Peter Gulia

RBG and others in this conversation, I hope you can answer a point of my curiosity: When a plan’s fiduciary is reluctant to open a separate bank account for the plan’s trust, does that happen because the fiduciary perceives that the employer would bear the fees of the plan’s account?

Counts VIII and IX in the second amended complaint in Cassell v. Vanderbilt University assert fiduciary breaches and prohibited transactions based on allegations that the plan’s fiduciaries allowed TIAA to use participants’ information for purposes beyond performing or providing TIAA’s recordkeeper services. But what if the retirement plan’s fiduciary: evaluates the communications and disclosures about the budgeting service, and finds they fairly describe the service, its fees, and its risks; evaluates the budgeting service, finds it is not inherently dangerous, and finds that an unknowledgeable person can make his or her own evaluation of the service; negotiates a recordkeeping fee that reflects an expert’s report on the value of allowing access to the participants for cross-selling; and discloses to participants that the fiduciary made this deal to lower participants’ expenses, and communicates to them that they must carefully evaluate the budgeting service for themselves. Could facts like these set up an explanation that a fiduciary acted loyally and prudently?

TaxLawyer1978, while I don’t give you or anyone advice, consider whether there might be some arguments in another direction. A Federal income tax rule suggests arguments that a self-employed individual is an employee for a year in which she has any earned income, and also for a year in which she rendered some personal services (even if her business provided her no earned income): (b) Treatment of a self-employed individual as an employee. (1) For purposes of section 401, a self-employed individual who receives earned income from an employer during a taxable year of such employer beginning after December 31, 1962, shall be considered an employee of such employer for such taxable year. Moreover, such an individual will be considered an employee for a taxable year if he would otherwise be treated as an employee but for the fact that the employer did not have net profits for that taxable year. Accordingly, the employer may cover such an individual under a qualified plan during years of the plan beginning with or within a taxable year of the employer beginning after December 31, 1962. 26 C.F.R. § 1.401-10(b)(1) https://www.ecfr.gov/cgi-bin/text-idx?SID=2ed955aaf30998b5f81b0ccb8bd185b9&mc=true&node=se26.6.1_1401_610&rgn=div8 And the rule doesn’t say ‘for IRC § 401(c)’; it says ‘for IRC § 401, which includes § 401(a)(9). The decision-maker would want to get into the details of the partnership agreement and the partnership accounting to discern whether the 70-something really is a partner. And did he render some personal services? Did he at least make a few courtesy calls to placate clients? If we were debating whether an employee has a severance-from-employment to permit a distribution a plan otherwise would not provide, some (perhaps including the IRS) might argue that part-time work—even a substantial reduction “in the number of hours that an employee works”—is not a severance. See, by analogy, 26 C.F.R. § 1.401(a)-1(b)(3). I don’t suggest these arguments resolve all questions or even lead to a sound conclusion. But a plan’s administrator might get its lawyer’s advice and find there’s enough to support an interpretation that the plan doesn’t compel a minimum distribution.

I sometimes encounter similar questions in contexts about nonowner workers. Perhaps BenefitsLink mavens will help me with some reasoning. If a retirement plan’s administrator were deciding this question about a nonowner, how would we analyze whether a part-timer is “retired”? If someone works one day a month, is she retired? Or does any work at all mean the worker is not yet retired? Does the analysis vary based on whether our question is: Whether the participant has “retired” enough that the plan’s IRC § 401(a)(9) provision compels a distribution? Whether the participant has a severance-from-employment to permit a distribution the plan otherwise does not provide?

ldr, your client might want your advice about how to write the plan's document to express the profit-sharing contribution's allocations.

