Peter Gulia

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?

Thank you for the help. Does the mention of 100 full-time employees mean a different rule applies for an employer that has fewer than 100 FTEs? (The employer I ask about has 35 employees.) Is the rule an Affordable Care Act provision or a State's law for group health insurance contracts?

Smart.

For QDROphile's point about whether a business organization that is not a bank, trust company, or other financial institution may serve as a trustee, check relevant States' laws. While many States’ laws prohibit a corporation that’s not a bank or trust company from engaging in a business of serving as a trustee or other fiduciary, a State’s law might permit a corporation to serve as the trustee of a trust for an employee-benefit plan for the corporation’s employees. For example, Pennsylvania’s Banking Code permits a non-bank corporation to act as trustee of a trust “for the benefit of [the corporation’s] own employe[e]s[.]” 7 Pa. Stat. § 106(a)(iii). https://govt.westlaw.com/pac/Document/NDECBA6206BE411E28981FA740B828C88?viewType=FullText&originationContext=documenttoc&transitionType=CategoryPageItem&contextData=(sc.Default) I used to have a many-States survey, but no longer maintain it.

Consider (1) whether the corporation's documents correctly state the directors' (or a delegated-to committee's) resolution or other act approving the desired allocations of each shareholder-employee's compensation; (2) whether the retirement plan's documents state the desired provisions; (3) whether the corporation's Form 1120-S, Schedule K-1s, and other tax and information returns are consistent with (1) and (2); and (4) whether the corporation's financial statements, even if not audited or reviewed, are consistent with the desired allocations. Of course, some (or even all) of this might be beyond the task of the retirement plan's TPA. But in my experience sometimes the retirement-services practitioner needs to lead other professionals.

An employer asked me: "Is it legal" for an employer to require, as a condition of employment, that its employee have health coverage (somehow, not necessarily under the employer's plan)? The employer pays most, but not all, of the premium for an employee enrolled under its group health insurance contract. The employer told me a health insurance salesperson suggested the idea as a way to get a sufficient percentage of employees to meet an insurer's underwriting requirement. The workforce is low-paid and does not fear the play-or-pay excise tax. Several employees refuse to do anything about getting health coverage. Beyond employee-benefits issues, what kinds of employment-law problems might result from refusing to continue an employee if he does not furnish proof of health coverage?

Observing these different views about whether it makes sense to pay a distribution (whether to an IRA custodian, or under an abandoned-property regime) or account for a right to restore a forfeiture, I wonder whether a typical plan's administrator has a choice. Does a typical prototype or volume-submitter document grant the administrator discretion to decide the mode for paying or forfeiting a benefit? Or does a typical plan state the provision?

In at least one case, the court found that the trustee's selection of valuation dates was not an honest exercise of discretion, but rather was a disloyal effort to shift an allocation of investment losses from his account to those of former partners and employees. Janeiro v. Urological Surgery Prof'l Ass'n, 457 F.3d 130 (1st Cir. 2006). What do BenefitsLink mavens think about specifying in advance the conditions under which a plan will use an interim valuation?

Thank you for the further perspective. Perhaps the SEC might answer the lobbyists' call for symmetry by requiring a broker-dealer that advises a "retail" investor to state a legally enforceable obligation to provide advice in the investor's best interest.

A friend guessed that for anyone who hasn't yet accumulated the first $1 million in investments, the portion beyond tax-favored accounts is no more than 5%. Is he wrong?

How common is it for an IRS-approved prototype or volume-submitter document to restrict a user plan's investments to those of the document sponsor and its affiliates? Which providers do it this way?

"The plan does not offer an early retirement provision." Under the plan's provisions, does severance-from-employment alone entitle the participant to a distribution?

When opponents of the Labor department’s investment-advice fiduciary rule still were trying to delay the rulemaking, one of the arguments was that the Labor department shouldn’t set standards for “retirement” investment advice until the Securities and Exchange Commission had set standards generally for a broker-dealer’s investment advice, including for advice about accounts beyond those for which the Labor department’s interpretive powers has a legal effect. Once the Labor department’s rule takes effect (in about 3½ weeks), that point is over. But the SEC still has on its agenda considering a rulemaking that could set some new standards for a broker-dealer’s advice to a retail customer. How much is left for the SEC to do? Perhaps it’s biased by who my friends and neighbors are, but I sense that while many people have investments under employment-based retirement plans, Individual Retirement Accounts, Archer Medical Savings Accounts, Health Savings Accounts, and Coverdell Education Savings Accounts – all of which the Labor department’s rule applies to, few have significant investments outside those forms. Is my guess right? Is your experience different? What’s your guess about the portion of the population with investments beyond the tax-favored accounts named above (and § 529 plans, which have some investment-advice regulation by other means)? Is there survey evidence or an economist’s study on this?

