Peter Gulia

QDROphile, I’m unaware of any Federal court decision that imposed a liability on an ERISA-governed plan’s administrator because—even assuming the administrator’s actual receipt of a notice that a could-be alternate payee intends to soon submit a domestic-relations order—the administrator did not impose a segregation or “hold” regarding the participant’s benefit. I have not researched States’ courts’ decisions because I presume an ERISA-governed plan’s administrator will have done everything it can to: maintain ERISA’s supersedure; specify in its engagement of every lawyer that the lawyer has no authority to accept service of process; specify in its engagement of any service provider that the service provider has no authority to accept service of process, even if the service provider is engaged to provide a QDRO-review service; limit carefully which persons are authorized to accept service of process on the administrator, and write the summary plan description, QDRO procedure, claims procedure, and anything else to explain in plain language who may and who cannot accept service of process; assert a State court’s lack of jurisdiction, including at least a lack of subject matter jurisdiction; remove claims against the plan or its administrator to the Federal court; and apply the plan’s exclusive-forum provision. Likewise, an ERISA-governed plan’s directed trustee would assert those procedural protections and that the trustee lacks authority to decide a distribution. But that a plan’s administrator might be ERISA-protected in doing nothing until a domestic-relations order is submitted is only one of many factors I consider if I advise an ERISA-governed plan’s administrator. Different interests might matter regarding a governmental plan, or regarding a church plan that has not elected to be ERISA-governed.

For more ways to protect yourself, read my 10 tips for rewriting your service agreements yourself in ASPPA’s Plan Consultant magazine (Fall 2020).

“Extending the time to file does not extend the time to pay tax.” The instruction for Form 8868 part III line 1b states: “Enter the amount of tax estimated to be due with Form 5330[.]” Form 5330’s Part II has lines for the tax due, the amount paid with an extension or otherwise before filing the return, and the remaining tax due or overpayment. This is not advice to anyone.

The pension plan’s administrator might re-read carefully and thoughtfully consider the administrator’s procedure about domestic-relations orders. Some administrators are “strict constructionists” and do little or nothing until the administrator has received a court’s order. Other administrators provide some help to a domestic-relations litigant’s lawyer before a court makes an order. (I would not suggest that help unless the plan’s risks of harm from inept domestic-relations practice outweigh the risks from helping, and the administrator gets a deeply knowledgeable lawyer to design the procedure.) A prudent administrator usually prefers to follow its domestic-relations-order procedure and its claims procedure. If a procedure needs a redesign, do it before handling a particular situation. This is not advice to anyone.

The Form 5500 Instructions include this: “An extension granted by using this automatic[-]extension procedure [related to “the employer’s” Federal income tax return] CANNOT be extended further by filing a Form 5558[.]” 2025 Instructions for Form 5500 Annual Return/Report of Employee Benefit Plan, “Using Extension of Time To File Federal Income Tax Return”, page 4 right column (emphasis in original), https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2025-instructions.pdf Not all extensions that result from an extension of an employer’s tax return get as long an extension as one can get by filing a Form 5558. For example, a calendar-year corporation’s tax-return due date might extend only to mid-September, rather than a calendar plan year’s extension to mid-October. Filing a Form 5558 sometimes gets a longer time, and even if the Form 5500 due-date extensions are identical often gets greater comfort or convenience about the Form 5500 extended due date. I’m not readily imagining a situation in which the incremental expense of filing Form 5558 outweighs that comfort. I suspect many practitioners do not deliberately omit a Form 5558 extension. Rather, one resorts to a tax-return extension if a Form 5558 was not filed. Paul I, do the computer systems allow checking both the “Form 5558” and “automatic extension” boxes for the opening page’s Part I item D? BenefitsLink mavens, is there more learning on TPApril’s query or this topic?

