Peter Gulia

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.

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)?