GBurns and hr for me, thank you for the further information.

If you presentation remarks on ambiguities, here's another: Schedule I part II line 4g asks "Did the plan hold any assets whose current value was neither readily determinable on an established market nor set by an independent third party appraiser?" If the answer is Yes (and none of the exceptions applies), the instructions say: "Enter in the amount column the fair market value of the assets referred to on line 4g[.]" Is the amount to be reported the sum of the end-of-year values? Or is it the highest values during the year? If it's end-of-year and the plan disposed of all of the 4g assets before the year's close, does one report the amount as $0.00?

For Schedule C's line 2 element ©, the text on the Schedule and the instruction [page 27] refer to a relationship to the plan's sponsor, an employer, an employee organization, or another party-in-interest. The instruction gives four examples of relationships: (i) employee of employer, (ii) vice-president of employer, (iii) union officer, and (iv) affiliate of plan recordkeeper. Each of those examples refers to a relationship that exists separately from the fact of providing a service to or regarding the employee-benefit plan. I recently reviewed a Schedule C in which this element's reporting on the custodian, investment manager, accountant, lawyer, and recordkeeper all were "none".

Effen, what do you think about the letter's explanation that assuming one average entry age is not sufficiently sensitive to the purpose of the evaluation? ESOP Guy, although lowering pensions might conserve some cash flow, even the maximum benefit suspensions that can be allowed might not lead to a projection that the plan would return to the degree of normalcy that the Multiemployer Pension Reform Act of 2014 requires as a condition for approving a benefit suspension. The challenge for the Central States Pension Fund is to discern whether there is any configuration of benefits, contributions, and withdrawal liability that would avoid the plan's insolvency.

In the U.S. Treasury Secretary's denial of Central States Pension Fund's application to allow benefit suspensions, special master Kenneth Feinberg cited some actuarial practice standards, and found weaknesses in some of the application's assumptions. https://www.treasury.gov/services/Responses2/Central%20States%20Notification%20Letter.pdf

Thanks, everyone, for your good help. The "refund" or return is under a combination of an administrative-services-only arrangement and a stop-loss insurance contract under which the employer/insured pays upfront amounts that pretend that a year's claims would reach the point at which the stop-loss insurance starts paying. If the experience is better than that "maximum liability", the employer gets a return of the employer's money the ASO held as the employer's agent. In the real world, does an employer separately account for how participant contributions are used to assure that none of that amount is used for a purpose beyond paying the health plan's benefits and administration expenses?

Some further guidance is in a recent ERISA Advisory Opinion. https://www.dol.gov/ebsa/pdf/AO2015-02A.pdf

About point 2 (in my earlier post and your most recent), in my experience what the ministers want (and the church wants to help happen) is that the payer's 1099 reporting will display not only the gross amount paid but also a lower taxable amount - to make the minister's tax-return preparation easier and tidier. When I represented the payer/tax-reporter, it would play along if it got satisfactory indemnification from an entity with plenty of money. The letter ruling one might seek would not be about whether something is excludable as a parsonage allowance; rather, you'd ask the IRS to confirm that an otherwise available tax treatment (whatever it is) does not become undone merely because the obligation was transferred from the pension plan to the annuity insurer.

Flyboyjohn (and others), does Chaz's description about participant contributions lead us to revisit the analysis? Does it matter whether the participant contribution was specified only as a particular amount (with the employer stuck with the all-else), or instead as a percentage of the "cost" of a specified health coverage?

Kevin C, I'm not sure, but I suspect the church plan's fiduciaries might want your advice on at least these questions: 1) On plan termination, can the church governing body or authority and the plan's fiduciaries resolve a designation of the amounts or portions of the periodic payments that are treated as parsonage allowance so that this designation will last for decades? 2) Can the plan's fiduciaries negotiate with the annuity insurer for tax-reporting that supports a participant's exclusions from income? (If the pension plan ends, what person or entity with enough steady money will indemnify the insurer for its reliance on the parsonage instruction?) The ideal is to get an Internal Revenue Service letter ruling on all points. But given a small plan with few participants, the people involved might prefer not to spend the plan's or the church's money on that procedure. Alternatively, they might spend a little money on lawyering to get the insurer/payer comfortable.

Thank you for the good reminder. Just curious, what consequences did the small church bear?