MoJo

Yes. We do it all the time. There are two things to consider: 1) The assets must be in a trust subject to the jurisdiction of U.S. Courts (typically meaning a U.S. based trust with U.S. based trustee(s); and 2) SOME service providers require a U.S. address for purposes of correspondence (especially if an affiliate institution acts as trustee). Just depends.

What is interesting here is that in the cited cases, with the exception of Peter's third example, is that the courts applied "equitable principles" (latches, fraud) to "award" the benefit to another, without addressing the threshold question of "who is the spouse." Kevin's comment points out who has the "burden of proof" (at least in that case), but otherwise the premise is the same: ERISA says a benefit goes to the "spouse." Proving who is the spouse, or whether some equitable theory can "divest" one of their spousal rights (a theory I think wholly incorrect as it applies to ERISA covered plans) is another matter entirely. Interplead. Let a court decide the issue (whether you agree with it or not). At least you won't have to pay twice....

Unfortunately, I disagree. It is "irrelevant" that the plan followed it's procedures and came to a conclusion, if the fact is that Y's marriage precedes the marriage to X. The participant's marriage to X in that situation is, in fact, NOT a marriage (as nowhere in this country can one "legally" marry another person when they are already married). Plan procedures don't override the underlying FACTS - which must be determined. After all, the benefit being paid to X is a "spousal" benefit - and if X isn't the "legal" spouse, then those payments are erroneous. I agree with Andy. Everything in writing. Everything to (and through) plan counsel.

A good "due diligence" review/audit of the old plan can mitigate against the risks. Terminating the plan will have the "risk" of having employees who spend what was intended for retirement, and while some employers say it's not their concern, there are some interesting studies/articles out there on the very real costs of having an employee population not on track for retirement.

I agree it's "one and done" unless renewals or changes happen - however, since we have to do the participant disclosure annually, and we're in the same databases to compile that information as we would be for the 408b2 notices, we do provide a "refreshed" 408b2 notice at the same time we give our clients the participant notice. We also let them know it's because we're transparent about fees and (by inference) better than our competitors....

If they are statutorily excludable, no - they don't count for testing purposes. Only if they are excluded by plan design and NOT statutorily excludable would you have to include them for testing.

Depends on how "geeky" you are/want to be. I use 3CX (www.3cx.com) as a virtual PBX in house, with a VOIP service provider. They offer a fully functional "free version" (limiting the number of line to 8, I think). You can have remote "extensions," and a virtual receptionist, voicemail, etc. I even have it set to "simulring" my desk phone, cell phone, and even "skype" if I'm travelling. You can "set it up yourself" or pay to have it done. The more complex the setup, the more valuable a consultant/reseller would be.

You *can* exclude non-resident non-U.S. citizens with no U.S. "source" income, but you don't have to. You *can* allow them to participate in the plan, BUT, the tax consequences of which are dependent on U.K. law (i.e., salary deferrals may not be a tax savings to them, depending on U.K. laws). Also, participation in the plan *may* (depending on U.K. law) interfere with other benefit rights (U.K.'s social security equivalent) where they are resident.

