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I struggle with the use of alternative investments as options in participant directed plans because usually such decisions are driven by one or more stakeholders at the owner or management level who fancy themselves knowledgeable and sophisticated investors, whether they are or not is irrelevant, for the purpose of catering to their preferences rather than as a fiduciary prudent decision for the benefit of all participants. Should such plans offer crypto, hedge funds, real property? Certainly they could be strategic components of a well diversified retirement portfolio, but what limiting parameters should be imposed, if any, and what sort of investment education is provided to protect Joe Lunchbox (and is there a sophistication level sign-off, like brokerages often require before you can trade options)? I can see a 55-year-old retail middle manager who got a very late start saving for retirement after putting kids through college, sees Bitcoin trading at $20k and knows it was at $60k not that long ago and should get there again, and even knowing the risks (it went from $60k to $20k after all) invests 50-100% of his account in crypto. You can say it's a personal choice but it is also a retirement security and social issue - if a future crypto crash wipes out a billion dollars of retirement savings (on top of other normal stock market declines) who is left holding the bag? Tax payers supporting the social programs that end up being the safety nets for those making poor, ill-informed decisions. If we were still in a pension-driven environment where SS and a DBP could deliver 50-60% or higher replacement ratios, then I'd be all for aggressive DC investing - and where this is actually the case, sure, take the gloves off. However, that is not the majority of our retirement plan participants. Sometimes we need to be protected from ourselves - we have met the enemy and it is us.

As I mentioned above, some retirement plans would require an after-marriage consent. If a plan includes a provision ERISA § 205 requires (or a similar provision to get IRC § 401(a) tax-qualified treatment), a premarital agreement cannot be a spouse’s consent to waive those rights. Usually, a spouse’s consent must be signed by the spouse, and a person making a premarital agreement is not yet a spouse. See ERISA § 205, 29 U.S.C. § 1055; 26 C.F.R. § 1.401(a)-20, Q&A-28. See, for example: Appeals courts Hurwitz v. Sher, 982 F.2d 778 (2d Cir. 1992); Hagwood v. Newton, 282 F.3d 285 (4th Cir. 2002); Greenebaum Doll & McDonald PLLC v. Sandler, 2007 F. App’x 0822N (6th Cir. 2007); Howard v. Branham & Baker Coal Co., 968 F.2d 1214 (6th Cir. 1992); Pedro Enters. Inc. v. Perdue, 998 F.2d 491 (7th Cir. 1993); National Auto Dealers & Assoc. Ret. Trust v. Arbeitman, 89 F.3d 496 (8th Cir. 1996); Trial courts Robins v. Geisel, 666 F. Supp. 2d 463, 467–468 (D.N.J. 2009); John Deere Deferred Sav. Plan for Wage Employees v. Estate of Propst, No. 06 Civ. 1235, 42 Empl. Benefits Cas. (BL) 2076 (E.D. Wis. 2007); Davis v. Adelphia Communications Corp., 475 F. Supp. 2d 600, 605-606 (W.D. Va. 2007); Veolia Water Ret. Sav. Plan v. Smith, 2007 U.S. Dist. LEXIS 9754, 2007 WL 496425 (W.D. Va. Feb. 12, 2007); Neidich v. Estate of Neidich, 222 F. Supp. 2d 357 (S.D.N.Y. 2002); Ford Motor Co. v. Ross, 129 F. Supp. 2d 1070, 1073–1074 (E.D. Mich. 2001); Callahan v. Hutsell, Callahan & Buchino, P.S.C. Revised Profit Sharing Plan, 813 F. Supp. 541 (W.D. Ky. 1992), vacated and remanded on other grounds, 14 F.3d 600 (6th Cir. 1993); Nellis v. Boeing, No. 91 Civ. 1011, 15 Empl. Benefits Cas. (BL) 1651, 18 Fam. Law Rep. (BL) 1374 (D. Kan. 1992); Zinn v. Donaldson Co., 799 F. Supp. 69 (D. Minn. 1992).

