Peter Gulia

I'll add that I was neither the applicant nor its representative for the Form 5307 application described above.

While I don't give you any advice, I invite you to consider this question: If one imagines a possibility that the physician might "certify" a plan-defined disability for anything fewer than 100% of the claims, who will do the work of the explanations and other claims-procedure steps the employer/administrator prefers to avoid?

In 2010, I wrote a provision that entitled a participant to an in-service distribution only if, among other conditions, “the Participant’s claim includes his or her instruction to pay the distribution as a direct rollover into an eligible retirement plan (including an IRA).” A Form 5307 application disclosed this provision as a variation from the preapproved document. With no question from the IRS, the applicant received its requested determination letter.

Beyond Flyboyjohn's point about circumstances that might not attract an excise tax under section 4980H of the Internal Revenue Code of 1986, the church might want its lawyer's advice about whether a provision or condition of a group health insurance contract (if any) obligates the employer to offer coverage to the employees asked about.

That a summary plan description produced using plan-documents software often doesn’t set up evidence of an intent or expectation different than the written plan was the subject of my article “Should we write the summary plan description before we write the plan” published in the July 2017 issue of 401(k) Advisor. 2017-06 Should we write the summary plan description before we write the plan.pdf

Thanks, RBG, Bird, austin3515, and AKconsult, for the thoughtful information. For a situation in which the trustee won't be a bank or trust company, do you suggest that the business owner accept or avoid a trusteeship? What factors play into which persons to set up as trustees?

RatherBeGolfing, thank you for the further information, especially about a choice between directed and undirected investment. If a sponsor selects the option to recognize a participant's domestic partner as though they were spouses, what provisions does that option invoke? Must a participant who has a domestic partner get the partner's consent to make a beneficiary that would provide a benefit other than to the partner? Does the option invoke any other provision? Now that every State that affords opposite-sex marriage must equally afford same-sex marriage, do sponsors ignore this domestic-partner option, or are there some that ask about it? Does the document permit a user to specify ranges of dates for when the domestic-partner provisions apply and don't apply? For example, could a plan specify that the domestic-partner provisions applied for deaths before August 1, 2016, and do not apply for deaths after July 31, 2016?

Your questions about risks illustrate some reasons why a church might want its lawyer's advice about governing-law provisions; exclusive-venue provisions; use of plan and church claims procedures, and internal dispute-resolution procedures; and restrictions on which persons are authorized to accept service of process.

Larry Starr, thanks for your good grace in engaging with the question. BenefitsLink mavens, I've heard that when a choice isn't directly considered some practitioners choose whichever provision the practitioner believes will incur a less or least expensive correction if the employer operates the plan differently than the written provisions. Is this a sensible work method? If so, how do you use it?

jpod, you're right that 30Rock's query and its assumed facts suggest a likelihood that the church plan's desired provision might have little practical impact, and so might be mostly about the church expressing a policy or belief.

Thank you for the helpful observations. A few specific questions: Do you explain the advantages and disadvantages of automatic-contribution arrangements? Do you talk about whether to allow or preclude participant loans? Do you talk about whether to allow or preclude hardship distributions? Do you discuss the several choices for service-crediting methods? If not, what information do you gather to discern which methods are the better fits for a particular employer? Do you usually discuss whether to include or exclude nonresident aliens? If usually you don't, do you discuss it if the workplace is within commuting distance of Canada's border? And perhaps BenefitsLink mavens will suggest more questions.

jpod's and CuseFan's observations are among the many possibilities. Even without a subsidized death benefit or subsidized survivor annuity, some church plans provide a survivor annuity or impose a spouse's-consent condition even if nothing in public law calls for it. And in setting such a condition a church might choose its private-law meaning of spouse. Also, a church plan's definition of a spouse might not always be about discriminating against same-sex spouses; a plan might recognize spouses more widely than public law does.