The Internal Revenue Service has published guidance on allocating plan-administration expenses with charges applied only against the accounts of severed-from-employment participants. Rev. Rul. 2004-10, 2004-7 I.R.B. 484-485 (Feb. 17, 2004). Among several conditions, the charge must be no more than the proportionate share, counted as if a charge applied to all individuals’ accounts, of the proper plan-administration expenses. Does the plan you describe have at least $22,500 a year in plan-administration expenses? If so, is the amount proper in the sense that the plan pays only for necessary services and pays no more than reasonable compensation for each service particularly and considering the combination of services? This is not advice to anyone.

Even if the retirement plan is not ERISA-governed and a relevant State’s law recognizes an oral trust, the IRS might assert that a written trust is a condition of I.R.C. § 401(a)-qualified tax treatment. Consider, for example, 26 C.F.R. § 1.401-2(a)(1) https://www.ecfr.gov/current/title-26/part-1/section-1.401-2#p-1.401-2(a)(1). That the Treasury’s interpretation speaks of what the trust instrument must provide suggests the Treasury’s interpretation that the trust must be written. While there might be other interpretations, few clients want unnecessarily to interpret tax law contrary to a long-established mainstream. This is not advice to anyone.

None of us knows what’s provided or allowed in an agreement we haven’t read. But I imagine a possibility that the situation shERPA describes could be not a breach of the huge TPA firm’s obligation. I have seen service agreements that: warn that the provider is obligated only by its service agreement, and is not bound by the plan or its trust; get the employer/administrator’s acceptance that the provider has no duty or obligation to read the plan or its trust; omit a service the plan’s administration needs, warning that the employer/administrator without the provider’s help must apply the plan’s provisions; describe a service that looks like one designed to meet a tax-qualification condition, but warn that the provider gives no assurance that using the service results in the plan meeting the condition; provide a service according to specified assumptions, even if an assumption is implausible or even contrary to a known fact; excuse the provider’s responsibility for an error that results from following the written plan, even when the provider knows the written plan states or omits a provision contrary to a tax-qualification condition; warn that the provider will follow the employer/administrator’s instruction, even if the provider knows the instruction is contrary to the plan, relevant tax law, ERISA’s title I, or other law; end the provider’s responsibility for an error or omission the employer/administrator does not remark on within 30 days from the report’s delivery; warn that the provider does not provide accounting, tax, or other legal advice; and obligate the employer/administrator’s failure to get a lawyer’s advice when an ERISA-prudent person would do so, and provide that the employer’s failure to do so is a breach for which the employer is obligated to defend and indemnify the provider. I’m mindful that many of us who devote our work to providing good service think some provisions of those kinds might, in at least some circumstances, be unfair or even oppressive. I’m aware many feel a TPA’s services and work standard ought to be guided by the plan, applicable law, and relevant tax law. Yet, I’m also aware that many service providers’ business executives feel it’s not unfair for a service recipient to be bound by the contract it assented to. Over 42 years, I’ve seen service agreements with many of the provisions described above. I’ve not yet seen a court’s decision that voids such a provision because it’s unconscionable in the meaning the common law of contracts puts on that word (as applied to business-to-business, rather than consumer, contracts). Whether some business practices might be unfair or indecent in other senses, I’ll leave to BenefitsLink neighbors’ views (and my undeclared personal thinking).

We don’t know what was agreed between the TPA and its service recipient.

Perhaps your former client might now discern some differences between your capabilities and the other firm’s weaknesses.