The 2014 hyperlinks no longer point to the sources described. The court decision is available in Bloomberg BNA's Employee Benefits Cases and in Bloomberg Law. Melendez v. Hatfield’s Equip. & Dedication Servs., Inc., No. 1:13-cv-03684-ELH, 59 Empl Benefits Cas. (BNA) 1637, 1641, 2014 BL 223275 (D. Md. Aug. 12, 2014) (The complaint did not sufficiently allege facts that, if proven, could show that an English SPD was not understandable to “average” participants. 29 C.F.R. § 2520.102-2 refers not to what language a participant speaks; but rather to whether participants read a language other than English and do not read English. “Although [the plaintiffs] allege that they are ‘40 Spanish-speaking employees’ whose ‘first language’ is Spanish, the Amended Complaint contains no allegation regarding the number of total plan participants, the percentage of total plan participants who are only literate in Spanish, or even that they are only literate in Spanish. Accordingly, the facts alleged in the Complaint, taken as true, do not state a claim for relief.”) (emphasis in original). What written and oral communications beyond English a plan's fiduciary ought to provide to meet ERISA fiduciary duties and other duties or obligations is a fact-sensitive question.

Even if a plan’s fiduciaries have reduced their risks of liability (and the plan’s obligation regarding a mistake) to none, is it still worthwhile to reduce further a risk that a plan acts on a false document (if it’s feasible to do so with almost no incremental plan expense)? If so, is my idea about a little delay, communication, and time to respond an effective way to get someone else’s check against a false document? Is there some reason it’s a bad idea?

And ERISA § 206(d)(3)(G)(ii) states: “Each plan shall establish reasonable procedures to determine the qualified status of domestic relations orders[.]” (The statute doesn’t say the procedures must be written, only that the plan must somehow “establish” them.) If an administrator uses written procedures, the administrator might consider whether the procedures document should describe (or deliberately not describe) what kinds of evidence the administrator uses to consider whether a document submitted is a court’s order.

I wanted to remind myself about the standards ERISAAPPLE mentioned, so here’s two points: ERISA § 206(d)(3)(I): “If a plan fiduciary acts in accordance with part 4 [“Fiduciary Responsibility”, ERISA §§ 401-414] of this subtitle in—(i) treating a domestic relations order as being (or not being) a qualified domestic relations order, or (ii) taking action under subparagraph (H) [to separately account for amounts that might be due an alternate payee], then the plan’s obligation to the participant and each alternate payee shall be discharged to the extent of any payment made pursuant to such Act [ERISA].” ERISA § 404(a)(1)(B): “[A] fiduciary shall discharge his duties with respect to a plan . . . with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims[.]” How does this change any preliminary thought about which steps might be prudent or imprudent in discerning whether a writing is an authentic court order?

Whether it’s forgeries of purported death certificates or of purported court orders, that people present forgeries is a continuing problem in administering retirement plans. Let’s extend EHE’s survey. Imagine a plan administrator’s QDRO procedure does these things: It deliberately delays a decision on whether an order is a QDRO until at least 31 days after the date of the order. (Among other reasons, an administrator might set this to get some likelihood that times to seek whatever kinds of reevaluations the court might allow have expired.) It mails the decision to four persons: the participant, the participant’s representative (if there is one); the proposed alternate payee, the alternate payee’s representative (if there is one). It doesn’t separate the accounts or benefits until a month after a QDRO approval, allowing whoever might be harmed by a forgery (or some other defect) a little time to act on the situation. Would these procedures get some guards against forgeries?

Of the casualty claims (without a declared disaster) possibly allowable under the earlier deemed-need rule or under a "facts and circumstances" need, one wonders how many of them incorrectly state that the need cannot be relieved through insurance?

As one bit of information in a wide background to help you consider actuaries’ and lawyers’ advice about withdrawal liability to a multiemployer pension plan, consider the attached court decision. Among other findings, Judge Sweet found fault with the plan’s asymmetric use of a “Segal Blend” rate to assume for withdrawal liability a lower investment return than the plan and its actuary estimate for funding and other purposes. This is one of several cases in which a withdrawn employer challenges, on statutory and even constitutional grounds, a plan actuary’s use of differing assumptions about investment returns. The New York Times Company v Newspaper and Mail Deliverers Publishers Pension Fund.pdf

For employment-based retirement plans, changes made in response to the 2016 investment-advice fiduciary rule are likely to continue beyond the rule's legal effect. That was the theme of my CE session at last week's ASPPA Eastern Regional Conference.

About an individual-account (defined-contribution) retirement plan, does anyone have an experience with using annual or quarterly participant account statements in an effort to persuade the Internal Revenue Service that participants' true expectation was what those statements showed, and was not what the written plan and the summary plan description stated? If so, did it persuade the IRS?

