Kirk Maldonado

Jon: Please explain the significance of the difference classes of shares.

Avoid VEBAs at all costs. I did a lot of them before the 1984 legislation, but I've never seen a single one that made economic sense since then, and I've probably seen close to 100 proposals. They are only good if you to spend a lot of money buying a lot of unnecessary insurance. If you just want to burn money, though, they are a great way to do it.

In my experience, the IRS accepts any reason as justifiable cause for late filing, as long as you complete the filings before they catch you.

SACOBB: A discussion of the relevant securities laws would take hours. There is an extensive discussion of these securities laws issues as they apply to tax-qualified retirement plans in BNA Tax Management Portfolio 362, Securities Laws Aspects of Employee Benefit Plans. It is available in almost every tax library. (In the interests of full disclosure, I wrote the portfolio.)

Don't forget about the need for the plan to file a Form 11-K each year. In my experience, that form is frequently forgotten.

Jenny: I don't think you need to apologize. One of the advantages that the message boards offer is that we can exchange our views as to the quality of services that we are receiving from vendors. I think that honest feedback, whether positive or negative, is very useful information to everybody that reads the message boards.

Maybe I'm being overly simplistic, but I don't think the the fact that the plan fiduciaries would lose the protection from liability provided by ERISA Section 404© (if the funds were invested without direction from the participants)would allow the broker/dealer to commit a prohibited transaction (by being able to keep the money without paying interest on it).

That's a prohibited transaction because options aren't qualifying employer securities that can be held by a plan.

The DOL has issued an advisory opinion right on point that these state laws are preempted.

While being pretty ignorant on the rules regulating broker/dealers, it seems that this situation is fair similar to where the bank/trustee decides to hold some of the assets of the plan in a non-interest bearing account, or where it places the money in its proprietary sweep account. It would seem to me that any time the broker/dealer is exercising discretion to keep the funds in a non-interest bearing account (which presumably benefits the broker/dealer) or in an account where broker/dealer earns any fees, there is a prohibited transaction.

GBurns. If you go back and read the prior messages, the question that was posed to you was what are the cites to the PLRs. Your response was that information was proprietary. That was what I was responding to.

The Revenue Ruling mentioned by ptpnthr is Revenue Ruling 61-146.

Read the regulations. They expressly deal with this topic.

I have a question for GBurns. How can you have a proprietary interest in citations to PLRs? I'm sure that the IRS would be very interested in knowing how you can have an ownership interests in official governmental documents. Are you going to try to charge the IRS a license fee for publishing their PLRs? What an example of capitalism at its finest!

I wrote an article on this very topic. If you would like a copy of it, send me your e-mail address. P.S., I believe the employer is in trouble.

My position is that the State is precluded from taking any action directly against the employer for failure to comply with the State law. Of course, the State can enforce its laws against the insurance companies, but that should have no direct effect on the employer.

My experience has been that the enforcement actions relatilng to COBRA emanate from private litigants, not from governmental entities. Interestingly enough, some COBRA compliance comes about as a result of due diligence in M&A activities, when employers learn that they have not been in compliance with COBRA.

I've written a BNA Tax Management Portfolio on this topic. It is #362, Securities Laws Aspects of Employee Benefit Plans. You will find it in most comprehensive tax libraries.

See Internal Revenue Code Section 420.

I wish to retract my prior comment. Revenue Procedure 99-23 states that "disqualifying provision" for purposes of the RAP includes all disqualifying provisions of new plans adopted after December 7, 1994. Thus, there is no need to file a determination letter with respect to a newly established plan until the GUST deadline.

The RAP only applies to amendments required because of that legislation. If the IRS determines that your plan does not comply with some other provision, then you're dead if you wait. I never recommend waiting for a determination letter with respect to new and amended plans. It would be nice if the IRS allowed the RAP to apply to the GUST changes and any other change that the IRS reviewer might request, but I don't read the rules that way. Thus, unless you are absolutely 100% positive that your plan is in compliance with all conceivable rules except for the GUST change, I'd wouldn't recommend waiting.

I think that SLUSKIN is confusing what prescriptions are reimbursable under insurance policies and what is an acceptable medical care expense. They are completely unrelated concepts; simply because an insurance company will not reimburse a prescription does not mean that the expense cannot be reimbursed under the medical care reimbursement plan.

I've received dozens of determination letters on plans like that and it has never been challenged by the IRS.

We have the same problem in California. My position is that California can only regulate insurance companies, not benefit plans. Thus, the California legislation is only binding on the insurance companies; not on the employers.

Could you provide a cite to the statute in California that authorizes governmental entities to adopt ERISA plans?