Ability to look outside the plan document

[smm]

I'm searching for some authority that requires a plan sponsor to stay within the 4 corners of the plan document and precludes him from looking outside the document. I seem to recall the IRS/DOL (??) issuing something to that effect but cannot put my finger on it. Any thoughts???

[Guest FormsRmylife]

Internal Revenue Code section 401(a) is replete with statements that in order to be qualified the plan must provide. The IRS voluntary compliance program Rev. Proc. 2003-44 describes the corrections when a plan is not adminsitered in accodance with its terms. Beyond that you are left with case law requiring the plan to be administered in accordance with is terms as with any contract. The Code and regulations do not specifically state that a plan docume is a contract that must be followed. The rules are just based on this foundation principal; otherwise, why would 401(a) be based on the plan providing the variousl points.

I picked up this string of cases at one point: An ERISA plan is a contract, e.g., Anstett v. Eagle-Picher Industries, Inc., No. 98-3983, 2000 WL 137127, at *2 (7th Cir. Feb. 8, 2000); Mathews v. Sears Pension Plan, 144 F.3d 461, 465 (7th Cir. 1998); Haley v. Paul Revere Life Ins. Co., supra, 77 F.3d at 88…

[smm]

Your point is well taken and I agree. I was thinking of a situation where the plan documents contemplates that the employer will look elsewhere to determine the meaning of a provision in the plan, i.e., how a category of employees is defined, how a contribution is determined, etc. I seem to remember something that says that you cannot look outside the 4 corners, but instead spell it all out in the document.

[JanetM]

OH No, I sure hope you don't find one. We regularly point outside the plan document to collective bargaining agreements to define contribution levels and eligibility.

[david rigby]

The Plan Administrator (capital letters are significant) or "Retirement Committee" may make reasonable administrative decisions, but those must be consistent (that is the reason such decisions will be (!) written) and are for the purpose of clarifying items that were not anticipated in the document. Of course, this assumes the plan document gives the PA such authority. Read carefully.

In practice, you may find that some such items are significant enough to be elevated to the level of plan amendment.

[g8r]

Unfortunately, I think the answer may depend on the facts.

If you're referring to the IRS (i.e., a "plan" for purposes of the IRC), the IRS doesn't like references to outside documents unless the reference is in the plan and is something that is outside the unilateral control of the employer (such as collective bargaining agreements and prevailing wage laws). But, with job classifications the employer does have latitude so I can't say it's a hard-and-fast rule.

But, if you're referring to the DOL (i.e., if participants bring a suit against the plan), you're at the mercy of the court. There are numerous court cases where documents outside of what the IRS considers to be the "plan document" for ERISA purposes. Just look at the cases where the SPD conflicts with the plan and the courts say the SPD controls (especially when there has been detrimental reliance). In some respects, one could argue that what the court recognizes has now become part of the "plan."

Based on your question, you said the employer wants to go outside of the plan. Depending upon what it is the employer wants to refer to, I'd be very careful.

[smm]

ok. here is why I am asking this question. Sponsor wants to amend psp to have 2 different allocation formulas, each of which when viewed independently, are safe harbor formulas. Sponsor wants to decide (via board resolutions, hence, outside of the plan) how much to allocate pursuant to each formula. Lots of issues here, but for the moment, I was wondering if you can look to the outside document (resolutions) to determine how to "divide" the contribution for allocation purposes.

[JanetM]

Why not just amend each to be "discretionary" formula.

[jaemmons]

Assuming a contribution is discretionary(as this is a PSP), a resolution is usually pointed to for clarification of allocation amounts. Many prototype and volume submitter documents I have seen actually contain language to this affect. IMHO I don't think you have a problem.

[GBurns]

The problem here seems to be the interpretation of what "outside the plan" means.

Many normal operating things are "outside the plan" that have to be "outside the Plan", but those thing are authorized by the Plan. Selecting a Trustee requires that you go outside the plan. Changing investment vehicle providers requires that you go outside the plan. Using a discretionary formula requires, by its definition, that you go outside the plan.

[g8r]

It sounds like here the plan has a discretionary contribution with one allocation method. And, the employer wants to use that one contribution and one allocation formula and give different amounts to 2 different groups. The IRS would have a problem with that. Look at the guidance regarding cross-tested plans. Each group must be specifically defined in the plan and the plan must permit a discretionary contribution for each group (with an allocation formula for each group). The employer then notifies the trustee (per IRS but I think it really should be to the administrator) as to the contribution for each group.

In essence the administrator is supposed to be able to allocate a contribution w/out looking to outside documents. And, it sounds like that wouldn't be the case here - if the plan only provides for 1 discretionary contribution.