Peter Gulia

The preceding post describes that ERISA governs a plan that is "established or maintained" by an employer. But, even if so established or maintained, ERISA does not govern a governmental plan. Likewise, ERISA does not govern a church plan unless the plan affirmatively elects to be governed by ERISA. Consider also that a plan someone assumed was not governed by ERISA was governed by ERISA.

Without disagreeing with the other observations: If one is considering contributing property other than money, here’s a list of prohibited-transaction exemptions for an “in-kind” contribution to a pension plan. PTE 2017-02 Aon Pension Plan (LP interests) PTE 2016-08 Baxter International Inc. (stock) PTE 2015-21 Idaho Veneer Company/Ceda-Pine Veneer, Inc. Employees’ Retirement Plan (real property) PTE 2015-16 Red Wing Shoe Co Pension Plan for Hourly Employees, Red Wing Shoe Co Retirement Plan & S.B. Foot Tanning Company Employees’ Pension Plan (stock) PTE 2015-07 Rock Wool Manufacturing Company Salaried Retirement Plan (real property) PTE 2014-10 Family Dynamics, Inc., Pension Plan (notes) PTE 2014-06 AT&T Inc. (together with AT&T Inc.’s Affiliates, AT&T) (preferred membership interests) PTE 2014-02 ABB Inc. Cash Balance Pension Plan; Cash Balance Pension Plan for Certain Represented Employees of ABB Inc.; Pension Plan for Employees of the Process Analytics Division of ABB Inc. Represented by the Laborer’s International Union of North America, Local No. 1304; Pension Plan of Fischer & Porter Company; ABB Inc. Pension Plan (U.S. Treasury securities) PTE 2012-12 Weyerhaeuser Company and Federalway Asset Management LP (assets) PTE 2012-06 Retirement Program for Employees of EnPro Industries (GIC) PTE 2012-01 The Kemper Corporation Pension Plan (stock) PTE 2011-23 Bayer Corporation (U.S. Treasury securities) PTE 2011-13 Ford Motor Company (amendment to PTE 2010-08) (LLC interests, notes, warrants and stock) PTE 2010-12 Chrysler LLC (stock and note) PTE 2010-08 Ford Motor Co. (LLC interests, notes, warrants, and stock) PTE 2008-06 The Swedish Health Services Pension Plan (securities and mutual fund shares) PTE 2006-19 Kaiser Aluminum Corp. and its subsidiaries (stock) PTE 2006-03 The Zieger Health Care Corp. Retirement Fund (LLC interests) PTE 2005-05 RG Dailey Co. Inc. Defined Benefit Plan (stock) PTE 2005-04 Wheeling Pittsburgh Corp. (WPC) and Wheeling Pittsburgh Steel Corp. (stock) PTE 2005-02 Roy A Herberger Defined Benefit Pension Plan (stock) PTE 2004-08 Kinder Morgan Inc. (stock) PTE 2004-01 United States Steel and Carnegie Pension Fund (timber rights) PTE 2003-26 Northwest Airlines Pension Plan for Salaried Employees et al (stock) PTE 2002-24 Carl Mundy Jr Defined Benefit Plan (stock) PTE 2000-40 Washington County Hospital Association Employees Cash Balance Plan (securities) PTE 1998-51 US West Inc. et al (stock) PTE 1998-02 First Bank System Personal Retirement Account (interests) PTE 1996-77 Mewbourne Oil Co. Inc. Plan (securities) PTE 1996-21 WW Taylor Jr MD PC Money Purchase Pension Plan (securities) The hyperlinks lead, in series, to the Federal Register notices. Reading these can help a practitioner discern conditions the Labor department likely would require. If the business owner can sell his securities, why wouldn’t he?

Here’s a quotation from the statute: If some or all of the information necessary to enable the administrator to comply with the requirements of this title [I of ERISA] is maintained by an insurance carrier or other organization which provides some or all of the benefits under the plan, or holds assets of the plan in a separate account, . . . such carrier [or] organization . . . shall transmit and certify the accuracy of such information to the administrator within 120 days after the end of the plan year[.] ERISA § 103(a)(2)(A), 29 U.S.C. § 1023(a)(2)(A). https://www.govinfo.gov/content/pkg/USCODE-2017-title29/html/USCODE-2017-title29-chap18-subchapI-subtitleB-part1-sec1023.htm

loserson, thank you for your further observations. Those points (and more) were in my advice.

