Peter Gulia

ERISA § 203(e)(1) states: “If the present value of any nonforfeitable benefit with respect to a participant in a plan exceeds $5,000, the plan shall provide that such benefit may not be immediately distributed without the consent of the participant.” It might require a little imagination for a plan’s administrator to obtain the consent of a decedent. Is a plan’s IRC § 401(a)(9) minimum-distribution provision an exception to ERISA § 203(e)? 26 C.F.R. § 1.411(a)-11(c)(4). Does a plan’s termination obviate the ERISA § 203(e)(1) provision? 26 C.F.R. § 1.411(a)-11(e)(1). K2retire, is there anything about the distribution that needs the recordkeeper’s cooperation? Or is the plan’s administrator free to ignore what the recordkeeper says?

If the participant didn't begin a distribution before the participant's death and the designated beneficiary didn't begin a distribution within one year of the participant's death, what would preclude the plan's administrator from applying the plan's provision that "requires full distribution within 5 years of the death"? A related question for BenefitsLink mavens: If the plan pays the distribution but the beneficiary does not deposit or negotiate the check, must the plan's administrator continue filing Form 5500 as long as the plan has some asset? Or is there another reporting treatment practitioners are comfortable with?

I tell many clients and friends that the only dumb question is the one you didn’t ask. And for myself I think it’s better to reveal my ignorance than pretend knowledge I don’t have. I’ve never seen an individual health insurance contract, so this is my naïve question. To meet tax-law conditions for a qualified small employer health reimbursement arrangement within the meaning of Internal Revenue Code § 9831(d)(2), a plan must provide its reimbursement only for medical care and only after the employee furnishes proof of minimum essential coverage. Further, imagine a QSEHRA plan that reimburses only purchases of individual health insurance, not other medical expenses. Following this, to be reimbursable the insurance contract must meet two conditions: it must include (i) minimum essential coverage within the meaning of IRC § 5000A(f)(C) and (ii) no coverage beyond medical care within the meaning of IRC § 213(d). If a small-business employer puts in a decent effort to apply those conditions, how does one discern that a contract meets them? Does a contract that provides minimum essential coverage recite that it does? If so, where in the contract would one expect to see that language? If there is no such recital, what language clues would one look for to find that a contract includes minimum essential coverage? Without reading the whole contract, what shortcut might one use to form a reasonable belief that a contract insures nothing beyond medical care?

austin3515, some retirement plans and TPAs furnish a model form of domestic-relations order, typically as an illustration of what would get an administrator’s Yes. Many divorce lawyers put requesting the plan’s model form as a first step in their work toward a domestic-relations order. Some plans furnish a model form only to a requestor who presents herself as an attorney-at-law. Some plans furnish the form also to a non-attorney requestor who is the plan’s participant or who refers to a participant and presents himself as that person’s spouse or former spouse. Some service providers offer a service, often for an incremental fee, of deciding whether an order is a QDRO. They reason a service is non-discretionary under 29 C.F.R. § 2509.75-8/D-2 if the service provider does no more than check whether an order follows the model form the plan’s administrator specified. I’ve designed and written these regimes from both sides – sometimes as counsel to a plan’s sponsor/administrator specifying its procedure and forms, and other times as counsel to a third-party administrator that designed what its customer would instruct the TPA to follow. These services are increasingly a norm for large plans that prefer to outsource the work. But the service might be even more useful for small plans. A small employer might have so few submissions that it’s too hard to teach an employee how to do QDRO reviews. But a TPA with a sufficient aggregation of clients might see enough volume (and might have enough related knowledge and experience) that the TPA can do QDRO reviews efficiently.

MoJo, thank you for describing a different view. If anyone is wondering, my views distinguish out-of-court advice and in-court acts as a representative of a litigant. But those distinctions don't change my view that even an unrepresented litigant ought to be permitted to choose any drafter. The litigant accepts responsibility for the document he or she submits to a court. I'm aware that my views are a departure from received ideas; so again, thank you for helping me think about different ideas.

