Category: Benefits

Reuters is reporting: “Bush will sign bankruptcy bill passed by Congress.” (View the final vote here.) The legislation–“The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005“–contains provisions impacting retirement plan assets. More on the bill later . . .

(Previous post mentioning the legislation here.)

The publishers of TechnoLawyer, a popular email newsletter network for lawyers and law firm administrators, have launched a new blog: TechnoLawyer Blog.

From Jim Calloway’s Law Practice Tips Blog:

At ABA TECHSHOW’s “60 Sites in 60 Minutes,” the site I showed that got the most crowd reaction was the Baby NameVoyager. It is a graphic representation of all of the common names given to babies from 1900 to 2003. Try several of your friend’s names and see how names gain and lose popularity over the years. The display is somewhat mesmerizing.

From SFGate.com: “OT Offer Marks Shift in Silicon Valley..” The article reports how one video game company told employees that “they would get the overtime pay they have demanded but not the stock options that have made millionaires out of countless rank-and-file Silicon Valley workers.” The articles goes on to report that “the change is a result of [a] lawsuit and comments from employees, who said in a November survey that they would prefer cash to merit-based bonuses and options tied to the company’s stock performance.”

Today’s Wall Street Journal is reporting that the SEC intends to delay the implementation date for FASB’s option expensing rule:

An announcement of the SEC’s decision could come as early as this week . . The new rules by the Financial Accounting Standards Board, which require companies to include employee stock-option compensation as an expense on their earnings reports, currently are set to take effect for fiscal quarters starting after June 15. The SEC’s staff has recommended that SEC commissioners vote to change the deadline, so that the rules instead would take effect for fiscal years starting after June 15.

Rev. Rul. 2005-25 (via Benefitslink.com) answers two questions:

(1) Is a married individual eligible to contribute to a Health Savings Account (HSA) if the individual’s spouse has non-HDHP family coverage that does not cover the individual? Answer: An individual who otherwise qualifies as an eligible individual does not fail to be an eligible individual merely because the individual’s spouse has non-HDHP family coverage, if the spouse’s non-HDHP does not cover the individual. Accordingly, that individual may contribute to an HSA.

(2) If the individual is eligible to contribute to an HSA, what is the maximum contribution limit? Answer: The maximum amount under section 223(b) that an eligible individual may contribute to an HSA is based on whether the individual has self-only or family HDHP coverage.

Those of you who like to read HR-related blogs will want to take note of a new one located at the Employment Law Information Network—The Employment Law Blog–authored by Patrick J. Della Valle and Suzanne H. Stenson.

Additional thoughts on Rousey v. Jacoway:

To meet the federal bankruptcy exemption under § 522(d)(10)(E) which was the focus of the Rousey decision, a debtor’s right to receive payments from an IRA must constitute a:

“a payment under a stock bonus, pension, profit sharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.” (11 USCS 522(d)(10)(E))

Commentators have been emphasizing that the “reasonably necessary” requirement of the bankruptcy exemption will lessen the benefits of the Supreme Court’s Rousey opinion for IRA holders with large amounts in their IRAs. They go on to note that qualified plans subject to ERISA will likely offer more protection for such debtors under the Patterson v. Shumate case than IRAs offer for debtors under the Rousey v. Jacoway case. (In other words, parking all of one’s qualified retirement plan money in an IRA might not be the wisest choice for wealthy individuals, when it comes to to the issue of protecting assets from bankruptcy.)

Other issues that have been raised by commentators:

(1) Would Rousey protect Roth IRAs? Maybe not.

(2) The effects of Rousey would depend on state law, since under the Bankruptcy Code, states can opt out of the federal exemptions and provide their own exemption, give debtors the choice between the federal exemptions or the state exemption, or limit debtors to the federal exemption.

(3) RIA reports on recent bankruptcy legislation:

“Sec. 224(e) of S. 256, the Senate-passed Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, would provide a comprehensive set of rules for retirement plans, IRAs, and Roth IRAs. In particular, it would exempt IRAs (other than SEPs and SIMPLE plans) and Roth IRAs to the extent that their aggregate value, without regard to amounts attributable to rollover contributions under Code Sec. 402(c) , Code Sec. 402(e)(6) , Code Sec. 403(a)(4) , Code Sec. 403(a)(5) , and Code Sec. 403(b)(8) , and earnings thereon, does “not exceed $1,000,000 in a case filed by a debtor who is an individual, except that such amount may be increased if the interests of justice so require.”

Article on the implications of Rousey:

Reish Luftman Reicher & Cohen: Rousey v. Jacoway: The Supreme Court Extends Bankruptcy Protection to IRAs, or Does It? (via Benefitslink.com)

As usual, in spite of the hectic tax season, Joe Kristan of RothCPA.com has continued to write on the blog without losing his sanity and has posted some helpful last-minute information about filing extensions here, including this link to a new IRS web page devoted to extensions here.

Get your copy of:

Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return (PDF 76K).

Here is a list of recent IRS promulgations and news pertaining to benefits:

Issuance of Rev. Rul. 2005-24 which provides guidance on health reimbursement arrangements. The Ruling discusses an HRA plan design involving an employer contribution for unused vacation and sick leave.

Issuance of Rev. Proc. 2005-25 providing guidance on how to determine the fair market value of a life insurance contract, retirement income contract, endowment contract, or other contract providing life insurance protection for purposes of applying the rules of §§ 79, 83 and 402 of the Internal Revenue Code.

Issuance of LRMs for 401(k) plans and defined contribution plans.

A Special Edition of Employee Plan News noting that the TE/GE division of IRS is going through another restructuring. View the new area map here. The EP Examination field structure has been realigned from six areas into five:

• Northeast Area
• Mid-Atlantic Area
• Great Lakes Area
• Gulf Coast Area
• Pacific Coast Area

Apparently, the Mid-Atlantic Area no longer covers New Jersey, but now covers Ohio and West Virginia. Tennessee and Florida are now under the Gulf Coast umbrella.

(Source for Revenue Ruling and Revenue Procedure: Benefitslink.com.)