Peter Gulia

AlbanyConsultant, some retirement plans allow a beneficiary to disclaim or renounce a benefit; some don't allow this; and some say nothing, which might leave a question about whether a disclaimer is recognized to the plan administrator's construction or interpretation. If a plan recognizes a disclaimer, typical conditions are that the disclaimer must be legally valid under the law of at least one relevant State, and further that the disclaimer must be one that meets Internal Revenue Code section 2518. If New York law is relevant, this link is to the NY Estates, Powers and Trust Law provision: http://public.leginfo.state.ny.us/lawssrch.cgi?NVLWO I would not accept any State statute's recitation that following it results in a disclaimer effective under Internal Revenue Code section 2518. http://uscode.house.gov/view.xhtml?req=(title:26

When Congress wrote this in 1984, the staffers assumed defined-benefit pension plans and money-purchase pension plans would have annuity payouts. And they were told that some individual-account plans that tax law called profit-sharing plans might not provide annuity payouts. I think that's why the statute speaks with a variation for an individual-account plan that is not a pension plan with funding standards. But it's easy to concur with your observation that a good writer with enough time (unlike the pace asked of Congress's staffers) could express the same resulting rules more clearly by stating them from concepts rather than consequences.

If the plan is ERISA-governed, here's the statute on what a plan must, may, and may not provide: ERISA section 205: http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title29-section1055&num=0&edition=prelim

I’m hoping BenefitsLink people will help me crowdsource some background for a research project. The research project assumes that, whether on May 7 or by some later date, a court issues a mandate to vacate the 2016 investment-advice fiduciary rule. The first of the questions is: which plan-sponsor fiduciaries are affected by that result? If one follows the rulemaking’s 2015-2016 reasoning, it is small plans that more need to be protected from communications by those who, but for applying the to-be-vacated 2016 rule, might not be held to fiduciary standards of loyalty and care. But how small is small? In recent years, I’ve seen plans smaller than the Labor department’s $50 million dividing line use registered investment advisers who sign contracts expressly accepting status and responsibility as an ERISA fiduciary. In your experience, what size sorts plans between those unlikely to use a fiduciary adviser and those likely to use a fiduciary adviser?

And in looking to a register of wills or whatever court or office handles administrations or successions of decedents' estates, a plan's administrator might consider also a county in which the administrator guesses the decedent was domiciled, resided, or owned real property.

Recognizing some burdens a plan's default-beneficiary provision might put on a plan's administration, some plan sponsors might want to change the provision that otherwise would result from adopting a preapproved document. (Assume a plan's sponsor would not change anything that puts a surviving spouse ahead of others.) May an adopting employer change a default-beneficiary provision without losing reliance on the IRS's opinion letter? Is this an "administrative provision" Revenue Procedure 2017-41 allows an adopter to change (without losing reliance, and without seeking a determination letter)?

While we’re discussing what Cynchbeast’s originating post describes as a potential situation (a possible need, before any claimant submits a claim, to pay something to meet a required beginning date): Although a plan’s administrator reading the plan’s governing document might discern the role or relationship a person must have to be a default beneficiary, that doesn’t always mean one readily can locate or even identify the should-be claimant. In many situations about a default beneficiary, an administrator might lack a record about a should-be claimant’s address, or even name. That’s especially so if a search already has run past the decedent’s spouse and children. For situations in which no one has submitted a claim for a retirement plan’s death benefit and the taker would be a default (rather than participant-designated) beneficiary, practitioners have a range of views about how much effort a plan’s administrator must, may, or should use to try to identify and communicate with such a would-be taker. Also, there’s a range of views about how a plan may or its fiduciary should allocate those expenses.