From what I've read/researched on the topic, is that the DOL doesn't see brokerage accounts as being consistent with the appropriate fiduciary duties imposed by ERISA - and that has implications with respect to 404©. Under the regs, 404© requires a plan sponsor to "select" an investment menu consisting of a selection of "diversified investments" (i.e. NOT individual securities, but mutual funds or other pooled investment vehicles), each with different risk and return characteristics which when taken as a whole would allow "a" participant to structure a portfolio with risk and return characteristics appropriate for that participant. By simply offering brokerage accounts, the DOL believes the fiduciary has abdicated the responsibility to select that range of diversified investment options appropriate for "all" participants - leaving many unable to effectively structure an appropriate portfolio (especially considering the bewildering universe of investments out there). In other words, the DOL sees it as a fiduciary duty limit the investment options available so as to provide only that which comports with ERISA's standards. Now, if there is a "core" lineup of mutual funds, and a brokerage option, the DOL has less concern - except that 1) they would question why there isn't an "appropriate lineup" including funds to satisfy the needs of those who elect a brokerage account; and 2) who monitors the brokerage investments for "prudence" - as required under ERISA? Then of course, there is the whole fee disclosure debacle.... I generally advise AGAINST brokerage only plans - except in very rare circumstances, and advise that AFTER selecting a good core lineup, if, and ONLY IF, there is a demonstrated need for a few participants to have a broader choice (NEED, not WANT), then consider the brokerage option as the "next" investment fund on the risk/return continuum (i.e. if there are 12 core funds, ranging from conservative/principle preservation (SVF) through small cap growth (higher risk), then consider the brokerage account as the 13th fund - one step (or more) higher on the risk scale), document the need appropriately, and monitor its use to see that it fills that need. The problem being, is that while you can determine that the "risk" increases with the use of a brokerage account (in theory), there is no way for the plan sponsor/fiduciary to determine if the return is approrpiate for that risk - as there is no control over what the participant invests in. Also, include "criteria" in the IPS for the fact that brokerage accounts are "needed" and why, and evaluate there effectiveness against those criteria. Interestingly, when I worked for a large discount brokerage firm that provides bundled 401(k) record keeping services (who you can "Talk To...") - where many plans had brokerage accounts, the number one holding was cash (at a lower rate and higher expense than the SVF in the "core") and that the average brokerage account UNDERPERFORMED the plan as a whole by 200 basis points (2%). So much for the doctors being smarter invertos than anyone else....

I also agree with your compliance side..., but the view of your everyday practical side is what (perhaps, maybe, possibly - and every other hedge I can think of) is what a certain TPA that I'm familiar with does. Unfortunately, those darn brokerage houses just don't pay attention to us when we asked them to be more specific.

I had this happen many years ago and it's a sticky situation - only because of the interplay of ERISA and state law. The state where I had it happen (Ohio) would not allow a prisoner to receive funds except through the Warden of the prison, some of which would be used to offset costs of incarceration, and/or to make restitution for their crime. That of course could be problematic under ERISA. I would make sure the Warden/other officials are aware, and if they choose to intervene, perhaps an "interpleader" action would be appropriate, where the trustee asks a court to make a determination as to whom the funds should be paid.

The budget year begins October 1, 2013 - but that doesn't answer your question, as Congress has to get involved - which means... well don't hold your breath. As per the "current" normal, they may (or may not) pass a series of (short term) continuing resolutions that allow the guvmint to continue operating under the old budget. The suggest cap you talk about was to limit TAX DEDUCTIBLE/DEFERRED retirement benefits to the 415 limit for pension plans (converted to a lump sum) - so it would increase with the increases in the 415 limit.

Generally, a fiduciary has no liability for those actions that took place prior to their becoming a fiduciary (and I would argue that that applies in the case of "acquired" plans) BUT a fiduciary has an obligation to find and correct mistakes that may exist (the "knew or SHOULD HAVE KNOWN" standard) - the failure of which is a breach of their own fiduciary duties. A good "indemnification" provision in the purchase agreement is always recommended, but it is NEVER a substitute for a thorough due diligence process BEFORE the acquisition, and on-going AFTER the acquisition. Indeed, while my preference is to merge plans (rather than terminate one before the acquisition - as we all know assets will leave and participant will spend and few will be "retirement ready"), I have been know to have the acquirer delay the merger of plans until it can be thoroughly vetted - and I've even had an employer maintain two plans - the active one for all current employees and a "frozen" one that would contain suspect or "dirty" plans acquired - just to prevent one from tainting the other (and that happened with a Fortune 50 company that acquired companies with plans about as often as I change my socks...).

While I don't disagree with ESOPguy and masteff, it really ticks me off when employers do such things. Attend the session, then call the DOL and report them for not paying for the time.

That depends on the TPA. Some are better than others. Get references, and talk to existing and former clients to see how it worked for them. I agree completely with David - the success of the arrangement really depends on the engagement of the company's principles.

