Comment on FR Doc # E7-16084

I have questions about the proposed regulations with regard to LTD benefits. Suppose that: (i) an employee has compensation of $50,000, is making elective deferral contributions of 6% of compensation to either a 401(k) or 403(b) plan and is getting a 50% match, (ii) the employee is permanently and totally disabled under IRC 22(e)(3) (and has "compensation" under IRC 415(c)(3)(C)), and (iii) the employer pays for a disability policy that provides that contributions will be made to the plan in the amount that were being made at the time the employee suffered the disability. When the employee is determined to be disabled, the insurance company starts to make payments of $375 per month directly to the plan. [$50,000 x (.06 + 50% of .06)/ 12 = $375] Questions: 1. Am I correct in understanding that the proposed regulations would treat the monthly payments as going to the employee and then from the employee to the retirement plan? 2. If the employer: (i) had a policy of making contributions to the plan if an employee suffers a disability, and (ii) did not have an insurance policy, the employer would be making $375 monthly payments directly to the plan out of the corporate treasury. The payments would be treated as nonelective employer contributions that would not be subject to the ACP test. [They would be subject to the 401(a)(4) general test, and the disabled employee would need to have 415 compensation.] If the employer purchases an insurance policy to cover its obligation, why shouldn't the payments be treated as going from the insurer to the company (not the employee) and then to the plan? The purchase of insurance to cover an employer obligation should not change the nature of the contributions to the plan. 3. How does the incidental benefit rule work with respect to such a disability benefit? If the insurance premium is not being paid out of plan assets, can there still be a problem? Thank you Jim Silverman 412-767-2237