Some questions an independent qualified public accountant might consider and evaluate: If the pension plan’s administrator is unwilling to engage counsel when a prudent fiduciary would do so, should an independent qualified public accountant treat that as a weakness in management’s internal controls, and so intensify the audit’s procedures? If the accounting firm engaged as the pension plan administrator’s independent qualified public accountant also has an engagement regarding the employer’s financial statements (even if unaudited and unreviewed), the firm might consider whether there is another professional responsibility regarding the issues about PBGC coverage and premiums. Even if the employer’s financial statements are on the cash-receipts-and-disbursements method of accounting, should there be some narrative disclosure of a loss contingency that PBGC might assert a claim for PBGC premiums due? If the accounting firm engaged as the pension plan administrator’s independent qualified public accountant also has an engagement regarding one or more of the employer’s tax returns and there is doubt about whether the pension plan is tax-qualified, consider whether there is another professional responsibility about whether or how the employer may claim deductions for contributions to the pension plan. For example, if the pension plan and its trust are not tax-qualified under Internal Revenue Code § 401(a), that might affect deductions. Consider the AICPA’s Statement of Standards on Tax Services. Consider Internal Revenue Code § 6694. Consider that a pension plan administrator’s independent qualified public accountant who applies AICPA standards must satisfy herself that the plan administrator’s Form 5500 report is at least logically consistent with the plan’s financial statements that are the subject of the IQPA’s report. That is so regarding both the audited period’s statements and report and the preceding period’s statements and report. If there is doubt about whether a pension plan is terminated, might the plan’s financial statements need a receivable (or a narrative disclosure of a gain contingency) if a contribution ought to be made? Beyond PBGC coverage and premiums, what else might be wrong? This is not advice to anyone.

I suppose I shouldn’t have asked whether there are situations with a temptation, but rather whether the tempted see that the evidence electronic regimes leave behind makes it easy for an examiner to detect a falsity.

EBP, thank you for your helpful explanations about ways the consequences of an untimely adoption are lessened.

About half a generation ago, someone might face a pressure to help a plan’s sponsor date a document falsely. https://benefitslink.com/boards/topic/44420-ethical-dilemma/ Now, many service providers use software and internet delivery to present a ready-to-sign document, and expect a plan sponsor’s adoption or approval through DocuSign or another e-sign tool. Is an ink-on-paper signature such a disruption that it’s too hard to pretend a document was signed sooner than when the plan sponsor signed it? Are there still situations in which a temptation to date a document falsely persists?

Whether a plan’s administrator recognizes or refuses an agent, and for which kinds of acts, can be clear if the documents governing the plan and written procedures make it clear. Some plan sponsors prefer that a plan grant its administrator wide discretion. Some prefer that a plan grant its administrator only constrained discretion, or almost no discretion. Which of those ways a plan sponsor prefers might vary with a particular plan’s surrounding facts and circumstances. For the situation AlbanyConsultant describes, the plan’s administrator might be burdened by the documents the plan sponsor wrote.

If the employer/administrator does not count hours of service each day, and instead counts or approximates hours by a wider period, consider (among many points): “In the case of hours of service to be credited to an employee in connection with a period of no more than 31 days which extends beyond one computation period, all such hours of service may be credited to the first computation period or the second computation period. Crediting of hours of service under this paragraph must be done consistently with respect to all employees within the same job classifications, reasonably defined.” 29 C.F.R. § 2530.200b-2(c)(4), https://www.ecfr.gov/current/title-29/part-2530/section-2530.200b-2#p-2530.200b-2(c)(4). The rule section of which that quoted text is a subpart includes at least six admonitions that administrative-convenience rules must be “consistently applied.” If one’s client seeks to make a service-crediting rule the administrator could apply, uniformly, to all situations that involve December and January, what rule would that be? How confident are you that the employer/administrator’s computer system can apply that rule? Is crediting a pay period’s hours of service to the computation period in which the pay period ends simpler than crediting the hours to the computation period in which the pay period begins? This is not advice to anyone.

Without remarking on the many other issues: A plan’s administrator might want its lawyer’s advice about whether—before beginning a further evaluation of whether the writing presented meets conditions to be a domestic-relations order and, if so, a qualified domestic-relations order—the administrator might first take prudent steps to confirm that the writing is a court’s order. Consider, after considering surrounding facts and circumstances, asking the court itself for a certificate that the writing is the court’s order. And consider prudent steps to detect, independently, whether a certificate is a forgery, or was unauthorized. While doing that might not be a plan’s regular procedure for an order the plan received reasonably promptly after the order’s date, a delay of 30 years might suggest a presumption of regularity no longer is fitting. And while a suggestion to get one’s lawyer’s advice often is unheeded, this situation seems to involve unusual risks (and so more value in careful procedure and careful communication). This is not advice to anyone.

