Peter Gulia

ERISA § 3(18)(B)(i), as this legislation would add it, states: “For purposes of clause (ii) of subparagraph (A) [determining the fair market value of a security for which there is no generally recognized market], a fiduciary of an employee stock ownership plan (as defined in section 407(d)(6)) may make a good faith reliance on a valuation provided by an independent valuation expert or business appraiser that has relied upon the principles and methodologies set forth in Internal Revenue Service Revenue Ruling 59–60 (as amplified and modified by the Internal Revenue Service from time to time) in determining the fair market value of an asset described in such clause.” I’m curious: What does this legislation do to lessen a fiduciary’s responsibility in determining the fair market value of an untraded security?

Among reasons for focusing on a service provider’s agreement is that acting beyond one’s obligation might increase the service provider’s exposures to liabilities and expenses. A participant might assert that the volunteer became a fiduciary of the plan. That could include a cofiduciary’s responsibility to make prudent efforts to remedy other fiduciaries’ breaches. Or, a participant might assert that the volunteer provided tax, ERISA, or other legal advice. Courts hold a nonlawyer who provides (or is alleged to have provided) any legal advice to the standards of competence, diligence, accuracy, completeness, and conduct that apply to a licensed and professionally behaving lawyer. A participant might assert that she was an intended beneficiary of the service provider’s advice, and the less-than-careful advice harmed the participant. A volunteer might beat back those and other claims. After spending too much money on attorneys’ fees and other expenses, likely unrecoverable. For example, consider CSA 401(k) Plan v. Pension Professionals, Inc., 195 F.3d 1135, 23 Empl. Benefits Cas. (BL) 2241 (9th Cir. Nov. 23, 1999). A TPA tried to get an employer’s chief executive, who also was a plan trustee, to restore money he stole from the retirement plan. For this Good Samaritan effort, the participants sued the TPA, asserting that the TPA’s efforts made it the plan’s fiduciary. The TPA suffered two rounds of litigation, and paid substantial attorneys’ fees, before the appeals court found the TPA was not a fiduciary. The TPA’s attorneys’ fees and expenses were not reimbursed by any of the wrongdoers. This is not advice to anyone.

Did the plan’s administrator deliver the summary plan description to participants who were immediately eligible? Whether that was done, or omitted, might matter in the administrator’s and other fiduciaries’ evaluations of correction opportunities. This is not advice to anyone.

Lois Baker, thank you for your refresh, which shows an action not yet displayed when I looked. So, Article I § 7’s “ten days (Sundays excepted)” began. Unless the 119th Congress adjourns, the legislation seems likely to become a law. “The amendments [of ERISA § 3(18)] “shall apply with respect to determinations described in [ERISA §] 3(18)(B) [as amended] “made on or after the date of enactment of this Act.”

Today, Congress.gov shows seven House of Representatives actions on September 16. https://www.congress.gov/bill/119th-congress/senate-bill/2403/all-actions And shows an enrolled bill. https://www.congress.gov/119/bills/s2403/BILLS-119s2403enr.pdf But does not yet show anything for “became law” or even “to President”. The parchment might not have been delivered to the President. I express no view about whether the legislation or some part of it might be contrary to the Constitution of the United States of America.

If mtopalovic (or her employer) is a service provider, and not any fiduciary: Have you been paid for all services already performed? Might you decline to provide further services until they are paid in advance? Might a suggestion that the corporation pursue shareholders for a contribution of capital be beyond your contract services? If you assemble a draft of the plan’s administrator’s Form 5500 report on 2025, do it truthfully. If you would be an electronic submitter of the administrator’s Form 5500 report, consider, after getting and considering your lawyer’s advice, withdrawing that service if the administrator instructs you to submit a report you believe would be false. How will the plan’s administrator deliver to the plan’s participants, beneficiaries, and alternate payees the summary annual report that refers to the Form 5500 report on 2025? Which person is responsible to tax-report distributions paid in 2026? If contributions needed for 2025 safe-harbor treatment remain uncollected by October 15, 2026, has the plan lost 2025 safe-harbor treatment? What steps could help you show that the service provider never had any discretionary authority, and never exercised any discretion? This is not advice to anyone.

