sloble@crowleyfleck.com

Well, he is a specialty physician (as are all the trustees) so his time, to his fellow physicians, is worth about $600/hour. They think $2,000 per month is very cheap. But Mojo phrased it spot on: they need to determine his value to the trust. It is not relevant what he earns in his day job. Reprasing my question to this Message Board - What are some options for determining trust chairman service value, i.e. through benchmarks, comparisons, and documetation? Also this trust has about 3million in assets running well with about $300k in surplus. I am looking for specifics (even references) for independent consultants, institutional fiducairies for comparison, specific formulas you have seen or used, etc.

The chairman of a MEWA/VEBA Board of Trustees spends 5-10 hours per week on plan management matters and his co-trustees want to compensate him $2,000 per month from trust assets. He does a critical job and has served the trust 7 years without pay (no back-pay is sought). The legality is sound in that he is not employed by any employer or union participating in the plan and is not employed by the association - He receives full-time pay from a non-participating employer group. He is completely removing himself from this discussion (other than answering the question of how many hours he devotes to the trust on average). QUESTION: Any thoughts on how the trustees should benchmark and document this? $2,000 would be $100/hour on a slow month which seems high... Thanks in advance!!

Thanks. Additional important fact: The in service Bonus is only available after 20 years of service as a shareholder. But a shareholder can still elect to take it any time after 20 years. Is there a SROF after 20 years? "2009 Regs" means the 2007 regs effective in 2009.

NQDCP provides that shareholders can, at any time, cash in their shares. The act of cashing in of their shares gives them the right to an in-service deferred compensation "Bonus" in the same year. The shareholder can elect not to take the Bonus, in exchange for the right to a Deferred Compensation Payment only upon actual termination from service. The Deferred Compensation Payment is calculated based on an average of compensation formula. The Bonus is computed using the same formula reduced by 25%. Is the Deferred Compensation Payment subject to a SROF because it is materially greater than the Bonus? Or is this an impermissible haircut because the shareholder can elect to receive a deferred benefit subject to a penalty? I think it is subject to a SROF and not a haircut because its not entirely discretionary (i.e., only in the year of retirement of shares) and it is not an insignificant cut (more than 10%). This design is intended to pass muster under the 2009 regs.

Montana School District has draft 403(b) plan document ready to adopt this summer - based on IRS model. Vendors are insisting that School District adopt the vendors' 403(b) plan document (not just info-sharing/services agreement and annuity contracts). This could mean 4-5 different plan documents; Any thoughts or experiences? Has anyone been "forced" onto this situation? MT law does not require acceptance of particular number of vendors.

Don: Thank you, I appreciate your expertise in this area.

Don: Thank you for your comments: The state is Montana and the relevant law is at http://data.opi.mt.gov/bills/mca_toc/33_35.htm 80-26 is a prohibited transaction exemption that permits a party-in-interest (here, the association sponsor) to make an interest free loan to a Plan (here, the MEWA) without violating the prohibition on loans between a plan and a party in interest. I think my scenario falls into this exemption, but I was curious whether I might avoid having to apply it if the pre-funding is only a settlor function. You are right that settlor decisions have nothing to do with fiduciary decisions. That is why my question is whether pre-funding a MEWA is a settlor decision. Then it would not have fiduciary implications. I appreciate your comments but I am not an insurance person but rather an ERISA lawyer so I dont follow some of your points (my questions are in ALLCAPS for clarity, I am not SHOUTING...): Since the state applied boiler plate rules for reserves and surplus, you can be assured the general requirements do not fit what would be needed for your plan. These are not my words. Rather, this is the opinion of the NAIC, as well as the Lewin Group, a well respected actuarial firm. WHAT IS THE POINT OF MAKING THE RESERVES "FIT WHAT WOULD BE NEEDED FOR THE PLA"-- ARE YOU SUGGESTING THAT THE LOAN AMOUNT (WHICH IS OBTAINED TO MEET RESERVE REQUIREMENTS) MIGHT BE TOO HIGH BASED ON PLAN OPERATIONAL NEEDS OR TOO LOW? WHAT IF WE OBTAINED A FINANCIAL ASSESSMENT TAILORED TO THE PLAN, WOULD THAT ELIMINATE YOUR CONCERNS? With stop-loss insurance, I assume the reserve and surplus requirements were lowered, as opposed to a self insured plan without stop-loss insurance. I THINK SO By the way, if the reserve and surplus requirements are excessive, the VEBA will have Unrelated Business Income Tax to pay. If that occurs, the reserve and surplus laws may be preempted to lower or eliminate the UBIT. If that is the case, a VEBA may be an excellent choice. I AM CONFUSED> DO YOU MEAN THAT ERISA WOULD PREEMPT THE RESERVE AND SURPLUS LAWS BECAUSE THE UBIT IS INCONSISTENT WITH ERISA? DO YOU HAVE AUTHORITY FOR THAT? AGAIN, IF WE OBTAINED A FINANCIAL ASSESSMENT TAILORED TO THE PLAN, WOULD THAT ELIMINATE YOUR CONCERNS?

