Peter Gulia

If your client wants an IRA asset not to be counted for one or more Medicaid purposes, a relevant measure might be none of the tables established for minimum-distribution rules under Internal Revenue Code of 1986 § 401(a)(9) and provisions that refer to it. A State’s Medicaid program might use different rules and measures for how much one may, must, or must not receive from a retirement account. Some of Medicaid’s law is Federal law, and some is State law. You might find the law in a combination of statutes, rules or regulations, other administrative-law interpretations, and court decisions. The law varies considerably from State to State.

Luke Bailey, thank you for the further ideas.

CBZ and CuseFan, thank you for confirming I wasn’t overlooking an exception or excuse. CBZ, thank you for the helpful citation. The situation described above shows how a plan sponsor might needlessly burden itself by using a preapproved document without getting advice about provisions a user might change or delete. The plan-document sentence quoted above might be an “administrative provision” a user might delete without losing reliance on the IRS’s opinion letter. Had it been deleted, the plan’s administrator might undo the prohibited transactions without also needing an IRS correction procedure for a qualification failure.

An individual-account § 401(k) retirement plan provides participant-directed investment. Following participants’ directions, the plan’s trustee engages in transactions with a party-in-interest. No exemption applies, and there is no doubt these are prohibited transactions under ERISA § 406 and Internal Revenue Code § 4975. Yet these transactions are not necessarily an IRC § 401(a)(2) exclusive-benefit violation. Among other facts, each investment has an above-market return, and the plan’s counterparty has strong creditworthiness and liquidity. The plan’s governing document includes this: “The Trustee shall not engage in any prohibited transaction within the meaning of the Code and ERISA.” Does something that might not have tax-disqualified a plan have that effect because the plan’s fiduciaries failed to administer the plan according to its governing document?

Revenue Ruling 2002-45 [http://www.irs.gov/pub/irs-drop/rr02-45.pdf] describes a restorative payment (the ruling’s antidote against counting an amount as a contribution) as a payment “made to restore losses to the plan resulting from actions by a fiduciary for which there is a reasonable risk of liability for breach of a fiduciary duty under title I of the Employee Retirement Income Security of 1974 (ERISA)[.]” Beyond the examples given in the ruling, the IRS in practice has treated a payment as restoration if the employer made a written finding that the selection or negotiation of the insurance or investment contract was (or might have been) a breach of the employer’s fiduciary responsibility, whether under ERISA or other law, and the finding is plausible. The Treasury department’s interpretation requires also that “participants who are similarly situated are treated similarly with respect to the [restorative] payment.” For a limitation year that began or begins on or after July 1, 2007, the ruling’s principle is included in the annual-additions-limit rule. 26 C.F.R. § 1.415(c)-1(b)(2)(ii)(C). https://www.ecfr.gov/cgi-bin/text-idx?SID=9ee62d943d4b498039cba586af9d3fc9&mc=true&node=se26.7.1_1415_2c_3_61&rgn=div8 The Treasury adopted my suggestion about looking beyond ERISA to other Federal law, and to State law. The key driver is that there is “a reasonable risk of liability”.

Imagine that a TPA has made the business decision, and a service agreement specifies the communications services the TPA provides (and, perhaps, a fee for those services). And assume the TPA prefers to avoid discretion and otherwise to provide services only as a non-fiduciary. In those circumstances, the TPA might prefer that a plan's administrator specify the methods the TPA uses to identify whether an inquirer is a participant. That returns to my question: What identifiers and methods might a TPA suggest?

For those TPAs that are or might become willing to talk with a participant: What identity controls might a TPA use to satisfy yourself that it's reasonable to believe an inquirer is the participant (or even a participant) rather than an impostor? Big recordkeepers use regimes of controlled identifiers, passwords, and other restraints. But which methods are feasible for a TPA? Are there software solutions that are useful to help a TPA check an inquirer's identity? (I'm not asking anyone to reveal a particular company's methods. Rather, I'm asking generally about what TPAs might do.)

