Peter Gulia

Yes, thepensionmaven described a TPA firm. And asked for a reference to Circular 230’s return-of-records rule. And later in the discussion described an example about accountants. My post has in it a quotation of an accountancy rule, and a citation of and hyperlink to the particular Circular 230 rule thepensionmaven asked for. My post doesn’t state anything about what a TPA must, may, or should do. Larry Starr explains his firm’s method. I mostly agree that external law does not ordinarily impose a duty to make copies of copies of records already in a client’s possession. Some TPAs need not follow any professional-conduct rules. Some TPAs have a worker who follows the American Retirement Association’s rule, which applies even if the member is not governed by the rules for practice before the Internal Revenue Service. Some TPAs have a worker who wants the TPA to follow a rule for lawyers, accountants, actuaries, or another profession. (Some regulators assert that the profession’s rules apply to whatever a licensee does, even if her work is not of a kind that requires the profession’s license.) Returning to what I imagine might be thepensionmaven’s interest, sometimes a hint about some return-of-records rule—even if the rule might not or does not apply—helps persuade a removed TPA to cooperate in furnishing what the next TPA seeks. Consider too Larry Starr’s observation that a prospect of incurring fees might motivate a client to become less lazy about looking for what it already has.

Beyond the rules for practice before the Internal Revenue Service, a certified public accountant likely is regulated by States’ accountancy laws. For example, here’s a regulation of New Jersey’s State Board of Accountancy. N.J.A.C. § 13:29-3.16 Records a) A licensee or the licensee’s firm shall furnish to the licensee’s client or former client, upon request made within a reasonable time after original issuance of the document in question: 1) A copy of a tax return of the client; 2) A copy of any report, or other document, issued by the licensee to or for such client; 3) Any accounting or other records belonging to, or obtained from or on behalf of, the client which the licensee removed from the client’s premises or received for the client’s account, but the licensee or the licensee’s firm may make and retain copies of such documents when they form the basis for work done by the licensee; and 4) Licensee-prepared client records that would ordinarily constitute part of the client’s books and records, are contained in the licensee’s or his or her firm’s working papers, and are not otherwise available to the client. Copies of such records shall be produced to the client in the same manner, media, and format as the record was created by the licensee. b) A licensee or the licensee’s firm shall not withhold client records for the non-payment of fees for services performed. I picked New Jersey as an example because I remember from my experience in advising CPAs that New Jersey harshly enforces this rule. The Circular 230 rule (if it applies) has more tolerance. 31 C.F.R. § 10.28 https://www.ecfr.gov/cgi-bin/text-idx?SID=2eeaa78d7df8a20eb74ecf9cb721ece2&mc=true&node=se31.1.10_128&rgn=div8

Here's a text of the Senate-passed bill. Paycheck Protection Program and Health Care Enhancement Act bill.pdf

To read the rule Luke Bailey describes: https://www.ecfr.gov/cgi-bin/text-idx?SID=d7e5f18218c1cca961286a6fa1b6f4cf&mc=true&node=se26.20.301_17701_67&rgn=div8

So how long can a super-smart TPA wait?

Just curious, how long can the software makers wait before one must invent an answer to get the recordkeepers' computers ready?

The key to understanding the SECURE provision is that the employment-based retirement plan’s distribution is not a payment of money; it is a distribution of the contract, the one that is no longer the plan’s investment alternative. (The plan should provide, or at least not preclude, a distribution by a delivery of the contract.) Under Internal Revenue Code § 401(a)(38)(A)(ii), a plan doesn’t tax-disqualify because the plan allows “distributions of a lifetime income investment in the form of a qualified plan distribution annuity contract[.]” “If a trust described in section 401(a) and exempt under section 501(a) purchases an annuity contract for an employee and distributes it [the annuity contract] to the employee in a year in which the trust is exempt, and the contract contains a cash surrender value which may be available to an employee by surrendering the contract, such cash surrender value will not be considered income to the employee unless and until the contract is surrendered. . . . .” 26 C.F.R. § 1.402(a)-1(a)(2) https://www.ecfr.gov/cgi-bin/text-idx?SID=85324826c4efd646e65f48bddbb1cf78&mc=true&node=se26.6.1_1402_2a_3_61&rgn=div8 Caution: This discussion is limited to helping employee-benefits practitioners. Anything I post here is not advice to anyone.

