Peter Gulia

Some plans’ administrators might use a disclosure regime conceptually like your description, but with different means, by following the Labor department’s rule for a participant’s, beneficiary’s, alternate payee’s, or other covered individual’s implied assent (by not generally opting-out) to notice-and-access electronic disclosures. Among many conditions, the regime requires that the individual furnished, or was assigned, an electronic address (which remains operable). https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/section-2520.104b-31 If you consider it, get your lawyer’s advice about meeting the rule’s conditions and requirements.

Has anyone explained to the broker that those who don't play well with others are less likely to get referrals?

Thank you for the helpful information I was looking for. (When I was inside counsel to a recordkeeper, an employer's payments seldom followed the loan-repayment schedule. Not satisfied with what the software did, the operations people asked me(!) to invent a rule for crediting the payments. I don't remember what we did.)

About #3, perhaps Brian Gilmore has seen what some employers are doing?

Without doubting the wisdom of BenefitsLink mavens’ yuck and double-yuck observations, I’d like to understand why something is impractical or difficult. (I have great respect for those who work in recordkeeping operations.) If one or more methods for refinancing a participant loan are described in the tax-law regulations, one might think mainstream recordkeeping software would be programmed so a user could use those methods. Am I ignorant about the software? Or if the software can do it, are there other reasons it’s impractical or difficult?

But only if the problems are uncovered before the employer gets rid of them.

The employer is exposed to potential liabilities, civil penalties, and expenses for: failures to tax-report wages; failures to withhold Federal, States’, and municipalities’ income taxes; failures to file Form 5500 reports; failures to deliver summary annual reports; failures to deliver other ERISA title I disclosures; deception under Federal and States’ securities laws; negligent misrepresentations under States’ common law of torts; and more problems an incautious employer faces. The employer should lawyer-up. Managing the situation calls for complete control of all communications. Even if some communications with a certified public accountant or other “Federally authorized tax practitioner” advising only within her proper scope might get a limited evidence-law privilege under Internal Revenue Code § 7525, that’s not good enough. That privilege never applies for anything about a State’s law, including a State or local tax law. For Federal law, it can apply only about tax law (and only civil, not criminal); not ERISA’s title I, and not securities law. Seeking a lawyer’s advice, the employer might protect information using evidence-law privileges for attorney-client communications, and for attorney work product, including fact work product and opinion work product. How to deal with the former executive might turn on discerning how much he knows about the employer’s weaknesses, and how skillfully or ineptly he might try to exploit them. One might consider also whether he is complicit in any of the failures, and how recognizing that the plan did not result in a deferral of compensation could affect his personal tax situation. There are opportunities to use a severance negotiation and, perhaps a settlement agreement with confidentiality provisions, to buy time and breathing room for an easier clean-up project.

Do health-reimbursement plans provide domestic-partner coverage? Imagine this not-so-hypothetical situation. An employer sponsors a health plan of the kind people call an “HRA” or health-reimbursement-arrangement plan. There is no participant contribution. Claims for reimbursement of a medical expense are paid by the employer from its assets. Presume the employer intends the plan to fit Internal Revenue Code § 105(b) and the Revenue Rulings interpreting § 105(b) regarding an HRA. The employer knows same-sex couples have no less right to marry than opposite-sex couples. But the employer, for its own business reasons, wants to provide its HRA benefit regarding the medical expenses of an employee’s non-spouse civil-union or domestic partner [26 C.F.R. § 301.7701-18(c)] equally to those of an employee’s spouse. The employer wants to provide this even if there is no support for treating an employee’s domestic partner as the employee’s spouse, dependent, or child. 1. Do plan-document vendors set up providing HRA coverage for a domestic partner as a check-the-box choice? 2. If it is a document choice, what (if anything) does a vendor explain about the Federal tax law implications of providing that the employer will reimburse the medical expenses of an employee’s non-spouse? 3. If an employer provides domestic-partner coverage, what methods does it use to add an amount for the value of the coverage, or of the reimbursements, to an employee’s wages for W-2 tax-reporting and withholding wage and income taxes?

You’re seeing the distinction I invited you to think about. Even if one is confident that nothing in ERISA’s title I or the Internal Revenue Code requires a provision, one might be reluctant to change a provision from an IRS-preapproved document if doing so might defeat the user’s reliance on the IRS’s opinion letter. As I understand the IRS’s preapproval regime, the IRS does not review, and an IRS letter does not opine on, beyond-the-plan procedure documents, such as a separate participant-loan procedure.

Is the provision limiting participant loan refinancing: in a procedure document? or in the IRS-preapproved document (whether in the basic plan document, or in the choices the adoption agreement presents)? If the provision is in the IRS-preapproved document, would a user’s change defeat the user’s reliance on the IRS’s opinion letter?

