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IRS audits 419 welfare benefit plans that robin weingast sold google lance wallach for details

Beta plan and other 419 plans are IRS audit targets. Then the buyer sues the insurance agent that sold the plan to get all their money back. IRS also audits 412i plans and sometimes captive insurance and section 79 plans.

Google lance wallach for articles and details about these plans and IRS audits and lawsuits or try www.lancewallach .com com

or www.taxaudit419.com or vebaplan.com for a lot more info about 419 welfare benefit plans and IRS audits, lawsuits and more. Thanks

Monetary Loss: $500.

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Today the IRS issued a press release announcing that it is significantly increasing enforcement actions for syndicated conservation easement donations and that these transactions are a priority compliance area for the agency. In the press release, the IRS stated that examinations of conservation easement donations are being coordinated across the agency.

The IRS also announced that investigations relating to conservation easement deductions had been initiated by the IRS Criminal Investigation Division. Currently, there are more than 80 conservation easement cases pending in Tax Court, and the IRS outlined its commitment to bringing more cases to Tax Court where it believes the deduction should be disallowed.


Robin is great at selling and really knows insurance, pensions etc, Lance Wallach


Robin Weingast - 419 IRS lawsuits IRS audits

4 of 5 Robin Weingast Reviews

Jun 18, 2012 by anonymous 397 VIEWS 14 COMMENTS 5/5 REVIEW RATING New York, New York Professional Services 419 Welfare Plan

Google lance wallach for help, as an expert witness his side has never lost a case, get all your money back

Media Newswires 01/22/2010

Small Business Retirement Plans Fuel Litigation Small businesses facing audits and potentially huge tax penalties over certain types of retirement plans are filing lawsuits against those who marketed, designed and sold the plans. The 412(i) and 419(e) plans were marketed in the past several years as a way for small business owners to set up retirement or welfare benefits plans while leveraging huge tax savings, but the IRS put them on a list of abusive tax shelters and has more recently focused audits on them.

The penalties for such transactions are extremely high and can pile up quickly - $100,000 per individual and $200,000 per entity per tax year for each failure to disclose the transaction - often exceeding the disallowed taxes. There are business owners who owe $6,000 in taxes but have


IRS tax relief firm, Lance Wallach, speaking: 412i-419 Plans: 412i ...


by Lance Wallach - in 49 Google+ circles

3 days ago - sea nine veba 419 help beta plan 419 IRS audits lawsuits ... Employers: Abusive Tax Shelters & 419 Plans Lawsuits: IRS to Audit Sea N....

Help with Common IRS Problems: Beta Plans Abusive Tax Shelters

abusiveplans.blogspot.com/.../help-with-common-irs-problems-beta.html‎ by Lance Wallach - in 49 Google+ circles Feb 19, 2014 - 23 hours ago - Jan 21, 2014 - sea nine veba 419 help beta plan 419 IRS audits lawsuits.

RS to Audit Sea Nine VEBA Participating Employers: ... beta plan images - We Heart It

Cherron Qlr

Robin told me that she is a pension expert and has a lot of clients. I know that she is a hard worker.


Dolan Media Newswires 01/22/2010 Small Business Retirement Plans Fuel LitigationSmall businesses facing audits and potentially huge tax penalties over certain types of retirement plans are filing lawsuits against those who marketed, designed and sold the plans. The 412(i) and 419(e) plans were marketed in the past several years as a way for small business owners to set up retirement or welfare benefits plans while leveraging huge tax savings, but the IRS put them on a list of abusive tax shelters and has more recently focused audits on them.The penalties for such transactions are extremely high and can pile up quickly - $100,000 per individual and $200,000 per entity per tax year for each failure to disclose the transaction - often exceeding the disallowed taxes.There are business owners who owe $6,000 in taxes but have been assessed $1.2 million in penalties.

The existing cases involve many types of businesses, including doctors' offices, dental practices, grocery store owners, mortgage companies and restaurant owners. Some are trying to negotiate with the IRS. Others are not waiting. A class action has been filed and cases in several states are ongoing.