Thanks. The plan's sponsor is the trustee. They tried to get a bank or trust company to serve, but none wants this plan's business. (There might be other reasons for that.)

loserson, it's not about incremental expense in processing checks rather than direct deposits. Rather, a retirement plan's sponsor has had some bad experiences with a distributee presenting the same check twice. While one would like to think the plan trustee's drawee bank should charge its drawer's (the trustee's) bank account only once, what I heard is that it's not so easy. (My task does not include getting into the negotiable-instruments and payments law.) The idea is that direct deposits might decrease the frauds.

If your client considers a combined form to name a beneficiary for two or more plans, suggest your client consider which plans require, as a condition for an effective designation of a beneficiary other than the participant's spouse, a qualified election and spouse's consent . If not all plans are the same, a combined form should explain which plans require a spouse's consent (or other condition), and which plans do not provide such a requirement. Also, consider that no matter how carefully a form explains this point, some aliterate participants might mistakenly assume that a spouse's-consent condition, perhaps including an appearance before a notary, is required even when it isn't.

loserson, thank you for your helpful observations. No one is yet doing anything. And it isn’t my idea. Rather, a business wants to evaluate the idea. (I understand that some find the idea unseemly. I often give clients business, practical, and even moral advice that goes beyond technical legal advice.) Thank you for your pointer about 26 C.F.R. § 1.411(a)-11(c)(2). But doesn’t -11(c)(4) make a consent unnecessary once the participant has attained the later of age 62 or normal retirement age? My query isn’t about a fiduciary interfering with a participant’s right to get what the plan provides; rather, it’s about what the plan provides. The key question is whether a plan’s proper provisions may limit the manner of payment. Or whether a participant somehow has a right that the plan’s manner of payment not be too burdensome. Again, it’s just an idea. These BenefitsLink thoughts might persuade a business to abandon the idea.

Kevin C and FPGuy, thank you for your observations. Even when a plan’s sponsor and the plan’s administrator are the same person, ERISA sets a distinction between creation and fiduciary roles. An administrator administers the plan on the governing documents delivered to the administrator. A plan’s sponsor creates a plan without an ERISA fiduciary’s responsibility. The statute tells a plan’s administrator not to follow a document’s provision to the extent that it is inconsistent with ERISA’s title I or title IV. But I don’t see in those statutes a specific command about a retirement plan’s manner of payment. Thank you for helping me think about whether a plan’s provision might be a claims procedure that might inhibit or hamper the initiation or processing of a claim for the plan’s benefit. A Federal court might treat a complaint about a default IRA as implausible if the complaint suggests the plan specified or the fiduciary selected the IRA following 29 C.F.R. § 2550.404a-2(c). And an IRA’s holder can exit the IRA whenever she wants to. In my experience, financial institutions’ systems designed to look for a taxpayer identifying number will process any kind—SSN, ITIN, EIN—that could be an IRS-assigned number. One who lacks a Social Security Number can get an Individual Taxpayer Identification Number.

Kevin C, jpod, and David Rigby, thank you for your helpful thinking. Just to consider the idea in a way that might bypass a no-bank-account problem, imagine this: The plan provides a normal-retirement-age distribution that is logically consistent with ERISA § 206(a) and IRC § 401(a)(14), and always results in a distribution no later than age 69. The plan does not allow a participant to delay the distribution. (Just for discussion, let’s leave aside the problem of what provisions to make for later accruals.) The plan provides that a failure to furnish sufficient direct-rollover or direct-deposit instructions is a deemed election of a rollover into a default Individual Retirement Account. Would this result in a regime under which (leaving aside a 70-something’s accruals) the plan’s administrator never need write a check? Would it work?

A retirement plan's sponsor would like to amend its ERISA-governed plan to restrict distributions to preclude a check and allow only a direct deposit to a distributee's bank or other financial institution account? Would such a provision be contrary to any required provision of ERISA's title I? Would such a provision tax-disqualify the plan under Internal Revenue Code section 401(a)? Why?

