mbozek

If you are asking those questions you should consider retaining ERISA counsel to advise you. You need to review ERISA 503 and the Dol regs on benefit claims to determine if your client should file a claim for benefits under ERISA for the disputed amount which would require dismissal of the law suit while the participants claim is reviewed by the plan administrator. You should familarize yourself with the requirements for filing a claim and the documents that a particpant is entitled to receive from the plan administrator. If the plan expects to recover the excess then it must provide both the factual basis as well as the plan provisions that would require the return of the payment. The plan can't just state that it overpaid benefits without explaining how the benefit was derived because all benefits must be paid in accordance witth the plan's written formula.

I dont understand your concern with the AARP, EEOC and Medicare since employers are not required to maintain health benefits under ERISA. I thought the medicare issues under age discriminaton apply where employer health coverge is reduced or eliminated when retirees becomes eligible for medicare at 65. Why not refer the question to counsel to determine if there is any liability risk under the terms of the employer's health plans? I am sure the board would want a legal opinion before making a decision.

See PLR 200007025 where IRS held that a self funded plan in which risk for health benefits for employees and partners was shifted to the plan from the partnership that sponsored the plan is an arrangment having the effect of accident or health ins in which payments are excluded from the income of the partners of the plan sponsor. The IRS views insurance as the shifting of the risk from the insured to the insurance program and the risk of loss is distributed among the participants in the program. The payment of additonal premiums to cover unexpected losses incurred by the plan does not prevent the arrangement from being treated as accident or health ins.

Does it really matter that the ees have the right to receive stock? If the Esop tenders the stock the employees will recieve cash which can be rolled over. If the the ees receive stock upon termination then they will have to tender the stock back to the buyer to receive the cash. Since there is no NUA which can be taxed as capital gain for a distribution upon termination of the plan there is no benefit to be gained by receiving a distribution from the plan in stock.

I thought that ERISA 202(a)(4) permits a plan to limit participation to members of an eligible group as defined by the plan. The employer can define participation as any classification of employees not based on age or service.

The dividends would be paid to the plan as the owner of record of the stock and would be mailed to the plan's address since the company has no record that the Dr has possession of the shares. I dont know how the Dr. could cash the check if it is payable to the plan unless the plan trustee endorses the check to him.

What does the plan provide if a bene is not designated? Usually the plan will have a default bene such as the spouse if married or estate if single. In a k plan the spouse is automaticlly the bene unless another person was designated.

You really should rethink what you are doing if you represent the custodian-IRA transfers under 408(d)(6) are subject to different rules than QDROs and IRS has disqualified IRA transfers to ex-spouses where the requirements of 408(d)(6) were not complied with resulting in taxation to the IRA owner. The case you cite refers to the obvious- funds cannot be transfered to the ex spouse's IRA before the ct order or divorce decree dividing the IRA has been issued.

I dont understand what you are saying. If the ee elects to receive $ from the NQDC plan he has constructive reicpt of the funds. If the employer uses the funds to purchase a LI policy the ee is taxed under Section 83 as if he had used the $ to pay for the premium once he has a vested interest. CR/ economic benefit is not dependent on agreeing to pay a specific amt - it results from making $ available for ee's benefit. See Goldsmith v. US, 586 F2d 810. 409A only adds another level of taxation to the existing provisions of the IRC including 83 and 451.

Self employed Dr can maintain a plan for the medical practice he reports on the Sked C regardless of where it is located because business code is the same. He has two options-pay terminated ees 100% of benefits which should not be a problem because ee contributions are 100% vested and continue plan in new city. Second he can terminate 401k plan and establish disretionary PS plan or SEP plan for his new job and rollover his account from the 401k plan into new plan. SEP is less expensive than qual plan but no loans are permitted.

According to TaylorJeff there is an exposure of 100k. Maybe you are thinking of a different policy. If there is no risk to the ins co the policy cannot be marketed as insurance. Q- is this policy available in NY?

IRAs are not subject to QDRO rules because they are not qualfied plans and custodians are not plan admin. IRAs can be divided by ct order under IRC 408(d)(6) in non taxable transfer if custodians receive proper instructions from ct.