Without expressing my view about what would or wouldn’t be an unauthorized practice of law, let me indulge a bit of history. In the 1980s, if one wanted Corbel to produce a plan document, one needed a lawyer (or at least someone willing to say she’s a lawyer) to sign the intake questionnaire. In 1990, Florida’s Supreme Court found that the State lacked “power to place limitations on the authority granted to a nonlawyer by a Federal agency.” The reasoning referred to how 31 C.F.R. Part 10 allows a certified public accountant to practice before the Internal Revenue Service. The Florida Bar re Advisory Opinion – Nonlawyer Preparation of Pension Plans, 571 So.2d 430 (Fla. Nov. 29, 1990). After that decision, Corbel revised its intake form to allow not only a lawyer but also a certified public accountant to be the instructing professional. Some might defend an accountant’s, actuary’s, or ERPA’s drafting of plan documents under an assumption that she might file a Form 2848 to appear before the IRS as a representative on the plan sponsor’s application for a determination. (With fewer opportunities to apply for a determination, this reasoning becomes more tenuous.) For drafting a domestic-relations court’s order, it seems doubtful there is much connection to a proceeding before the Internal Revenue Service. So a State authority would decide whether the nonlawyer’s practice is unauthorized without applying the U.S. Constitution’s supremacy of Federal law. If one fears enforcement grounded on unauthorized practice of law, one might design a service to avoid judgment or discretion about what provisions to state in the draft order, and to avoid advice about what a particular retirement plan allows or precludes. I remind BenefitsLink readers of my longstanding view that the law ought to permit any person to give legal advice (including drafting documents that involve advice), and to be responsible for that advice.

Does anyone know whether Fidelity checks the OFAC lists?

Last week, Groom Law Group published a Benefits Brief suggesting that at least some retirement plans consider procedures to comply with laws administered by the U.S. Treasury department's Office of Foreign Assets Control. http://www.groom.com/media/publication/1863_OfAC_Update_8-7-17.pdf Groom suggests this might include "[c]hecking if participant or beneficiary payments are going to individuals on the SDN [specially designated nationals], FSE [foreign sanctions evaders], or SS [sectoral sanctions] lists." Are recordkeepers providing this service?

DocuSign, RightSignature, and other providers are glad to take you through a demo of the software. If you use a CRM software, one might ask that provider which of the e-signature software providers built integrations for your CRM software. If you use CCH/Wolters Kluwer, Citrix, or another file-sharing host, one might ask that provider which of the e-signature software providers build integrations for your file-sharing software.

Perhaps you might do a short request-for-proposals to select the consultant that would run your RFP to select the pharmacy benefit manager.

In my experience, another advantage of a carefully automated plan-documents system is that it facilitates reviews to increase the likelihood that a document will be complete and accurate before the signer signs. But if there is a revision, why should the plan's sponsor desire to delete a record of what previously was done. My clients' experiences are that their older signers (even many in their 80s or 90s) are favorably impressed, and younger signers simply assume electronic is how business is done.

I’m aware of at least one big recordkeeper that uses an electronic-signature regime for adoption agreements, other plan documents, and service agreements. And some of my clients that are investment advisers use it for investment-advisory agreements. I like electronic signatures because: A signer can be anywhere (unless it’s so remote it lacks an Internet connection). A recipient gets much more confidence that the signature was made by the person named. Knowing that the computer systems make and keep detailed time records of what was done when reduces a temptation to make a false statement about when the document was signed. There is no incremental expense for delivery of the signed documents. Some systems facilitate a courtesy delivery to a lawyer or other third person as the signer requests. To advise clients, I’ve reviewed several providers’ electronic-signature services. All I’ve seen are good. One might choose a service provider based on available integrations with other software one uses. I had one client who needed to get a few hundred signatures on new agreements in one month. Not only did she succeed, the set-up of the software handled almost all the work. The software’s reminders and nudges helped get signatures (without telephone calls), even from signers on vacation far away.

Beyond the other suggestions, in the AICPA's Audit & Accounting Guide for Employee Benefit Plans, a few Q&As at the end of chapter 11 illustrate what the independent qualified public accountant's report should state or explain when the IQPA did not audit a comparison year's financial statements.

In my experience, rigorously and carefully following ERISA 503 claims procedures, including explaining every reason for a denial, often results in a further flow of information.

fiona1, does your client's plan mandate a single-sum distribution if, on severance-from-employment or other retirement, the present value of the participant's pension is less than $5,000?

If the participant died before a distribution began, what are the plan's provisions for that situation? If no survivor has communicated with the plan's administrator, perhaps there is no claim the administrator need respond to? Do the plan's provisions mandate an involuntary distribution? When is the required beginning date?