The originating post’s premise is that the might-be-receiving plan does not initiate participant loans. Basically’s query is about whether to accept a rollover-in contribution that includes an outstanding loan made under the distributing plan. Consider austin3515’s observations. About uniformity. And about what’s practical. Even if both the distributing and receiving plans’ administrators are willing, either’s recordkeeper might less helpful. Tax law’s coverage and nondiscrimination rules and ERISA § 408(b)(1)’s call for loans to be “available to all . . . participants . . . on a reasonably equivalent basis” suggest that a plan’s sponsor and administrator might expect a provision that allows a rollover-in contribution to include accepting an outstanding loan allows that opportunity uniformly for all similarly situated participants. 29 C.F.R. § 2550.408b-1 https://www.ecfr.gov/current/title-29/section-2550.408b-1. Consider that a plan’s acceptance of the repayment rights under a participant loan that had been payable to another plan might be a novation of the loan agreement. This is not advice to anyone.

One quibble: If a participant’s request for a participant loan is denied and the denied claimant seeks a review of that decision, wouldn’t ERISA § 503 claims procedure suggest that a review is with the multiple-employer plan’s administrator or its claims administrator—likely aligned with the professional-employer organization, not the service-recipient employer?

Considering the agreement between the health plan’s administrator and its TPA service provider: Does the agreement provide that the service provider is not responsible for following the plan administrator’s direction? Does the agreement provide that the employer indemnifies the service provider against a third person’s claim that results from following the plan administrator’s direction? If so, an employer/administrator might argue that another writing ought to be unnecessary. But a service provider might argue that it merely seeks a further assurance consistent with the agreement. This is not advice to anyone.

Today’s before-publication release of Eliminating Unnecessary IRS Internal Revenue Bulletin Guidance, IRS Notice 2026-58, includes a few items for employee-benefits advisers. Among the 71 items of revoked guidance are: Notice 96-8, Cash Balance Pension Plans, 1996-6 I.R.B. 23. This notice provides guidance concerning the requirements of sections 411(a) and 417(e) with respect to the determination of the amount of a single sum distribution from a cash balance plan. This guidance was obsoleted by section 701(b) of the Pension Protection Act of 2006, Public Law 109-280, 120 Stat. 780 (2006), which enacted section 411(a)(13) and (b)(5) of the Code. Rev. Rul. 2003-6, Employee Stock Ownership Plans; Delayed Effective Date; Abuse, 2003-3 I.R.B. 286. This revenue ruling identifies as a listed transaction all transactions attempting to avoid the effective date of section 409(p) by using employee stock ownership plans formed on or before March 14, 2001. Notice 2007-76, Qualified Transportation Fringes, 2007-40 I.R.B. 735. This notice delays the effective date of Revenue Ruling 2006-57, 2006-47 I.R.B. 911 (regarding the use of smartcards or other electronic media to provide qualified transportation fringes), to January 1, 2009. Notice 2009-31, Election and Notice Procedures for Multiemployer Plans Under Sections 204 and 205 of WRERA, 2009-16 I.R.B. 856. The notice provides guidance for sponsors of multiemployer defined benefit plans relating to the elections described in sections 204 and 205 of the WRERA, and on the notice required to be provided if a plan sponsor makes an election under section 204. The election period has closed. Notice 2009-42, Extension of Date for Multiemployer Plans to Elect Relief Under Sections 204 and 205 of WRERA, 2009-20 I.R.B. 1011. The notice provides guidance to multiemployer plans making elections described in sections 204 and 205 of the Worker, Retiree, and Employer Recovery Act of 2008, Public Law 110-458, 122 Stat. 5092 (2008) (WRERA). This guidance only relates to actions that could be taken in 2008 and 2009. Rev. Proc. 2009-43, Revocation of Elections by Multiemployer Defined Benefit Pension Plans to Freeze Funded Status Under Section 204 of WRERA, 2009-40 I.R.B. 460. The revenue procedure provides that the IRS will automatically approve a revocation request if certain requirements are met, including a deadline for making a decision to revoke; notice to employees and other interested parties; and consistent treatment of participating employers during the plan year. The revocation period has closed. https://www.irs.gov/pub/irs-drop/n-26-58.pdf

Consider also whether another employment-based retirement plan might accept a rollover of a participant loan, even if the receiving plan does not initiate participant loans; or refuse a rollover of a loan, even if the plan provides participant loans. https://benefitslink.com/boards/topic/81756-rolling-a-loan-from-one-plan-to-another-new-plan-doesnt-allow-loans/#comment-358430

Again, thank you for this helpful information.