ERISA § 209 might, at least for some employee-benefit plans and in some factual circumstances, require an employer to keep work and wage records for several decades. For just one example, consider this case: The litigants and the trial and appeals courts had four different interpretations about when a worker’s service began. Resolving the case required a court in 2008 to consider records of a worker’s employment in 1971 and birth in 1942. Pell v. E.I. DuPont de Nemours & Co., 539 F.3d 292, 44 Empl. Benefits Cas. (BNA) 1944, 2008 U.S. App. LEXIS 16854 (3d Cir. Aug. 8, 2008) (precedential), reversing in part, Pell v. E.I. DuPont de Nemours & Co., No. 2002-00021, 39 Empl. Benefits Cas. (BNA) 1270, 2006 WL 2864604 (D. Del. Oct. 6, 2006). A claimant’s production of evidence that raises a genuine question about an employer’s failure to maintain sufficient records shifts to the employer the burdens of proof and persuasion. E.g. Mason Tenders District Council Welfare Fund v. M.A. Angeliades, Inc., 43 Empl. Benefits Cas. (BNA) 1193, 2007 WL 4208587 (S.D.N.Y. 2007). A duty to make and keep records includes a duty to use at least reasonable care to detect false, suspicious, or unreliable records. E.g. Trustees of Chicago Painters and Decorators Pension, Health and Welfare, and Deferred Savings Plan Trust Funds v. Royal International Drywall and Decorating, Inc., 493 F.3d 782, 41 Empl. Benefits Cas. (BNA) 1026 (7th Cir. 2007).

MoJo’s experience is correct. The idea that a registered investment company must not allow a redemption of a security (such as a fund share) at a price other than one based on the current net asset value next computed after the RIC or its agent received the order to buy or sell the security is in public law, including Investment Company Act Rule 22c-1 (17 C.F.R. § 270.22c-1). And a RIC’s service providers use agreements to conform a retirement-services provider’s agency to those rules (and other rules under the Securities Exchange Act of 1934). But the Investment Company Act rule to define “current net asset value” (17 C.F.R. § 270.2a-4) doesn’t directly specify the close-of-trading on the New York Stock Exchange as a fund’s valuation time. While NYSE-close is the mainstream convention, has anyone seen any fund allow a later cut-off time?

In my experience (with plans, recordkeepers, and SEC-registered investment companies), a participant's investment direction received by the plan's recordkeeper before 4:00 New York (Eastern) Time is treated as timely received to get the open-end mutual fund prices later determined for that day. Are there any circumstances in which a recordkeeper could allow a later cut-off time? If so, does anyone allow a later cut-off time? Or do all recordkeepers set 4:00 as the time for all funds?

In other contexts, the Internal Revenue Service and Treasury department have said that allowing a participant control over the participant's claim is inconsistent with treating a plan as providing a restriction, at least one needed to support a tax-qualified treatment. For example, an annuity contract that allows its annuitant, rather than the insurer, to decide that the annuitant is entitled to a hardship distribution, is not a 403(b)-qualified contract. For an IRS-preapproved document, would an indirect provision that allows a participant to decide whether she has a disability interfere with the IRS's preapproval?

Belgarath, there are situations in which a court has sufficient jurisdiction to order an insurer or custodian to pay a hardship or unforeseeable-emergency distribution.

Following QDROphile's observation: If one is working with an IRS-preapproved document, is it feasible to add text to support the idea that it is proper for the plan's administrator to not keep records of past periods' accounts? And what language in the Revenue Procedures does one rely on to support a tax position that such a change does not interfere with reliance on the IRS preapproval?

If a domestic-relations order is directed to a non-plan not governed by ERISA, ERISA doesn't preempt State law (including a State court's order). Whether a person must, may, or must not do (or refrain from doing) something might turn on the provisions of all relevant contracts and how much jurisdiction the court has to command the person's act.

Mojo, thank you for the kind words. Belgarath, I concur with your observation that there are many more ERISA-governed plans than some charitable-organization employers admit.