Most certainly they do (that's precisely the business my employer is in). Check out the local TPA's - and find one with experience "fixing" non-compliant plans. Some work (and some cost) will be incurred.

While I'm not a labor lawyer, under various labor laws, if the meeting is mandatory for an hourly worker, I believe she must be paid. Call the Department of Labor. Same disclaimer, under those same labor laws, withholding of pay is both a civil matter, and a criminal one. Call the Department of Labor. The only ERISA violation (which I believe to be a labor law violation as well) is if they attempt to coerce her in the exercise of a right she has under ERISA (i.e. her distribution options upon termination of the plan). Call the Department of Labor. Calls to the DOL can be anonymous - though under the circumstances, if there are not others in the same position as your wife, it may not be difficult for them to ascertain who called. After calling the Department of Labor, suggest that your wife review and revise her resume....

Check out the DOL's Advisory Opinion 2012-04A. They will treat such an arrangement as TWO SEPARATE PLANS, albeit using a common document, absent some commonality that binds the companies (as fiduciaries).

I think this thread is getting a little "out there." I don't believe the SCOTUS ruling on DOMA did ANYTHING to invalidate laws against bigamy, polygamy, incest, or marriages between relatives of any degree. Nor does it allow marriages between a human and non-human animal, or an inanimate object. It merely invalidated the provision of DOMA that prohibited the FEDERAL government from refusing to recognize a same-sex marriage valid in a state where same sex-marriages are legal. As I see it, the issue is: "What benefits/rights does a same-sex spouse now have with respect to federally regulated and/or mandated benefit plans (including tax consequences) (my particular interest being retirement plans) under these conditions: a) A couple is married in a state recognizing same-sex marriages and continues to reside in such a state (whether where they were married or not) - an easy answer, I think; b) A couple is married in a foreign country where same-sex marriages are legal (i.s. Canada) and resides in a state where same-sex marriages are legal (actually, the situation the plaintiff was in in the case decided by the SCOTUS) - an easy answer I think; or c) A couple is married in a state or foreign country recognizing same-sex marriages and resides in a state that doesn't recognize same sex marriages (or specifically prohibits the recognition of same-sex marriages even if legitimate where the marriage actually took place) - and this is the rub for must of us in the industry. Some secondary authority indicates that federal regs have looked at the status of the individual in the state in which they reside for a variety of purposes - and not just on the basis of the status of the individual where that status was achieved (i.e. where they got married), which will require a re-examination of those regulations to determine if, and when they may change to give "federal" recognition even to those residing in a state that does not recognize mtheir married status. The complications arise for everything from multi-state corporations that sponsor one plan, but may have to follow different rules based on where an employee lives and/or got married (who tracks the state an employee got married in?), to QDRO's (how wold a non-recognizing state issue one if they don't recognize the marriage for purposes of divorce) to "ownership attribution" from/through spouses. In other words, fasten your seatbelts - and don't worry about someone marrying their pet (rock). Just my two cents worth on where this discussion should go.

I'm not aware of the case law, but I believe that the SCOTUS only invalidated the provision of DOMA as it relates to the definition of marriage for federal law purposes. There is a provision of DOMA that provides that each state may choose to recognize or not recognize same-sex marriages from other states - and that, I believe (haven't read the whole opinion yet) is still in force. One would have to wonder how long until that provision (if still in effect) is challenged as being a restriction of the "privileges and immunities clause" (which requires each state to recognize the rights and privileges of citizens of other states - and would specifically apply to the status of heterosexuals married/and or divorced (i.e. the fabled "quickie divorce" in Las Vegas being valid wherever) in another state) and/or the equal protection provisions of the 14th Amendment (or both).

