PLR that had no effect

[Guest Southern FA]

CalPERS, in its materials regarding its OPEB trust, mentions the following:

"A PLR does not guarantee tax qualified plan status. Tax qualified plan status is maintained by careful administration, not by a PLR. The unfortunate consequences of ignoring this fact were illustrated during 2007 in the case of a trust program marketed to local public agencies in Orange County by a nationally recognized trust administrator. This trust fund had received a favorable PLR from the IRS. Nevertheless, later the IRS found the trust program to be non-compliant due to improper administration" http://www.calpers.ca.gov/index.jsp?bc=/em...e_Letter_Ruling?

CalPERS does not have, and apparently will not seek, a private letter ruling on its trust.

Does anyone know what the provider in this case did wrong to lose tax exemption? Despite knowing the year, and that this was Orange County CA, I have not been able to find more details.

[mbozek]

CalPERS, in its materials regarding its OPEB trust, mentions the following:

"A PLR does not guarantee tax qualified plan status. Tax qualified plan status is maintained by careful administration, not by a PLR. The unfortunate consequences of ignoring this fact were illustrated during 2007 in the case of a trust program marketed to local public agencies in Orange County by a nationally recognized trust administrator. This trust fund had received a favorable PLR from the IRS. Nevertheless, later the IRS found the trust program to be non-compliant due to improper administration" http://www.calpers.ca.gov/index.jsp?bc=/em...e_Letter_Ruling?

CalPERS does not have, and apparently will not seek, a private letter ruling on its trust.

Does anyone know what the provider in this case did wrong to lose tax exemption? Despite knowing the year, and that this was Orange County CA, I have not been able to find more details.

You need to be more specific in your question. What is an OPEB trust? What benefits does it provide? Who are the employers?

[SoCalActuary]

CalPERS, in its materials regarding its OPEB trust, mentions the following:

"A PLR does not guarantee tax qualified plan status. Tax qualified plan status is maintained by careful administration, not by a PLR. The unfortunate consequences of ignoring this fact were illustrated during 2007 in the case of a trust program marketed to local public agencies in Orange County by a nationally recognized trust administrator. This trust fund had received a favorable PLR from the IRS. Nevertheless, later the IRS found the trust program to be non-compliant due to improper administration" http://www.calpers.ca.gov/index.jsp?bc=/em...e_Letter_Ruling?

CalPERS does not have, and apparently will not seek, a private letter ruling on its trust.

Does anyone know what the provider in this case did wrong to lose tax exemption? Despite knowing the year, and that this was Orange County CA, I have not been able to find more details.

You need to be more specific in your question. What is an OPEB trust? What benefits does it provide? Who are the employers?

Other Post Employment Benefits - like retiree health, long term care, etc.

The trust is used for holding the advance funding of the lifetime benefits.

For example, union-guaranteed life-time health coverage for fat-cat govt workers.

[mbozek]

CalPERS, in its materials regarding its OPEB trust, mentions the following:

"A PLR does not guarantee tax qualified plan status. Tax qualified plan status is maintained by careful administration, not by a PLR. The unfortunate consequences of ignoring this fact were illustrated during 2007 in the case of a trust program marketed to local public agencies in Orange County by a nationally recognized trust administrator. This trust fund had received a favorable PLR from the IRS. Nevertheless, later the IRS found the trust program to be non-compliant due to improper administration" http://www.calpers.ca.gov/index.jsp?bc=/em...e_Letter_Ruling?

CalPERS does not have, and apparently will not seek, a private letter ruling on its trust.

Does anyone know what the provider in this case did wrong to lose tax exemption? Despite knowing the year, and that this was Orange County CA, I have not been able to find more details.

You need to be more specific in your question. What is an OPEB trust? What benefits does it provide? Who are the employers?

Other Post Employment Benefits - like retiree health, long term care, etc.

The trust is used for holding the advance funding of the lifetime benefits.

For example, union-guaranteed life-time health coverage for fat-cat govt workers.

Isnt the tax exempt status of a trust that provides welfare benefits determined by designation as a tax exempt organizaton under IRC 501©((9) instead of a PLR or if the trust is established by government employer, exempt under IRC 115?

[SoCalActuary]

So the trust applied under 501(c )(9) and got a PLR indicating they are an exempt trust. Then they violated the rules and lost their exemption.

Am I missing something in your comment, mbozek?

[GBurns]

I think that this issue relates to PLR 200704005 and the related investigations done by the FSLG Division of the IRS. It was reported in their Newsletter July 2006 and followed up in 2008. They seemed to have entered into a closing agreement with the provider resolving the tax issues of more than 500 governmental entities.

I recall but cannot find, the Notiice that was put out. The plan design that I recall as being in question involved an HRA related to a VEBA. They did not say who this provider was but there are not many who fit the size parameter.

You might get more or better info if you post your question onn other Forums such as VEBAs or Health Plans.

