Peter Gulia

If a fee does not meet all conditions of ERISA section 408(b)(2) (or some other statutory, class, or individual exemption), it would be a nonexempt prohibited transaction, and a plan's fiduciary should not use plan assets to pay such a fee. Although an employer may pay a fee from the employer's assets, a service provider that did not sufficiently disclose a fee for 408(b)(2) purposes might also have failed to get a binding obligation of the employer. Some employers persuade a service provider to abate a fee that had not been sufficiently documented.

A plan's fiduciary might consider whether the data-exporting fee had been sufficiently disclosed to, and approved by, the fiduciary.

For an individual-account plan, a plan's normal retirement age based on ERISA section 3(24) might have little or no effect on when people "retire" or begin a drawdown of the retirement-savings account. I'm aware of one employer/fiduciary that, for a non-instructing participant, sets the default target-year fund as the one labeled to "mature" when the participant would attain age 70. The employer's evidence shows a trend of its people not leaving work until 75 or 76 (and many of those then working elsewhere), but the fiduciary set the target so the fund would mature before a participant might be required to begin a minimum distribution.

The American Academy of Actuaries Code of Professional Conduct [http://www.actuary.org/files/code_of_conduct.8_1.pdf],in Annotation 10-5 under Precept 10, seems to say an actuary "need not provide any items of a proprietary nature, such as internal communications or computer programs", and may require "reasonable compensation for the work required to assemble and transmit pertinent data and documents."

If, after considering advice (which might include advice similar to Andy the Actuary's observations), your client tries an effort at persuasion based on the Circular 230 rule, some of the potential counter-arguments might be about whether the preceding actuary is a practitioner and whether the data sought is the actuary's work product (rather than the client's original records). 31 C.F.R. § 10.28 Return of client’s records. (a) In general, a practitioner must, at the request of a client, promptly return any and all records of the client that are necessary for the client to comply with his or her Federal tax obligations. The practitioner may retain copies of the records returned to a client. The existence of a dispute over fees generally does not relieve the practitioner of his or her responsibility under this section. Nevertheless, if applicable State law allows or permits the retention of a client’s records by a practitioner in the case of a dispute over fees for services rendered, the practitioner need only return those records that must be attached to the taxpayer’s return. The practitioner, however, must provide the client with reasonable access to review and copy any additional records of the client retained by the practitioner under State law that are necessary for the client to comply with his or her Federal tax obligations. (b) For purposes of this section, Records of the client include all documents or written or electronic materials provided to the practitioner, or obtained by the practitioner in the course of the practitioner’s representation of the client, that preexisted the retention of the practitioner by the client. The term also includes materials that were prepared by the client or a third party (not including an employee or agent of the practitioner) at any time and provided to the practitioner with respect to the subject matter of the representation. The term also includes any return, claim for refund, schedule, affidavit, appraisal or any other document prepared by the practitioner, or his or her employee or agent, that was presented to the client with respect to a prior representation if such document is necessary for the taxpayer to comply with his or her current Federal tax obligations. The term does not include any return, claim for refund, schedule, affidavit, appraisal or any other document prepared by the practitioner or the practitioner’s firm, employees or agents if the practitioner is withholding such document pending the client’s performance of its contractual obligation to pay fees with respect to such document. I'm curious: What are the provisions in the actuaries' professional-conduct rules?

Before considering your query about applying an automatic-enrollment provision only to match-eligible employees rather than all elective-deferral-eligible employees, the church might want its lawyers' advice about whether the plan is a church plan and, if ERISA does not govern the plan, about the effect of each State's wage-payment law that might apply.

If Merrill Lynch is only a custodian (or directed trustee), how does it have or get authority to transfer the plan's assets?

If you really mean a qualified termination administrator as 29 C.F.R. 2578.1(g) defines that term, there usually is no selection because a QTA must already "hold[] assets of the plan that is considered abandoned[.]" If someone will appoint a fiduciary, limiting a selection by geography might be unnecessary; and someone elsewhere might have experience administering abandoned plans or have other capabilities that make his or her service efficient or effective for the plan's exclusive purpose.

