Peter Gulia

And if you seek information about law and enforcement beyond tax law, the second-best source (if you don't engage Carol Calhoun) is chapters 7-9 in her Governmental Plans Answer Book.

If the worry is that a distribution other than a hardship distribution might reduce a net payment (after withholding toward Federal, State, and local income taxes) to less than an amount the participant needs to meet an expense, wouldn't the participant claim a bigger amount (up to the available subaccount balance)?

Beyond considering what gets an employer some reliance under an IRS procedure, a TPA might consider which business practice protects the TPA. If I understand TPApril’s originating query, a TPA might draft an amendment using neither the predecessor TPA’s preapproved-documents set nor the successor TPA’s preapproved-documents set. If so (and assuming the TPA is not admitted to law practice, and would not present the amendment in any submission to the Internal Revenue Service), could drafting such an amendment be the unauthorized practice of law? Even if one assumes no prosecution, should a TPA worry that, under the TPA’s errors-and-omissions insurance contract, the unauthorized practice of law is not within the professional services insured or fits an exclusion (perhaps for a crime or another violation of law)? Conversely, if a TPA is an authorized representative of the sponsor of the preapproved-documents set the TPA works with, might proper use of that set be within the sponsor’s practice before the Internal Revenue Service? (Under the U.S. Constitution, a State cannot forbid what Federal law authorizes.) Might avoiding risks with the TPA’s insurance coverage be a reason not to draft an off-system amendment?

RatherBeGolfing, thank you for your profoundly helpful thinking!

Yes. Under the existing-law rule or the proposed rule, a fiduciary is at least permitted to attach a document to an e-mail. My query was about whether there are reasons not to do so. The existing-law rule allows sending communications to a work e-mail address the participant is expected to check as a part of her regular work. It allows also using a non-work e-mail address if there is a clear affirmative consent. What some like about the proposed regime is that an employer can give its employee an e-mail address that need not be about work. And a participant’s assent would be inferred from the absence of an opt-out after notice. Under the proposed rule, an e-mail would point to a website from which the participant can retrieve the communication. I think it would be better for an e-mail to have both the pointer to a website and an attachment of the communication. If I were a recipient, I’d welcome the convenience of opening a document with a mouse click or two, and being spared the bother of entering a username, password, and other identifiers to go to a website, especially if I have no other purpose for using the website.

If the participant’s loan agreement mandates payroll deductions: While I’ve never rendered advice on this issue (and don’t now), I’ve heard the analysis go something like this: Obey the participant’s loan agreement, without exception if the State wage-payment law that governs the employer’s payment of the participant/employee’s wages allows an irrevocable authorization or does not make taking a payroll deduction without the employee’s authorization a crime. but allow a deviation if the governing wage-payment does not allow an irrevocable authorization and taking a payroll deduction without the employee’s continued authorization is a crime. ERISA § 514(b)(4): “[ERISA § 514(a)’s preemption] shall not apply to any generally applicable criminal law of a State.” https://www.govinfo.gov/content/pkg/USCODE-2017-title29/html/USCODE-2017-title29-chap18-subchapI-subtitleB-part5-sec1144.htm

And if you use those and other ideas, consider that a cash-balance defined-benefit pension plan might express an account balance only once a year.

My query did assume the communication would not have in it any addressee's name or other personal information. So I'll try inviting comment again: Is there a reason why a plan’s fiduciary should not attach to the e-mail message a .pdf of the document to be furnished? Or am I right in my working assumption that there's no good reason not to attach a .pdf (assuming a reasonable size)?

But a plan's fiduciary might be reluctant to instruct such a distribution if the beneficiary had not requested a distribution and the plan's governing documents do not provide an involuntary distribution.

Assuming there was no document that called for a fiduciary to do what the auditor suggests, among prudent responses to such a communication a plan's administrator might increase the care, skill, prudence, and diligence the administrator uses in its selection of an independent qualified public accountant.