What does the 401(k) plan say? It may say you reduce the 401(k) balance, leaving you to have to make up an administrative rule. Plans used to contain elaborate provisions that described which plans would reduce first in a multiple plan situation, but due to changes in EPCRS that allow you to correct operationally like any other plan error those have gone out of fashion.

Likely because classes of investments offered before now for useful diversifiers were not readily identifiable ponzi schemes. DoL warned this past March against crypto in retirement assets because crypto's velocity of voluminous volatility is the poster child for imprudent investing. (I call it the V3 asset class.) I think the senators know that the losses will be huge, as will the outcry when it happens, and are engaging in prelitigation strategy with a deep pocket which will be able to pay for those losses. In April, Fidelity requested DoL rescind its guidance on crypto, saying DoL's guidance failed to offer "meaningful substantive help for plan sponsors", that DoL overstepped its bounds by concluding plan sponsors couldn't act in the best interest of their employees while including digital assets in retirement plans. Fidelity's self-serving and defensive position re the guidance reminds me of the "logic" espoused by a former client ,who was a meth cook, about only serving a ready market. Plan sponsors as fiduciaries are about as likely to avoid crypto as my former client's distributors because many will adopt Fidelity's posture to pass the risk on to Joe Lunchbox.

I don't think they're saying that Fidelity is a fiduciary, Peter. For Fidelity its a business decision that Fidelity wanted to clear an ERISA law hurdle just to lower their own business risk. The senators are just pointing out that Fidelity doesn't need to do it, i.e. could make a business decision not to. Lots of other platforms won't do it. The senators don't want Fidelity to do it, and they're telling them that. The DOL did as much in their advice to actual plan fiduciaries. It's government/public policy, and politics, not ERISA law. Who will look right will depend on where the invention of a missing Japanese mathematician or amateur mathematician who may or may not actually exist stands a year from now. The closest thing to BTC (and it's not that close) is currency futures. How many plans have that as an investment option for up to 20% of your account?

While I am at it, this is an opportunity to reiterate my disapproval of a statute that encourages plans to throw unsophisticated individuals to the wilds of self-directed investment as a refuge from the bogeyman of fiduciary liability.

There are many factors to consider here, and you are not likely to get a simple yes/no answer on this board. If the leasing company were my client, I would advise them to have a lawyer make this determination. If you have access to "Who's the Employer" by S. Derrin Watson, read chapter 4 to get a good understanding of the issues involved and to understand how to go about analyzing the situation. IRC 414(n), Notice 84-11, and Rev Proc 2002-21 are all required reading for this topic.

I think the original question is being posed backwards, and the fiduciary relationship is possibly being misunderstood by members of the US Senate. Selection of retirement plan service providers is a fiduciary decision; for selection of an investment provider, the fiduciary needs to consider (among other factors) the investment alternatives offered by the provider. If Fidelity's offering is not prudent, then the fiduciary has a duty to select a different provider. If the fiduciary lacks the experience to determine whether the investment menu is suitable for the plan's participants, then they should retain an investment advisor or other professional who is qualified to help them make that decision.

I say yes. Employed for at least part of the day, everything which would normally apply to employees does so here.

Isn't this the same as the still unresolved issue of whether a plan sponsor has a fiduciary duty to not include a brokerage window if it concludes that some of the participants can't handle it? Some would argue that 404(c) absolves the plan sponsor from any fiduciary duty to restrict choice, as long as good choices are unrestricted, right? And I don't think it's clear they're wrong. Some folks (I'm pretty sure a minority of knowledgeable people outside the crypto business) think crypto is a great investment. A lot of others think it's like tulip bulbs in the 17th century. There's just really nothing else like it that folks can put money into. Clearly, the senators are in the latter group. At some point Congress will have to legislate in order to impose anti-money laundering controls and get capital gains collected on crypto transactions. Maybe they will authorize Treasury to move forward with a digital dollar as well. Maybe the senators are laying the groundwork for including in that legislation a prohibition on using crypto in retirement plans, just like there is currently a prohibition on cars, wine, and other collectibles. Just add crypto to 408(m).

