Peter Gulia

Sorry if I confused anyone. I didn't read all the facts carefully enough, and missed that the employer maintains a group health plan beyond the reimbursement arrangement.

Without otherwise commenting on the wisdom of the described plan design, the employer and its employee-benefits lawyer should read section 18001 [pages 306-312] of the 21st Century Cures Act.

Thanks, David Rigby, Lou S., and ESOP Guy for the further information. Lou S., a BenefitsLink thread earlier this year explained that some administrators do not code a 1099-R concerning disability if the administrator's decision that the distributee was entitled to the distribution did not require the administrator to decide whether the participant was disabled (usually because a distribution was entitled on any severance-from-employment). This leaves processing about whether an early-distribution tax applies or doesn't between the taxpayer and the Internal Revenue Service. What experiences have BenefitsLink readers observed about this?

David Rigby, thank you for the excellent help. rocknrolls2, yes that might be a useful efficiency. But many employers don't have a disability plan. Another query for the BenefitsLink mavens: Is it feasible to design an individual-account retirement plan so there is no benefit that turns on whether a participant is disabled?

Quickly following the recent publication of the Labor department's rule on an ERISA-governed plan's claims procedure concerning a disability benefit, some practitioners suggest that an employer design an individual-account (defined-contribution) retirement plan, if any benefit is provided because a participant is disabled, to refer to the Social Security Administration's decision on whether a person is disabled. Leaving aside questions about an alien who is authorized to work in the United States, is there any circumstance that would make a citizen ineligible for a Social Security benefit so there could be no SSA decision to refer to?

A treaty between the United States and another nation might include provisions that could result in some kinds of plans being treated as analogous to a U.S. qualified retirement plan for some rollover purposes. (I don't know what the U.S.-Mexico treaty provides.) Your client's plan administrator might want its lawyer's advice about whether and how to consider and interpret such a source of law if a participant's request to make a rollover contribution raises the point.

Bill Presson's suggestion about avoiding compensation (and selecting investments not priced to provide compensation) can help. Beyond concerns about ERISA and the Internal Revenue Code, an investment adviser should get its lawyer's advice about how serving in a fiduciary role regarding a retirement plan, even a plan for the adviser's employees and even without compensation, can affect investment-adviser compliance. Just to pick one example, providing investment advice (even without compensation) to a participant arguably might result in "custody" (as defined under investment-adviser law), which would require a Form ADV disclosure, and result in a higher risk profile with securities regulators. See Question XII.1 https://www.sec.gov/divisions/investment/custody_faq_030510.htm (I'm not saying this Q&A is a correct interpretation of the law; rather, I suggest only that it illustrates some of the difficult issues involved, and securities' regulators' incomplete knowledge, concerning an investment adviser's role regarding a retirement plan for the adviser's employees.) There are ways to work with the arrangements to avoid this and other problems.

An employer maintains an individually-designed plan. This plan is in cycle A. The plan received favorable determinations for the previous intervals of the cycle. The employer will not apply for the IRS's determination this winter. For whatever could be the subject of a remedial amendment, what is the last day for the amendment to be executed? Is it January 31, 2017? Or is it (assuming all relevant tax and plan years are calendar year) December 31, 2016?

Kevin C and My 2 cents, thank you for your good help. As I understand the usual seven-day-yield illustration, it assumes the recent seven days' income will continue for a year. Just to pick one example, Fidelity's website displays the seven-day yield for "Fidelity Investments Money Market - Money Market Portfolio - Class I" as 0.77% (counting fee waivers) or 0.73% "without reductions". The same website display shows the shares' one-year past performance as 0.43%. Any more views about whether information furnished to directing participant should include or omit a money-market fund's seven-day yield?

If you're assembling a plan's rule 404a-5 disclosure to participants ... Do you include or omit a money-market fund's seven-day yield? If you include it, what is your reasoning for showing it? (I assume there is no one inarguably right or wrong answer. Rather, I hope to get some sense of customs of recordkeepers and TPAs.)

An administrator's selection of an independent qualified public accountant is a fiduciary decision (even when the plan does not pay the IQPA's fee). If all or some of the IQPA's fee will be charged against participants' accounts, an administrator should consider the relation of the IQPA's services and fee to incur no more than a prudent expense.

Has the employer considered charging nonemployee participants' accounts their proportionate share of all plan-administration expenses, including the fees and expenses of the independent qualified public accountant?