For one point about the design of a retirement plan, a recent BenefitsLink discussion shows differing views about which set of provisions is likelier to meet a sponsor’s interest, and perhaps about how the point might be explained in a plan-design discussion (or instead presumed). https://benefitslink.com/boards/index.php?/topic/62281-that-a-retirement-plan-required-no-spouses-consent-for-a-distribution-before-the-participants-death-meant-a-surviving-spouse-gets-no-portion-of-a-27-million-benefit/&page=2 That started me thinking about a practical point: The time available for a plan-design discussion might be limited—whether by a client’s availability or attention span, a client’s choice to limit a practitioner’s time billed, or a practitioner’s choice to limit time to sustain profitability for a fixed fee or an assumed cost. If time is limited so it’s not feasible to discuss all plan-design choices, how does a practitioner leading the discussion decide which topics should get little or no attention (and instead fall into some presumed norm)?

If a plan is a church plan (as ERISA § 3(33) defines it) and has not elected to be governed by ERISA, ERISA § 205 does not apply. For an IRC § 403(b) plan, providing a qualified joint and survivor annuity, a qualified preretirement survivor annuity, or a death benefit absent a spouse’s consent is not a condition for Federal income tax treatment as a § 403(b) plan. If a church plan provides a benefit that varies on the existence or non-existence of a spouse, a plan may (within constraints set by other tax-law conditions) provide the church’s or the plan’s definition of spouse. For benefits other than those stated to meet a tax-treatment condition (such as an IRC § 401(a)(9) provision), a church plan may define a spouse more narrowly, or more widely, than U.S. Federal and State laws define who is or isn’t a spouse. A church might want its lawyer’s advice not only about the question described above but also about many other points for which a church plan may (and a church might prefer to) depart from other retirement plans’ norms. Likewise, a church might want its lawyer’s advice about a church plan’s provisions (if any) about alienations to benefit a nonparticipant other than the participant’s death-benefit beneficiary. A plan not governed by ERISA does not enjoy ERISA’s preemption of States’ laws. A church plan might be vulnerable to some courts’ orders, including some that not only depart from the QDRO norm but also command a payment or set-aside that the plan does not provide and is beyond the kinds and forms the plan provides. Some other opportunities include governing-law provisions; exclusive-venue provisions; use of plan and church claims procedures, and internal dispute-resolution procedures; and restrictions on which persons are authorized to accept service of process. Further, some provisions relate to exercise-of-religion rights under the Federal and States’ constitutions.

David Rigby, I don't advocate or even suggest any legislative choice. For me what's interesting is that while all plans governed by ERISA's Part 2 give a spouse at least some control over a plan's death benefit, a vast many plans give a spouse (of an undivorced, unseparated marriage) almost no control regarding a retirement benefit. Whatever society considers the appropriate degree of control to provide a spouse regarding the participant's retirement plan benefits, it seems perhaps odd to provide more control about the fortuity of death than is provided for a retirement plan's primary benefit.

RBG is right that on the day of the distribution the spouse was then a spouse rather than a survivor. And yes, the bigger amount dramatizes the consequences about what the law and the plan provide. This story caught my attention because a few days ago some of us on BenefitsLink were musing about how ERISA section 205's protection for a spouse might vary according to whether the plan has or lacks annuity provisions. The Congress that in 1984 set rules to try to get spouses to jointly consider joint needs might not have fully considered how many participants would have a right to a distribution without a provision for one's spouse. We recognize that the plan administrator's and the Federal courts' decisions are correct. Rather, I suggest only that the story illustrates some consequences of Congress's legislative trade-offs and public-policy choices in the Retirement Equity Act of 1984.