Many States’ laws governing a personal power of attorney (rather than a power coupled to a business stake or position) include clear-statement or “are you sure you mean to provide that” rules. Many restrict gifts, or a gift more than a specified amount. Some restrain a power to make one’s principal’s beneficiary designation, or otherwise to change beneficial interests. Even when an ERISA-governed plan’s administrator is unconstrained by a State’s law, an administrator still must read the power-of-attorney document, and must construe and interpret the document’s effect and meaning. To do so, an administrator might interpret the effect and meaning of a document and the powers it grants by looking—at least for some aspects—to the State law the document specifies as the power’s governing law. Or, if the document has no choice-of-law clause, the law of the place where the document was made. (Often, that’s knowable the principal’s acknowledgment or the notary’s certificate.) Construing and interpreting a document in accordance with the law the document’s maker at least impliedly assumed as relevant regarding the document seems a logical way to discern what powers the principal granted or omitted. Using North Carolina law as an illustration, the statute enumerates ten things an agent is not empowered to do unless the power-of-attorney document “expressly grants” the power. N.C. Gen. Stat. § 32C-2-201(a), https://www.ncleg.gov/EnactedLegislation/Statutes/PDF/ByChapter/Chapter_32C.pdf. Using AlbanyConsultant’s story, if the participant’s sister presented as the primary beneficiary’s power-of-attorney document one made following North Carolina’s statutory short-form power of attorney and the principal had not initialed the line for “Disclaim or refuse an interest in property”, a plan’s administrator might find that the agent lacks power to disclaim the primary beneficiary’s benefit. Even if an agent generally has a power to disclaim, an ERISA-governed plan’s administrator might refuse a disclaimer unless the agent can show that the disclaimer is in the principal’s best interest, is not a fraud on any creditor or healthcare-financing regime, and does not involve the agent’s self-dealing (even if the principal had expressly authorized the self-dealing). The situation AlbanyConsultant describes might be untroubled by any of those issues. Rather, an agent might submit the primary beneficiary’s claim, and would deposit the retirement plan’s payment to the primary beneficiary into a bank account the agent set up for her principal’s money. This is not advice to anyone.

