Opinion Addressing Taxation of Demutualization Proceeds

Here is a link to a Court of Federal Claims opinion, issued August 6, 2008, on the income taxation of demutualization proceeds: Fisher v. U.S. Not only will the opinion be very helpful to the many taxpayers who receive such proceeds, but the story behind the opinion which you can read about here is heart-warming. No indication yet whether the case will be appealed.

(From the TaxGuru)

UPDATE: Read more about the case here and here.

Study on Personal Savings Behavior

Most people do better with short-term goals than long-term goals. That is the conclusion reached by a recent study from Rice University on saving entitled “The Effects of Time Frames on Personal Savings Estimates, Savings Behavior and Financial Decision Making.” Excerpt from a press release: “Americans need to save paycheck to paycheck“:

For example, in one study, those saving for next month estimated they would save $287 but actually saved $440. On the other hand, participants who were asked to estimate how much they would save in a specific month in the future indicated a much higher value — $946 — but ended up saving far less — only $123.

Another argument, I guess, for the automatic enrollment proponents since saving from paycheck to paycheck doesn’t always lend itself very well to the qualified plan world.

Early Retirees Struggling

Informative article on how those who have taken early retirement are coping with the difficulties of dealing with the economy: “Some early retirees have second thoughts.” Obtaining health care benefits appears to be the biggest concern. Praise goes to those companies who are able to provide health-care benefits for part-time workers, which according to the article is only about one-quarter of the companies that provide health care benefits.

Census Report on Health Insurance

From the U.S. Census Bureau Report issued yesterday:

  • Both the percentage and number of people without health insurance decreased in 2007. The percentage without health insurance was 15.3 percent in 2007, down from 15.8 percent in 2006, and the number of uninsured was 45.7 million, down from 47.0 million.
  • The number of people with health insurance increased to 253.4 million in 2007 (up from 249.8 million in 2006). The number of people covered by private health insurance (202.0 million) in 2007 was not statistically different from 2006, while the number of people covered by government health insurance increased to 83.0 million, up from 80.3 million in 2006.
  • The percentage of people covered by private health insurance was 67.5 percent, down from 67.9 percent in 2006. The percentage of people covered by employment-based health insurance decreased to 59.3 in 2007 from 59.7 percent in 2006. The number of people covered by employment-based health insurance, 177.4 million, was not statistically different from 2006.

  • Press Release is here.

    From Plan Sponsor’s article on the report here:

    Rates for 2005-2007 using a three-year average show that Texas (24.4%) had the highest percentage of uninsured, the report said. At 8.3%, Massachusetts and Hawaii had the lowest point estimates for uninsured rates, but they were not statistically different from Minnesota (8.5%), Wisconsin (8.8%) and Iowa (9.4%). In addition, Hawaii was not statistically different from Maine (9.5%).

    Interesting Search Tool

    You might want to try a search with Viewzi. PCMagazine has this to say about it:

    Viewzi aggregates search results from Google, Yahoo!, YouTube, and more, and lets you pick how you want them presented. Do you want just the text from the Web pages? Just the photos? Video previews (shown here)? Searching with Viewzi is fun and, depending on your search term, can actually be more convenient than a simple Google search.

    (Try searching “benefits blogs” with the term here.)

    Employer Loses Battle with IRS Over Employment Classification

    According to a federal district court in Iowa, an employer mischaracterized its sales team as “independent contractors.” The Tax Update Blog discusses the case here. The IRS held against the employer in spite of the following:

    . . . The salesmen testified they were provided with no health benefits or other typical employee benefits.

    Updated 409A Links

    I have updated my Section 409A links section in the side-bar to include all of the IRS Notices which have been issued since 2005. (If I missed one, please let me know.)

    IRS Ruling Prevents Certain Pension Transfers

    The Treasury Department today issued Revenue Ruling 2008-45, which answers this question: Is the exclusive benefit rule of § 401(a) of the Internal Revenue Code violated if the sponsorship of a qualified retirement plan is transferred from an employer to an unrelated taxpayer and the transfer of the sponsorship of the plan is not in connection with a transfer of business assets, operations, or employees from the employer to the unrelated taxpayer? The IRS answers “yes” in the ruling. However, in conjunction with the ruling, they have announced that, with the help of the PBGC, the DOL, and the Commerce Department, they have put together “a legislative framework of principles” that are intended to guide the development of legislation that would permit such transactions for “frozen” plans. See the Announcement here for the legislative framework they are recommending. (Apparently, this effort is intended to address situations such as those described in this article here.)

    Joint Committee on Employee Benefits Posts 2008 Agency Q & As

    JCEB has posted its 2008 Agency Q & As:

    Many readers will be interested in DOL Q & A 19 in which the DOL appears to take issue with what many practitioners had thought might be a viable structure for insulating corporate boards of directors from the ongoing fiduciary duty to monitor:

    Question 19: A corporation and its directors and officers are aware of the view that a person who or that has a discretionary power to appoint a fiduciary is, to the extent of that power, a fiduciary – with some responsibility to monitor his, her, or its appointee’s performance to the extent needed in evaluating whether to remove the appointee. In establishing a new pension plan, the corporation, by its governing board, adopts a plan document that specifies that a particular named person is the plan’s administrator, trustee, and named fiduciary. Although the plan document includes an amendment provision, that provision states that an amendment that purports to change or remove the administrator, trustee, or named fiduciary is void. The plan document also provides that no person other than a court can remove the plan’s administrator, trustee, or named fiduciary, and that any such purported removal is void. Is it clear that the corporation and its directors and officers need not monitor the fiduciary’s performance?

    Proposed Answer 19: Yes. A person can’t have a duty to consider whether to perform an act that would be void.

    DOL Answer 19: The DOL staff disagrees with the proposed answer. The selection of plan fiduciaries, such as a plan’s administrator, trustee, or named fiduciary, is a fiduciary function and those who appoint the fiduciaries remain responsible for monitoring those whom they have selected, regardless of any plan language to the contrary. Any amendment that would purport to eliminate a plan fiduciary’s responsibility to monitor, and, if need be, change or remove the plan’s administrator, trustee, or named fiduciary would be contrary to ERISA. See also ERISA section 404(a)(1)(D) – A plan fiduciary shall discharge his duties with respect to a plan in accordance with the documents and instruments governing the plan insofar as such documents are consistent with the provisions of Title I and title IV. See also 29 C.F.R. § 2509.75-8, Q D-4, Amicus Brief of DOL in Tittle v. Enron, In the United States District Court for the Southern District of Texas, Houston Division, Civil Action No. H-01-3913 and Consolidated Cases, Aug. 30, 2002.

    The traditional disclaimer stated on the JCEB website applies:

    The questions are submitted by ABA members and the responses are given at a meeting of JCEB and government representatives. The responses reflect the unofficial, individual views of the government participants as of the time of the discussion, and do not necessarily represent agency policy. Reports on each of the discussions are prepared by a designated JCEB representative, based on the notes and recollections of the JCEB representatives at the meeting, and may be reviewed by agency personnel. The questions are submitted in advance to the agency, and it is understood that these reports will be made available to the public.

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