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Is this choice-of-law provision now common?


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In reviewing an IRS-preapproved document, I saw this: “To the extent such laws are not preempted by federal law, the terms and conditions of this Plan will be governed by the laws of the state in which the Pre-approved Document Provider is located[.]”

This choice sometimes might matter because the document can be used to state a non-ERISA plan.

The document defines “Pre-approved Document Provider” not as the documents’ publisher but rather a retirement-services provider (a licensee of the documents).

Is this choice-of-law provision now common?

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Our Relius documents set the default as the state in which the plan sponsor's principal office is located, but allows the sponsor to designate a different state in the adoption agreement. 

Another (from Ascensus) that happens to be in my inbox has the same provision you reference as the "Prototype Document Sponsor."

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At least for ftwilliam, the basic plan document refers to the state designated in the adoption agreement, with no apparent default. The adoption agreement has a blank to fill in a state, which presumably would be required to complete the documents. I don't work with them directly.

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6 hours ago, Peter Gulia said:

Does anyone know what’s in the ftwilliam documents?

 

5 hours ago, EBECatty said:

At least for ftwilliam, the basic plan document refers to the state designated in the adoption agreement, with no apparent default. The adoption agreement has a blank to fill in a state, which presumably would be required to complete the documents.

Correct, you have to name the state or commonwealth for choice of law in the adoption agreement.  The document will not pass the FTW edit checks without completing this item.

 

8 hours ago, Peter Gulia said:

The document defines “Pre-approved Document Provider” not as the documents’ publisher but rather a retirement-services provider (a licensee of the documents).

Which makes sense, the licensee has been issued the IRS opinion letter in its name.  Also, it would be very inconvenient to have a practice in Florida, a plan sponsor in Florida, but have document governed by laws of another state.    I would assume that if a service provider utilizes a document that is in the document's publishers name rather than its own, it would be governed by the law of the state of the publisher. 

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ASC documents use the state in which the Trustee has its principal place of business, but allows the Trustee and Employer to agree to a different state law with respect to the construction, administration and enforcement of the Plan.

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EBECatty, RatherBeGolfing, and Kevin C, thank you for the further information.

For those documents that don’t invite an adoption agreement’s fill-in, only the most determined and careful readers will see a base plan document’s choice of law, fewer will try to negotiate a different provision, and yet fewer will have the bargaining power to get a change.

Often, the choice of State law will be practically irrelevant, even for a non-ERISA plan.  But when this provision matters, it’s likely to be uncovered after it’s too late for an effective change.

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