I don't suggest that a restatement not done by July 31 is timely. Rather, I mention only that some circumstances might call an advocate to present a face-saving argument. (I would not present the argument without researching it and analyzing it.)

My response is "Hell No!" Both the primary people at EBSA and members of the HELP and Finance Committees on the Senate side, and the Ways and Means and Education and Labor Committees on the House side should be forced to sit through a four-hour course of ERISA fiduciary duty requirements before they come up with some other hare-brained scheme to cast persons who are not, and should never be, characterized as fiduciaries, into them. If they fail to get the message on the purpose of these requirements, they do not belong in a policymaking role in government at any level. Until this cryptocurrency pronouncement, EBSA (and its predecessor, the PWBA) took the position that no class of investments is per se imprudent. In designing the plan and making the decision to allow participants to invest in certain types of investment funds, the plan's fiduciaries should take into account the level of investment sophistication of the average plan participant. Perhaps they should warn them about selecting investments that are or could be extremely risky or should perhaps limit the menu of available funds for selection as part of their fiduciary duty. Or, perhaps they should disclose the need for participants to determine, on an individual basis, their own risk tolerance as well as the period of time their accounts will be invested in the plan (such as proximity to retirement age) in determining whether a particular class of assets is appropriate for them. Otherwise, casting certain types of persons as a super-fiduciary or watchdog defeats the purpose of providing investments for retirement.

Peter, interesting twists in there. In my humble opinion (and based on webinars attended) If signed and dated 8/1, late. If signed on 7/31 but dated 8/1, no idea how one would defend it. What happens if late? Document is now not a pre-approved document. I want to say not a biggie but again depends on the clients/plan provisions. The good-faith amendments may be an issue with non pre-approved documents. Erisapedia did a great job last week on the presentation (thank you Ilene and Derrin). They provided a very informative session on this.

I also can't blame lawmakers for wanting to suppress the opportunity for tax-deferred (or in a Roth situation, tax-free) penny-stock billionaires to arise. Or in this case, something potentially as volatile such as crypto.

Fully agree with Effen - if 0% vested terminated employees are deemed cashed out then you have a legitimate forfeiture under the terms of the plan at the time specified in the plan (usually termination of employment). These people are no longer participants as of the plan termination date, same as if someone was say 20% vested and paid out while forfeiting the unvested 80%. If the plan later terminates you do not go back and fully vest. However, be mindful of partial termination issues that could come into play before the actual termination. If you have standard language that forfeiture occurs upon earlier of distribution of vested balance or 5 consecutive one-year breaks but without the deemed cash out provision, then I believe you would need to fully vest those non-vested terms w/o 5-year breaks. However, I would be shocked if that was the case, I can't recall the last time I saw a plan w/o the deemed cash out provision.

If the leasing company excludes all the owners (who are automatically HCE), then they have a better shot at passing coverage tests. If the inhouse employees are all NHCEs, then you can definitely cover just them and automatically pass. We've done similar things for restaurant chains, etc.

Signature date is different than effective date. To me, it's late.

If an official, and presumably well-crafted and reviewed, letter from the most august legislative body the English-speaking world cannot use “begs the question” properly, we cannot expect them to understand ERISA fiduciary nuances. The misuse of “begs the question” for the purpose of sounding sophisticated, elegant, or erudite simply proves the opposite. And if the government believes that cryptocurrency is inappropriate for retirement savings, it can easily legislate to that end, as it has for other exotic or questionable assets. Oh, wait, I forgot that we do not have an ability to legislate anymore. Cranky

Uh, in a discriminatory manner not in accordance with the plan document?