That a retirement plan required no spouse's consent for a distribution before the participant's death meant a surviving spouse gets no portion of a $2.7 million benefit. The participant's claim was processed on a Friday; he died on Sunday. Wengert Eighth Circuit.pdf

Apart from questions about whether a trust and trusteeship are created and valid under non-tax law, a plan’s sponsor might prefer that the trust be treated as a domestic trust for Federal tax law purposes. “In order for a trust forming part of a pension, profit-sharing, or stock bonus plan to constitute a qualified trust under section 401(a), the following tests must be met: (i) It must be created or organized in the United States, as defined in section 7701(a)(9), and it must be maintained at all times as a domestic trust in the United States[.]” 26 C.F.R. § 1.401-1(a)(3)(i). https://www.ecfr.gov/cgi-bin/text-idx?SID=11fcc33aff5d36a6e50159549926b1f4&mc=true&node=se26.6.1_1401_61&rgn=div8 Unless the retirement plan’s trust meets a transition rule regarding the Small Business Job Protection Act of 1996, the plan’s sponsor might consider sufficiently involving one or more U.S. persons. If the goal is establishing and maintaining the trust as a domestic trust, consider that merely adding a second trustee might not be enough if the first trustee is not a U.S. person and the second trustee lacks power to overrule the first trustee. Some details are in the Treasury department’s rule: https://www.ecfr.gov/cgi-bin/text-idx?SID=77049054e181a5d01c90facf3bef8340&mc=true&node=se26.20.301_17701_67&rgn=div8

RatherBeGolfing, thank you for the helpful information. As I suspected, it seems likely the practical enforcement depends mostly on happenstance. If someone barred from service as a fiduciary starts a new business, establishes a retirement plan, and serves as the plan's fiduciary (especially if the business has no other executive), a TPA behaving correctly might transmit a Form 5500 report and we doubt that EBSA's computers would detect that someone barred from service as a fiduciary is serving. I don't suggest that a TPA should have any responsibility; I'm only observing a weakness in the systems.

Many court decisions about a theft from an employee-benefit plan include an order that a wrongdoer is barred from serving as a fiduciary of an employee-benefit plan. But how (if at all) is such an order practically enforced? Am I right in guessing a TPA might not spot a problem? Leaving aside a 3(16) TPA, an ordinary service provider might not be a fiduciary, and might have no duty or obligation to guard against an ineligible person's service. And if a TPA runs a check on its new customer, would the TPA's check spot this problem? If a Form 5500 annual report includes an ineligible person's name as a signer or authorizer, does anything in EBSA's error-checking or post-filing review catch a problem?

Here's the Labor department's interpretive rule: https://www.ecfr.gov/cgi-bin/text-idx?SID=278017dd2eca615ddfbe139bbbfd3fe5&mc=true&node=se29.9.2510_13_63&rgn=div8

For another commentary about whether to treat plans as distinct when the circumstances show no business reason for more than one plan, see Q&A 14 in the attached American Bar Association session. The hypo invites a substance-over-form interpretation. And the ABA's format for these unofficial Q&A sessions requires the questioner to submit a proposed answer. The proposed answer set up some reasoning an EBSA speaker could use to support saying one must look through the multiple plans and treat them as one that needs an independent qualified public accountant's audit. Yet the EBSA people said it's okay to follow the contrived plans. dol_2009.authcheckdam.pdf

Yesterday evening, I heard that Fidelity, 92 days before the 2016 rule's delayed applicability date, sent many customers a service agreement amendment, which ostensibly was deemed assented to if not expressly rejected. The amendment offered services for which Fidelity expressly recognized its status as a fiduciary. Perhaps such a written undertaking might make Fidelity a fiduciary even if it otherwise might not be under the absence of the 2016 rule. Does anyone know whether Fidelity's amendment is conditioned on the application of the 2016 rule?

Kevin C and RatherBeGolfing, thank you for your helpful observations. Others' outlooks? And does anyone have a guess about how ADP, Paychex, Fidelity, John Hancock, and others that serve small plans will react to the erasure of the fiduciary rule?

Beyond other reasons, consider that not maintaining at least the fidelity-bond insurance required under ERISA section 412 might be a Federal crime. http://uscode.house.gov/view.xhtml?req=(title:29