[Guest Southern FA]

I think that this issue relates to PLR 200704005 and the related investigations done by the FSLG Division of the IRS. It was reported in their Newsletter July 2006 and followed up in 2008. They seemed to have entered into a closing agreement with the provider resolving the tax issues of more than 500 governmental entities.

I recall but cannot find, the Notiice that was put out. The plan design that I recall as being in question involved an HRA related to a VEBA. They did not say who this provider was but there are not many who fit the size parameter.

You might get more or better info if you post your question onn other Forums such as VEBAs or Health Plans.

This presentation from the IRS seemed to be related, starting on page 10. Still no mention of the provider or participants.

[mbozek]

I think that this issue relates to PLR 200704005 and the related investigations done by the FSLG Division of the IRS. It was reported in their Newsletter July 2006 and followed up in 2008. They seemed to have entered into a closing agreement with the provider resolving the tax issues of more than 500 governmental entities.

I recall but cannot find, the Notiice that was put out. The plan design that I recall as being in question involved an HRA related to a VEBA. They did not say who this provider was but there are not many who fit the size parameter.

You might get more or better info if you post your question onn other Forums such as VEBAs or Health Plans.

This presentation from the IRS seemed to be related, starting on page 10. Still no mention of the provider or participants.

Under IRS privacy laws all identifiying information of the taxpayer is deleted in a PLR.

[Guest Southern FA]

Looks like Anaheim was involved (among many others) and ICMA-RC that was the vendor.

http://www.anaheim.net/images/section/121/2007RHSFAQ.pdf

NEW CHANGES FOR RHS

Q1: Is RHS changing?

Yes, the RHS plan can no longer offer elective features.

Q2 Why is RHS changing?

The Internal Revenue Service (IRS) conducted payroll audits involving a number of RHS plans and determined that the elective features of the RHS program may not be part of a health reimbursement arrangement.

Q3: What does this mean for the elective features of the plan?

Your participation and elections will continue in force until the end of 2007. Elective participation and contributions will not be permitted beyond the end of the year for unrepresented employees. The City is working on the necessary amendments to allow for mandatory participation and contributions.

BASICS OF THE CITY OF ANAHEIM RETIREMENT HEALTH SAVINGS PLAN

Q4: What is the City of Anaheim

Retirement Health Savings Plan?

The City of Anaheim Retirement Health Savings (RHS) Plan offered through ICMA-RC is an employer-sponsored health benefit savings vehicle that allows for the accumulation of assets to pay for certain medical expenses in retirement (or other eligibility) on a tax-free basis.

RHS offers a number of benefits, including tax-deferred accumulation of earnings and, when account assets are used to pay for tax qualified medical benefits, the additional benefit of tax-free withdrawals.

[Guest Southern FA]

Looks like Anaheim was involved (among many others) and ICMA-RC that was the vendor.

http://www.anaheim.net/images/section/121/2007RHSFAQ.pdf

NEW CHANGES FOR RHS

Q1: Is RHS changing?

Yes, the RHS plan can no longer offer elective features.

Q2 Why is RHS changing?

The Internal Revenue Service (IRS) conducted payroll audits involving a number of RHS plans and determined that the elective features of the RHS program may not be part of a health reimbursement arrangement.

Q3: What does this mean for the elective features of the plan?

Your participation and elections will continue in force until the end of 2007. Elective participation and contributions will not be permitted beyond the end of the year for unrepresented employees. The City is working on the necessary amendments to allow for mandatory participation and contributions.

BASICS OF THE CITY OF ANAHEIM RETIREMENT HEALTH SAVINGS PLAN

Q4: What is the City of Anaheim

Retirement Health Savings Plan?

The City of Anaheim Retirement Health Savings (RHS) Plan offered through ICMA-RC is an employer-sponsored health benefit savings vehicle that allows for the accumulation of assets to pay for certain medical expenses in retirement (or other eligibility) on a tax-free basis.

RHS offers a number of benefits, including tax-deferred accumulation of earnings and, when account assets are used to pay for tax qualified medical benefits, the additional benefit of tax-free withdrawals.

Here is an article from 2007. http://www.fundaction.com/Article.aspx?ArticleID=1341408 Liman Cheng - 04/13/2007

"The Internal Revenue Service has shut down an ICMA-Retirement Corp. retirement health savings offering that allowed participants to make voluntary contributions. ICMA has also paid an undisclosed fine as part of its settlement with the IRS.

The offering, part of the firm's VantageCare Retirement Health Savings Plan, was a health reimbursement arrangement (HRA). The IRS said HRAs can be funded only by employer contributions or through companywide mandated employee contributions. HRAs are subject to different rules than health savings accounts, which require participants be enrolled in a high deductible health plan and allow tax-free savings to be used for immediate health costs.

The IRS raised questions about the voluntary HRA through payroll audits of ICMA's governmental clients, according to statement from ICMA issued to DCSPA. ICMA stopped offering the voluntary HRA to new clients at the end of 2006. The firm also offers mandatory and employer contribution HRAs. A spokeswoman declined to provide further comment...."