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Does the plan document say anything about a participant's power of attorney?


Peter Gulia
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Many practitioners suggest that at least one of the starting points for solving a question about plan administration is to RTFD - read the Fabulous document.  And for some of those questions, a next step is to read the plan-administration procedures.

My question today is about how much, if anything, preapproved documents say about whether the plan allows some acts to be done by a participant's agent; and, if allowed, what form of power of attorney is sufficient for the administrator to recognize the agent and the agent's powers.

I'll start our unofficial survey.  I searched prototype and volume-submitter documents of several big investment houses and recordkeepers, and found a complete absence of any expression about circumstances in which the plan recognizes or refuses a power of attorney or other agency.

Would you please confirm whether the plan document you most often work with is the same or different?

And if the plan document yields a nothing, does the set of documents include a model or sample procedure that says anything about how to handle a power of attorney?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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In 35+ years, I've never seen any plan document or administrative procedure that made any reference to a POA.

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I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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Sometimes legal guardians of incompetent persons have the authority under plans to issue directions with respect to plan benefits.

Question:  Would permitting someone having a power of attorney with respect to the participant or the participant's spouse to waive a QJSA be a violation of ERISA and Section 417 of the Internal Revenue Code, irrespective of applicable state laws?  To put it in other words, do pension documents fail to mention powers of attorney because for plan purposes (excluding incompetence issues, which would generally require that there be a recognized guardian) there is nothing that the plan could permit the POA to do?

In a plan not subject to the QJSA rules (i.e., a 401(k) plan), can the person holding the POA direct that the participant's account be paid out?

Always check with your actuary first!

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David Rigby, thank you for your confirmation.

If you'll indulge me once more, in your wide experience have you ever seen a situation in which a plan's administrator was presented with a power of attorney and was in doubt about whether to allow or refuse what the agent wanted to do?  If so, what methods did the decision-maker use to discern whether to say yes or no?

 

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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My 2 cents, I think you're right that an administrator is wise to be cautious about recognizing an agent to do an act concerning a qualified election or spouse's consent under ERISA section 205 or Internal Revenue Code sections 401(a)(11) and 417.

Yet there are other claims or instructions a participant might make, for which an administrator might be called to decide whether to recognize or refuse an agency.

Some plans permit a participant's agent to make the participant's claim for a distribution.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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I've seen a POA a few times.  In every case, the PA got its own confirmation/legal opinion that a POA was valid or not.  (This may have included other practicalities, such as other known evidence about a participant's disability, etc.)  In all cases, the PA was clear that lack of authenticity of the POA would mean "don't do anything", except that the plan's appeal process may be triggered by the submission of a (proposed) POA.  If the POA was determined to be valid, the same legal advisor would describe whether the POA has limitation(s) within the plan context.  (IMHO, this last part is essential, and is evidence that the legal advisor reviewing the POA should be an ERISA attorney.)

As the actuary, I give my opinion only when requested by the PA, but always defer to opinion of the legal advisor.

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I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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Thank you for the further information.

And it's easy to like a call-the-lawyer procedure.:D

For a plan that has enough volume on these questions, it can be worthwhile to invest some effort to make a written procedure.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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On ‎2‎/‎1‎/‎2017 at 5:16 PM, Fiduciary Guidance Counsel said:

For a plan that has enough volume on these questions, it can be worthwhile to invest some effort to make a written procedure.

I agree with a desire for procedure(s), as long as that is general principles, not detailed instructions.  However, I do not suggest putting anything in the plan (or SPD).

BTW, I searched the Gray Book and found no reference.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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I just got a POA the other day.  The POA was very clear the son had the authority to ask for a distribution for the father.  No one at our firm or the client seem to have an issue with it. 

We can at times have an issue if it is silent about qualified plans or seems very limited in scope as to raise doubt the POA was intended to allow the POA to have the needed authority. 

For what it is worth I deal only with DC plans.  As such almost none of them need a spouse to agree with the distributions. 

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First, neither of our document (major modifier Relius, off-the-shelf ASC) have any provisions for POAs.  In fact, I've never seen such a provision in a document.  Second, an appropriately drafted POA puts the agent in the shoes of the grantor of the power (participant), and so the agent may act consistent with the powers granted - which is a STATE LAW issue - and I'm not aware of anything in ERISA or other federal law that would allow a plan fiduciary to ignore a "properly drafted" POA.  Third, we get POAs all the time, and we do review them (as a courtesy to our clients) and specifically look for a specific grant of authority to manage plan assets.  Sometimes that is difficult to ascertain.  We prefer a POA that specifically mentions retirement plan assets and authorities listed in dealing with it (some may allow investment selection - as in the case of a financial advisor with a POA, and some with respect to a distribution or other actions).  We are cautious with respect to things like distributions - and seek to verify specific authority to do so (not just a "general" power to do anything the grantor/participant could do).  We provide our analysis to the sponsor who makes a final determination (usually consistent with our analysis).

Just as an aside, we recently got one from Germany - written in German along with a provided English translation.  It was unique to say the least, and we actually had to find someone to verify the English translation was accurate - and then still rejected it because it didn't contain sufficient specificity.  We got an earful from the German lawyer - apparently the POA would have been more than sufficient under German law to allow the agent to do anything they darn well pleased.  We didn't see it that way.

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The ASPPA Annual IRS Q&A actually had a POA question.  They don't publish written answers anymore but I will try to dig up my notes later.  The short version (best recollection) was that applicability would be very limited and probably could only apply if the the participant had been declared incompetent. 

 

 

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1 hour ago, RatherBeGolfing said:

The ASPPA Annual IRS Q&A actually had a POA question.  They don't publish written answers anymore but I will try to dig up my notes later.  The short version (best recollection) was that applicability would be very limited and probably could only apply if the the participant had been declared incompetent. 

Interesting. The most common POA reason I've seen is because the participant was called to active duty military service.

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K2

I believe the the question had to do with being able to sign for benefits, like waiving something or starting to collect benefits etc.  Also worth noting that that at least one panelist (Rob Richter with FIS I believe) disagreed with the IRS panelist and maintained that under Florida law a POA could be narrowly drafted to do just that.

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