Thank you, this is wonderfully helpful. Is $50 million in plan assets enough? Or, must it be $50 million in Vanguard funds?

And even for the issues already found, the evidence-law privilege for lawyer-client communications can help, especially if the plan’s sponsor or administrator might decide to leave any failure or violation uncorrected. An unprotected communication can make the employer’s situation worse by changing an ignorant failure into a knowing failure.

Some recordkeepers are willing to process a participant’s repayments made by bank transfers. If that service is available, an employer/sponsor/administrator might (if a plan so provides, or a discretion is exercised) tolerate a rolled-in participant loan without involving payroll. This is not advice to anyone.

For a 401(k)-style retirement plan to get recordkeeping services at Vanguard (not Ascensus), what size and other conditions must a plan meet? Any anecdotal information would help me. Thank you for your neighborly help.

Just as a participant’s account can include rights that are not yet nonforfeitable, an alternate payee’s account might include rights not yet nonforfeitable. (I recognize that a plan administrator’s service provider might lack software to apply a forfeiture to an alternate payee’s segregated account. One might need to use other methods.) I recognize the idea is unwelcome and impractical for everyone involved. I mention the idea only because some divorcing spouses and their advisers encounter difficulty in negotiating a value regarding not-yet-vested ESOP rights, which involve at least two layers of contingencies. If an alternate payee’s segregated account gets some still-forfeitable rights, the alternate payee bears the risk that the participant severs from employment before those rights become vested. (The alternate payee bears a further risk if a right becomes vested but is not distributable.) I don’t doubt that most people negotiate a division that provides an alternate payee’s portion only from nonforfeitable rights, maybe leaving forfeitable rights with the participant. But now I’m curious: Ignoring ESOPs and considering readily divisible daily-valued account balances, what division do divorcing spouses negotiate when the participant’s account has only forfeitable balances? (For example, imagine the participant made no elective deferral, the employer made nonelective contributions, those are burdened by five-year cliff vesting, and neither of the divorcing spouses wants to wait until the vesting condition is met.)

Some individual-account retirement plans lack complexities like providing delays on when a participant’s accruals become nonforfeitable. And many plans are designed to allow an immediate QDRO distribution no matter that the participant yet has no currently exercisable right to a distribution and is young. These provisions and daily measures of accrued individual-account balances have resulted in many domestic-relations lawyers getting less experience in thinking about how to divide or value rights. But dividing rights under an ESOP, especially if the employer securities are untraded (and more so if the corporation has a power to redeem shares regarding an individual who no longer is an employee), involves understanding rights and conditions under the plan. About how divorcing spouses deal with an employee stock ownership plan: Have you considered writing a DRO that would deliberately separate division and payment functions? An order’s division of rights in an ESOP might be grounded on the division of marital property the litigants negotiate or the domestic-relations court finds. A DRO’s division might set over to the alternate payee’s segregated account a portion of ESOP rights that includes rights that have not yet become nonforfeitable. An order might allow its alternate payee choices, subject to the plan’s provisions, about how quickly or slowly the alternate payee claims distributions from the alternate payee’s segregated account. An alternate payee might wait for a transferred ESOP right to become nonforfeitable. And, if even a vested right is not immediately distributable, an alternate payee might wait until the participant attains the ERISA § 206(d)(3) earliest retirement age. This is not advice to anyone.

If it’s unclear or uncertain whether a report or return ought to be on Form 5500-SF or 5500-EZ, consider asking EBSA’s Office of the Chief Accountant. While any response you might get doesn’t bind any government agency (or protect against a participant’s, beneficiary’s, or alternate payee’s claim), making a record of having asked might be some evidence of a good-faith effort to pursue an answer. Also, an inquiry might help EBSA spot a need to improve the instructions. This isn’t advice to anyone.