If a plan’s administrator recognizes an agent’s authority to submit the primary beneficiary’s claim and approves the claim, the plan pays the distribution to the primary beneficiary. (The agent would deposit the payment into a bank account the agent set up for her principal’s money.) A starting point is, as many BenefitsLink neighbors remind us, RTFD—Read The Fabulous Documents. A plan’s administrator might recognize an agent’s authority to submit her principal’s claim if the plan allows (or at least does not preclude) recognizing the beneficiary’s power of attorney, and the plan’s administrator finds that the power grants the might-be agent authority to do the thing she asks to do. An ERISA-governed plan may (but need not) state provisions for recognizing or refusing an act carried out by a person’s agent. Likewise, a plan may (but need not) state provisions about how the plan’s administrator decides whether it will recognize a person’s power-of-attorney document as sufficient for the administrator to recognize the agent and the agent’s authority. If not inconsistent with the plan, a plan’s administrator may adopt written procedures to guide its exercise of discretion. Unless the plan provides otherwise, ERISA alone does not require a plan to recognize a power of attorney or other agency. See, e.g., United Refining Co. Incentive Sav. Plan for Hourly Emp. v. Morrison, No. 1:12-cv-238, 2013 U.S. Dist. LEXIS 166186, 2013 WL 6147672, at *17 (W.D. Pa. Nov. 22, 2013) (“In order to honor Morrison’s beneficiary designation, the Plan Administrator would be required to determine the meaning and validity of the [power of attorney], which is an exercise explicitly rejected by the court in Kennedy.”). Some administrators interpret plan documents’ silence about recognizing a power of attorney and other provisions that grant discretionary authority as allowing an administrator to recognize or refuse an agent. Discretion must be exercised with loyalty, impartiality, and prudence. Even when an ERISA-governed plan’s administrator recognizes a person appointed an agent, the plan’s governing documents and ERISA govern the meaning and effect of the agency regarding the plan, including whether the agent has or lacks authority to do the thing the agent would seek to do. See, e.g., Taylor v. Kemper Fin. Servs. Co., No. 98 C 0929, 1999 U.S. Dist. LEXIS 14989, 1999 WL 78207 (N.D. Ill. Sep. 24, 1999); Pension Comm. Heileman-Baltimore Loc. 1010 IBT Pension Plan v. Bullinger, No. 1:92 Civ. 00204, 16 Empl. Benefits Cas. (BL) 1024, 1992 U.S. Dist. LEXIS 17325 (D. Md. Oct. 29, 1992); Clouse v. Philadelphia, Bethlehem & New England R.R. Co., 787 F. Supp. 93 (E.D. Pa. 1992); see also In re Shafer, No. 2:13-cv-00405, 2014 U.S. Dist. LEXIS 156622, 2014 WL 5599064 (S.D. Ind. Nov. 4, 2014). With ERISA’s supersedure of States’ laws, a plan’s administrator may interpret a power-of-attorney document in ways that need not follow any particular State’s law. But many fiduciaries consider the meaning and effect of a power-of-attorney document under a relevant State’s law. If a plan’s administrator recognizes an agent’s authority to submit the beneficiary’s claim and approves the claim, the plan pays the distribution to the named beneficiary. (The agent would deposit the payment into a bank account the agent set up for her principal’s money.) A plan would not pay a contingent beneficiary unless the primary beneficiary is dead, or disclaimed, which seems unlikely if the might-be disclaimant has diminished capacity. Even if a plan allows a beneficiary’s disclaimer and might allow a beneficiary’s agent to disclaim, an attempted disclaimer might not be an I.R.C. § 2518 qualified disclaimer, which many plans require, or might be invalid as a fraud on creditors. And at least one court has interpreted that unless a plan states that a power to disclaim can be exercised by a beneficiary’s agent, only the beneficiary personally may exercise the power to disclaim. R. Scott Nickel, as Plan Benefit Adm’r of the Thrift Plan of Phillips Petroleum Co. v. Estate of Lurline Estes, 122 F.3d 294, Pension Plan Guide (CCH) ¶ 23937U (5th Cir. 1997). A fiduciary might consider whether ERISA’s exclusive-purpose loyalty and prudence call the fiduciary to take steps to protect a beneficiary. AlbanyConsultant, you might help the plan’s administrator use its lawyer’s time efficiently by collecting the documents governing the plan and relevant procedures, and noting provisions that might matter for the analysis. And if the plan’s recordkeeper or third-party administrator has procedures about recognizing or refusing a power of attorney, those procedures might aid the plan administrator’s decision-making. This is not advice to anyone.

About whether a severance-from-employment of the third worker results in a partial termination, consider whether amending the plan so that participant is immediately 100% vested might be less expensive than the legal advice the plan’s sponsor/administrator might get to support why the severance-from-employment (if one assumes the change from employee to nonemployee) does not result in a partial termination. This is not advice to anyone.

Paul I, thank you; your explanation is valuable information. I like your observations about being mindful of opportunities for misuse within a client. BenefitsLink neighbors: About a disclaimer or warning, is it common for a TPA’s written material to include a warning that it is only for the named client’s use, and no one else may use it or rely on it? Is a warning like that enough to be “reasonable steps” to guard against risks of misuse? Is there something more a professional ought to do? (I promise not to misuse anything you share with me. And I ask only to support my teaching.)

