Peter Gulia

Thanks for sharing the story. As someone who previously served over 21 years inside a big retirement-services provider, I remember what it's like to have an employer react to situations like those you describe.

I'm not sure what problem you seek to solve; but if it's about finding investment alternatives and individual-account records for participants under a micro or super-micro plan: I've had successes with Vanguard taking on 403(b) plans with no condition for a minimum amount of assets or a minimum number of participants or employees. If you'd like to talk through the terms under which Vanguard does this, feel free to call me.

MoJo, thank you for sharing information about DoL/EBSA staff views. Was the EBSA employee's reasoning grounded on the idea that if a fiduciary has discretion about whether to pay a distribution, the fiduciary must use the discretion in favor of whichever outcome advances the purpose of providing retirement income to the participant? Was the DoL/EBSA speaker someone from the office of interpretations? Or an examiner? Or a benefit analyst? Or some other kind of staff person?

Yes, a sentencing court can grant relief. The Parole Commission seems to be another route if the court had not granted relief in the original sentencing (perhaps because the defendant might not have known to ask), and the disqualified person prefers not to go to court. In my 33 years of employee-benefits practice, I've never seen a matter involving ERISA 411 (but I assume that's because every applicant with a conviction was screened out before hiring). I teach section 411 to my LL.M. students; thanks for giving me something to think about.

According to the rule, a hearing is "before one or more Commissioners, or before one or more administrative law judges appointed" for the purpose. https://www.ecfr.gov/cgi-bin/text-idx?SID=7c623260ae7a9ec2e2ab0d2e3aab4ab3&mc=true&node=se28.1.4_18&rgn=div8 A rule for considering, and allowing an applicant's response to, an administrative law judge's recommended decision suggests that a hearing by an ALJ is typical. An applicant's representative need not be admitted to practice law in the State in which the applicant resides or works; it's enough to be admitted to practice before the highest court of any State. https://www.ecfr.gov/cgi-bin/text-idx?SID=7c623260ae7a9ec2e2ab0d2e3aab4ab3&mc=true&node=se28.1.4_19&rgn=div8 I'd bet few lawyers have handled even one matter seeking to remove an ERISA 411 disqualification.

A few points of information the employer and its lawyer might explore: To get relief from ERISA § 411, the rule is: Procedure Governing Applications for Certificates of Exemption under the Labor-Management Reporting and Disclosure Act of 1959, and the Employee Retirement Income Security Act of 1974, 44 Federal Register 6,890 (Feb. 2, 1979), 28 C.F.R. §§ 4.1 to 4.17. To guess how long the process might take, the U.S. Parole Commission’s decisions are available not only under the Freedom of Information Act but also under the Commission’s rule. One might look at the records of several cases to get a sense of the durations from filing an application to a decision on it. Beyond ERISA, the employer might ask for its lawyer’s advice about 18 U.S.C. § 1033(e). It makes it a Federal crime for a person convicted of a disqualifying crime to “engage[]” in the business of insurance[.]” Also, it makes it a Federal crime for a natural person to “willfully permit[]” a disqualified person’s “participation” in an insurance business. An otherwise precluded employment can be allowed with an insurance regulator’s express consent that meets the terms of the Federal statute. If the insurance agency or third-party administrator has subsidiaries or affiliates in banking, commodities, securities, investment-advisory, or other financial-services businesses, the employer might want its lawyer’s advice about whether a law that applies to a related business also affects the affiliated group. The employer might want its lawyer’s advice about the effect of representations the employer might have made in applying for fidelity-bond, employee-dishonesty, or other surety or liability insurance.

I do think a plan's fiduciaries have responsibilities concerning the investment of a participant's account until a beneficiary gets control. I also think there are situations in which a plan's administrator might furnish to a claimant or someone who has expressed an interest in becoming a claimant information about how to become an estate's personal representative, including under a State's small-estate procedure.

While I say nothing about what might or might not be qualifying employer real property, consider what arrangements your client would make to ensure that "the indicia of ownership of" the real property would be within "the jurisdiction of the district courts of the United States." ERISA 404(b). While one might use a U.S. bank as the holder, as is commonly done with securities, think through whether a similar arrangement is effective for real property.

Yup, I concur with those two reasons for finding an ERISA-governed plan. Also, I think FAB 2004-01 is incorrect, even under the particular facts it assumes.

If the circumstances and the plan's provision are as 401(k)athryn describes: (It isn't so that the participant/decedent has no estate, because the estate might have a claim to the retirement plan's death benefit.) Doesn't the plan's administrator do nothing until there is a claim to respond to? Doesn't the administrator deny a claim unless it is satisfied that the claimant is the duly appointed personal representative of the decedent's estate? If the plan pays the personal representative, isn't the claim under the plan satisfied? Isn't it the personal representative's duty to sort out who are the estate's distributees? In my experience (which includes thousands of beneficiary claims), it's usually unwise for the plan to try to find a beneficiary and it's much safer to let a beneficiary find the plan.