A quick look at the regulatory agenda http://www.reginfo.gov/public/do/eAgendaMain;jsessionid=3CE3C61A96992CC5E2D3540CE845BF1B?operation=OPERATION_GET_AGENCY_RULE_LIST&currentPub=true&agencyCode=&showStage=active&agencyCd=1500 suggests there is no project open.

GMK, thank you for the further ideas. BenefitsLink mavens all: Do IRA custodians ask an IRA applicant to furnish the distributing plan's IRS determination letter? Or does an IRA custodian accept the applicant's written representation that the source of the rollover contribution is an eligible retirement plan?

Belgarath, thank you for the further perspective. By the way, it would not be me or my firm doing the restatement/determination work.

GMK, thank you for the information about when preapproved documents for an ESOP might become available.

This is a real situation currently faced by a paying client that asked for my advice. (As happens more often than one might like, ERISA lawyers sometimes get called to a sad or even dire situation after the bad stuff was done.) While the usual mode for many practitioners is to assume it's worthwhile to get a determination (or reliance on a preapproved document), I'm thinking about what reasons I could explain to a plan fiduciary who is trying sincerely to meet her responsibility of incurring only those plan-administration expenses that are reasonable and for the exclusive purpose of providing retirement benefits to the plan's participants and their beneficiaries. In this plan's circumstances, the expense of getting an IRS determination would lower participants' account balances and would weaken the cash flow needed to pay for investment-management and other services.

If the circumstances are that the employer will not incur any expense to obtain an IRS determination and the plan's administrator is evaluating whether it is prudent for the plan to incur such an expense, how should a plan fiduciary evaluate the idea that, while all participants share in an expense, some (perhaps many) participants are unlikely to benefit from this expense? (The plan's administrator anticipates that many future distributees will not face a third person's request for "proof" that the plan's document stated provisions that met IRC 401 tax-qualification conditions.)

You might not find a rule or regulation that explicitly commands when such an amount must be credited to a participant's account. The rule you refer to, 29 C.F.R. 2510.3-102, governs when an amount is treated as a plan's asset. But it's at least possible that a plan could have circumstances in which an amount belongs to the plan but might not yet be allocated among participants' accounts. When an amount ought to be allocated to a participant's individual account is governed by other law, including ERISA sections 402-408, the written plan, and other documents governing the plan or its trust.

jpod, thank you for your helpful observations. Even if having a determination remains an entry condition for an IRS correction program, wouldn't such a condition be met by having a determination that, according to the IRS, has not expired? Likewise, if a distributee asks a bank to accept a rollover into an IRA, would such a custodian be willing to rely on a determination that the IRS states has not expired?

For an employee stock ownership plan (with employer securities that never traded and never will), the employer has stated the plan as an individually-designed plan. The employer is a Cycle A employer. In 2011, it applied for the IRS’s determination, which the IRS furnished in 2014. The 2014 determination states it was based on the 2010 Cumulative List. As I read the 2015 Cumulative List, I see nothing that would call for adding, deleting, or changing any provision of this plan. Likewise, as I think about recent years’ changes in tax law, I can’t think of any that necessitates a change in this plan’s text. Notice 2016–03 states: “Rev. Proc. 2007–44 will be modified to provide that expiration dates included in determination letters issued prior to January 4, 2016, are no longer operative. Future guidance will clarify the extent to which an employer may rely on a determination letter after a subsequent change in law or plan amendment.” I am wondering whether it now makes sense to apply for a determination. If (i) the determination the plan already holds does not expire, (ii) there has been no tax-law change that matters to this plan, and (iii) there has been no amendment of the plan since the most recent determination, what value (if any) could be obtained by seeking a determination now? For whatever expense one might incur to obtain another determination, what value is provided? (I’m not presuming a conclusion; I really want to know what BenefitsLink mavens think.)

Ivena, thank you for describing the economics. And GMK is right that many of us need (and welcome) help on health plans and employee-benefits topics beyond retirement plans.