Have you ever had a client misuse your work to unfairly influence a third person? The professional-conduct code of the American Society of Pension Professionals and Actuaries and other divisions of the American Retirement Association includes this: “A Stakeholder [a Member or a Credential Holder] shall not perform Professional Services when the Stakeholder has reason to believe that they may be altered in a material way or may be used to violate or evade the Law. The Stakeholder should recognize the risk that materials prepared by the Stakeholder could be misquoted, misinterpreted, or otherwise misused by another party to influence the actions of a third party{,} and should take reasonable steps to ensure that the material is presented fairly and that the sources of the material are identified.” Am. Ret. Ass’n, Code of Pro. Conduct, Control of Work Product (amended May 2026), https://fcwpol.files.cmp.optimizely.com/download/cea33626560611f18c27b2e7a7a4a6b0. In your real-world experience, how often does it happen that something you wrote or compiled was used with a person beyond your client? Was your writing misused? Did someone use your materials to persuade a person beyond your client that you support a conclusion, opinion, or advice that’s not your advice? When someone used your materials to persuade a person beyond your client that you support a conclusion you did not express, do you feel you had failed to prepare for the risk that your work could be misused? Or, would the misuse have happened no matter how carefully you expressed your work? Do you think what the rule asks is fair to the professional? Should a professional have a duty to guard against the possibility that someone other than one’s client misunderstands your work you presented to your client? And, most important, why or why not?

Following this rule change, a securities broker-dealer need not require its worker to report one’s opening of a securities account beyond one’s employer if the account is restricted to § 530A accounts (and other securities excused under the rule). Likewise, other banking, commodities, insurance, investment-advice, securities-related, and other financial-services business that supervise all or some workers’ personal transactions might excuse reporting a § 530A account. Yet, a financial-services business might in its procedures require more disclosure and reporting than public law, including self-regulatory organizations’ rules, requires. This is not advice to anyone.

30Rock, imagine some further possibilities: The workers of the transferred business still are the seller’s employees, are leased to the buyer’s new subsidiary, and expenses allocable to those workers are paid by the buyer’s new subsidiary (or the buyer parent or an affiliate). Or, the workers of the transferred business are the buyer’s new subsidiary’s employees, and the buyer’s new subsidiary is a participating employer under the seller’s plan, maybe for a transition period (even if that might result in a multiple-employer plan). Or, another of many ways to allocate economic and accounting consequences between the seller and the buyer. You might get more information when each plan’s administrator reads all the documents, not only all documents governing the plan it administers but also all documents about the deal between the seller and buyer, including related agreements. This is not advice to anyone.

I don’t know what EPCRS or anything of tax law suggests for a situation like this. Might the employer that paid purported contributions ask the receiving plan’s administrator and trustee to recognize the employer’s mistake of fact? Might the employer’s assumption that the employer’s employees could accrue further benefits under a retirement plan of which the employer was not a participating employer be a mistake of fact? Also, might the receiving plan’s administrator’s acceptance of the purported contributions be a breach of that administrator’s fiduciary responsibility? One imagines the receiving plan’s administrator knew, or had it used ERISA § 404(a)(1)(B) prudence would have known, that the payer was not a participating employer (and that the payer’s employee were not eligible for accruals attributable to amounts paid by a nonparticipating employer). If there was a mistake, ERISA’s title I does “not prohibit the return of [a mistaken] contribution to the employer within one year after the payment of the contribution[.]” ERISA § 403(c)(2)(A)(i). The receiving plan would return to the nonparticipating employer the amounts mistakenly paid in, each adjusted for investment loss but not for investment gain. The receiving plan’s net-breakage gain might be allocated to the receiving plan’s account for plan-administration expenses. The employer would pay its affected employees the wages due for the amounts that were not elective deferrals. Next January, the employer would report correctly W-2 wages paid in 2026. The employer would pay each affected employee an interest or time-value-of-money amount on the wages not timely paid, or, if the greater, the amounts each applicable State wage-payment law provides. About the amounts paid for what was not a matching contribution under the mistakenly-receiving plan, the employer might use that money toward any nonelective or matching contribution obligation (if any) the employer has under a retirement plan of which the employer is a participating employer. This is not advice to anyone.