mbozek

You keep ignoring the distinction between self funded and insured plans which the Sup Ct. made in the Met Life Case. If an ERISA plan provides benefits by self funding, state min. benefits provisions under the ins law do not apply and the er can enter into any arrangement with an insurer. If the benefits are provided under an insurance contract where the insurer guarantees payment of benefits in return for a premium then state minimum benefits must be provided because ERISA does not preempt state regulation of insurance companies.

A criminal conviction does not create the right to recovery of excess payments. In this case the son filed for bankruptcy stating that he had spent all of the payments from the plan. Even if the plan can sue the son under state law on the theory that the claim would be for something other than the recovery of excess benefits under ERISA there would be no assets to collect on the judgement to justify the legal fees involved.

No. There is only one deferral for all 457 plans in which an ee participates, 14k/18 in 05.

I disagree. The J & S can be paid if the plan fiduciary has the authority intrerpret the plan provisions and the plan does not expressly prohibit this payment.

The employee is taxed as ordinary income on the amount of the basis (i.e., employer's cost) in the year the shares are distributed to the employee (2004). Under IRC 402(e) the net unrealized appreciation (NUA) which is the fmv of the shares in excess of the basis is not taxed at distribution. The NUA is taxed as capital gains the year the shares are sold by the employee (CG = sales price - the basis). All NUA on the date of distribution is taxed as Long term CG. It is presumed that the stock was distributed as part of a lump sum distribution in 2004. There is a different rule for taxation of er stock which is attributable to ee after tax contributions. The employee needs to consult a tax advisor to determine the taxation of the distribution.

Don: I agree with your last post including the last part in which the policy is submitted to the state ins dept as an agreement between the insurer and the employer. However the ins dept will not approve the issue of a policy w/out state mandates and under the Met life decision ERISA does not preempt regulation of the policy provisions under state ins law. If the insurer issues a policy without state mandated benefits it will be subject to sanctions by the state ins. department including suspension of its license to sell ins. because state regulation of insurance companies is not preempted by ERISA.

As noted by Kirk, the US Sup Ct in Met life case, 471 US 724, Part IIIB specifically disposed of your argument when it held that a mandatory benefit provision (e.g., providing treatment for mental illness) which was required under state insurance law for any group health insurance contract issued in MA was not preempted by ERISA because requiring minimum benefits is part of the business of insurance which was preserved under ERISA 514(b)(2)(A). The Travelers case did not modify the Met life decision. While your statement that state ins laws are preempted by ERISA 514(b)(2)(B) as to what the minimum benefits must be under the terms of the Employers plan is correct, it applies only if the employer self funds the plan, instead of providing benefits under an insurance policy subject to state law.

Don: The type of plan you are describing is a self funded plan where the employer hires the insurer to pay claims under a health care plan in which the employer decides what the benefits are. The employer and insurer sign an administrative services agreement which is not an insurance policy subject to state insurance law. In an ASA the employer agrees to pay the cost of all benefits plus a fee to the insurer for administering the plan. In a self funded plan all state insurance laws mandating minimum benefits are preempted because the employer retains the risk of paying the benefits and the plan is not an insurer subject to state ins laws. As discussed by Kirk, if the employer provides benefits under the plan through an insurance policy in which the employer shifts the risk of paying benefits to the insurer in return for paying a premium, state insurance laws will determine what minimum benefits are covered under the policy. If the employer provides health benefits under an IRC section which is funded by purchasing a high deductible insurance policy where the insurer assumes the risk of paying the benefits in return for a premium from employer or employee the policy will be subject to state ins. law requirements.

Don: I will not discuss your claim that state ins laws are preempted if the ins policy is sold to an ERISA benefit plan (which is without merit since ERISA does not preempt state regulation of insurance policies sold to employers). Since all ins policies must be approved by state ins depts I dont think any insurer would issue an Ins policy to an employer which was not approved by the state ins dept with the provisions required under state law because of the sanctions that would be imposed by the ins dept for issuing a non approved policy, including suspension of its license to sell ins in the state.

As a non actuary I agree with Pax with the clarification that the the deducton of the mortaliity charge could be taken if the death benefit is a payment required under the terms of the plan regardless of whether LI is purchased. If the plan is obligated to pay the Death Benefit to the participant's benes even if the ins is not in effect then the mortality cost would be deductible. Otherwise the question is whether the contribution would be deductible under 404/412 limits.

Persons who have standing as a party to a law suit have immunity for the actions taken before a court during a suit- parties who do not have standing can be sued for statements they present to the court regarding the invalidity of a divorce by a litigious employee and spouse. (I dont understand what reasonable steps to determine the credibility of the evidence could be). I dont think the plan could pay the legal fees for defending such a suit against the PA. The DOL did not consider this issue when it issued the opinion.