Just to set up a "devil's advocate" argument: EBSA's Field Assistance Bulletin 2004-01, describing some reasoning for its interpretation that an employer-provided contribution to a Health Savings Account neither establishes nor maintains a plan, says: Because of these differences, we regard court precedent on the significance of employer contributions to group or group-type insurance arrangements as inapposite to HSAs. In the group health insurance context, the employer, whether by choosing an insurance policy or creating a self-funded program, typically establishes the type of benefits provided, the conditions for their receipt, and the manner in which claims will be adjudicated. In the context of HSAs, however, the employer may be doing little more than contributing funds to an account controlled solely by the employee. If an employer does no more than reimburse a premium an employee paid to buy, voluntarily, individual health insurance of the employee's choosing, does such an employer do anything to "establish" the health-coverage benefits to be provided? Or did the individual choose the health-coverage benefit?

If an employer's arrangement to reimburse an eligible employee's payment of a premium for an individual health insurance contract follows all the rules and conditions for a qualified small employer health reimbursement arrangement ["QSEHRA"] described in Internal Revenue Code section 9831(d), the arrangement is not a group health plan for ERISA section 607(1) or 733(a)(1). But do other ERISA issues remain? Does the employer's reimbursement of its employee's premium paid for individual health insurance make the arrangement a welfare plan defined in ERISA section 3? Must a QSEHRA be stated by a written plan? Must a QSEHRA's administrator furnish a summary plan description? Must a QSEHRA's administrator adopt and follow a claims procedure? What further issues should we think about?

As a thank-you to those who aided my research, email me and I’ll send you a copy of my article “Should we write the summary plan description before we write the plan?” (after it’s published).

BG5150, thank you for sharing that story. One wonders how important the other 19 pages were if the plan’s administrator performed its tasks for three years without noticing the absence of an anticipated provision or that someone acted contrary to the written plan’s provisions.

If an employer's arrangement to reimburse an eligible employee's payment of a premium for an individual health insurance contract follows all the rules and conditions for a qualified small employer health reimbursement arrangement ["QSEHRA"] described in Internal Revenue Code section 9831(d), the arrangement is not a group health plan for ERISA section 607(1) or 733(a)(1). But do other ERISA issues remain? Must a QSEHRA be stated by a written plan? Must a QSEHRA's administrator furnish a summary plan description? Must a QSEHRA's administrator adopt and follow a claims procedure? What further issues should we think about?

This discussion is also a nice illustration of the value-added of a good third-party administrator. I confess I've been imagining a situation in which a plan's sponsor gets no service from a lawyer, other practitioner, or TPA, and the only written evidence of what the plan's sponsor intended is the entries in a recordkeeper's computer system that generated the whole kit of plan documents, including the summary plan description.

Thanks, again, for the further observations. Imagine a new plan (so there is no preceding document): what evidence can one find that the employer intended a provision different than the one stated in the one plan document it signed? About looking to how a provision was communicated to employee, won't the summary plan description (typically compiled by the software from the same instructions given to make the plan document) not say anything inconsistent with the plan document? Will the IRS allow a reformation if the only evidence of the intended provision is the employer's in-operation administration?

To build factual support to show that an employer intended a provision different than the one stated by the plan document the employer signed, what evidence do you use?

So our samples are over 300, 180, 175, 166, and 145 pages. A follow-up query: If we concur that almost no sponsor reads the plan document, does an employer read the summary plan description? And if it reads the SPD, does it use that reading as a way to check that the plan document states the provisions the employer intended?

ESOP Guy, thank you for the useful (and interesting) response. (And I share your liking one comprehensive definitions part and disliking provisions stated by assembling cross-referenced provisions.) I'm interested in your (and other BenefitsLink mavens') thoughts about how realistic it is to believe that a plan sponsor's executive or employee read the whole document before deciding to adopt it.

Thank you for the helpful responses. (My opening example, which isn't even in the running for the longest I've seen, is 193 pages without policies, procedures, or forms, and without the summary plan description.) So should we have a contest on which preapproved document is the shortest, and which is the longest?

I'll start the sampling: For a small-business employer's "plain vanilla" safe-harbor plan, the prototype is 193 pages.

Quick (we hope) and unscientific survey: If a plan's sponsor were to read all of its plan document, how many pages would that be? In the prototype or volume-submitter set you regularly use, counting the adoption agreement, base document, and all appendixes and supplements that state provisions of the plan, how many pages (in total) is it?

David Rigby's point is most important: Be picture-perfect about following the plan's claims procedure (and double-checking that the procedure conforms to ERISA section 503).

The Labor department's grant of a prohibited-transaction might relieve a fiduciary from one or more of the prohibited-transaction consequences, but does not relieve a fiduciary from any other responsibility, including duties to act prudently and for the exclusive purpose of providing the plan's benefits. The conditions the Labor department might require could include not only using an independent appraiser or other valuation expert but also engaging an independent fiduciary to oversee at least the conflicted transaction and perhaps later years' valuations.