The business owners claim that they were targeted by insurance companies; and their agents to purchase the plans without any disclosure that the IRS viewed the plans as abusive tax shelters. Other defendants include financial advisors who recommended the plans, accountants who failed to fill out required tax forms and law firms that drafted opinion letters legitimizing the plans, which were used as marketing tools.A 412(i) plan is a form of defined benefit pension plan. A 419(e) plan is a similar type of health and benefits plan. Typically, these were sold to small, privately held businesses with fewer than 20 employees and several million dollars in gross revenues.

What distinguished a legitimate plan from the plans at issue were the life insurance policies used to fund them. The employer would make large cash contributions in the form of insurance premiums, deducting the entire amounts. The insurance policy was designed to have a "springing cash value," meaning that for the first 5-7 years it would have a near-zero cash value, and then spring up in value.Just before it sprung, the owner would purchase the policy from the trust at the low cash value, thus making a tax-free transaction. After the cash value shot up, the owner could take tax-free loans against it.

Meanwhile, the insurance agents collected exorbitant commissions on the premiums - 80 to 110 percent of the first year's premium, which could exceed $1 million.Technically, the IRS's problems with the plans were that the "springing cash" structure disqualified them from being 412(i) plans and that the premiums, which dwarfed any payout to a beneficiary, violated incidental death benefit rules.Under §6707A of the Internal Revenue Code, once the IRS flags something as an abusive tax shelter, or "listed transaction," penalties are imposed per year for each failure to disclose it. Another allegation is that businesses weren't told that they had to file Form 8886, which discloses a listed transaction.According to Lance Wallach of Plainview, N.Y. (516-938-****), who testifies as an expert in cases involving the plans, the vast majority of accountants either did not file the forms for their clients or did not fill them out correctly.Because the IRS did not begin to focus audits on these types of plans until some years after they became listed transactions, the penalties have already stacked up by the time of the audits.Another reason plaintiffs are going to court is that there are few alternatives - the penalties are not appealable and must be paid before filing an administrative claim for a refund. The suits allege misrepresentation, fraud and other consumer claims.

"In street language, they lied," said Peter Losavio, a plaintiffs' attorney in Baton Rouge, La., who is investigating several cases. So far they have had mixed results. Losavio said that the strength of an individual case would depend on the disclosures made and what the sellers knew or should have known about the risks.In 2004, the IRS issued notices and revenue rulings indicating that the plans were listed transactions. But plaintiffs' lawyers allege that there were earlier signs that the plans ran afoul of the tax laws, evidenced by the fact that the IRS is auditing plans that existed before 2004."Insurance companies were aware this was dancing a tightrope," said William Noll, a tax attorney in Malvern, Pa.

"These plans were being scrutinized by the IRS at the same time they were being promoted, but there wasn't any disclosure of the scrutiny to unwitting customers."A defense attorney, who represents benefits professionals in pending lawsuits, said the main defense is that the plans complied with the regulations at the time and that "nobody can predict the future."An employee benefits attorney who has settled several cases against insurance companies, said that although the lost tax benefit is not recoverable, other damages include the hefty commissions - which in one of his cases amounted to $860,000 the first year - as well as the costs of handling the audit and filing amended tax returns.Defying the individualized approach an attorney filed a class action in federal court against four insurance companies claiming that they were aware that since the 1980s the IRS had been calling the policies potentially abusive and that in 2002 the IRS gave lectures calling the plans not just abusive but "criminal." A judge dismissed the case against one of the insurers that sold 412(i) plans.The court said that the plaintiffs failed to show the statements made by the insurance companies were fraudulent at the time they were made, because IRS statements prior to the revenue rulings indicated that the agency may or may not take the position that the plans were abusive. The attorney, whose suit also names law firm for its opinion letters approving the plans, will appeal the dismissal to the 5th Circuit.In a case that survived a similar motion to dismiss, a small business owner is suing Hartford Insurance to recover a "seven-figure" sum in penalties and fees paid to the IRS. A trial is expected in August. Last July, in response to a letter from members of Congress, the IRS put a moratorium on collection of §6707A penalties, but only in cases where the tax benefits were less than $100,000 per year for individuals and $200,000 for entities.

That moratorium was recently extended until March 1, 2010. But tax experts say the audits and penalties continue. "There's a bit of a disconnect between what members of Congress thought they meant by suspending collection and what is happening in practice. Clients are still getting bills and threats of liens," Wallach said.