Just curious: Does the plan your client might submit a DRO to furnish a suggested form? Many plans’ administrators and their service providers furnish, at least to lawyers, a “model” form for an order likelier to get the plan’s QDRO approval. While employee-benefits lawyers differ on whether a plan should furnish a model, some suggest it as a way to help protect a plan’s administration from difficulties and expenses that would result from responding to judges and lawyers less knowledgeable and less capable than you. Likewise, many service providers furnish a model to lower the operating expenses of a DRO-review service. While you wouldn’t limit your work to following a plan’s model, sometimes reading the particular plan’s model reveals what kinds of divisions or payment commands likely would result in a denial that an order is a QDRO. If you don’t find a model from the plan or by other means, consider Wolters Kluwer’s VitalLaw, Thomson/West’s Practical Law, or Lexis’ Practice Advisor. This is not advice to anyone.

A no-reading problem is common not only in domestic-relations courts but also in retirement plans’ administration. In some circumstances, a lawyer’s deliberately incomplete work might be proper, if the lawyer and her client have a carefully arranged understanding about the scope of the lawyer’s work. Likewise, there can be circumstances in which a plan administrator’s, DRO administrator’s, claims administrator’s, or other fiduciary’s responsibility to a retirement plan might make less-than-perfect administration a prudent balance of competing fiduciary duties. Hard choices of those kinds are not unique to domestic relations or employee benefits. This is not advice to anyone.

This might have the makings of a neat software tool. I can imagine a few kinds of potential licensees: A law firm that’s not an employee-benefits boutique and has only a thin employee-benefits practice might use this tool for a first-cut analysis so the firm doesn’t put in too much time (maybe more than the client will pay for), and can focus on the more difficult questions. A service provider asked for, or seeing a need for, a § 414(b)-(c)-(m)-(n)-(o) analysis in circumstances under which the service provider must pretend not to give tax or other legal advice. A service provider might describe the tool’s report as preliminary information assembled for its customer’s lawyer’s convenience—even if the service provider internally imagines it’s unlikely its customer would ask a lawyer. A service provider that considers its own liability exposure or a business-reputation “why didn’t you tell me” risk because its customer maintained a plan without advice about which businesses form the § 414(b)-(c)-(m)-(n)-(o) employer. You’d want to think through all the many sales, operations, and other business challenges. You’d need to protect your intellectual property. You’d want conspicuous and clear warnings that the tool doesn’t produce a reliable conclusion (even if you think it does). You might restrict sales to law firms, accounting firms, TPAs, recordkeepers, and other service providers you vet. A sale directly to an end-user plan sponsor or employer might increase your risks about the unlawful or unauthorized practice of law. When you’re ready to sell the tool and hire workers for that business, help the Bakers by advertising on BenefitsLink! This is not advice to anyone.