Dalai Pookah, the description “ERISA Attorney” beneath your screen name suggests you might be a lawyer. If so, you might consider relevant States’ lawyers’ Rules of Professional Conduct. I say States’, plural, because a few States’ rules might apply. For example, a State’s law might apply because it is a State that admitted you to law practice, because your conduct occurred in the State, because your conduct affected a person who or that resides in the State, or because your conduct affected property in the State. If you are a lawyer but about the situation you described did no work as a lawyer, you might read each State’s rules carefully to discern which rules (within the State’s set of rules) apply. Some rules refer to “representing” (including advising) a client. Other rules lack such a reference and might apply because one is (or was) a lawyer, even if she never represents, advises, or otherwise serves any client as a lawyer. If your client did not use your services to further your client’s crime or fraud, States’ rules differ about whether one must, may, or must not reveal confidential information, which often includes information you learned through your role, even if the information is not a secret. If a rule applies to your conduct and you’re considering how it applies to the facts of your situation, you would think carefully about which person is (or was) your client. Is it the pension plan?, the plan’s administrator?, the plan’s sponsor?, the owner of the plan’s sponsor? Different answers to those who’s-the-client questions can lead to different analyses of the lawyers’ professional-conduct rules. If you follow the American Retirement Association’s Code of Professional Conduct, it allows a member to obey law (including, for example, a licensee’s conduct rules) that applies to the member. Feel free to call me if you’d like more thinking than is appropriate for a public website’s display. -------------------- BenefitsLink mavens: For a university’s LL.M program, I teach a course, Professional Conduct in Tax Practice, for “the three As”—attorneys, accountants, and actuaries. For ASPPA members, I lead CE/CPE/CLE ethics sessions. I’d welcome your thoughts to help my teaching. If an ASPPA or ARA member governed only by that Code of Professional Conduct is an owner or employee of a TPA firm, sees facts like those described above, did nothing to facilitate the crime or fraud, and lacks responsibility as a retirement plan’s fiduciary: May the member, without the principal’s permission, reveal the information? Or must the member treat the information as confidential information, and so not reveal it until “required to do so by law”? And for either (or another) answer, why?

While none of us knows the surrounding facts and circumstances of the situations bveinger describes: Whoever perceives a duty or obligation to decide something about a § 403(b) plan or § 403(b) contract might want to read carefully all the documents and get its lawyer’s advice about whether the plan or contract requires a distribution. A § 403(b) contract must meet § 401(a)(9) minimum-distribution rules. But in applying those rules to § 403(b) contracts, the minimum-distribution rules for IRAs apply. 26 C.F.R. § 1.403(b)-6(e)(2). An individual need not take a minimum-distribution amount from a particular contract; it is enough that one gets her required amounts from whichever of her § 403(b) contracts she chooses. A beneficiary may aggregate all § 403(b) contracts she holds as a beneficiary of the same decedent. See 26 C.F.R. § 1.408-8, Q&A-9. Because a plan’s administrator might not know whether a participant or a beneficiary has § 403(b) contracts beyond those held under the plan, some plans might not compel an involuntary distribution to meet a § 403(b)(1)/§ 401(a)(9) condition. bveinger, none of this is advice to you or anyone.

Mike Preston, thank you. Many people imagine tomorrow's proposed rule as about communications that lack an individual's information (and even nonpublic information of other kinds); but a fiduciary would want to use prudent care with a communication that includes sensitive information.

Other ideas?

C. B. Zeller, thank you.

As BenefitsLink this morning reported, tomorrow’s Federal Register will publish notice of a proposed rulemaking under which fiduciaries of an ERISA-governed retirement plan could furnish some ERISA-required communications under a notice-and-access regime with a notice that the communication is available at a plan-maintained website. Relying on the new regime would require, among other conditions, having an electronic address for the person entitled to the communication to be furnished. If that electronic address is an e-mail address (rather than a smartphone number): Is there a reason why a plan’s fiduciary should not attach to the e-mail message a .pdf of the document to be furnished? (One could do this besides posting the document on a website.) Is there ever a situation in which attaching a .pdf could be harmful to the e-mail’s addressee?

Each beneficiary might want her lawyer's information and advice about whether a treaty might allow a desired tax treatment. https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z

Before too hastily assuming an examination might find a written-plan defect under IRC § 125(d)(1) or another section of the statute, the employer and lawyer you describe might evaluate whether more than one document or writing states the written plan. For example, if the election forms and claims forms were sometimes revised, could those revisions have restated the written plan?