"Thousands of business owners are being hit with million-dollar-plus fines. ... The audits are continuing and escalating. I just got four calls today," he said.

A bill has been introduced in Congress to make the penalties less draconian, but nobody is expecting a magic bullet. "From what we know, Congress is looking to make the penalties more proportionate to the tax benefit received instead of a fixed amount."

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NSA: Member Link

Your link to accounting, tax and practice management ideas, tools, news and information.

Captive Insurance and Other Tax Reduction Strategies – The Good, Bad, and Ugly

By Lance Wallach May 14, 2008

Every accountant knows that increased cash flow and cost savings are critical for businesses in 2008. What is uncertain is the best path to recommend to garner these benefits.

Over the past decade business owners have been overwhelmed by a plethora of choices designed to reduce the cost of providing employee benefits while increasing their own retirement savings. The solutions ranged from traditional pension and profit sharing plans to more advanced strategies.

Some strategies, such as IRS section 419 and 412(i) plans, used life insurance as vehicles to bring about benefits. Unfortunately, the high life insurance commissions (often 90% of the contribution, or more) fostered an environment that led to aggressive and noncompliant plans.

The result has been thousands of audits and an IRS task force seeking out tax shelter promotion. For unknowing clients, the tax consequences are enormous. For their accountant advisors, the liability may be equally extreme.

Recently, there has been an explosion in the marketing of a financial product called Captive Insurance. These so called “Captives” are typically small insurance companies designed to insure the risks of an individual business under IRS code section 831(b). When properly designed, a business can make tax-deductible premium payments to a related-party insurance company. Depending on circumstances, underwriting profits, if any, can be paid out to the owners as dividends, and profits from liquidation of the company may be taxed as capital gains.

While captives can be a great cost saving tool, they also are expensive to build and manage. Also, captives are allowed to garner tax benefits because they operate as real insurance companies. Advisors and business owners who misuse captives or market them as estate planning tools, asset protection vehicles, tax deferral or other benefits not related to the true business purpose of an insurance company face grave regulatory and tax consequences.

A recent concern is the integration of small captives with life insurance policies. Small captives under section 831(b) have no statutory authority to deduct life premiums. Also, if a small captive uses life insurance as an investment, the cash value of the life policy can be taxable at corporate rates, and then will be taxable again when distributed. The consequence of this double taxation is to devastate the efficacy of the life insurance, and it extends serious liability to any accountant who recommends the plan or even signs the tax return of the business that pays premiums to the captive.

The IRS is aware that several large insurance companies are promoting their life insurance policies as investments with small captives. The outcome looks eerily like that of the 419 and 412(i) plans mentioned above.

Remember, if something looks too good to be true, it usually is. There are safe and conservative ways to use captive insurance structures to lower costs and obtain benefits for businesses. And, some types of captive insurance products do have statutory protection for deducting life insurance premiums (although not 831(b) captives). Learning what works and is safe is the first step an accountant should take in helping his or her clients use these powerful, but highly technical insurance tools.

Lance Wallach speaks and writes extensively about VEBAs, retirement plans, and tax reduction strategies. He speaks at more than 70 conventions annually, writes for 50 publications, and was the National Society of Accountants Speaker of the Year. Contact him at 516.938.5007 or visit www.vebaplan.com.

The information provided herein is not intended as legal, accounting, financial or any other type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.

National Society of Accountants


March 8, 2010

In a speech last May, President Obama said, "Nobody likes paying taxes . . . . And yet, even as most American citizens and businesses meet these responsibilities, there are others who are shirking theirs." He was referring to offshore tax havens and other loopholes that wealthy Americans often exploit to reduce their tax burden. But it doesn't take moving money to Switzerland to avoid paying taxes. If history is any guide, 2010 will be a year in which many Americans use a few simple methods to reduce their tax liability, which could potentially cost the government billions of dollars.

This year is the last before the expiration of tax cuts originally put in place by the Bush administration. If Congress allows these tax cuts to expire, as the president supports, in 2011 the top marginal tax rates will increase from 28, 33, and 35 percent to 31, 36, and 39.6 percent.