Not necessarily. If a limited-liability company has established series, each series might have separate members, LLC interests, and other rights. Delaware_Code_title_6_section_18-215.pdf

A series limited-liability company is a company designed to avoid some inconveniences and expenses in registering and administering what otherwise would be many companies. Since the mid-1990s, business lawyers have used a series-LLC format. Don’t assume a company’s series have common ownership or otherwise fall into a § 414(b)-(c)-(m)-(n)-(o) group. Also, consider which series have employees, and which don’t. If Delaware law governs, consider that some new provisions take effect August 1, 2019.

jpod, returning to your query: Will the sponsor's desired design fit within the fill-in-the-blanks or further specifications allowed for the preapproved document the sponsor uses? If not, will the sponsor pay for whatever document variation is needed?

The January 10, 1975 temporary rules for ERISA § 412 (using rules made for § 13 of the Welfare and Pension Plans Disclosure Act of 1958) do not directly control how to respond to a Form 5500 query. Yet in evaluating the strengths and weaknesses of different reporting positions one might consider those temporary rules (to the extent a rule is consistent with ERISA § 412). If I were writing a memo and had research time to spend, I might research several sources, including the Federal Register notices about the development of Form 5500. Without research, I might consider reporting the beginning-of-year coverage because that reporting would allow the Labor department to check, using only Form 5500 data, whether the coverage amount likely met the ERISA § 412(a) minimum. Given the question’s ambiguity, several different good-faith reporting positions might be defensible.

The cited rule was published in 1976. The Revenue Ruling cited in the rule was released June 11, 1976. Strictly speaking, the rule's text about 1,000 hours in a computation period refers to a year of service, for eligibility or vesting, or a year of participation for an accrual. The cited rule does not directly constrain a profit-sharing plan's allocation condition. But in the inquirer's circumstances, which include an IRS examination, it might be unwise to push the 1,300-hours point, especially if the employer/sponsor might accomplish much of its business purpose using a combination of a 1,000-hours condition and a last-day condition.

Beyond the Government Publishing Office: If you want the older sources in convenient bound volumes with CCH's finding lists, indexing, keying to CCH Pension Plan Guide, and other editorial enhancements, CCH in 1989 published "Pre-1986 IRS Revenue Rulings" and "Pre-1986 IRS Tax Releases Other Than Revenue Rulings". There are second-hand dealers who sell these.

Consider this rule and the several statutes' sections and other rules this cites: https://www.ecfr.gov/cgi-bin/text-idx?SID=55842d869c1e469dad9d00e37cea9aff&mc=true&node=se29.9.2530_1200b_61&rgn=div8 Consider also whether imposing as allocation conditions not only 1,000 hours in the year but also a last-day condition might help accomplish some of what the sponsor seeks. But also test it for coverage and non-discrimination.

With a lawyer-client relationship and more facts, I might be inclined toward that view. But if I were to express it in a social-media forum, I'd have liability exposure and might breach a statement made to my malpractice insurer.

You might want your lawyer’s advice about: whether reporting the circumstances to your liability insurer is your obligation under your contract, or is only a condition for coverage; what after-the-fact notice or written explanation might make sense; whether to offer to adjust the affected participant’s account for some investment-direction opportunity she claims she missed because she lacked notice of the blackout; the exact meaning of Form 5500 Schedule I item 4n’s query and the instruction for it, and whether a proper response is Yes or No; if that response is No, whether a written explanation attached to the Form 5500 report might be helpful or harmful. How those and related points play might affect how likely it is or isn’t that the Secretary of Labor becomes aware of the failure, or assesses an ERISA § 502(c)(7) civil penalty. If you get Labor’s notice of intent to assess a penalty, observe that 29 C.F.R. § 2560.502c-7(d)-(e) allows not assessing the penalty if the Labor department is persuaded by your reasonable-cause explanation.

If a QDRO would pay the alternate payee 100% of the participant’s benefit, how close would that come to the value your client would negotiate for her marital property interests in her spouse’s pension right and the company’s right to a reversion from the pension plan’s surplus? Could your client be better served by negotiating for a payment from property other than the pension plan? Could doing so get a quicker payment? Might it get a no-worse or better tax treatment?