You know, I was part of that project team - as a representative from the legal department as an ERISA attorney - and I can assure you it was not a "facile, narrow, formalistic" approach subject to some laughter. The project came about quite legitimately as a result of the OCC regulator overseeing the $80 Billion dollar bank with $120 Billion dollars in trust assets (the successor to the famed "Cleveland Trust Company" - trustee to the Rockefeller fortune (still to this day), who determined that the risk to the bank as service provider and trustee concerning compliance with loan regs was one that had to be "controlled" through a well thought out, documented investigation and process. We spent over six months on the project, exploring every angle of the requirements, the characteristics of plan loans, similarities to commercial, corporate and personal loans, and developed a "Trust Policy" that, to this day, is part of the regulatory framework under which Key operates it's trust business. It was a valuable process - even though the conclusion was there were no comparable loans against which to benchmark plan loan rates, and hence we justified (to the satisfaction of the OCC) to use "industry standard" rates of prime plus.

I think you misinterpret. KeyBank was NOT evaluating whether they should have loans in their own plan (they do, in fact offer loans), but rather was evaluating HOW TO SET RATES FOR PLAN LOANS, for their retirement plans services business (Key was a bundled recordkeeper/trustee/administrator) for about 1200 plans at the time. The lenders were asked how *they* would set rates for plans being serviced by the trust department - to which they replied, they wouldn't take such loans. To me, that was incredibly helpful - in that it taught me that plan loans were probably NEVER "commercially reasonable" by the standards of those in the business of making commercial loans.

It's all appropriate (and my preference is to actually "merge" plans together, lest the money "leak" and not be available for retirement) BUT - these are issues that should have been discussed, decided and documented BEFORE THE ACQUISITION TOOK PLACE. Having been doing this for more decades than I care to count, I'm not naive enough to assume it will ever happen in the right order, but I can still put my two cents in. In the organization for which I am currently providing my services (a TPA/Consulting/Actuarial/Technology company) we are trying to educate clients that corporate transactions that may have plan impacts need to be handled earlier - and we are trying to gain their trust so that they will look to us for plan advice when such is contemplated. After the fact decisions can restrict options.

Actually, Key Bank was incredibly helpful. They convened an underwriting committee to evaluate the scenarios, engaged outside counsel to assist in the process (i.e. the lenders spent money on the issue), asked a lot of questions, took about 6 months to come to a conclusion, and then indicated, in a well reasoned report that such loans would be imprudent for a lender to grant, applying commercially reasonable standards, without doing a full underwriting process on each and every plan loan request - as if it were an uncollateralized personal loan. The bottom line is that they could come up with no "commercially reasonable" equivalent analysis to value the loan - a necessary precursor to pegging the interest rate and approving the loan. Personally, considering the account balance collateral, the relatively short term involved (5 years unless....) and the practice of payroll deduction repayments, I don't have a problem with prime plus as an interest rate. Any other analysis would require individual underwriting - which my clients would never do - even if it meant eliminating loans (which I'm all in favor of).

There are differences. The "regulatory position" is that the loan must be on commercially reasonable terms - of which there is no analogous situation. Yes, "account collateralized" loans exist - but based on the ability to immediately attach it on default. The same is not true in a plan loan (though I understand defaulting, deeming, and actual distributions) - BUT it is a different scenario that does impact the "commercial reasonableness' which essentially means that what bankers may say is an appropriate interest rate, or what the parameters are for setting such a rate isn't necessarily complaint with that standard. In other words, the uniqueness of a plan loan makes comparisons to non-plan loans for purposes of setting interest rates to be in apt. That was the point of my original post. Regulatory perception does, in fact, bear no relationship to commercial reality, yet they seem intent on mirroring commercial practices, however inappropriate, to determine interest rates. Allow (or require) plans to set interest rates based on the ultimate use of the use of the proceeds, and allow the plan to take a collateralized interest in the purchase and then you get "closer." Loans for matters not related to purchases (debt consolidation, or whatever) would then need to be treated as "personal loans" and credit reports, debt to income rations, and other things would need to be collected. Indeed, a dilemma exists for a plan sponsor planning a RIF - grant a plan loan knowing the person may or may not be around to pay it back? If the IRS or DOL pursues the "commercial reasonableness" standard to the logical conclusions and employers would have to get far more involved in the financial affairs of their employee/participants requesting loans - which might not be a bad thing as it would cause plan loans to be written out of plans.