Although it is not certain that tax rates will go up, many wealthy Americans are looking at 2010 as the end of the party. "Everybody thinks taxes are going up and tax breaks are being eliminated. Everybody's thinking this, and they're planning for it," says Lance Wallach, a New York author, lecturer, and financial consultant who advises high net-worth clients, including entertainers and athletes. His phone is ringing off the hook with questions from clients about how they can take advantage of this year's rates relative to 2011's.

One of the most popular strategies is moving income from 2011 to this year. Usually, accountants encourage clients to postpone income so there is less income taxed in one year. But in 2010, the incentives have flipped. "This is the exact opposite. Accelerating your income makes 100 percent sense," says Wallach.

Creative maneuvering. This would not be the first year taxpayers have pursued this strategy. In 1992, Bill Clinton was elected president with promises to raise taxes on wealthy Americans, which Congress did in 1993, boosting the top marginal rate from 31 to 39.6 percent. In late 1992, many taxpayers, expecting rates to be higher the next year because of Clinton's victory, moved more income onto 1992's tax return to avoid paying more with the higher rate. Robert Carroll, an economist at a Washington research organization called the Tax Foundation, estimates that about $20 billion was shifted and paid at the 31 percent rate rather than the 39.6 percent—meaning there was about $1.5 billion that the federal government did not collect in revenue.

Something similar could happen this year. "Anyone who has flexibility with income is going to try to shift their income," says Carroll. An example of flexibility would be a business owner who gives himself or herself a bonus in December 2010 rather than January 2011.

There's also an incentive to delay tax deductions. For example, state property and income taxes can be deducted from federal income tax returns. Wallach says he is recommending that clients hold off on paying those taxes until next year, so that the deductions can be cashed in at the higher rate.

Some may choose to delay charitable gifts for the same reason—charitable giving is tax deductible, so some taxpayers may decide to hold off on a gift they would make in 2010 and instead give a larger amount in 2011. "What we know from history, if the taxes go up, people will delay their giving," says Nancy Raybin, chair of the Giving Institute, an association of nonprofit consultants. But Raybin says such delays usually are not significantly damaging to charities because people will often just push a gift forward a few months—from December to January, for example. "If there's a 12-month delay, it could be a problem. But if a donor is just delaying one month, it's not a big problem," she says.

These tax-avoidance strategies will probably be a one-time deal for those who pursue them. A study by economist Austan Goolsbee, currently a member of the Council of Economic Advisers, found that the 1993 drop-off in reported income was temporary. Income bounced back in following years. If tax rates appear to be steady after 2011, accelerating one's income or delaying deductions is no longer advantageous. But taxpayers will continue to look for ways to reduce their liability—they just need the time and money to find the loopholes. Wallach says most of his clients will adjust to higher tax rates with his help. "For the very sophisticated people, there will always be loopholes," he says, such as deducting travel and entertainment expenses. "None of my clients pay more in taxes than a schoolteacher." For issues like these Wallach has various websites including www.taxlibrary.us .


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FBAR Information


By Lance Wallach, CLU, CHFC Abusive Tax Shelter, Listed Transaction, Reportable Transaction Expert Witness

Call Lance Wallach at (516) 938-****


The willful failure to file the FBAR report or retain records of your foreign accounts can potentially lead to a ten-year prison sentence and fines of up to $500,000. This criminal penalty applies to all US citizens pursuant to 31U.S.C Section S322B and 31 C.F.R. Section 103.S.9.C It may also apply to persons living in the United States who are not citizens.

If you fail to answer the question truthfully on schedule B of your Form 1040 which asks if you “have an interest in or a signature or other authority over a financial account in a foreign country”, then your false statement might be deemed a criminal offense by the IRS per the sections mentioned above if other surrounding facts and circumstances apply.

Our office is headed by a former international tax IRS agent with 37 years experience as a CPA and Associate Professor of accounting. Call our office immediately so you can avoid the dire circumstances described above and deal with the other associated problems.

The information provided herein is not intended as legal, accounting, financial or any other type of advice for any specific individual or entity. You should contact an appropriate professional.


Lance Wallach is a frequent speaker at national conventions and writes for more than 50 publications. He was the National Society of Accountants Speaker of the Year.

