Kirk Maldonado

I agree with ScottN. In my experience, TPAs tend to be more cost-efficient than insurance companies.

First, I want to say that I've known Carol Calhoun for many years and I respect her opinions. Second, while it is true that some truly ugly situations can arise, there may be situations where, based upon the particular facts, the level of risk is tolerable for the parties involved. This particularly true if the leased employees will only be there for a short duration, as is often the case. Thus, for example, the amount of benefits that the leased employees could potentially claim under the governmental unit's pension plan (should they raise that argument) would only be nominal, at best. Third, I must confess that I represent a client that leases employees to governmental units, so that may flavor my views. Fourth, I would restate Carol's admonition to be "Don't even go there, unless your eyes are wide open."

RK Mattta: You might want to consider covering "broken sales" (e.g., that have to be rescinded because of noncompliance with SEC Rule 144 or Section 16). There's precious little discussion of these transactions.

Check out the website of the California Franchise Tax Board (that's the relevant governmental agency). They have a lot of useful information on it.

Before you terminate anybody in these circumstances, you better get the advice of a labor law attorney.

An interesting question is whether state law would be preempted by ERISA in this context.

What is the basis for your opinion?

Check 401KWire's website. I saw a survey and I thought that's were it was. I definitely remember that the statistics were amazingly good; negative enrollments really work.

How the Hell (pun intended) can a nun participate in a nonqualified retirement plan, especially if she has taken a vow of poverty?

For a number of technical reasons, most ERISA attorneys vastly prefer being paid by the employer rather than by the plan. Although not all of the same issues arise when the plan documentation is prepared by another service provider, it is generally better if the employer pays those fees.

Surprisingly enough, the studies show that investment education is a more important factor in increasing participation in a Section 401(k) plan that providing for matching contributions.

Technically, you should file one. However, that same situation happened to me and I filed for a new determination letter. The IRS reviewer called me to ask why I filed an application for a new determination letter. He said you've already got one, why do you think you need another? I think it is a fair characterization that the Exempt Organizations part of the IRS is very different from the Employee Plans part of the IRS on this issue.

I'm not in your area, but extremely few of my clients outsource that work. This is true, even though most of them have had their plans in effect for many years.

I prepared a cafeteria plan for a client with a $15,000 per year maximum contribution to the health care flexible spending account.

I've had many clients undergo DOL audits, and none of them were served with subpoenas. A subpoena would be a sign that the DOL suspects something is very seriously amiss. If the DOL is coming after you with a subpoena, you'd better retain expert ERISA counsel ASAP.

In a community property state, the court order does not create the right in the ex-spouse, it existed all along; the order just officially recognizes the existence of the ownership interest of the ex-spouse. I think that a fiduciary that allows the employee spouse to take out the entire account balance when it is apparent that a divorce is impending is breaching his or her fiduciary duty to the non-employee spouse who owns one-half of the benefit. If the plan gives the authority to follow such procedures, I think that the freezing of the account is proper.

I've (unfortunately) faced this situation several times before, and I completely agree with MWeddel. [This message has been edited by Kirk Maldonado (edited 02-07-2000).]

As to where benefits will be in 20 years, I would recommend you contact Dallas Salisbury in DC. I believe that the name of the organization that he heads is the Employee Benefits Research Institute. (It is a think tank. He is a Washington "insider" and speaks frequently on benefits topics. He is one of the most popular speakers around on these topics.) [This message has been edited by Kirk Maldonado (edited 02-07-2000).]

The citation to the ruling mentioned by RLL is Revenue Ruling 80-155. For all of the reasons stated by RLL, and a number he did not mention, I believe that any keyman insurance should be held by the employer, not by the plan. In my experience, the reason why the insurance is held in the plan is so that the premiums can be paid by means of pre-tax contributions to the plan. However, I don't think that this factor outweighs all of the negatives associated with the insurance being held by the plan

If you use six months of service (without regard to the hours of service performed), that is the elapsed time method of crediting service. This methodology involves many rules that are very different than those for the (standard) hours of service methodology. Adding these rules to your plan will necessitate adding several additional pages of text (of the elapsed time rules). The approach that I recommend (which does not invoke the elapsed time method, is to require 500 hours of service within 6 months. [This message has been edited by Kirk Maldonado (edited 02-01-2000).]

ERISA preempts state laws because it expressly states so. However, I don't believe that the Internal Revenue Code does so. For example, in many instances, state law conflicts with the Internal Revenue Code (e.g., the tax treatment of employee contributions to a Section 125 or Section 401(k) plan).

My position, which may involve different facts than as originally posited, is that if an employee terminates employment and is rehired in the same year, that employee can make a new election pursuant to the 1997 temporary regulations. Inasmuch as those regulations expressly allow changing of elections upon termination and/or commencement of employment, I think that those rules trump the langauge in the prior proposed regulations that you could not make a new election in the same plan year. As to problem that the 1997 regulations do not expressly refer to (and supersede) the portion of the proposed regulation you cited, I personally submitted written comments to the IRS on this matter, asking them to remove this ambiguity when the regulation is finalized. [This message has been edited by Kirk Maldonado (edited 02-01-2000).]

I agree with everything that Jon stated, but I want to emphasize something. My experience is that the DOL is quite aggressive about going after employees that don't forward employee contributions to retirement plans. Also, they will pursue these employer even if the total amount that wasn't forwarded is a relatively small amount (e.g., under $10,000). I predict that you will find that the DOL will be very helpful in assisting you to get your money.

JWK: I stand by my prior remarks. Although I will admit that I was focusing more upon termination of employment/rehire within the same plan year scenario. You said "Under these circumstances, the employee must not be allowed to make a new election for the rest of the plan year." You said that I was wrong because somebody could remain unde the prior version of the regulations. Of course that is true, but your prior statement was unequivocal that a person could not make a new election. That is wrong. If the employer switches to the new version, employees can make new elections. You didn't say that if the employer stays under the old rules no new election could be made; you said in no case could a new election be made. This change was made because of the injustice that occurred under the prior regulations where an employee was (legitimately) let go and rehired in the same plan year. In such a case, the person could not make an election to pay insurance premiums with pre-tax dollars.

Your information is based upon an earlier set of regs. The IRS has issued a subsequent set of regs for 125 plans.