MEWA will be established as a single self-funded ERISA plan (an association of bona fide group of employers is the sponsor). Association needs to pre-fund to get it going. State insurance laws require certain reserves, etc. Association would like to loan the funds directly to the MEWA trust. My feeling is that we need to follow the requirements of PTE 80-26 as amended and do this as an interest-free loan to the plan. But, I was thinking, the plan does not exist yet so could the contribution merely be viewed as a setllor function.

Don Levit: I gather that the association is in only one state, correct? YES What type of trust are you using; is it a VEBA? PROBABLY - STILL DECIDING Are the employers satisfied with the reserves and surplus required by the state laws? YES SO FAR Were the amounts required according to the laws as written for MEWAs, or, were the requirements the same as for commercial insurers? THE STATE LAW IS SPECIFIC TO SELF FUNDED MEWAS In other words, were the reserve and surplus requirements decided after reviewing the MEWA's liabilities, or did the Department of Insurance use the "boiler plate" requirements? BOILER PLATE/STATUTE I gather the MEWA is partially self insured, correct? IT IS FULLY SELF INSURED BUT IT WILL HAVE STOP LOSS I hope this helps you consider my original question. THANKS

MEWA will be established as a single self-funded ERISA plan (an association of bona fide group of employers is the sponsor). Association needs to pre-fund to get it going. State insurance laws require certain reserves, etc. Association would like to loan the funds directly to the MEWA trust. My feeling is that we need to follow the requirements of PTE 80-26 as amended and do this as an interest-free loan to the plan. But, I was thinking, the plan does not exist yet so could the contribution merely be viewed as a setllor function.

MEWA will be established as a single self-funded ERISA plan (an association of bona fide group of employers is the sponsor). Association needs to pre-fund to get it going. State insurance laws require certain reserves, etc. Association would like to loan the funds directly to the MEWA trust. My feeling is that we need to follow the requirements of PTE 80-26 as amended and do this as an interest-free loan to the plan. But, I was thinking, the plan does not exist yet so could the contribution merely be viewed as a setllor function.

We are a small employer with limited resources. We all have a duty to do the best we can with the resources we have to be sure. The Corbel form is purportedly not just for the Corbel plan: https://www.relius.net/products/401Amendment.aspx. Of course it would be reviewed and perhaps tailored to our situaion If you have other (helpful) comments please feel free to share. Thanks.

Thanks--we have an individually designed plan. I checked with Corbell and their interim amendment is $400. I may wait and see if the IRS comes up with a good faith one for free! We have until July 30 2007 for calendar year plans, correct?

Anyone have any resources for an interim amendment for the final 401k regs. According to the May meeting of the JCEB/IRS, it sounds like the IRS is not changing its position that interim amendment is required by the plan sponsor's tax filing deadline for 2006. http://www.abanet.org/jceb/2006/JCEBQAwithIRSfor2006.pdf (see q/a 8)

Apparently several insurers have been tried prior to me taking this over. Before I keep trying new insurers I want to make sure I am correct in believing that an insurance company should be able to accommodate this situtation. Pax--thanks for your reply but can you cite any support for your apparent belief that SOME insurance company should be able to handle this? Legal authority or authority based on experience would help me in my discussions with additional insurers. References for potential insurers welcome too.