For situations that involve uncertainty about the law or about the law’s application to a set of facts, lawyers are trained to go to one’s client for a conversation about how much uncertainty and risk the client is comfortable with and how to manage possible interpretations or applications. Perhaps the practical world of documenting an IRC § 401(a) plan might help you frame a similar discussion. Would the plan be stated using a preapproved document? Consider whether your client’s desired provisions can be stated within the adoption agreement’s check-off-box choices. If instead a provision would be stated by “free writing” on a blank line, how much confidence can you muster in telling your client (whether expressly, or impliedly) that the provision follows the “parameters” the preapproved package allows for that line? Or if your client’s desired provisions would not “color within the lines”, is your client ready to pay for an individually-designed document, and for your advocacy in persuading the IRS it states a plan that, in form, tax-qualifies?

I think you’ve spotted an issue. Beyond the definitely-determinable issue, consider also whether a discretion of the kind you describe could lead to related problems under civil-rights law, employment law, labor-relations law, or a law special to government employment, such as a civil-service or merit-protection law.

If a participant sues the plan’s administrator for its fiduciary breach in approving a hardship claim it ought to have denied, the administrator might use the plan’s readiness to accept a repayment and the participant’s failure to repay to support several arguments, including: The participant lacks standing to pursue the plan’s loss. Because the participant had the use of the money, the participant’s plan account didn’t suffer a loss. The payment of the unentitled distribution was a nonexempt prohibited transaction [see also ERISA § 408(c)(1)], equitable relief [ERISA § 502(a)(3)] can be had from any person, and restoration or disgorgement should be had from the party-in-interest who received the proceeds of the prohibited transaction. Ordering the breaching fiduciary to restore the incorrectly paid amount to the participant’s plan account (without relief from the distributee) would afford a windfall to the participant, and the court instead should order equitable relief to avoid such an unconscientious result.

Luke Bailey, thank you for that helpful observation. In setting up my originating question, I didn’t pause to consider that idea. A plan’s administrator might respond to a participant’s complaint by inviting her to return the money she says she wasn’t entitled to.

Which person, the partnership or each corporation, maintains the retirement plan regarding which you provide services? What is stated in the plan's definition of compensation (whichever definition is relevant to the task you're getting ready to do)?

One imagines the IRS should prefer that a correction of an information return filed electronically also be made electronically. If your client consents, following Dave Baker's suggestion to post here the redacted letter might help you crowdsource finding whether the letter is a fraud.

Of the 1095-Cs that might be questioned, were they filed electronically?

For Form 5500, codes 2G and 2H refer to whether an individual-account plan has participant-directed investment, in whole or in part. Code 2F refers to whether a fiduciary intends to meet conditions that would allow an ERISA § 404(c) defense against a fiduciary-breach claim. spiritrider, if you or your client wants the breakdown between participant-directed and not, consider asking a data collector (perhaps one that advertises on BenefitsLink) what fee it would charge for pulling the Form 5500 data on your question.

I get the idea that a fiduciary shouldn’t leave unimproved a known flaw in the procedure that allows errors because of the procedure’s provisions. And I get the idea that we should not deliberately fail to correct a detected error (if there remains an opportunity to do so). But at least for work done by humans, the only method I know that might reduce errors to zero is reinspection of each worker’s work. And what if a reinspector makes a mistake? Some might interpret ERISA § 404(a)(1) as stating several commands, some of which might sometimes bear some internal tension. And such an interpretation might lead to harmonizing those commands following a retirement plan’s purpose. Section 404(a)(1)(B) refers to “the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent [person] 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[.]” Yet one might read § 404(a)(1)(D)’s command to administer a plan “in accordance with the documents and instruments governing the plan” as calling for perfect fidelity to a plan’s provisions. But could such a reading conflict, at least at the margin, with § 404(a)(1)(A)’s command that a fiduciary discharge its duties “for the exclusive purpose of providing benefits to participants and their beneficiaries; and defraying reasonable expenses of administering the plan”? If participants’ accounts bear the expenses, is it always “solely in the interest of the participants and beneficiaries” to reduce to zero the probability of mistaken claims decisions (especially if an unreviewed mistake grants a participant what he or she asked for)? Perhaps in the fall semester I’ll invite my ERISA Fiduciary Responsibility law students to research and write about these questions. Thank you for a thoughtful discussion.