Peter Gulia

Belgarath, you're right to think about whether the client authorized, whether expressly or by implication, the certified public accountant to reveal confidential client information.

RatherBeGolfing, I put in my variation of the hypo "Assume the TPA is not a . . . preparer of any tax return" because I believe a preparer must disassociate herself from a tax return she believes to be false. But assume the TPA's employee is an ASPPA member. Does the report and warning described in my hypo meet a member's duties under ASPPA's Code of Professional Conduct?

Just so we all learn together, let me ask what BenefitsLink mavens think about a variation on the hypothetical situation: Assume the TPA is not a signer or preparer of any tax return. The TPA performs all requested work using the data set its client furnished. In delivering the TPA's report to its client, the TPA includes written explanations calling out that the owner's daughters' service and compensation information seems doubtful. The TPA explains that the results would be different if the work assumed different amounts. The TPA explains that the plan might be misadministered (and might be tax-disqualified) if a contribution was determined from an amount that is not really compensation for services rendered. The employer/administrator receives the report, confirms that it understands the TPA's advice, and makes no change. The employer and administrator file the plan's Form 5500 report and all tax returns of the employer and business assuming the daughters' false compensation and contribution, and the business's deductions and other tax treatments based on them. By explaining correct information to the TPA's client, has the TPA's employee done what her profession's ethics rules ask of her? Is there something further the TPA's employee must do? Is there something further the TPA's employee should do? What, if anything, must the TPA's employee refrain from doing? For each of these questions, why?

PFranckowiak, if a plan's administrator (or its employee or discretionary agent) is evaluating whether to treat the order as a qualified order, one looks to the plan's definition of a qualified domestic relation order. If the plan follows ERISA section 206(d)(3), the plan likely provides that an order is not a QDRO unless, among other conditions, the order "clearly specifies" the amount to be paid to each alternate payee. That your originating post describes two possible readings (without considering that yet more interpretations are possible) suggests that the order does not "clearly specify". If the plan's administrator already decided that the order is a QDRO to be followed, a non-discretionary service provider asked to implement a division might seek protective instructions (and indemnity) from the plan's administrator.

What do BenefitsLink mavens think about these potential corrections: The defined-benefit plan or the employer pays the profit-sharing plan the amounts it advanced. The breaching fiduciary or the employer pays the profit-sharing fair interest on those amounts. The breaching fiduciary or the employer pays fees of professionals and other expenses incurred because of the error and correcting it. jkharvey, if by today or tomorrow the profit-sharing plan has not collected all correction amounts, will the administrator allocate the correction receivable among participants' accounts?

I concur with Flyboyjohn; an employer/administrator should not be responsible for a breach of its fiduciary duty to administer the plan according to its document and ERISA unless the employer/administrator knew the participant intended not to repay.

To determine whether something is a participant loan that might meet conditions for ERISA's statutory prohibited-transaction exemption: "The existence of a participant loan or participant loan program will be determined upon consideration of all relevant facts and circumstances. Thus, for example, the mere presence of a loan document appearing to satisfy the requirements of section 408(b)(1) will not be dispositive of whether a participant loan exists where the subsequent administration of the loan indicates that the parties to the loan agreement did not intend the loan to be repaid." http://www.ecfr.gov/cgi-bin/text-idx?SID=e3a3147a70d22f29bb42e4675a67fe47&mc=true&node=se29.9.2550_1408b_61&rgn=div8

Along with reading the plan's provisions and carefully interpreting the provisions if any is ambiguous, an employer/administrator might consider that fixing the date of when a deemed employee's deemed employment ended might be less obvious than it is for a common-law employee. http://www.ecfr.gov/cgi-bin/text-idx?SID=de2a11e42d5517340084ea34d12a1004&mc=true&node=se26.6.1_1401_610&rgn=div8

As this conversation shows, the ERISA rule's application can be less than clear, and can be burdened by practical difficulties.

ESOP Guy, I read the rule as allowing an electronic notice, subject to the other conditions, if the integral-part condition is met or the affirmative consent was made (and has not been withdrawn). I read the rule as an "or", not as requiring both of those conditions. David Rigby, an employer/administrator should use technological means to show that the notices were delivered. In my experience, if the employer really requires its employee to use e-mail as a part of his or her job, bad addresses can be readily detected and corrected. (If an error in addressing a current employee goes unobserved, how "integral" to the work is the regular use of the e-mail system?) And many employers use, for other business reasons, a system of surveillance on employee's use of the employer's e-mail system. My 2 cents, I too find that many employers and service providers are struggling with the trade-off of a today expense to build the programming and systems to get a tomorrow expense savings. Also, a service provider might have little incentive to build something to manage an expense that's external to the service provider. Thank you, everyone, for helping me think.

leveena, My 2 cents, and RatherBeGolfing, thank you for the helpful thoughts. So let's try some examples: Imagine a hotel operator requires a cleaner to begin each daily shift by checking electronic communications. Or imagine a delivery-service operator requires a driver to begin each half-day shift by checking electronic communications. If this is enough part of the job's requirements that it's "integral", an employer/administrator may, without a participant's consent, deliver notices by electronic communication (preserving a participant's right to request paper documents). If this is legally sufficient, why are so many employer/administrators still sending paper notices?

A fiduciary may use e-mail as the initial means of delivering a communication to a participant who can “effectively access documents furnished in electronic form at any location where the participant is reasonably expected to perform his or her duties as an employee” if “access to the employer’s … electronic information system is an integral part of those duties[.]” 29 C.F.R. § 2520.104b-1©. But what does it mean to say that using e-mail or some other software is “integral” to an employee’s work? If a person’s work involves physical activities but his or her employer requires him or her to check e-mail every two hours to get instructions, is that enough? Is the answer the same or different if the employee is required to check e-mail only once for a whole eight-hours shift? If a worker is required to read e-mail but is not expected to write any response, is electronic communication "integral" to his or her work?

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?