Internal Revenue Code of 1986 (26 U.S.C.) § 45E(e)(1) provides: “All persons treated as a single employer under subsection (a) or (b) of section 52, or subsection (m) or (o) of section 414, shall be treated as one person. All eligible employer plans shall be treated as 1 eligible employer plan.” http://uscode.house.gov/view.xhtml?req=(title:26%20section:45E%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section45E)&f=treesort&edition=prelim&num=0&jumpTo=true § 52 Special rules (a) Controlled group of corporations For purposes of this subpart, all employees of all corporations which are members of the same controlled group of corporations shall be treated as employed by a single employer. In any such case, the credit (if any) determined under section 51(a) with respect to each such member shall be its proportionate share of the wages giving rise to such credit. For purposes of this subsection, the term “controlled group of corporations” has the meaning given to such term by section 1563(a), except that— (1) “more than 50 percent” shall be substituted for “at least 80 percent” each place it appears in section 1563(a)(1), and (2) the determination shall be made without regard to subsections (a)(4) and (e)(3)(C) of section 1563. (b) Employees of partnerships, proprietorships, etc., which are under common control For purposes of this subpart, under regulations prescribed by the Secretary— (1) all employees of trades or business (whether or not incorporated) which are under common control shall be treated as employed by a single employer, and (2) the credit (if any) determined under section 51(a) with respect to each trade or business shall be its proportionate share of the wages giving rise to such credit. The regulations prescribed under this subsection shall be based on principles similar to the principles which apply in the case of subsection (a). http://uscode.house.gov/view.xhtml?req=(title:26%20section:52%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section52)&f=treesort&edition=prelim&num=0&jumpTo=true You’ll need the details on the partnership interests (or member interests, or shares) in the “old” firm, and in the “new” firm

Retirement plans’ fiduciaries and service providers have a wide range of responses to these situations. Yes, some have procedures for yearly and quarterly improvements in participants’ contact information. Some methods vary with the plan’s size, bargaining power, a fiduciary’s (or its lawyer’s or consultant’s) negotiating savvy, and a service provider’s business interests. The challenges are hardest when a plan lacks bargaining power to get anything beyond its recordkeeper’s standard service. It might help if recordkeepers build a standard service, available for extra fees, with those fees allocated to participants’ accounts. Like so much of what we do with retirement plans, a fiduciary can oversee a procedure but wants to make the work a contracted service function.

If a plan’s administration uses an implied-assent electronic disclosure regime based on 29 C.F.R. § 2520.104b-31, an administrator must design its system to detect an inoperable electronic address, whether an email address or a smartphone number. If there is a bounce-back and the administrator does not promptly cure it or replace it with another electronic address, one must treat the individual as if she opted out (and turn on paper delivery). https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/section-2520.104b-31

Form 5500 is used for at least two (and sometimes three or four) reporting or disclosure requirements. One of those is Internal Revenue Code § 6058(a)’s command for an information return: Every employer who maintains a pension, annuity, stock bonus, profit-sharing, or other funded plan of deferred compensation described in part I of subchapter D of chapter 1, or the plan administrator (within the meaning of section 414(g)) of the plan, shall file an annual return stating such information as the Secretary may by regulations prescribe with respect to the qualification, financial conditions, and operations of the plan; except that, in the discretion of the Secretary, the employer may be relieved from stating in its return any information which is reported in other returns. https://irc.bloombergtax.com/public/uscode/doc/irc/section_6058 One might read that long sentence, including its “or” phrase, to treat an employer’s duty as met if the plan’s administrator filed a return that meets the requirement. If a plan is not ERISA-governed and has no other need for an administrator to adopt the IRC § 6058 information return, the return might be filed only by an employer, with no signature for an administrator. Let’s not try to defend or explain the agencies’ design of the form and instructions; it’s not what we would have done.

Just as BenefitsLink people say about an employer-sponsored retirement plan, Read The Fabulous Document, one might follow that idea also for an Individual Retirement Account agreement. An IRA agreement’s beneficiary provisions vary with different providers, and sometimes vary even within one provider. But perhaps potentially differing provisions might not matter much if the husband’s might-be beneficiaries (whether contingent or default) are the same children as the wife’s beneficiaries.

