Peter Gulia

Bird, thank you for the clear and useful information. Other BenefitsLink mavens, would you like to confirm or deny?

Some individual-account (defined-contribution) retirement plans allow a participant a choice of taking a retirement benefit in periodic payments. Others provide a benefit is paid only as a single sum. Some reason that limiting payout options doesn’t harm participants because whatever one might choose in an employment-based plan’s payout options can be accomplished with an Individual Retirement Account or Annuity [IRA].) A recent Pensions & Investments article describes an Alight Solutions survey, which finds 57% allow periodic payments and 43% don’t. I haven’t read Alight’s report, but I guess the sample is larger plans. I wonder whether smaller plans have a different mix on allowing or precluding periodic payments. So informal survey: Do your clients’ plans allow periodic payments? About whether to allow or preclude payments, do most clients follow your suggestion?

Kevin C, thank you for the further information.

And 26 C.F.R. § 1.401(a)(9)-8 at Q&A-6 gives some details. https://www.ecfr.gov/cgi-bin/text-idx?SID=77332c4381a9782a72be8f1031b7e4b1&mc=true&node=se26.6.1_1401_2a_3_29_3_68&rgn=div8

Whatever tax law (including an IRS nonenforcement policy) might provide about a plan’s tax treatment, it doesn’t end an employer’s exposure to providing the benefit the written plan promised. Yet some employers might hope one’s employees and former employees remain unaware of what they were promised.

Pam Shoup, thank you for this helpful body of information.

Thank you for the further information. But would Millennium or another provider accept a payment if it is not an eligible rollover distribution (because, for example, it is a minimum distribution)?

ESOP Guy, thank you for the further information. BenefitsLink mavens, one of the issues I've been asked to think about is whether it's prudent for a plan's administrator to engage the locator service once each year if the fees charged against a to-be-located participant's account would substantially reduce her benefit.

Kevin C, thank you for the helpful information. Does anyone have an experience with a client having the plan (rather than the employer) pay a locator service's fee? Does anyone have an experience with a client charging the locator fee against the account of the to-be-located participant?

It remains unclear how much effort a single-employer individual-account retirement plan’s administrator must put into finding another address for a participant if the administrator receives information suggesting that the participant no longer is at the address the participant furnished (and perhaps neglected to update). Administrators have expressed concerns that some EBSA examiners suggest unreasonable efforts. Some of the tension results because not all of an employer/administrator’s cost is visible as an expense. Of those service providers that offer § 3(16) services, do any of them offer the service of finding better addresses on “missing” participants? Does that service have a distinct fee, or is it embedded in an overall fee? If there is a distinct fee, is it charged against the account of the to-be-located participant?

The New York Times reports that the IRS would furlough about 52,000 workers. https://www.nytimes.com/2018/12/19/us/politics/government-shutdown.html?module=inline

chc93, Kevin C, and Bird, thank you for your helpful information.

A retirement plan's accounting and reporting year is the calendar year. The plan's administrator would like to file its report on 2018 as early in 2019 as it can. The administrator does not have its own filing credentials, and has in years past authorized its TPA to do the submission. Apart from the TPA's service availability, is there any about Form 5500 software that would make it impractical to file in January 2019?

It seems I assumed too much; Labor has an appropriation. Treasury does not.

During a “funding lapse”, EBSA staff would not work on discretionary rulemaking projects. For the proposed rule on “Association Retirement Plans and Other Multiple-Employer Plans”, comments are due December 24. During a shutdown, EBSA staff would not work on analyzing the comments and other steps the Administrative Procedure Act and other laws require for adopting such a rule. Different practitioners have different views about whether such a delay would be a good or bad thing.

Which governmental activities stop (or continue) during a U.S. Government shutdown? Here’s the Labor department’s plan: https://www.dol.gov/dol/Contingency_Plan.pdf And here’s the Internal Revenue Service’s plan: https://home.treasury.gov/system/files/266/IRS-Lapse-in-Appropriations-Contingency-Plan_Nonfiling-Season_2018-12-03.pdf Other plans: https://www.whitehouse.gov/omb/information-for-agencies/agency-contingency-plans/

Cloudy, what did the pension plan invest in that it matters whether an asset is redeemed or sold for money, or instead is delivered to a participant or to the employer (in a reversion of the plan's surplus)?

Larry Starr, Pam Shoup, and ESOP Guy, thank you for your further thoughts. And if anyone was wondering, I didn’t express any view. I did get the information I was looking for; thanks.

Belgarath, Bird, and CuseFan, thank you for the further thoughts. For an employer without an owner-dominated design, does a "what's in it for me" analysis include getting rid of responsibilities (except for remitting payroll contributions) for establishing and administering a plan? Or does an employer perceive those responsibilities as so light that getting rid of them doesn't matter?

RatherBeGolfing, thank you for your thoughtful perspective. BenefitsLink mavens, is the analysis different if the size and composition of the workforce makes it impractical to do an owner-dominated design?

An individual-account (defined-contribution) retirement plan doesn’t share longevity and mortality risks. So that aspect isn’t a reason to organize a plan around a particular employer. A recent survey suggests about 60% of those employers that maintain a retirement plan would drop it if a government-organized plan were available. https://www.pionline.com/article/20181210/PRINT/181219911/survey-dc-execs-would-end-their-own-plan-for-a-state-plan?newsletter=defined-contribution-digest&issue=20181210#utm_medium=email&utm_source=newsletters&utm_campaign=pi-defined-contribution-digest-20181210cci_r=145845 Regarding many of the employers, a government-organized plan should have better scale and purchasing power to get services. And for many participants who would have been in micro or small plans, one’s expense for investment funds should be no worse (and might be better). Setting aside one’s personal interest in continued business or employment, what are the arguments for and against government-organized plans as an alternative to employer-organized plans?

Under many States' laws, a governmental employer might lack power to provide a contribution beyond salary-reduction contributions. If questions of that kind are beyond your engagement scope, consider whether it serves your interests to suggest that the governing body get its lawyer's advice.

For extra comfort, a business owner might consider asking his or her estate-planning lawyer to read these plan and trust provisions, and might consider referring to them in his or her will. Doing so might in some circumstances help answer a question about whether a decedent's estate's personal representative has some responsibility.

Providing for an orderly succession in fiduciary roles—including not only a trustee but also a plan’s administrator (especially if the trust provides the trustee is directed)—seems wise. Revenue Procedure 2017-41 states: “[T]he following types of amendments will not cause a plan to fail to be identical to a Pre-approved Plan and, thus, will not result in the [adopting] employer losing reliance on the [IRS’s] Opinion Letter: . . . Amendments to the administrative provisions in the plan . . . [if] the amended provisions are not in conflict with any other provision of the plan and do not cause the plan to fail to qualify under [Internal Revenue Code] § 401.” Many pages later, the Revenue Procedure states: “Administrative provisions include the allocation of responsibilities among fiduciaries [and] the resignation or replacement of fiduciaries[.]”

I have worked many times on plan designs that involve allocation conditions of these kinds. Consider whether your client's desired provision would fit within the IRS-preapproved documents your client would use. Or if not, consider whether your client likes its desired design enough to spend incremental money on documenting and explaining the provisions.