Category: Benefits

From the New York Times, “A Broker’s Empty Promise, a Retiree’s Shattered Dream.”

From WebCPA.com, “DOJ Files Suit Against Audit Defense Firm“:

The Justice Department asked a federal court in Las Vegas to issue a temporary restraining order against a Las Vegas-based telemarketing firm that it alleges sold fraudulent tax schemes that have bilked the Treasury out of an estimated $324 million.

Ever feel like this after completing your tax return? (From the TaxGuru.net.)

This is a great website, by the way–CrossingtheBar.com. The website provides good information regarding the statutes, rules and regulations that relate to the multijurisdictional practice of law. For instance, this page provides admission information regarding the different states.

Another good website here–HSA Insider–with info regarding health savings accounts. (Thanks to Benefitslink for the pointer.)

Finally, from Law.com, “Update: The Tax Man’s Travails.”

Thanks to Benefitslink.com for the pointer to this press release: “HEALTH PLANS FAIL TO DISCLOSE REQUIRED COVERAGE INFORMATION: New Report Shows HMOs Do Not Adequately Comply with State Law.” According to the press release, Attorney General Eliot Spitzer today released a report with a survey showing that health plans in New York State are failing to disclose required information that could help consumers obtain coverage for medically necessary treatments. Apparently, members of Spitzer’s staff posed as prospective enrollees of a health plan and wrote five letters to each of 22 health plans requesting information on the standards used to determine whether or not a treatment for five different conditions was medically necessary and therefore covered by insurance. Spitzer’s staff analyzed the responses from the health plans and assigned grades to the plans based on the number of satisfactory responses:

Out of 22 plans studied, half (11) received an “F” for compliance, seven plans received a “D,” three plans received a “C,” and only one plan got a “B.” No plan received an “A.” Twenty-six percent of the 110 letters received no response from the plans at all.

Spitzer has said that “when health plans fail to respond to such information requests they may discourage chronically ill New Yorkers from enrolling in their plans and thwart the state’s commitment to making insurance accessible to all without regard to health status.”

The Attorney General’s office has sent letters to each of the plans surveyed detailing particular violations and requesting that each plan take immediate measures to comply with the law and set a meeting date to discuss permanent compliance measures. The press release indicates that plans that repeatedly fail to comply with the law could face legal action.

In a previous post, I talked about how IRS officials had indicated that the IRS was leaning towards a staggered remedial amendment period approach with respect to keeping individually designed plans current with the law. This has now been confirmed in Announcement 2004-32 which provides an update as to the future of the EP determination letter program. According to the Announcement, the staggered remedial amendment period system would establish regular five-year cycles for plan amendment and determination letter renewal. The cycles, which would be based on taxpayer identification numbers, would ensure that employers would not have to request determination letter applications more frequently than every five years.

In addition, Announcement 2004-33 contains a draft IRS Revenue Procedure governing the issuance of opinion letters with respect to master and prototype (M&P) plans and volume submitter (VS) plans. The guidance announces that a new approach for keeping pre-approved plans up-to-date would establish regular six-year amendment/approval cycles for all pre-approved plans, beginning with the submission of these plans for EGTRRA opinion and advisory letters. The way it would work is as follows (according to Announcement 2004-32):

In year one, all pre-approved defined contribution plans would be required to be updated and submitted for approval based on the law in effect at that time. The Service would process these applications in years two and three. Adopting employers would then have a fixed date by which to adopt the approved plans (for example, by the end of year five). Meanwhile, in year three, all pre-approved defined benefit plans would be required to be updated and submitted for approval based on the law in effect at that time. The Service would process these applications in years four and five and adopting employers would have to adopt the approved plans by the end of year seven. The cycle would begin again in year seven; that is, in year seven, all pre-approved defined contribution plans would again be required to be updated and submitted for approval based on the law in effect at that time.

The IRS states in the Announcement that good faith plan amendments would still need to be adopted sooner than the end of a plan’s cycle, when appropriate. In addition, while the cycle is “fixed,” there would be flexibility built into the system to “allow the cycle to be modified when appropriate, particularly in response to the changing needs of plan sponsors.”

Additional changes to pre-approved plan procedures are as follows:

• Cross-testing provisions could be included as a design feature in nonstandardized defined contribution M & P plans.
• Volume submitter plans could be written to contain a provision that allows the practitioner to amend the plan on behalf of adopting employers for changes in the Internal Revenue Code.

Interested persons are invited to comment on the new procedures.

With the issuance of applicable federal rates for May, 2004, I have decided to add a section over on the right which will provide links to the Revenue Rulings tracking changes to the applicable federal rates each month. (I know, very dull and boring, but very handy for some. . . )

Forbes.com has a Special Report entitled “Best Blogs.” Unfortunately, law or tax blogs just didn’t make it into the report at all.

Also, more on blogs in this article: “Blogs: Here to stay – with changes.”