Has the employer tried charging nonemployee participants' accounts their proportionate share of the plan-administration expenses?

Thank you for the kind words. Without any expectation or hope for an engagement, my offer of free help to you, Belgarath, remains open. (I'm out-of-office Tuesday.)

Belgarath, I have experience with situations involving near-insolvent, insolvent, and bankrupt employers. I have some practical suggestions about how a fiduciary might get and use help. The ideas depend too much on the particular situation's facts to explain efficiently without a conversation. Feel fee to call me for those explanations. That the employer lacks money need not be an impediment to getting help and correcting what was or wasn't done.

Am I right in recalling that the limit on whether a participant contribution is an affordable portion of the employee/participant's pay refers to the amount required to get self-only coverage? If a participant chooses a self-plus-one or "family" coverage, how do the communications explain the formula for the limit on the participant contribution (recognizing that the limit's amount can vary according to wages and coverage choices)?

I'm curious: For a retirement plan that generally allows participants electronic access to one's account, does any recordkeeper allow an individual participant to instruct that she not have electronic access to her account?

Before one too quickly assumes that no notice is needed, ask for your lawyer's advice about law beyond ERISA, including: Would failing to give notice breach a provision of the deferred compensation agreement or some other contract? Most contracts are deemed to include an implied obligation of good faith and fair dealing, which often is interpreted as obligating a party not to act in a way that deprives or interferes with another party's opportunity to exercise his, her, or its rights under the contract. Would failing to give breach such an obligation? If a right or interest under the plan is a security, does anything in securities law call for a notice or disclosure?

401(k)athryn has solutions. For my curiosity and perhaps your mental challenge, does anyone think it's possible to express the contribution allocations in a formula that would be constant year-to-year?

Under the rule (29 C.F.R. § 2520.101-3), the notice must include the required information and “be written in a manner calculated to be understood by the average plan participant[.]” It’s possible to do so without using the word “blackout”. The rule itself defines “blackout period” as a period in which a participant, beneficiary, or alternate payee is temporarily restrained from doing something one could do in the plan’s ordinary administration. So translating “blackout period” as “no-transaction period” might, if it’s factually sound in the plan’s circumstances, be a sensible label (assuming the notice also includes the required information).

Beyond the task of reminding the employer to sign something once a year, is there any other reason why annual plan amendments could be a bad idea?

Since your query seems to be about what an employer's health plan could provide (and just to satisfy my curiosity so I learn something), why does the employer seek flexibility about covering a participant's stepchild only if the stepchild resides with the participant?

Scuba 401, ERISA § 401(b)(1) means the plan’s assets do not include a stock or bond the RIC “mutual” fund owns. My 2 cents, the originating post supposes some possibility that a plan fiduciary might face compromising interests based on the employer’s business. Considering an anonymous employer and plan fiduciary and now knowing what “that industry” and “those companies” refer to, I didn’t want to suggest any conclusion about the absence of a question to consider. Also, even if the fact that a fund (or a fund’s manager for another fund) invests, or could invest, in securities issued by the plan’s sponsor (or another party-in-interest) might not by itself necessarily lead to a prohibited transaction, a plan’s fiduciary nevertheless must act for the right exclusive purpose, and must not allow its best judgment as a fiduciary to be compromised by an interest other than the plan’s exclusive purpose. Without knowing the facts, we’re just imaging what questions Scuba 401’s client might have.

ERISA § 401(b)(1) [unofficially compiled as 29 U.S.C. § 1101(b)(1)] provides: For purposes of this part [part 4 of subtitle B of title I of ERISA]: In the case of a plan which invests in any security issued by an investment company registered under the Investment Company Act of 1940, the assets of such plan shall be deemed to include such security but shall not, solely by reason of such investment, be deemed to include any assets of such investment company. Thus, the plan’s asset is the share issued by the registered investment company, and not a proportionate interest in a RIC fund’s portfolio securities. However, for a plan established or maintained by an employer that has an investment-related business, other circumstances might raise prohibited-transaction, exclusive-purpose, and prudence issues that would not be faced by an employer that has no investment-related business. Some ERISA lawyers have practical experience with those issues.

Beyond the most recent cumulative list, one might scan the descriptions of documents collected on the IRS's "Recent Published Guidance" webpage. https://www.irs.gov/retirement-plans/recent-ep-published-guidance In my quick look, only two of those documents could affect the provisions of a mainstream 401(k) plan. Consider, however, that webpage states it was last updated on May 24.