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Can a parent make a deferral election for their child?


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6 hours ago, MoJo said:

Permission to be an "employee" doesn't equate to permission to make decisions about participation in a benefit plan.  There is a difference.  "Working papers" set conditions for the type of labor, hours,etc - but nothing beyond the four corners of the authorization.  It isn't "open ended."  ERISA has nothing to do with it.  ERISA only preempts when inconsistent with state law.  Nothing inconsistent here.

Like I said, at this point I will agree to disagree.  ERISA has everything to do with it; if a federal court agreed with me under ERISA terms, then ERISA controls. That is the question.

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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59 minutes ago, Albert F said:

Let me try again. The question at issue is not the child’s ERISA plan rights, but who can exercise those rights.  

If the child/employee is an 18-month-year old model, the child would have a right to the agreed compensation, but could not sign any papers to bring a legal action to recover any unpaid compensation.  The guardian of the child could, however, execute such papers and bring such an action, recover the funds and deposit the funds in an account for the benefit of the child. 

Similarly, the 18-month old could not understand or execute any compensation deferral elections, any investment directions, or make any distribution decisions with respect to a 401(k) plan for which the child is an eligible participant.  However, again the child’s guardian could act on the child’s behalf to enforce the child’s ERISA plan rights. 

Moreover, if the plan acted contrary to common sense and treated the 18-month child/employee as willing and able to elect whether to make a deferral, choose plan investments, or plan distributions, the plan would almost certainly be violating the plan terms and the tax-qualification rules.  

And let me try this again....

There are differences between 14 year and older "employees" (but under 18) who have working papers (which are only available at age 14) and child actors/actresses employed under what are mostly called "Coogan" laws (after child actor star Jackie Coogan who got fleeced by his parents).  I believe we are talking about the former, not the latter.  And it DOES make a difference.

Here's something to read about the Coogan laws: https://www.sagaftra.org/membership-benefits/young-performers/coogan-law

You can google for much more.  I happen to be significantly involved in Broadway productions; when you have real children involved, the complexity is enormous.  Of course, this almost never applies to children hired by their own parents participating in a retirement plan with employee deferrals when the child is under 18!  How many angels can dance on the head of a pin?

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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15 hours ago, Albert F said:

Let me try again. The question at issue is not the child’s ERISA plan rights, but who can exercise those rights.  

If the child/employee is an 18-month-year old model, the child would have a right to the agreed compensation, but could not sign any papers to bring a legal action to recover any unpaid compensation.  The guardian of the child could, however, execute such papers and bring such an action, recover the funds and deposit the funds in an account for the benefit of the child. 

Similarly, the 18-month old could not understand or execute any compensation deferral elections, any investment directions, or make any distribution decisions with respect to a 401(k) plan for which the child is an eligible participant.  However, again the child’s guardian could act on the child’s behalf to enforce the child’s ERISA plan rights. 

Moreover, if the plan acted contrary to common sense and treated the 18-month child/employee as willing and able to elect whether to make a deferral, choose plan investments, or plan distributions, the plan would almost certainly be violating the plan terms and the tax-qualification rules.  

The same would be true with respect to a 16 YEAR old - as in the eyes of the law, the 16 year old and the 18 month old are both legally "incompetent." 

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I am on MoJo's side here.  I don't think the legal answer is clear at all.  If you pointed a gun at my head I would say that you look at state law to determine if the minor has the capacity to enter into a contract to defer income, but aside from that I would suggest to the employer, if it was my client, that there is no reason for it to take any risk here and it should get the parent to sign off.  This assume that the employer is not the parent, or a company owned by the parent, in which case I guess the risk is completely theoretical and not real.   

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Is it the age of the minor or the competence of the minor or a combination of the two that would be determinative, in your opinion? 

Could state laws around the ability of a minor to consent to health care services be a proxy for ERISA application?  I know it's apples and oranges, but there are similarities.    I know there seem to be 2 camps here - an participant is a participant, regardless of age and a minor is a minor, regardless of employment status.  With healthcare, a minor is a minor until there are circumstances that reasonably justify (in a practitioners opinion) the minors ability to give consent.  It may be reasonable for ERISA deferral elections to track this?  Just thinking out loud. 

I appreciate all the responses!  This is an interesting discussion. 

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4 hours ago, MSN said:

Is it the age of the minor or the competence of the minor or a combination of the two that would be determinative, in your opinion? 

Could state laws around the ability of a minor to consent to health care services be a proxy for ERISA application?  I know it's apples and oranges, but there are similarities.    I know there seem to be 2 camps here - an participant is a participant, regardless of age and a minor is a minor, regardless of employment status.  With healthcare, a minor is a minor until there are circumstances that reasonably justify (in a practitioners opinion) the minors ability to give consent.  It may be reasonable for ERISA deferral elections to track this?  Just thinking out loud. 

I appreciate all the responses!  This is an interesting discussion. 

I don't think competence issues have anything to do with the issue in a retirement plan (unlike the medical issues that arise).  The issue has been laid out in the earlier emails.  There are differences of opinion, which is what makes horse racing!

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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On 9/20/2019 at 12:06 PM, MSN said:

Is it the age of the minor or the competence of the minor or a combination of the two that would be determinative, in your opinion? 

The fundamental issue here is that a minor is DEEMED to be incompetent for no other reason than being under age.  PERIOD.  There are exceptions - but in most cases, a court has to intervene (especially in the health care area (and again, there are exceptions) for a minor to receive care.  Indeed, it was only a few months ago that an 18 year old testified before Congress that he had to WAIT UNTIL HE WAS 18 in order to receive vaccines - because he his parents were anti-vaxxers" who would not consent.  The ""incapacity" is LEGAL - and actual competence is irrelevant.

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