DSG, לְשָׁנָה טוֹבָה תִּכָּתֵב וְתֵחָתֵם. I’ll reply only to your query about whether a QLAC purchase under an employment-based retirement plan requires a participant’s qualified election with the participant’s spouse’s consent. From context, I guess your query is about an individual-account (defined-contribution) retirement plan that is ERISA-governed; provides participant-directed investment; is subject to ERISA § 205 [29 U.S.C. § 1055] and ERISA § 206(d)(3) [29 U.S.C. § 1056(d)(3)]; states survivor-annuity, qualified-election, and spouse’s-consent provisions no less than ERISA § 205 commands (and to meet Internal Revenue Code § 417’s tax-qualifying conditions); and states at least ERISA § 206(d)(3)-required provisions to follow a qualified domestic relations order (QDRO). If an individual-account retirement plan allows a participant to direct investment in a QLAC: The portion a participant directs to be invested in a QLAC is subject to the plan’s survivor-annuity provisions (ERISA § 205 and Internal Revenue Code § 417) when the annuity becomes irrevocable. (By contrast, if the annuity contract provides a right to surrender the contract for a cash-surrender value and reinvest the amount under the retirement plan’s other investment alternatives with that account balance subject to the plan’s nonannuity ERISA § 205 100% death-benefit protection for a surviving spouse, a plan need not require a participant’s qualified election with the participant’s spouse’s consent until the deferred annuity becomes irrevocable.) Unless needed survivor-annuity benefits are subsidized or otherwise sufficiently provided, a QLAC does not meet a plan’s ERISA § 205 survivor-annuity provisions—even if the deferred annuity would, but for its annuity starting date, be otherwise a qualified joint and survivor annuity. Consider how that’s so if the participant’s death before the QLAC’s annuity starting date could result in the participant’s spouse not getting survivor-annuity protection for the period before the QLAC’s advanced-age annuity starting date. Thus, a participant’s direction to invest in such a QLAC requires the participant’s ERISA § 205 qualified election with the participant’s spouse’s consent. See, IRS, Application of survivor annuity requirements to deferred annuity contracts under a defined contribution plan, Rev. Rul. 2012–3, 2012-8 I.R.B. 383 (Feb. 21, 2012) (law, analysis, and holding for assumed facts situation 3), available at https://www.irs.gov/pub/irs-irbs/irb12-08.pdf. Under Reorganization Plan No. 4 of 1978, the Treasury department, including its Internal Revenue Service, has interpretive authority for ERISA § 205. Reorganization Plan No. 4 of 1978 (Aug. 10, 1978), reprinted in 43 Fed. Reg. 47713 (Oct. 17, 1978), 92 Stat. 3790 (1978), Pub. L. No. 98-532 (Oct. 19, 1984) (ratifying the reorganization plan), 98 Stat. 2705 (1984), as amended Tax Reform Act of 1986, Pub. L. No. 99–514, § 2 (Oct. 22, 1986), Pension Protection Act of 2006, 100 Stat. 2095; Pub. L. No. 109–280, title I, § 108(c), formerly § 107(c) (Aug. 17, 2006), 120 Stat. 820, renumbered § 108(c), Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010, Pub. L. No. 111–192, title II, § 202(a) (June 25, 2010), 124 Stat. 1297, 5 U.S.C. app., 29 U.S.C. § 1001 (executive documents under editorial notes), available at https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/executive-orders/4, at § 101. A retirement plan and annuity contract could be designed to protect a spouse’s ERISA § 205 rights such that a participant’s direction to invest in a QLAC would not require a qualified election with the participant’s spouse’s consent. But those provisions might defeat a purpose your hypothetical describes. If a QLAC annuity purchase is not completely irrevocable because the contract allows a cash surrender or other undo feature, consider whether a qualified domestic relation order can command that the participant’s right be exercised, putting an amount in a nonannuity account balance available for a QDRO division. If so, a QDRO distribution to a participant’s spouse or former spouse might be provided as soon as the participant’s ERISA § 206(d)(3)(E)(i) earliest retirement age (no later than the participant’s age 50, even if the participant then could not get a distribution. Or, a plan might allow a QDRO distribution without waiting for an earliest retirement age. See I.R.C. (26 U.S.C.) §§ 401(a)(13)(C) (flush language), 414(p)(9); 26 C.F.R. § 1.401(a)-13(g)(3), § 1.403(b)-10(c); H.R. Conf. Comm. Rep. on Pub. L. No. 99-514 (Tax Reform Act of 1986), 99th Cong., 2d Sess. II-858 (1986); IRS Ltr. Rul. 88-37-013 (issued June 7, 1988). Remember the BenefitsLink neighbors’ RTFD admonition to Read The Fabulous Documents. That includes not only documents governing the plan but also the annuity contract. This is not advice to anyone.

That some employers might encounter difficulty in engaging service providers for needed tasks (or in overseeing service providers) is among reasons some employers have resolved, so far, a go-slow on adopting a § 128 plan. Yet, some law firms are writing plans. And some service providers offer to collect some elements of needed information and inform a service-recipient employer about those. These services are not yet so established that there is a ready market convenient for an employer that lacks time and attention to devote to establishing a plan and arranging needed services.

I suspect ESOP Guy is right that enough retirement plans (not just some ESOPs, but some others too) lack a December-close valuation that it’s worthwhile for an IRS publication to explain the measure for determining a minimum distribution. ESOP Guy’s illustration shows how a valuation date to measure a calendar year’s minimum-distribution might precede the end of that year by 23 months or almost two years. Also, that a year’s minimum-distribution amount often might be determined regarding a valuation not the most recent valuation. Further, the IRS might explain that the measure is not merely the individual’s non-Roth account balance on the applicable valuation date but that balance adjusted for some contributions, allocations of forfeitures, and distributions after the valuation date but in the valuation calendar year (not necessarily a plan-accounting year). 26 C.F.R. § 1.401(a)(9)-5(b)(2) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(9)-5#p-1.401(a)(9)-5(b)(2).