And consider that a governmental plan might have provisions stated through statutes, administrative-law rules and interpretations, court decisions, and other sources of State and local law.

About records retention, there is no one uniform answer that is right for every service provider. Here’s a list of some questions I ask when I design a TPA’s, recordkeeper’s, or similar service provider’s records-retention/destruction plan: How often does it happen that a client’s question, worry, or request, or the business’ response, is in e-mail and is not fully described in other writings? Does the business want to be ready to save a client from the client’s failure to keep a record it ought to have kept? Does the business or an affiliate sometimes offer services as a § 3(16) administrator? a plan’s trustee? an investment manager? Does the business or an affiliate sometimes offer banking services? insurance-agency services? securities broker-dealer services? commodities dealer services? investment-adviser services? Has the business made any agreement with another service provider or a financial-services business? Read each of those agreements to find records-retention obligations. Does any record about a client ever get used in evaluating an employee’s job performance? In how many States are the clients located? Considering the business’ usual forms of service agreements, do they always, often, seldom, or never specify which State’s law governs the agreement? Considering the business’ usual forms of service agreements, do they always, often, seldom, or never specify a time limit on claims against the service provider? How often does the business face subpoena and other document-production demands? Does the business charge a client expenses, fees, or both for a document production?

If one uses a warning that an e-mail or some other writing must not be relied on, at least remove from it anything that says or suggests that the Treasury department or the IRS requires the warning. The IRS now treats such a statement as false or misleading.

What is the administrator's work method for reading each Form 5500 report to decide that the report is complete, accurate, and correct?

QDROphile describes smart concerns, and a plan can’t completely solve them. But one partial effort to help negotiators spot issues is this: Among other conditions that are tighter than the QDRO regime, a plan-approved domestic-relations must expressly state: that the court made its order after all litigants informed the court they had considered all non-U.S. taxes, all Federal taxes (including income, FICA, FUTA, estate, gift, transfer, and excise taxes), and all State and local taxes; that nothing in the order can alter an employer’s or other payer’s duty to withhold taxes and to tax-report information as required by law.

Some speakers sound an optimistic note because the speaker or her client has a business interest in having an audience perceive some realistic chance for this legislation. But as little as one spoiler can kill a bill. Just to pick one example: Chairman Neal stripped out of the bill a provision that would make homeschooling expenses a § 529-qualified expense. House Democrats wanted to quiet objections from public-school teachers. A Senator who supports homeschooling might insist that a Senate bill include the dropped provision. Under the Senate’s rules and customs, even one objection could derail a bill from getting a vote. Or if a bill includes this or another Republican provision passes the Senate, it could force a reconciliation showdown that might make it too difficult for both bodies of Congress to pass the same bill. The Groom article seems right in suggesting the best hope for those who favor SECURE/RESA legislation is a tuck-in with whatever appropriations, budget, or debt-ceiling legislation Congress perceives as must-pass.

Let's thank Luke Bailey for an interesting idea. Would a plan amendment of the kind described be a satisfactory correction if the plan's administrator had applied the wait to other participants who, but for the wait, were entitled to a distribution?

I confess a lack of experience about life-insurance plans. Employers seem to fall in with an insurer’s contracts, without an employee-benefits lawyer’s advice. About deferred compensation plans, here’s some practical suggestions: If a plan is not governed by ERISA § 206 and does not provide for recognizing a State court’s domestic-relations order, consider the many ways in which an employer or administrator might incur expenses to resist efforts to get the plan or the obligor to recognize a non-participant’s right. Then, the plan’s sponsor might consider whether all or some of those expenses should be a subtraction from the participant’s account, right, or benefit. In my experience, few employers beyond governments and churches will commit even-handed and sustained attention to resisting domestic-relations orders. For select-group and other deferred compensation plans not governed by ERISA § 206, I’ve had successes with plan provisions that recognize only a plan-approved domestic-relations order (with a definition that avoids the QDRO label) under conditions that avoid some weaknesses of the QDRO regime and do more to protect the employer, “rabbi” trustee, and administrator.