Advisory Opinion

October 27, 2009
Mr. Timothy Berry
1812 E. Toledo
Gilbert, AZ 85295

Article - Department of Labor
2009-03A
IRC § 4975(c)(1)

Dear Mr. Berry:

This is in response to your request for an advisory opinion from the U.S. Department of Labor (Department) concerning the application of the prohibited transaction provisions under section 4975(c) of the Internal Revenue Code of 1986, as amended (Code),(1) to certain transactions or arrangements involving an individual retirement account (IRA). Specifically, you ask whether it would be a prohibited transaction in violation of Code section 4975(c)(1)(B) for an IRA owner to grant to a brokerage firm (Broker) a security interest in the assets of his non-IRA accounts held by the Broker as a requirement for establishing an IRA with the Broker.

You make the following representations in support of your request. Your client currently has a personal brokerage account at the Broker. He now wishes to open an IRA with the Broker, and will self-direct investments made with the IRA’s assets. In connection with the establishment of the IRA, the Broker has asked your client to agree to the following clause:

All

Click to Read More...

Categories:   Pension News   Share Article

State of the Union and Your IRA

91%.  Can anyone guess the significance of that number?  No, its not the number of people underwater on their houses, although at 25% and rising its not a bad guess.  Actually, 91% was the highest marginal tax rate in the United States from 1951 – 1963.  From there, it dropped to 77%, and stayed at 50% or above well into the 1980’s.

The point of all this is that while marginal rates are poised to reset to the 39% of the Clinton years as the Bush tax cuts expire, in the broader historical context of the last century 39% is actually still quite low.  British tax rates on high-earners are already up to 50%. And the US will inexorably follow over the years. 

The math on this is blindingly obvious.  The US national debt today is somewhere in the range of $10-$11 trillion, or close to 70% of GDP, if you include the money owed to the Social Security Trust Fund (on another note, the entire concept of the Social Security Trust Fund is a fraud, but that is for another article).  Over the next decade, the additional deficits

Click to Read More...

Categories:   Pension News   Share Article

It’s no surprise that pension plans are taking a hit in terms of reserves, but state and municipal pension plans face additional stress.  State and municipal pension plans include teacher’s retirement, firefighters, and local government employees, such as police officers.

According to Northern Trust, due to the under performance of the market in 2008 pension plans lost an average of 30% or about $900 billion.  During the first two months of 2009, pension plans reported a loss of another $200 billion.  Some municipal funds may have lost more lost even more since the smaller funds seem to have taken a larger hit than the larger funds.

This means different things to different industries.  State plans in general run at about 60-70% of funding.  Now it is reported that the state funds only have half of the 60-70% capability.  This is big trouble for employees whose occupations fund the state retirement systems. 

Some of these funds have been forced to sell off assets at huge discounts to cover pensions, but the question is how long can this continue?  There seems to be no way that the federal government cannot intervene if these pensions are to survive, however that remains to be seen with

Click to Read More...

Categories:   Pension News   Share Article

ERISA Law Fails to Provide Benefits
Saturday July 5, 11:31 pm ET

By Michael Hathoway

Washington (AP)  Thomas Amschwand made every effort to make sure his wife would be taken care of as he was dying of a rare form of heart cancer at 30 years old in 2001. Spherion Corp., the temporary staffing company where Amschwand worked

Spherion's denied benefits to Amschwand and his wife Mellissa Bellinger after a bizarre set of circumstances. Spherion, switched insurers after Thomas Amschwand was diagnosed with a rare form of heart cancer.

Spherion announced that Amschwand's wife would not receive any of the $426,000 in benefits she believed she was due. Mellissa Bellinger took the case all the way to the Supreme Court and was denied a hearing on June 27, 2008.

The new policy did not take effect until an employee worked one full day. His wife said if he has known, he would have suffered through one day of work. Spherion never informed Amschwand of the requirement leaving him to think that his wife was covered by Life Insurance. Amschwand's wife was refunded a few thousand dollars in insurance of which she and her husband had

Click to Read More...

Categories:   Pension News   Share Article