Copyright Lance Wallach, CLU, CHFC

More information about Lance Wallach, CLU, CHFC

While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

HG.org Worldwide Legal Directories


California Enrolled Agent

January 2, 2009

Abusive 412(i) Retirement Plans Can Get Accountants Fined $200,000

By Lance Wallach & Ira Kaplan

Most insurance agents sell 412(i) retirement plans. The large insurance commissions generate some of the enthusiasm. Unlike other retirement plans, the 412(i) plan must have insurance products as the funding mechanism. This seems to generate enthusiasm among insurance agents. The IRS has been auditing almost all participants in 412(i) plans for the last few years. At first, they thought all 412(i) plans were abusive. Many participants’ contributions were disallowed and there were additional fines of $200,000 per year for the participants. The accountants who signed the tax returns (who the IRS called “material advisors”) were also fined $200,000 with a referral to the Office of Professional Responsibility. For more articles and details, see www.vebaplan.com and www.irs.gov/.

On Friday February 13, 2004, the IRS issued proposed regulations concerning the valuation of insurance contracts in the context of qualified retirement plans.

The IRS said that it is no longer reasonable to use the cash surrender value or the interpolated terminal reserve as the accurate value of a life insurance contract for income tax purposes. The proposed regulations stated that the value of a life insurance contract in the context of qualified retirement plans should be the contract’s fair market value.

The Service acknowledged in the regulations (and in a revenue procedure issued simultaneously) that the fair market value standard could create some confusion among taxpayers. They addressed this possibility by describing a safe harbor position.

When I addressed the American Society of Pension Actuaries Annual National Convention, the IRS chief actuary also spoke about attacking abusive 412(i) pensions.

A “Section 412(i) plan” is a tax-qualified retirement plan that is funded entirely by a life insurance contract or an annuity. The employer claims tax deductions for contributions that are used by the plan to pay premiums on an insurance contract covering an employee. The plan may hold the contract until the employee dies, or it may distribute or sell the contract to the employee at a specific point, such as when the employee retires.

“The guidance targets specific abuses occurring with Section 412(i) plans”, stated Assistant Secretary for Tax Policy Pam Olson. “There are many legitimate Section 412(i) plans, but some push the envelope, claiming tax results for employees and employers that do not reflect the underlying economics of the arrangements.” Or, to put it another way, tax deductions are being claimed, in some cases, that the Service does not feel are reasonable given the taxpayer’s facts and circumstances.

“Again and again, we’ve uncovered abusive tax avoidance transactions that game the system to the detriment of those who play by the rules,” said IRS Commissioner Mark W. Everson.

The IRS has warned against Section 412(i) defined benefit pension plans, named for the former IRC section governing them. It warned against certain trust arrangements it deems abusive, some of which may be regarded as listed transactions. Falling into that category can result in taxpayers having to disclose such participation under pain of penalties, potentially reaching $100,000 for individuals and $200,000 for other taxpayers. Targets also include some retirement plans.

One reason for the harsh treatment of 412(i) plans is their discrimination in favor of owners and key, highly compensated employees. Also, the IRS does not consider the promised tax relief proportionate to the economic realities of these transactions. In general, IRS auditors divide audited plans into those they consider noncompliant and others they consider abusive. While the alternatives available to the sponsor of a noncompliant plan are problematic, it is frequently an option to keep the plan alive in some form while simultaneously hoping to minimize the financial fallout from penalties.

The sponsor of an abusive plan can expect to be treated more harshly. Although in some situations something can be salvaged, the possibility is definitely on the table of having to treat the plan as if it never existed, which of course triggers the full extent of back taxes, penalties and interest on all contributions that were made, not to mention leaving behind no retirement plan whatsoever. In addition, if the participant did not file Form 8886 and the accountant did not file Form 8918 (to report themselves), they would be fined $200,000.

Lance Wallach, the National Society of Accountants Speaker of the Year, speaks and writes extensively about retirement plans, Circular 230 problems and tax reduction strategies. He speaks at more than 40 conventions annually, writes for over 50 publications and has written numerous best selling AICPA books, including Avoiding Circular 230 Malpractice Traps and Common Abusive Business Hot Spots. Contact him at 516.938.5007 or visit www.vebaplan.com.

