Demutualization and Welfare Plans: Looking for Actual Experience in d

[Guest wwest]

For those of you that have gone through demutualization, what did you do to allocate the demutualization compensation? I have seen all the articles, but curious as to what companies have actually done. Company has self-insured life insurance and long-term disability plans that will receive substantial compensation from this process. Active Employees make some contributions based on several factors including their salary, insurance experience rates, and the funding of the retiree welfare plans.

[Scott]

I am dealing with demutualization for the first time, so, unfortunately, I won't be any help to you. Could you possibly help me? You mention that you have "seen all the articles." I've searched everywhere I can think of, and have found precious little guidance on demutualization. Can you point me to some of those articles?

My client has a long-term disability policy for which the company has always paid the entire portion of the premiums. I'm trying to determine whether the demutualization compensation, which the company will receive in cash, will constitute plan assets or whether the company can use some or all of the compensation for corporate purposes. Any help would be appreciated.

[Guest wwest]

MetLife put out some good material. You can it access it on their website www.metlife.com. Also, a very good article by Alden J. Bianchi was published in the November 99 Tax Management Compensation Planning Journal. See also this topic under Retirement Plans in General in the message boards.

[JWK]

If the employer has always paid the premiums for the policy, then the employer should be able to keep the demutualization proceeds for any corporate purpose. Those premiums do not become plan assets. I don't think there's any definitive cite for this proposition in the context of a demutualization, but the DOL took this position with respect to employer-paid premiums generally in Adv. Op. 81-11A (1/15/81). There are some arguments that demutualization proceeds may be distinguishable, but I don't think the DOL is pushing those arguments.

It is possible that your insurance contract or employee communications or a state insurance law require a different outcome. You'd want to check those areas before doing anything with the proceeds.

Finally, because this is a high-profile issue, I'd request a legal opinion before using the demutualization proceeds for corporate purposes.

[Guest wwest]

Does anyone know how to access the publication "Demutualization Quarterly?"

[Guest Stephen Magowan]

I have had experience in this area with a client who was audited by the DOL. I do not know if this helps, but we were permitted to use the demutualization proceeds to declare a premium holiday for current employees and were not required to track down former employees.