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Urest Virglnla

Wlsconain

Grcen Bay 1414\498-2700 Milwaukee (414)771 -4650 llecnuSf we have received numer9ous calls from dealers in Arkansas and Oklahoma about the "Section 89" IRS Tax Rule and its effect on group health and life insurance programs, I thought I'd use this month's column to provide all dealers with a review of this potentially severe compliance burden.

First, let me say that everyone should check with his insurance representative to determine if he is in compliance since there are severe tax consequences to those who aren't. If you are presently covered by any of MLA's plans, you are in compliance so long as you are not funding discriminatory benefits for your highly compensated employees or flailing to include all employees eligible to participate in the plan.

The new S-89 non-discrimination rules were passed as a part of the Tax Reform Act of 1986. These rules were designed to provide uniform non-discrimination rules for employee benefit plans that previously had been operating under various standards. In general, these rules prohibit highly compensated employees from receiving employer-provided benefits in excess of the highest permitted benefit.

In particular, S-89 provides that your group life and health plan must satisfy either an 800/o participation test, or both a 50/900/o eligibility test and a 750/o benefits test. The 80% participation test provides that a group life or health plan will be deemed to satisfy the requirements of S-89 if at least 80% of all the employer's non-highly compensated employees are participants in the plan.

If your plan does not satisfy the 800/o participation test, it must satisfy both the 50/900/0 eligibility test and the 750/o benefits test. In order to qualify under

September 1988 these tests, at least 50% of the employees eligible to participate in the plan must be non-highly compensatdd employees, and at least 900/o of the non-highly compensated employees must be eligible for a benefit that is at least 50% as valuable as the benefit available to the highly compensated employee eligible for the most valuable benefits. In addition, the average employer-provided benefit received by non-highly compensated employees under all the employers plans of the same type must be at least 750/o of the average employer-provided benefit received by highly compensated employees under such plans.

There are numerous rules defining the various aspects of these tests. However, the most important phrase in S-89 is the term "employer-provided benefit." Again, S-89 defines a discriminatory benefit as "the excess of such employee's employer-provided benefit under the plan over the highest permitted benefit." The emphasis is on the employer-provided benefit.

Section 89 defines employer-Provided benefit as, "in the case of any health or group-term life insurance plan, the value of the coverage. provided during the plan year to or on behalf of such employee to the extent attributable to contributions made by the employer."

Thus, in order to maintain the tax favored status ol your group life insurance plan, the lollowing qualifications must be satisfied. First, if you wish to allow any employee to have group life insurance in excess of everyone else in the plan, that insurance can be purchased only by employee contributions, and not by employer contributions. Second, each employer must cover all employees eligible to participate in the olan.

Co.

Executlve Vice Presldent

FINAL arrangements are being made for a Sept. 14 tour of Dean Lumber in Gilmer, Tx.

The company, which is celebrating its golden anniversary this year, has a completely free-standing operation. It owns its own logging company which harvests the raw materials for the Gilmer facility.

After cutting, the logs are brought to Gilmer where Dean salvages the usable lumber from the raw materials with a sawmill capable of producing 500,000 board feet of lumber per week. Rough lumber is sent on to Dean's planer mill and low temperature, 72 hour dry kiln, also located at Gilmer.

Afler the lour of this process is completed, tour members will see the building products moved on to the pressure treating facility where they will be either Wolmanized or Dricon fire treated. After treating, the finished product is stored temporarily or loaded onto one of Dean Lumber's l5 over-the-road l8wheelers for shipment to lumber dealers in a 12 state region. The tour will allow participants to see the complete sawing, drying, planing and treating process.

The present itinerary calls for a bus to leave Oklahoma City on Sept. 13 at l0 a.m., traveling to Gilmer via Henryette, Ok., and the Indian Nation TurnPike, stopping at several pick-up points along the way.

In addition to the tour scheduled for the afternoon of Sept. 14, participants will take part in a wood treating seminar offered by representatives of the American Plywood Association and Koppers Co., lunch at the Gilmer Country Club and observe a Dricon fire test.

Late in the afternoon Dean Lumber Co. will host the 2nd annual "Wood Chip" golf scramble. Non-golfers are invited to eat dinner and attend a reception which golfers will join as they finish the tournament.

Oklahoma guests will leave Gilmer on the morning of Sept. 15, taking the same route back to Oklahoma City. Seating is limited to 35 people at the cost of $T5forOLAmembers and $125 for nonmembers.

Future Dates

Check out our Calendar on Page l8 for information on uqcominS, conventions, meetings and trade shows in your region.