the call option would have to comply with applicable state securities laws. Some states impose limitations upon call options.