The information provided herein is not intended as legal, accounting, financial or any other type of advice for any specific individual or other entity. You should contact an appropriate professional for any such advice.


Advisers staring at a new ‘slew' of litigation from small-business clients

Five-year-old change in tax has left some small businesses and certain benefit plans subject to IRS fines; the advisers who sold these plans may pay the price

By Jessica Toonkel Marquez

October 14, 2009

Financial advisers who have sold certain types of retirement and other benefit plans to small businesses might soon be facing a wave of lawsuits — unless Congress decides to take action soon.

For years, advisers and insurance brokers have sold the 412(i) plan, a type of defined-benefit pension plan, and the 419 plan, a health and welfare plan, to small businesses as a way of providing such benefits to their employees, while also receiving a tax break.

However, in 2004, Congress changed the law to require that companies file with the Internal Revenue Service if they had these plans in place. The law change was intended to address tax shelters, particularly those set up by large companies.

Many companies and financial advisers didn't realize that this was a cause for concern, however, and now employers are receiving a great deal of scrutiny from the federal government, according to experts.

The IRS has been aggressive in auditing these plans. The fines for failing to notify the agency about them are $200,000 per business per year the plan has been in place and $100,000 per individual.

So advisers who sold these plans to small business are now slowly starting to become the target of litigation from employers who are subject to these fines.

“There is a slew of litigation already against advisers that sold these plans,” said Lance Wallach, an expert on 412(i) and 419 plans. “I get calls from lawyers every week asking me to be an expert witness on these cases.”

Mr. Wallach declined to cite any specific suits. But one adviser who has been selling 412(i) plans for years said his firm is already facing six lawsuits over the sale of such plans and has another two pending.

“My legal and accounting bills last year were $864,000,” said the adviser, who asked not to be identified. “And if this doesn't get fixed, everyone and their uncle will sue us.”

Currently, the IRS has instituted a moratorium on collecting these fines until the end of the year in the hope that Congress will address the issue.

In a Sept. 24 letter to Sens. Max Baucus, D-Mont., Charles Boustany Jr., R-La., and Charles Grassley, R-Iowa, IRS Commissioner Douglas H. Shulman wrote: “I understand that Congress is still considering this issue and that a bipartisan, bicameral bill may be in the works … To give Congress time to address the issue, I am writing to extend the suspension of collection enforcement action through Dec. 31.”

But with so much of Congress' attention on health care reform at the moment, experts are worried that the issue may go unresolved indefinitely.

“If Congress doesn't amend the statute, and clients find themselves having to pay these fines, they will absolutely go after the advisers that sold these plans to them,” .


www.vebaplan.com for help







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lawsuits IRS audits 419 audits 419 lawsuits :) :grin 8) :roll :upset :sigh


www.taxaudit419.com for help

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The IRS in Notice 2007-83 identified as listed transactions certain trust arrangements involving cash-value life insurance policies. Revenue Ruling 2007-65, issued simultaneously, addressed situations where the tax deduction has been disallowed, in part or in whole, for premiums paid on such cash-value life insurance policies. Also simultaneously issued was Notice 2007-84, which disallows tax deductions and imposes severe penalties for welfare benefit plans that primarily and impermissibly benefit shareholders and highly compensated employees.

Taxpayers participating in these listed transactions must disclose such participation to the Service by January 15. Failure to disclose can result in severe penalties--- up to $100,000 for individuals and $200,000 for corporations.

Ruling 2007-65 aims at situations where cash-value life insurance is purchased on owner/employees and other key employees, while only term insurance is offered to the rank and file. These are sold as 419(e), 419(f) (6), and 419 plans. Other arrangements described by the ruling may also be listed transactions. A business in such an arrangement cannot deduct premiums paid for cash-value life insurance.

A CPA who is approached by a client about one of these arrangements must exercise the utmost degree of caution, and not only on behalf of the client. The severe penalties noted above can also be applied to the preparers of returns that fail to properly disclose listed transactions.

Prepared by Lance Wallach, CLU, ChFC, CIMC, of Plainview, N.Y.,

516-938-****, a writer and speaker on voluntary employee’s beneficiary associations and other employee benefits.

Journal of Accountancy January 2008