ICMA's Retirement Health Savings Plan

[Guest Lee Burns]

ICMA-RC has a Retirement Health Savings Plan that allows deposits while employed and withdrawals when retired, tax-free, for medical expenses. Sounds great except pre-tax contributions are irrevocable once elected. I am reluctant to commit any amount that cannot be changed over future years of employment. The plan is based on Treasury Regulation sec. 301.7701-3(a)(3) and a Private Letter ruling. Why is this election irrevocable instead of adjustable like a cafeteria plan? Anyone have any experience with this type plan?

[GBurns]

Have you seen this Private Letter Ruling? If so what is its # ?

You have stated that the contributions are irrevocable and also that "this election irrevocable instead of adjustable like a cafeteria plan". These are 2 different issues that I think you might have confused. The pre-tax election is your on-going payroll deduction which then becomes your contribution when it is later deposited into the plan.

Not having heard of this or seen any material before now, I cannot comment further and would love to see the alleged PLR.

[Guest Lee Burns]

I have asked for a copy of the ruling or the ruling number but have yet to receive it.

[Guest Lee Burns]

I have received a copy of the PLR-116685-99, from ICMA, dated December 28, 1999. It does not state anything about the election being "irrevocable". I continue to search and question.

[GBurns]

Will you please recheck that PLR #, the number that you gave was not compatible with the numbers used on either the IRS, Legalbitstream or UncleFed website.

[GBurns]

What ever happened regarding this PLR? Did you verify its authenticity and its # by looking it up on the IRS website or other reaearch site?

[Guest Lee Burns]

Try this link to the site where I found what ICMA gave me. If says nothing about your election being "irrevocable", so I'm still stumped why that would matter to the IRS. I think it's unrealistic for anyone to elect an amount or a % and not be able to change it for the remainder of their career.

http://www.irs.gov/pub/irs-wd/0012084.pdf

[GBurns]

The link was to PLR 200012084 which is a simple PLR giving the requested conclusion that the Trust is an integral part of the City, nothing more. It has no bearing on whether the plan described is allowed or not and even specifically states that this ruling gives no opinion on the federal income tax consequences of the transaction described.

The PLR also states in the description of the Plan that only the City contributes to the Trust and that no other person is allowed to contribute meaning that there are no employee contributions. Why did you think that it allows pre-tax contributions? Since the employee makes no contribution there should be no election to participate. Even if there was an election by the employee to receive this "free" benefit Why would there be any need for revoking the election?

The real question seems to be your opinion that "I think it's unrealistic for anyone to elect an amount or a % and not be able to change it for the remainder of their career." when no such condition seems to exist. There is no amount to elect or contribute even if there was an election to participate.

Maybe the real problem could be the person giving explanations and descriptions that are questionable and not supported by the PLR. The PLR seems irrelevant and does not seem to mesh with the description in your posts. The PLR was not issued on the plan but on the tax status of the Trust.

[Everett Moreland]

Anyone know why 457(f) does not apply to these plans?