It would depend on whether the claim for recovery under state law is based on law or equity. E.g return of an over payment is a claim in equity. The claim can be for damages if the IRA owner is defrauded by a crook as happened to a WSJ columnist a few years ago who was tricked into allowing $400k in IRA assets to be invested with a conman who promptly disappeared. The journalist sued the custodian for breach of fiducary duty for the failure to verify the credentials of the con man before transferring the assets. The Ct held that the custodian was not a fiduciary because its only duty was to follow instructions from the IRA owner.

Pax who is you? the Plan admin would have no standing in state divorce ct to contest the validity of the divorce because the plan is not a party (outside CA) to the divorce.

Yes the payment were made for 10 yrs after the ee died. ERISA only permits actions in equity, e.g., for restitution because of unjust enrichment. In an action in law the aggrieved party gets a judgment against the defendant which allows the seizure of any assets owned by the D. In equity the aggreived party can only recover the specific property which was misappropriated. If the property is not in the possession of the D there can be no recovery from other assets owned by D. The subtle difference between law and equity applies in the case of subrogation of helath care benefits.

Why cant the employer define who will be eligible to participate in the plan and pay increased salary to the other employees? 125(d)(2) only requires that plan participants must be offerred a choice between benefits and cash. If the plan is available to X div. employees and the employer pays Y div. employees who are not eligible to participate in the plan 1k more why is that a violation of 125? There is also no prohibition on paying extra comp to HCEs to cover the cost of the employee payments to the plan, e.g., if ee health premium is 3k a year the er could increase HCE salary by 3k.

ERISA preempts state laws that regulate the plan as an insurer, not state regulation of the terms of the ins. policy issued to the plan. E.g. Mass. ins. law requiring that employer health plans cover ex-spouse of employee is not preempted when applied to HMO but is preempted as to a self funded plan. State ins law could prevent insured HSA from being offered in state if there is no ins. policy available which can be used to fund HSA.

Retirement benefits are not subject to alienation under bkcy law and turnover under rule 70 is a violation of the nonalienation rules under Guidry and Jackson cases. State divorce ct can order turn over of retirement benefits under a DRO without part.consent if permitted under st divorce ct but not under rule 70.

Isnt the issue whether including all of his pay would be discriminatory comp under 414(s)? Check the regs to see whether plan comp can be designed this way or just pro rate his comp.

Benefits and pay are conditions of employment which are agreed to by the employer and employee and can be changed at any time if there is no written contract. The employee is free to accept the change in the conditions of employment or resign.

Need to check the PERA statute to see if it is subject to other state laws. Some public retiree plans are required to pay benefits to beneficaries designated by participants without regard to other state laws.

I dont disagree when the distribution can be traced to a specific account of the participant and identified and the amount is significant. However, if the plan cannot identify the funds in assets under the participants control the lawsuit will be dismissed. If the participant spends the excess retirement benefit there can be no recovery by the plan. In a recent case a lawsuit by a plan to recover 100k from the son of a deceased participant who cashed retirement checks for 10 yrs was dismissed because the son admitted that he spent the funds to pay for graduate school and the plan could not locate any pension assets. My comment was intended to remind Plan admin of the need to identify where the plan assets could be in the particpants possession before commencing a lawsuit. If the funds cannot be identified or located the suit will be thrown out.

Recovery though law suits is not practical because of cost and ERISA's limitation on recovery as a law in equity which requires the plan to trace the overpayment to specific assets in the participant's possession. If a part. cashes the distribution check in las vegas and spends it at the slot machines there can be no recovery by the plan even if the participant owns a home and has other assets.

I think there is a distinction between the tax rules for determining when plan assets are paid for terminaton of the plan and when payments are deemed made for the purpose of the taxation of distributions under IRC 402(a). The 5500 rules relate to payment of plan assets which continue until the last assets are withdrawn from the plan's account. There is an old IRS ruling that says that a plan is not terminated until all assets have been paid out. The plans assets are not paid out if the checks are not cashed. This is why a terminating plan shoud forfeit all benefits payable to missing participants because there are no uncashed checks to hold up the termination. The distribution rules apply to the date the payment is distributed, e.g, leaves the control of the payor, not when the check is received. IRC 402(a). In financial institutions MRDs are deem to be paid if the check is mailed or payment wired on Dec 31 regardless of when it is cashed or credited to participant's account because the plan's assets are deemed debited on that date. Under the CR rules a taxpayer is deemed taxed when the payment is made because if taxation was delayed until the check was cashed the taxpayer could avoid taxation simply by refusing to cash the check. However, if a check bounces for lack of funds there is no distribution. A payment to a missing participant which is never cashed is taxed in the year the payment is distributed and is reported on the 1099-R for that year.

How would 409A apply to accumulated vacation pay which is exempt from 409A under the notice?

The IRS has issued PLRs which allows accumulated vacation pay to be contributed by the employer to a Qualified plan before termination which would be eligible for a roll over to an IRA. Contribution is not subject to FICA taxation. Plan requires that employee have no right to receive excess vacation pay in cash. The same method can be used for 403(b) plans. IRS has such programs under review because of the fica issue.