Thanks again. It is so that an adverse-selection subgroup within a wider community-grated group can result in inefficient or even unfair pricing for others. But isn't the point of community rating to cause some better risks to subsidize some worse risks? Do many or most small-business employers in the small-group market present somewhat similar risks of not knowing how an employer's subgroup will change in health and participation from one year to the next? Any BenefitsLink mavens want to weigh in with other thoughts?

Ivena, thank you so much! For others who want to refer to these provisions, I add below hyperlinks to the compilations in the United States Code. Public Health Service Act § 2701 [Fair Health Insurance Premiums] 42 U.S.C. § 300gg https://www.gpo.gov/fdsys/pkg/USCODE-2014-title42/pdf/USCODE-2014-title42-chap6A-subchapXXV-partA-subpart1-sec300gg.pdf Public Health Service Act § 2702 [Guaranteed Availability of Coverage] 42 U.S.C. § 300gg-1 https://www.gpo.gov/fdsys/pkg/USCODE-2014-title42/pdf/USCODE-2014-title42-chap6A-subchapXXV-partA-subpart1-sec300gg-1.pdf Public Health Service Act § 2703 [Guaranteed Renewability of Coverage] 42 U.S.C. § 300gg-2 https://www.gpo.gov/fdsys/pkg/USCODE-2014-title42/pdf/USCODE-2014-title42-chap6A-subchapXXV-partA-subpart1-sec300gg-2.pdf Public Health Service Act § 2703(b)(3) states: “A health insurance issuer may nonrenew or discontinue health insurance coverage offered in connection with a health insurance coverage offered in the group or individual market based only on one or more of the following: . . . In the case of a group health plan, the plan sponsor has failed to comply with a material provision relating to employer contribution or group participation rules, pursuant to applicable State law.” Does this mean a health insurer may nonrenew a group contract (perhaps one that had its initial enrollment in an open-enrollment period) merely because an insufficient number of eligible employees choose coverage? Is it fair that a worker could be denied health coverage because his coworker refuses to enroll?

Thanks again, Chaz, Ivena, and Flyboyjohn, for helpful observations. And please understand, none of what the employer is considering is based on my advice. The only advice I've given so far is to push back on the ostensible underwriting requirement. Flyboyjohn (and anyone who might point me to it), while I'm ready to do my own legal research, if your recall can speed my search, what is the law source making no longer legal a minimum-participation requirement?

My 2 cents, I was generally agreeing with your observations in post #9. That a factor can buy a receivable so cheaply might suggest that it ought never to have been regarded as an obligation, much less a debt. I know many people who have the good sense to ignore the collection efforts. You're right that it's a shame that anyone should have to deal with the circumstances you describe.

That a factor can buy these receivables at a price of four-tenths of one penny on the dollar might teach us something about the quality of the ostensible "debt".

I appreciate everyone's help and some good analysis. But we haven't exactly handled my originating query. An employer, without any compulsion to do so and not because the employer faces a play-or-pay excise tax, wants to help those of its employees who want health coverage. The counts of total employees, full-time employees, and full-time-equivalent employees all are below 50. The group health insurance contract is a standard (non-skinny) coverage that provides at least minimum value. The employer is willing to pay for most, but not all, of the premium for employee-only coverage. The portion the employer is willing to pay results in keeping the participant contribution within the ACA affordable range for every employee. Despite what the employer considers a decent offer, the percentage (within those who do not have coverage other than through the employer) of eligible employees who would enroll is insufficient to meet the insurer's underwriting requirement. The employer is thinking of saying to its employees: If you want to be our full-time employee, you must show you have health coverage by other means or enroll in our group health insurance. If you do neither, we will not continue you as our full-time employee; we'll restrict your workweek to three eight-hour shifts or two ten-hour shifts. (The employer is not worried about attracting sufficient employees.) Would doing so be contrary to law?

What, if anything, does the plan's document say about the circumstances in which the plan's administrator must, may, or must not recognize a participant's agent? If the plan's document is silent or ambiguous, what does the administrator's plan-administration procedures states? What does the plan's claims procedures state? What does the plan's summary plan description state? Has the plan's administrator read the participant's power-of-attorney document to discern which powers it grants the would-be agent?