Congress granted the Secretary of Labor power to delay due dates, but not to change ERISA § 103’s command to engage an independent qualified public accountant. ERISA § 518 [29 U.S.C. § 1148], amended by CARES Act § 3607.

Gilmore, the practical answers might come from some cautious lawyers in retirement-services businesses, especially big insurance and trust companies. When I was inside counsel, the operations guys often reminded me that anything I said had to be functional across a dozen or more different computer systems (often, with no new or revised programming). And I sometimes considered that even the slightest weakness in my legal reasoning (or just an unfortunate change in a regulator’s, arbitrator’s, or court’s appetite) could be magnified by tens of thousands of plans, with tens of millions of individuals, and hundreds of billions of dollars. Further, a recordkeeper’s counsel has to manage these issues for a context in which all but the biggest plan sponsor/administrators have no lawyer but everyone must pretend that no one gives tax or legal advice to anyone beyond the recordkeeper itself. Those facts of business life lead to doing what can be sourced to the government agency, with little or no room for interpretation. Your originating post suggests your client plans are stuck with what the recordkeepers provide. Don’t be surprised that a recordkeeper might give big-ship answers.

RatherBeGolfing, thank you for helping me think this through, especially the reasoning. The situation is a nice reminder about not letting a good impulse overtake careful thinking and sound judgment.

Larry Starr, thank you for helping me think this through. I’m imagining the possibility that what a plan paid as an ordinary distribution could nonetheless be a coronavirus-related distribution within § 2202(a)(4) that gets the tax-withholding treatment of § 2202(a)(6)(A). Would your outlook be different if the trustee or other payer acts on its own without asking anything from the plan’s administrator (relying only on the distributee’s certification)?

I assumed one need not change tax-withholding, and is (at least) permitted to withhold 20%. I’m asking whether a withholding-only recognition of a coronavirus-related distribution is permissible and feasible. Is it as easy as putting one more paragraph in a form? (And perhaps one more switch in the computer system.) Or am I missing something? If a service provider can help a distributee get lower or no tax-withholding without imposing a risk on plan fiduciaries (and with not too much burden on the service provider), might doing so be a nice courtesy?

To “determin[e] whether any distribution is a coronavirus-related distribution”, the statute allows an eligible retirement plan’s administrator to rely on a claimant’s certification. CARES Act § 2202(a)(4)(B). Could a recordkeeper put on a form for an ordinary distribution, in a part in which a distributee may specify a withholding choice for a distribution not an eligible rollover distribution, a § 2202(a)(4)(A)(ii) certification—to be relied on only for tax-reporting (if the IRS later sets a 1099-R code) and tax-withholding? To the extent that a plan’s directed trustee or other payer may rely on the plan’s administrator’s instructions to support tax-reporting and tax-withholding, could a payer rely on an administrator’s instruction (perhaps a standing instruction) that a distributee who completed that certification gets coronavirus withholding treatment?

Tomorrow’s Federal Register will publish an interim rule in which the Federal Retirement Thrift Investment Board waives a requirement. But it does nothing for another plan. Some notaries will officiate if the notary can see and hear the signer, handle documents safely, and use sensible ways to guard against a forgery or alteration. Nat’l Notary Ass’n, Important Coronavirus Guidance For Signing Agents And Mobile Notaries, https://www.nationalnotary.org/notary-bulletin/blog/2020/03/notaries-precautions-coronavirus

Finding a person who has obtained authority to receive a payment for a decedent’s estate might slow down paying a corrective distribution. Many people have so much property, including bank accounts and investment accounts, transfer by beneficiary designations, transfer-on-death, and other non-probate means, that no one seeks an appointment as a decedent’s personal representative, or even to use a small-estate regime.