The short and practical answer is "no." Of course morons shouldn't be allowed to invest in bitcoin, but where do you draw the line? How do you determine who is a moron (other than wanting to invest in bitcoin 😉). If some is ok, why is 20% ok, and not 15%, or 5%, or whatever. And frankly, why are retirement plans so special that they need special rules? Someone could be saving in a non "retirement account" for retirement. Now that I'm nearing the end of my career, I wouldn't care if they did away with "retirement" plans altogether. Lots of silliness for questionable gains, IMO. (I didn't start out cranky but sure can get there quickly.)

Filing a 5558 does not create an obligation to file if no Form 5500 is required.

Agree with Lou--suggest you write a letter to the Service under IRC Section 6652(e) pleading reasonable cause. That Code section says "failure to file a return....required (under the various sections) " which this was not. We have not been denied in our 47-year history of filing about a dozen of these under various fact patterns.

And get the amendment done going forward. I think you are mostly stuck. This is a problem that tends to happen because ESOPs tend to be written by one attorney and the 4k by another. They don't always play well together. I would recommend going forward when you get a new ESOP client to see if you can get this figured out as part of the conversion process to get things sync. It makes you look good to the new client for one thing. Also make sure you did all you can do to minimize the 415 failure. Things like if the ESOP is leveraged and the plan allows did you use the lower of the loan payment or the FMV of the shares released?

I believe another factor is if your document has deemed cash out language in it. That is that anyone who terminates with 0% vesting is deemed to be cashed out. Therefore, if you have paid anyone who was partially vested, and anyone who was not vested is deemed to be paid out, you can probably get away with a 1-year look back. Let the ERISA attorney and the sponsor make the decision.

The Form 5500 Instructions include this: If the filing due date falls on a Saturday, Sunday, or Federal holiday, the return/report may be filed on the next day that is not a Saturday, Sunday, or Federal holiday. https://www.dol.gov/sites/dolgov/files/EBSA/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2021-instructions.pdf

The 75 days might be a reasonable expression that some might defend as slightly narrower than 2½ months. 365 / 12 = 30.4167 (average number of days in a month) 30.4167 x 2.5 = 76.0418 days The tax-law rule seems to allow a plan to count some recognized kinds of post-severance compensation, even if paid later than 2½ months after the severance, if it “is paid by . . . the end of the limitation year that includes the date of severance from employment with the employer maintaining the plan.” 26 C.F.R. § 1.415(c)-2(e)(3)(i) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR686e4ad80b3ad70/section-1.415(c)-2#p-1.415(c)-2(e)(3)(i) (If the plan’s limitation year is the calendar year and the plan provides as much time as the tax-law rule allows, a severance before October 17 might get a tolerance more than 75 days. A severance in the first few days of January might get around 360 days.) Is the TPA’s software coder writing her code to allow also the limitation-year alternative?