Law firm articles and newsletters recently published:

• Gardner Carton & Douglas: “HSAs Take Center Stage[pdf].”
• Groom Law Group: “Memo to Clients: Legislative Update.”
• Hodgson Russ LLP: “Employee Benefits Developments.”
• Kutak Rock LLP: “Defined Contribution Plan Update: Charging Only the Accounts of Former Employees for Administrative Expenses.”
• Proskauer Rose: “Temporary Funding Relief for Defined Benefit Pension Plans.”
• Reish Luftman Reicher & Cohen: “404(c) Issues:Mapping, Blackouts, Disclosure, Annuities vs. Registered Issues (Powerpoint Presentation).”
• Vedder Price: “Employee Benefits Briefing[pdf].”

A hearty welcome to Paul L. Caron who has started a new blog entitled the “TaxProf Blog.” Professor Caron is the Charles Hartsock Professor of Law and Director of Faculty Projects at the University of Cincinnati College of Law. The links on this new site are just outstanding, including a listing for tax professors (by name or by school) as well as a listing of tax course materials. (I have added a link to Professor Caron’s site under “Tax-Related Blogs” in the links section over in the right-hand column.)

It’s Tax Day, and time to celebrate with an article from CNNMoney.com, “It’s Tax Day, let’s party“:

If you’re one of the millions of Americans who wait until the last minute to file your taxes, you may encounter some obstacles at the post office today. . . It’s tax time again. Across the country, all sorts of people are using April 15 as a day to sell stuff and to say stuff. . . ”

The article tells of a group of women dressed up as lemons, handing out samples of the new Super Sour Lemonade. Their motto: “Life hands you lemons on Tax Day, so drink lemonade.”

Also, some tax humor from the Tax Guru here.

And on a more serious note, what do you do with that tax refund? Jonathan P. Decker for the Christian Science Monitor via ABC News.com offers a suggestion or two in this article–“Spend Wisely: Put Your Tax Refund to Work“:

“If you simply put part of your refund into your 401(k), and have a match from an employer of 50 cents for each dollar you contribute, that’s a terrific way to build a retirement nest egg,” says Marc Freedman, a financial planner at TriCapital in North Bethesda, Md. “I’d say about 70 percent of my clients invest all or a good part of their tax refund.”

Mutual funds in the news with this from the WashingtonPost.com–“Mutual Funds to Disclose Timing Policies“:

Mutual fund companies must disclose to shareholders their policies on the practice of market timing that is at the heart of many of the cases in the industrywide scandal, federal regulators decreed Tuesday. The five-member Securities and Exchange Commission voted to formally adopt rules requiring the fund companies to detail their market-timing policies in sales material and other documents given shareholders. . .The final rule backed off a plan to require detailed disclosure of efforts to police timing. Some major fund companies, including Fidelity Investments and T. Rowe Price Group Inc., had argued in written comments that the rule would provide a “road map” to those who wanted to evade detection.

From the St. Louis Post-Dispatch, “Some changes in 401(k) rules could avert disaster at 65“:

The creation of the 401(k) plan was perhaps the most revolutionary change in the American financial system in the past quarter-century. It has given millions of workers a way to finance their own retirements. But it also has led to missteps that weren’t possible in the earlier era of company-funded pensions.

Read the story behind the Crowley v. Corning case from this recent article from the New York Times, “All the Nest Eggs in One Company Basket“:

Such stories abound in this company town, where loyalty, self-interest and faith in the company led many to bet their retirement portfolios almost exclusively on the stock of their employer. Economists said what happened here offered a pristine window on the mixed fortunes and stresses that come with retirement accounts based on company stock.

Read the resulting case–Crowley et al. v. Corning–and how the company’s motion to dismiss in that case was granted. Nixon Peabody LLP has a recent article on a later case–Crowley v. Corning Incorporated, 2004 U.S. Dist. LEXIS 758 (W.D.N.Y. 1/14/04)–in which the court addresses plaintiff’s motion to reopen the prior 2002 decision. Plaintiffs had sought to reopen the case by submitting “a handful of new cases, including the Enron decision and a similar decision involving WorldCom.” However, the court distinguished all of these cases and affirmed its prior 2002 decision in this recent 2004 decision.

The 2002 Crowley decision has been cited in numerous cases by defendants in ERISA 401(k) litigation involving company stock, and was cited by the court in the case of In re: Williams Cos. ERISA Litigation as pivotal authority in an unreported decision in which the court declined to adopt the DOL’s interpretation of the law as espoused in the DOL’s Amicus Brief. (See this previous post where this unreported decision is discussed.) However, the DOL strongly notes in its WorldCom Amicus Brief that the Williams decision (which relied on Crowley) was “wrong” and “contrary to the weight of precedent.”

Defendants sought to rely on the Crowley case in the Dynegy case, Constance K. Schied v. Dynegy, Inc., et al. but their motions to dismiss were not granted. (Read the opinion in a recent Order Denying Motion to Dismiss.) Another case where defendants sought to rely on Crowley, but did not prevail, was in the In re Sears, Roebuck & Co. ERISA Litigation. (Read the recent Memorandum Opinion and Order Denying Defendants’ Motion to Dismiss in the Sears case.) Both the Dynegy and Sears opinions were rendered in March of this year.