If plan-administration expenses are properly chargeable against the plan’s assets: If an individual-account retirement plan’s documents provide for the allocation of expenses among participants’, beneficiaries’, and alternate payees’ accounts, those plan provisions are part of defining the benefit under the plan. To the extent that a plan’s governing documents do not provide a specific allocation of expenses among individual accounts, the plan’s administrator must decide the expense allocation in its discretion. ERISA provides general fiduciary principles, but does not provide express rules for how plan expenses may be allocated among participants and beneficiaries of an individual-account retirement plan. Therefore, a plan’s administrator has considerable discretion to decide how plan expenses are allocated among individual accounts. Obeying ERISA duties, a plan fiduciary must be prudent in selecting a method of allocation. Prudence requires at least a process by which the fiduciary considers the competing interests of various classes of the plan’s participants and the effects of various allocation methods on those interests. The Labor department’s internal guidance—EBSA Field Assistance Bulletin 2003-3—suggests “[a] per capita method of allocating expenses among individual accounts ([that is], expenses charged equally to each account, without regard to assets in the individual account) may also provide a reasonable method of allocating certain fixed administrative expenses of the plan, such as . . . auditing . . . and similar administrative expenses.” https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2003-03 It’s not obvious whether “pro rata” or “per capita” is a fairer allocation of charges for an independent qualified public accountant’s fee. I’ve had clients with reasoning for both views.

If you want to read the letter-ruling request and the full facts, presumably including the retirement plan’s documents, consider requesting (under the Freedom of Information Act) the whole administrative record. The Internal Revenue Service likely would redact some information that identifies the applicant, other taxpayers, and other people. (In my experience, the IRS redacted more than I asked for.) But the redactions shouldn’t impede getting the information you’re looking for.

Below Ground, thank you for your thoughtful and thorough response, and especially your explanation about ways to set a default allocation.

Does anyone deal with a situation in which the plan's administrator allows an affected participant to specify, before a due date, whether her corrective distribution is allocated to non-Roth or Roth? Is this feasible for a plan that has only a few highly-compensated participants? (The administrator would set the participant's due date a week or two before the date on which the administrator would instruct the corrective distributions.) Or even with only a few affected participants, is it too much work?

Even if nothing in ERISA or other law requires such a notice to participants, a recordkeeper's or other service provider's agreement might set some notice to the service provider before it is obligated to perform its service about the added investment alternative.

Returning to my curiosity about whether a plan's sponsor might balk at spending $$ on documenting a terminated plan, am I right in guessing that a service provider's fee for the restatement or amendment might be so modest that I'm imagining a nonproblem?

While the IRS's website guidance is not authoritative, some might consider its explanation. https://www.irs.gov/retirement-plans/terminating-a-retirement-plan

A curiosity: For those situations in which a practitioner suggests restating or amending a terminated or discontinued plan, how often does a plan's sponsor say it is unwilling to pay $$ for that work or document? If the plan's sponsor declines, do you just document that you rendered the advice? Or is there something more to do?

If there was a payment to a payee other than the participant and that payment is not explained by a death, QDRO, other court order, IRS levy, or direct rollover to an eligible retirement plan, do those facts suggest the plan's administrator and the paying or processing service provider should evaluate controls?

Just a point of curiosity: If the data about participants is the employer’s data, what distinct source of information (if any) does an independent qualified public accountant compare that data to? Or if the only data is the employer’s data, what methods does an IQPA use to find an incorrect entry in the employer’s records?

Last week, a court vacated the Labor department’s rule to interpret whether an association acts “in the interest of an employer”. But one imagines the Government will appeal that decision. Support for, or opposition to, the association health plans rule has a political divide. Republicans like a rule that could help businesses and workers avoid the Affordable Care Act’s small-group and individual health insurance markets. Democrats dislike a rule perceived as weakening the Affordable Care Act’s reforms. Could retirement plans legislation—if it includes provisions for association, professional-employer-organization, or other multiple-employer plans—invite politicking that reflects a proxy battle about association health plans?

What are the odds-makers saying about the probability that a bill of this kind would be enacted in 2019 (or early 2020)?

For 2017 and earlier years, were the plan's annual reports on the cash-receipts-and-disbursements method of accounting or an accrual method of accounting?

We’re no longer issue-spotting to help RatherBeGolfing, who let us know the situation is out for advice. Recognizing instead a professional-interest discussion, here’s another issue: Even if a plan’s administrator receives evidence from which the administrator finds a claimant (or a person identified by a claimant) is the participant’s child, how does someone prove the number of the participant’s children. Or how does someone prove the non-existence of any more children than already are identified to the administrator? Using the situation described above as a hypo, how does a plan’s administrator know that the two persons identified are the only children? If the plan pays a claimant 50% of the account, what responsibility applies about an overpaid 30% if later it is found that there are five children? If a plan’s administrator engages an heir-search service, is that fee a “reasonable expense[] of administering the plan” within the meaning of ERISA § 404(a)(1)(A)(ii)? In what circumstances is it prudent to incur the fee? In what circumstances is it imprudent to incur the fee? And if the expense is proper and prudently incurred, may a plan’s administrator allocate that expense against the account of the participant who made the expense necessary?