TaylorJeff: is this an underwritten product where the ins co reviews the applicant's medical history before issuing the policy or does the co do little or no medical review before issuing a policy? I dont think the standard is whether the ins co makes money on all health policies since ins co. dont lose money on group life policies. The question is whether risk of loss for medical expenses has been shifted to an unrelated third party under the policy. If the ins co can be required to pay up to 100k in benefits under the policy for med care for 30k in premium then there has been a shifting of risk. The probability that the carrier will incur a loss on the policy is not relevant. If it was then ADD issued to airline passingers would not be deemed ins proceeds under the tax law exempt from income tax for those few passingers who die in airline crashes. I dont think any ins co loses money on an ADD policy but ADD is still ins because the risk of loss has been shifted to the insurer.

Kirk: The ownership documents will be determined by contract between the investment company and investor. Some financial instruments are paperless such as book entry securites in which ownership is recorded on a computer.

I guess you were not around when ERISA was enacted. I dont see how the IRS can postpone the effective dates for 409A because they are statuory- they will just delay the dates plans will have to be amended for 409A.

Subscription agreements are used as the written contract in private placements for investments where no stock or bond certificates are issued to investors. Large pension funds purchase investments through private placements from hedge funds to diversify plan investments.

Will NQDC distributions which are contributed to a 401k plan by the employee be subject to FICA tax again under IRC 3121(v)(1) which includes as wages amounts which are contributed as pre tax contributions under 402(e)? Q has it right -it is a 0 sum game where the 401k contributions come from, so why bother with making them from NQDC distributions if there could be collateral tax issues?

What does the QDRO say about continuation of payments after the AP's death? She could only get a LS if plan provides for LS payment and many govt plans do not permit LS.

IRC 1366(d) limits losses of the S corp owner to the amount the owner has at risk in the S corp, e.g., amount paid into the corp and amounts borrowed by the corp. Tax ct has prevented S corp from evading 1366(d) by passing plan contributions to owner via 1099 as individual deductible amount .

Losses from an S corp can only be deducted by the S Corp owner to the extent that they do not exceed his basis in the S corp and any corp indebtedness attributable to him. Disallowed losses may be carried forward indefintiely by the taxpayer. The S Corp owner needs to consult a tax preparer.

KJ: While the cases are interesting, you are overlooking the purpose of the review which is whether tax counsel can render an favorable opinion within the confines of Circular 230 that the benefits would not be subject to income taxation because of the prior disqualfication of the plan. The opinion would protect the taxpayer from any penalites for substantial understatement of taxes in the event of an audit leaving the taxpayer no worse then if he paid the taxes (along with interest) in the year of receipt. Alternatively the taxpayer could decide to pay the taxes after receiving the opinion to avoid the risk of an adverse IRS audit.

Has the stock appreciated since the participants were cashed out? If not why would the participants accept an offer to receive stock for cash? If stock has appreciated how is the plan going to pay for the stock to distribute to participants in excess of the cash they received?

See PLR 9502030 for taxation of a non qualified trust. Its not easy reading.

The penalty may not apply because this a non qualified plan with a separate account which is 100% vested in the participant which will result in the trust income being taxed to the participant each yr under IRC 83. There may be open yrs for the decedent's tax return to report the income. The S/l for understatement is 6 yrs. See prior comments on applicication of fraud to a decedent. Since there is a risk the client needs competent tax advice but there is a significant amount to be gained if the plan assets are not subject to income taxation.

Disqualification occurs by operation of the tax law - If a plan does not meet the requirements of the IRC and regs it is disqualified subject to correction in a future year. There is nothing in IRC 402(b) that allows disqualfication only if the IRS determines that the plan is not qualified. Maintaining qualfied status requires that the plan contain all required provisions. If the plan is not amended to add required provisions the IRS cant make an exception from disqualfication. In addition to the document requirements, the plan may have been disqualified 17 years ago for the failure to pay MRDs. What the IRS thinks is not as important as the applicable law. The duty of consistency cannot extend to anyone other than the taxpayer who benefited from the mistake because employees would never have any protection from back taxes due to employer mistakes in reporting income on w-2 and 1099s. It would be inconsitent for the IRS to say that a plan without documents must be qualified when the IRS has disqualified plans for the failure to produce signed documents. This problem will become more prevalent because plans sponsored by individuals who stopped adopting amendments after ERISA are being terminated because of the retirement or death of the sponsors.