In my experience, a fiduciary might balance a retirement plan’s needs and interests in not “wiping out” low-balance participants while also not burdening high-balance participants more than is prudent. One way to do so is to allocate a portion of an expense on a by-accounts method and another portion on a by-balances method. What’s “fair” and prudent turns on the particular facts and circumstances. And a fiduciary must evaluate her decision considering only the retirement plan’s exclusive purpose, not her self-interest.

Some recordkeepers design systems to turn out Schedule C information without filtering it for any cutoff amounts. Some plan administrators choose to report more information than Schedule C requires. Again, all of us are imagining what might be involved in what WCC describes.

While the obvious is to ask the plan's administrator and its recordkeeper, your query invites speculation about possible reasons direct compensation might be reported with a negative amount. Could the plan's administrator (perhaps with guidance from an accountant, a recordkeeper, or another service provider) have been reporting Schedule C on an accrual basis of accounting? If so, could an adjustment, perhaps because the service provider was paid in an earlier year more compensation than the service provider was entitled to, explain the 2017 negative amount? Also, crediting indirect compensation against the plan's obligation to pay direct compensation and year-by-year variations and timing differences might sometimes result in a negative amount for the direct portion of a service provider's compensation.

Effen’s post suggests an observation: In the Retirement Equity Act of 1984, Congress assumed there could be situations in which a person “cannot” be located. In the early 1980s, it might have been burdensome and expensive (at least in some circumstances) to search a person’s potential whereabouts. While the law remains the same, perhaps the facts surrounding how much care, skill, prudence, and diligence a prudent fiduciary would use (or ought to use) have changed.

A few points one might consider in preparing to get advice. Before considering what evidence would support a finding, check first whether the plan provides a cannot-be-located variation. According to the Treasury department’s interpretation of not only Internal Revenue Code §§ 401(a)(11) and 417 but also ERISA § 205, a plan’s terms may permit a participant’s qualified election without his or her spouse’s consent if the plan’s administrator finds “that the spouse cannot be located[.]” ERISA § 205(c)(2)(B); 26 C.F.R. § 1.401(a)-20, Q&A 27. But not every plan so provides. In deciding whether to accept a participant’s statement that his or her spouse cannot be located, a plan’s administrator must act according to its fiduciary duties. ERISA §§ 206(c)(6), 404(a)(1). That includes no less care, skill, prudence, and diligence than would be used a prudent person who is experienced in administering a similar retirement plan in similar circumstances. And a duty to get expert advice if a prudent person would seek advice. At a minimum, meeting those fiduciary duties might require not relying solely on a participant’s statement if the fiduciary has information that would lead a prudent retirement plan administrator to question the truth, accuracy, or completeness of the participant’s statement. See, for example, Lester v. Reagan Equip. Co. Profit Sharing Plan & Emp. Sav. Plan, 91 Civ. 2946, 1992 U.S. Dist. LEXIS 12872, 1992 WL 211611 (E.D. La. Aug. 19, 1992). And an employer/administrator might not accept the participant’s statement without first checking the records of a health plan under which the spouse might be covered.

I presume your query is about a registered investment adviser and its fee measured on assets under management or advice. Law regulating investment advisers generally requires a written agreement. Just as many BenefitsLink commenters might say about a retirement plan, Read The Fabulous Document, to discern an investment adviser’s fee one might say, Read The Investment-Advisory Agreement. An agreement that anticipated the client’s investment in bonds might specify counting accrued interest. Or an agreement might specify that assets to determine the fee is measured by a custodian’s reporting or accounting. If there is an ambiguity in the client’s agreement with the adviser, some might look to some interpretation aids: Some might prefer an interpretation that is consistent with the adviser’s brochure or other disclosure over an inconsistent interpretation. Some might prefer a measure that does not involve the adviser’s discretion (if the discretion could allow the adviser to affect its fee). After considering the investment-advisory agreement, relevant law, and other interpretation aids, some might prefer a measure that is consistent with generally accepted accounting principles over one that is not. This is just some abstract thinking, not advice to anyone.

Thanks again. Does anyone have a document that affirmatively allows a user to provide arbitration? Does anyone have a document that is silent about whether arbitration can be provided or must be precluded?