The appeals court's March 15 decision vacates not only the 2016 investment-advice fiduciary rule but also the new and revised prohibited-transaction exemptions adopted in the same rulemaking. When the court's mandate issues next week, the Best Interest Contract Exemption no longer is available to anyone, including a person that is a fiduciary under the 1975 rule (if the statute is ambiguous and the 1975 rule is a permissible interpretation of the statute) or, more directly, the statute.

There’s really almost no doubt about the Labor department’s 2016 investment-advice fiduciary rule. At last week’s ASPPA Eastern Regional Conference, I said it was almost certain the Secretary of Labor would not seek a rehearing of the appeals court’s decision to vacate the rule and its related exemptions. Also, I mentioned both motions to intervene (by three States Attorneys General, and by the American Association of Retired Persons) and mentioned the possibility that taking time to decide the motions might slightly delay the court’s mandate. Yesterday, the court denied both motions. So, the court’s mandate to vacate the 2016 rule will issue next week. While the Secretary of Labor still has time remaining to petition the Supreme Court to review the appeals court’s decision, I believe the Secretary will not do so (and I’m unaware of any lawyer who thinks differently). Also, the Secretary has not asked the appeals court for a stay of its mandate. Larry Starr is right that the SEC’s April 18 vote was only to approve publishing three notices of proposed rulemakings. Developing a rule seems likely to take years. And a resulting rule could face challenges in courts.

Of the currently serving five Commissioners, two are Democrats, two are Republicans, and the Chairman is an Independent. In the April 18 meeting that concluded with a 4-to-1 vote for allowing proposed rulemakings to be published (which has not yet happened), everyone but the Commissioner expressed dissatisfaction with the content of the to-be-proposed rules.

Any thoughts? Without some auditing, how would a plan's fiduciary discern whether a recordkeeper's disclosures about the compensation its receives from investment funds is accurate?

Here’s an earlier discussion: https://benefitslink.com/boards/index.php?/topic/52446-personal-residence-hardship/&tab=comments#comment-227177 If the plan is ERISA-governed, a combination of ERISA § 404(a)(1)(A)-(B)-(D) exclusive-purpose, prudence, and obedience duties suggests a fiduciary ought to thoughtfully consider (while not causing the plan to pay or incur any more than “reasonable expenses”) the range of permissible interpretations to find one more likely than the others to be sound. If the plan’s administrator denies the claim, it should follow its claims procedure and, if not already in that procedure, anything required under ERISA § 503.

If there is no relevant court decision and no relevant administrative-law document that supports approving the claim, there also might be none that supports denying the claim.

While Federal gift tax and perhaps other gift and transfer taxes might be a concern for the person who gives his money to a non-spouse, is there anything about those taxes that might involve the plan or its administration? Or is the thought just austin3515's strong intellect?

MoJo, thank you for sharing two helpful stories.

If a recordkeeper’s compensation includes “revenue sharing”, 12b-1 fees, shareholder-service fees, or other compensation from investment funds, a sponsor/fiduciary’s informed approval depends on complete and accurate information about the compensation the recordkeeper receives from the investment funds. Does anyone use a CPA firm or other means to test the accuracy of a recordkeeper’s reporting or disclosures about compensation from investment funds?

What some employer/administrators don't like about the recent claims-procedure rule is a duty to explain a claim denial that varies from another's decision or view. If an employee-benefit plan's provision and procedure is to follow a Social Security decision, that burden doesn't apply.

Kevin C, I likely never knew whether the recordkeeper’s preapproved document had a provision of the kind you describe. (My client limited my scope. And although I sometimes volunteer work beyond what my client will pay for, I remember that project having such a harsh time pressure that I wouldn’t have taken time to read the document, or to think about any potential inconsistency with the tax-law rules mentioned above. My scope did not include considering whether the plan was tax-qualified, even in form, and did not include representation before the Internal Revenue Service.) But one imagines a preapproved document likely included such a direct-rollover provision. Perhaps the IRS’s reviewer didn’t see the inconsistency some BenefitsLink mavens see.