How an employer might react to this kind of stand-off might relate to several facts and circumstances, including: Does the employer’s name appear anywhere in the order? How confident is the employer that a court would decide that the 403(b) payroll practice is not a plan within the meaning of ERISA § 3? If the employer adopted a written plan (even if not under ERISA § 402 and only to tax-qualify under IRC § 403(b)), does that writing impose an obligation on the employer? Does the 403(b) contract incorporate by reference, or refer to, the written plan? If so, might one interpret the contract to impose an obligation on the insurer or custodian? Is the 403(b) contract (whether an annuity contract or a custodial account) a “group” or “individual” contract? How much obligation, if any, does the contract impose on the employer? Does the domestic-relations court have sufficient jurisdiction to command the employer to act? If the employer has the right to refuse to decide whether an order is a QDRO, will the employer have the fortitude to resist the divorcing people, the insurer or custodian, and attorneys? Will the employer face down a judge who threatens the employer? How do potential litigation expenses affect each player’s choices? I’ve advised both employers and insurance/investment providers about the stand-off on who responds to a domestic-relations order. Feel free to call me if you want more help.

Absent employer securities, I often suggest an employer might prefer to get rid of obligations to alternate payees as quickly as allowed. Any different views?

If an IRS-preapproved document's "adoption agreement" allows a choice to preclude a QDRO distribution until the ERISA 206(d)(3) / IRC 414(p) earliest retirement age, how would you advise an employer about whether it should select that provision?

The Treasury department proposes to remove 26 C.F.R. 1.401-4, and does not propose to remove any of 26 C.F.R. 1.401(a)(4)-0 to -13.

The proposed removals are of regulations, not lower-ranking guidance documents. But if a guidance document interprets a regulation that is removed, a taxpayer, preparer, or practitioner might consider the removal in evaluating how much support the guidance document provides to support a tax position.

If we assume it’s impractical to deny QDRO treatment to a court’s order merely because circumstances suggest an intent to game a plan’s distribution restriction, let’s consider a related plan-design question. For the retirement plans involved in the request for the 1999 advisory opinion or the litigation described above, both employers had an economic stake in not too easily allowing an alternate payee to get something the participant could not get. With a defined-benefit pension plan’s sharing of risks, guarding against adverse selection might matter. And with an employee stock ownership plan, an employer/issuer’s interests in markets for its securities (or, if the securities are not publicly traded, a repurchase or redemption obligation) might lead an employer to care about when an employee or former employee (or his or her beneficiary or alternate payee) gets a right regarding the securities. Imagine an individual-account (defined-contribution) retirement plan that has no investment in employer securities. Can smart BenefitsLink people imagine a situation in which an employer has an economic stake in restraining an opportunity to use a QDRO to get a distribution the participant could not get?

https://www.ecfr.gov/cgi-bin/text-idx?SID=9d64ceb86f3c44b37349665080eb2b07&mc=true&node=se26.6.1_1401_2a_3_24_3_64&rgn=div8

Another question for BenefitsLink readers: What employee-benefits issue have you worked on in recent years that turned on applying law or a plan's provisions to some time before 1975 (or another decades-ago effective date or transition date)? For example, I recently advised on a claim that turns on counting the participant's pre-ERISA service and advising about whether a plan's provisions are and were consistent with tax qualification under the Internal Revenue Code of 1954.

And here's a link to Reorganization Plan No. 4 of 1978: http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title5a-node84-leaf188&num=0&edition=prelim That plan makes Treasury department rules authority not only to interpret the Internal Revenue Code and other tax law but also to interpret some sections of non-tax ERISA.

Here's a link to today's publication in the Federal Register: https://www.gpo.gov/fdsys/pkg/FR-2018-02-15/pdf/2018-02918.pdf Proposals that relate to Internal Revenue Code sections 401-416 are at .pdf pages 10 and 11. And here's links to rules interpreting IRC section 411: https://www.ecfr.gov/cgi-bin/text-idx?SID=35e13deb9029e988c2d005510af23f04&mc=true&tpl=/ecfrbrowse/Title26/26cfr1g_main_02.tpl Many of the rules proposed to be removed are about transitions for changes in the statutes.