A payer tax-reports a distribution (and withholds taxes from it) based on what the plan's administrator directed before the payer paid. A distributee's tax treatment of a distribution is between the distributee and the tax authorities.

Most service-provider businesses call it a FICA-alternative plan; an IRS publication calls it a FICA-replacement plan. Both labels refer to a plan meet to meet the rule I cited. This would be an alternative only if the employer is governmental.

QPAetc’s point is one a service provider might think about. Especially if the provider’s fees are charged to the plan and it’s impractical to charge the loaned-out participant’s portion against the accounts of other participants.

That the plan’s sponsor is defunct, or even legally dissolved, does not change the plan administrator’s responsibility to file an annual report. Or to engage an independent qualified public accountant to report on the plan’s financial statements. If the retirement plan’s administrator is a corporation, even a dissolved corporation has powers to wind up the corporation’s duties and obligations. If the plan’s administrator is in a chapter 7 bankruptcy proceeding, the chapter 7 trustee “shall continue to perform the obligations required of the [ERISA § 3(16)(A)] administrator.” Bankruptcy Code (11 U.S.C.) § 704(a)(11).

Leaving aside questions about whether the involuntary distribution is proper, why do you feel it would involve difficult administration?

An employer might want its lawyer’s advice about whether a coronoavirus-related distribution defeats the rule’s conditions for allocations no less than 7.5% of compensation and reasonable investment returns, and that the “plan is maintained to provide retirement benefits”. Internal Revenue Code 3121(b)(7); 26 C.F.R. § 3121(b)(7)-2(e).

Of the many requests for CARES Act instructions service providers send, some ask whether a plan’s sponsor prefers a halt on minimum distributions. Some ask that question even of a § 403(b) plan’s sponsor. Further, some ask the question without considering that the IRS-preapproved document the same service provider furnished makes clear that the plan imposes no involuntary distribution to meet a minimum-distribution requirement. 26 C.F.R. § 1.403(b)-6(e)(2) https://www.ecfr.gov/cgi-bin/text-idx?SID=927705f9b141c0337a5dd365003a368b&mc=true&node=se26.6.1_1403_2b_3_66&rgn=div8 26 C.F.R. § 1.408-8 https://www.ecfr.gov/cgi-bin/text-idx?SID=927705f9b141c0337a5dd365003a368b&mc=true&node=se26.6.1_1408_68&rgn=div8 Unlike most BenefitsLink posts, this one asks no question. I put it here only so those reading for CARES Act ambiguities see another point.

Larry Starr, while I too sometimes suggest not answering a question or resolving an ambiguity until one needs to, today’s question won’t wait. Even in ordinary plan administration, some fiduciaries communicate about a plan’s changed provisions without waiting for a rule-based time for a restated summary plan description or a summary of material modifications. My question arose in my work for an employer/administrator that soon will furnish its description of the plan’s coronavirus provisions. A participant might want to know when the $100,000/100% provision ends. And even if an administrator believes no one needs or wants to know, a description that omits a condition of a provision might be misleading or otherwise not “sufficiently comprehensive”. While it’s possible to describe this condition without stating a date, such a description might not “be written in a manner calculated to be understood by the average plan participant[.]” RatherBeGolfing thank you for your count.

The originating post mentions an Optional Retirement Plan and a State university, but does not say which State. That information might lead us to the ORP's provisions (a governmental plan's provisions often are set by State law), which would affect the reasoning, and might affect the answer.

CARES § 2202(b)(1) refers to a loan “made during the 180-day period beginning on [March 27.]” Of the many explanations law firms, accounting firms, retirement-services providers, and others have published, some describe the end of that period as September 23, and some say September 22. Many BenefitsLink mavens are careful about how to read a text, and about how to count things. What do you say: does the 180-day period end on September 22 or 23?