PS, if you are an employee of a recordkeeper, third-party administrator, or trust company, you would not alter a 16b indicator (if your company ever touches it all) except as directed under your company’s procedures, which I don’t know. Some never touch a 16b indicator because the customer employer sets that indicator on or off in census uploads or through a plan-sponsor portal to the recordkeeping system. Or if a service provider sets or unsets a 16b indicator, it typically would restrict this to implementing the employer’s written instruction. Further, a service provider might restrict which of its employees may do this. A service provider might use its procedures and controls not only to avoid discretion in the way many retirement-services providers do (even for points of law on which the service provider’s knowledge often is superior to the customer’s knowledge) but also to avoid responsibility for a legal conclusion, especially about a point under securities law (rather than ERISA or the Internal Revenue Code). If you need guidance, you should get it from the right authority in your company.

austin3515, you’re right that dividing plans to evade an ERISA § 103 audit would fit only if all plan, trust, investment, service, and related records logically follow the separateness of the plans. If a collective trust, master trust, or other trust for more than one plan is used, one would want the separateness of the participating plans, and the separate accounting between or among them, to be carefully documented. Further, service agreements with a recordkeeper, a third-party administrator, and other service providers would show separateness of the plans (and each plan’s trusts), and might incur multiple per-plan fees. C.B. Zeller, you’re right to describe one of the many ways two or more plans might together use a trust (or a trust substitute, such as a custodial account or an annuity contract). What matters is whether the documents and accounting show the separateness of the user plans.

Recordkeeping software often uses an indicator to mark a fact or condition that might call for preventing or delaying a transaction that otherwise would be processed or handled routinely. For example, an indicator might flag a participant’s account as one affected by a bankruptcy proceeding or a to-be-evaluated domestic-relations order. Or an indicator might mark an account as one for which the participant’s investment direction requires a delay, special handling, or even an administrator’s pre-clearance approval. Or an indicator might mark an account as one that is a subject of beyond-routine information reports. 16b refers to Securities Exchange Act of 1934 § 16(b) [15 U.S.C. § 78p(b)]. Among other provisions, section 16 requires a securities issuer’s director, officer, or 10%-owner to file (electronically) a Form 4 Statement of Changes of Beneficial Ownership of Securities with the Securities and Exchange Commission by the second business day after nearly any transaction (including under a retirement plan) involving a security of the issuer. Although the reporting requirement applies to the insider, an issuer might facilitate its officers’ reports. Some recordkeepers offer a service of convenience reporting on an individual’s directions or claims that involve employer securities if the employer/administrator marked the individual as the employer’s director, officer, 10%-owner, or other “16b” insider.

Yup, we concur. I've done a Form 5500 report as quickly as the morning after the transaction that made the plan's assets zero.

With the caution that nothing a government speaker says in an association’s conference is law, consider Q&A 14 [pages 17-18] in the attached report from an American Bar Association conference. The inquiring lawyer set up the question and, following the ABA committee’s convention, a proposed answer to make it easy for the Labor department speaker to say an administrator should treat the two plans as, in substance over form, one plan, at least to apply ERISA’s provision on whether to engage an independent qualified public accountant. The government speaker didn’t take up the hint. Instead, the answer says an administrator may follow what the same person, as the plans’ sponsor, specified, even if the purpose is to evade an ERISA § 103 audit. 2009-05-07 Am Bar Assn Joint Committee on Employee Benefits Q&A.pdf

The Form 5500-EZ Instructions support what Bill Presson says: “For a short plan year, file a return by the last day of the 7th month following the end of the short plan year. Modify the heading of the form to show the beginning and ending dates of your short plan year and check box A(4) for a short plan year. If this is also the first or final return filed for the plan, check the appropriate box (box A(1) or A(3)).” https://www.irs.gov/pub/irs-pdf/i5500ez.pdf But for an information return one may choose to file by mailing paper, is there anything that precludes an employer/administrator from filing soon after the plan year ended?

If the sponsor's purpose is to get plans with small-plan counts of participants, should the sponsor make the split effective December 31, 2021 (perhaps after all investment funds price shares and units, and before midnight)?

Unless the real property is burdened by an assessment, attachment, covenant, lien, levy, tax, or other liability, wouldn’t the property have a value at least slightly more than $0.00? Or if there really is no buyer: Does the plan’s governing document permit (or at least not preclude) a distribution of property other than money? If the document precludes such a distribution, is it feasible to amend the document? If the plan distributes the real property, the Form 1099-R would report the trustee’s or administrator’s good-faith and prudent estimate of the distributed property’s fair-market value. A retirement plan should not donate its property, except, arguably, for property that has a negative value, and then only if, among other conditions, the transfer likely would succeed in getting rid of the plan’s liability.

These hyperlinks to BenefitsLink posts might help you find more information. https://benefitslink.com/news/index.cgi/view/20211104-168474 https://benefitslink.com/news/index.cgi/view/20211102-168431 https://benefitslink.com/news/index.cgi/view/20211029-168386

A bank or broker-dealer might be correct in asking for information on all trustees. Further, even if you might learn the banking and securities laws and rules involved and might find that a particular bank or broker-dealer asks for more information than the minimum public law requires, knowing that information likely wouldn’t help. In applying know-your-customer and anti-money-laundering laws and rules, each bank or broker-dealer designs its own policies and procedures. A procedure might require obtaining information about each human who has some authority or control over the account to be opened or continued.