What each of “he” and “she” needs is to get work from a good estate-planning lawyer. To get candid, unconflicted advice, each needs his or her own lawyer. Planning of the kind your post describes is mainstream, and need not be expensive. That’s especially so for a client who is intelligent, educated, and well organized. Much of what one might seek can be accomplished by supporting a retirement plan’s, IRA’s, or non-retirement investment’s beneficiary designation or transfer-on-death registration (or a bank account’s pay-on-death registration) with a premarital agreement or after-marriage consent and a trust (whenever and however created) to provide the differing beneficial interests a retirement plan’s, IRA’s, or investment’s beneficiary regime does not provide. (I’ve never seen an employer’s retirement plan that restricts a beneficiary to an income-only distribution. And many or most retirement plans do not determine income in the sense of the fiduciary accounting concept of distinguishing between income and principal.) For an ERISA-governed retirement plan, a good estate-planning lawyer would recognize that a premarital agreement alone is not enough for a qualified election (with the spouse’s consent) to negate an ERISA § 205 survivor annuity or death benefit. For a governmental retirement plan, one would look to the plan’s provisions (which often are, but might not be, stated or explained in a comprehensive document or summary) to discern whether the plan provides a participant’s spouse a survivor annuity or other death benefit, whether one may elect out of that benefit, and what is required for a valid opt-out. To simplify some planning and implementation steps, a participant entitled to an ERISA-governed retirement plan’s distribution might consider a rollover into a non-ERISA plan or IRA. Likewise, one might consider a rollover from a non-ERISA plan into an IRA. (There are several creditor-protection, investment, expense, and other factors that, depending on the surrounding facts and circumstances, might point in other directions.) Of the three retirement kinds—ERISA, governmental or church, or non-plan IRA, an IRA is most likely not to apply a protection for a spouse in the IRA’s administration. (For a non-ERISA plan or IRA, that a protection is not applied in a plan’s or an IRA’s administration does not defeat whatever rights a spouse has under one or more States’ laws.) For a trust that provides a surviving spouse income but not principal, one could design a trust so a trust’s beneficiary is treated as a designated beneficiary for a retirement plan’s or IRA’s minimum-distribution provisions. While the proposed rules do not yet apply (and are not even effective), one might design and document a trust to follow both the proposed and current rules. If the spouses ever will or might reside in a community-property State (or otherwise invoke a community-property law), either or both might want a premarital agreement that undoes community property for some or all of the property interests. If any State’s law for a spouse’s elective share might apply (which is almost everywhere in the USA if community-property law does not apply), either or both soon-to-be spouses might want a premarital agreement that undoes a surviving spouse’s elective-share right. If either would-be spouse imagines a possibility of divorce before death, he or she might want a premarital agreement to specify what property division applies on the divorce. Either would-be spouse might want a premarital agreement to specify how the spouses share or divide household and other living expenses. If you have access to 403(b) Answer Book, 457 Answer Book, Governmental Plans Answer Book, Roth IRA Answer Book, or SIMPLE, SEP, and SARSEP Answer Book, my Beneficiary Designations chapter in each book gives a reader further details on many of these points. Beyond the property-rights, tax, and other law issues involved, a good lawyer can help her client with practical aspects of the planning. This calls for foresight when the planning must or should consider the circumstances and personalities of his-and-hers families.

Retired, pop in here once and a while. Sorry to hear the gripes, having done software support for years on Pentabs (1992 - 1997). Worked my 'butt off' to learn the system and provide the best support I could, because it made a difference to me. Switched jobs when Pentabs closed down, did some training when a member of the Southern User Group, used to give away a number of Crystal reports I created. Have fortunately 'forgotten' much of the pension tuff, so no more grief of ADP test deadlines and the like. Now spending much of the time at church. Today is an especially glorious day for me. New tabernacle will be unveiled today, from funds I donated, quite a story with that, God gets what He wants when He wants.

No. But a professionally behaving lawyer must not fail to render advice a client asked for. Further, 10 C.F.R. § 10.21 sometimes arguably requires a practitioner to render advice a client has not asked for, might not need, and might not want. In this situation (and for reasons beyond the current issue), the bigger risk is an EBSA investigation about ERISA fiduciary breaches.

I don't believe a problem exists. I believe most plan documents default to include paycheck paid in the first few weeks (and that isn't even considered severance) I think the problem exists in the 'thinking process' Let's say document says W-2 comp is used. you quit Dec 28, 2014 but that week's paycheck shows up in the following year - 2015. Now, when you file your 2014 taxes do you include that paycheck? No, that paycheck is counted in 2015 for tax purposes. so I don't see why the plan should be treated any differently. so even though the plan year runs 1/1/2014 - 12/31/2014 the compensation runs from, let's say 12/27/2013 - 12/25/2014. so the person's term date fell within the 'comp year' not the plan year. if we were smart we would have a nice 364 day calendar (52 weeks of 7 days) and one 'free day' every year (sort of like New Year's - it doesn't count) and every leap year 2 free days instead of one. I forget which culture it was - the Mayans or one of those, they had 12 months of 30 days, and 5 'party' days. but maybe that is my imagination.

what are the other option of re-allocating?