FINAL EXAMINATION
(May 9, 2002)

Instructions:

Question 1 will require the longest answer. There are six separate parts to this question. (This Question is worth 42 points (or seven points each).)

Question 2 also requires more than a brief answer. (This question is worth 23 points (three part-worth 7, 9 & 7 points respectively).

Questions 3-7 require only a short one to five sentence response, depending upon the question. (Each question is worth seven points, totaling 35 points.)

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1. The Josephine Bierman Shoe Company asked for your legal opinion on the Shoe Company's legal requirements with respect to offering COBRA benefits to its employees and others. The Shoe Company has 45 employees. The Shoe Company presented you with several questions to answer.

a. When does COBRA have to be furnished? For example, please identify at least four events which are
qualifying events requiring that COBRA be offered?

b. Are there any special COBRA rules for disabled employees? If so, please describe the rule(s).

c. An employee of the Bierman Shoe Company recently voluntarily resigned and went to a competitor's shoe
company which did not offer health care benefits. Does the Bierman Company have to offer COBRA to this
employee? If so, explain why. If not, please explain.

d. How much of the premium does the Bierman Shoe Company have to contribute for a terminated employee's COBRA?

e. What are the time periods for offering and paying for COBRA? Specifically, when does an employee have to be notified of COBRA, how long does the employee have to elect COBRA, and when must the premium be paid?

f. Some of the Bierman Shoe Company's workers participate in a separate Union multiemployer medical benefits plan. Bierman management believes that those union workers will vote out the union and become nonunion. Some of these union employees have expressed concern that when they go non-union, they will lose their union medical coverage (which is a better medical plan than the nonunion medical plan). Bierman management wants to know whether the union plan will be required to offer COBRA to those employees who go from a union position to a non-union position, which would otherwise cause the loss of coverage under the union medical plan. Please answer yes or no as to whether COBRA must be offered, and explain the reason for your answer.

2. The Board of Trustees of the Petaluma Electrical Workers 401k Pension Plan has decided to offer a directed investment option program for its employees. The Board has requested advice of legal counsel (you) on the following questions.

a. There was discussion regarding the 404 (c) regulations issued by the Department of Labor. Is the Plan required to follow these regulations? If so, please cite the authority for that requirement. If not, would you, as legal counsel for a Plan, recommend to the Trustees that the Plan comply with the regulations? Whichever is your answer (yes or no), please explain. (worth 7 points)

b. Describe the general requirements for the Plan in complying with the 404(c) regulations with respect to investments and investment options. (9 points)

c. Please describe what information must be furnished to Participants under the 409 (c) regulations. (7 points)

Short Questions with Brief Answers

3. What is the primary legal difference (s) between a multiemployer plan and a single employer plan with respect to management of the plan?

4. What does the term "fiduciary" mean? Please describe how a fiduciary must discharge his or her duties under ERISA?

5. In a defined contribution pension plan (also known as an individual account plan and which includes 401k plans), are there situations in which an employee may lose benefits or have his or her benefits delayed? If so, please list at least three situations in which a loss may occur?

6. Doreen Chin recently was considering retiring from her long-term job (28 years) with International Tractor Co. She heard rumors that the company was considering offering an "incentive" for employees to retire by granting an additional 5 years of pension credit under the Pension Plan. If such years were granted, her pension benefit would increase by over $100 a month. Thus, prior to retiring on January 15, 2002, Ms. Chin asked the head of her Department whether International Tractor Co. was considering any such incentive program. Her Department Head indicated that he knew of no such plans. Accordingly, Ms. Chin retired as of January 31, 2002. Ms. Chin has just learned that International Tractor Co. has offered a retirement incentive program for any person retiring on or after May 1, 2002. She consults with you, as her attorney, and asks whether she might have a good lawsuit against the company. Please briefly describe the standard that the Ninth Circuit and other Courts have developed in ascertaining whether the company may have breached its fiduciary duty by not giving full or accurate information to Ms. Chin, among other possible concerns.