Peter Gulia

mbozek is right that broker-dealer compensation, insurance-agency compensation, and other forms of indirect compensation bring in further complexities not only under ERISA but also under banking, insurance, and securities law. (By the way, when I was in-house to a financial-services business, even a rep who renounced his or her commission, incentive compensation, production credit, and contest-qualifying measures still could not be involved in any business with a retirement plan or IRA regarding which he or she was a party-in-interest.) On austin3515's query about what's feasible, it might turn on an economics question: Does the inquiring fiduciary find that providing the advice to the plan's participants is important enough that the inquirer or the plan will pay for the advice of a lawyer who is experienced on all relevant laws? If not, anything that involves any party-in-interest or any person concerning which a fiduciary, an investment adviser, or an investment adviser's representative has an interest ought to be a non-starter.

Here’s an interpretive rule: http://www.gpo.gov/fdsys/pkg/CFR-2014-title29-vol9/xml/CFR-2014-title29-vol9-sec2550-408c-2.xml And here’s an advisory opinion: http://www.dol.gov/ebsa/programs/ori/advisory97/97-19a.htm The idea is to include in “direct expenses” the “salary and benefits paid to certain employees who are engaged full-time to provide administrative services to the Plan, and whose position would be terminated if [the employer] should cease providing services to the Plan[.]” Another advisory opinion recognizes that an employer may be reimbursed for the wages of a full-time employee who provides services to a group of pension plans if none of his or her services is for anything beyond the plans and his or her employment would not continue but for the plan fiduciary’s decision to engage the employee’s services: http://www.dol.gov/ebsa/programs/ori/advisory93/93-06a.htm I have rendered advice about arrangements that used the logic of these interpretations on looser facts. But a third-person broker-dealer’s payments might be difficult to characterize as “salary” or as “direct”.

For an extra-useful software, consider Gary Lesser's QP-SEP Illustrator: http://www.garylesser.com/

Apart from the plan's correction, what income taxes, excise taxes, and corrections are required of the participant?

Thank you for the citation and quotation of the tax-law rule for a distributing plan's administrator. Under Rev. Rul. 2014-9, 2014-17 Internal Revenue Bulletin 975 (April 21, 2014), a receiving plan's administrator may presume a proposed rollover contribution is from an eligible retirement plan by looking up a recent Form 5500 report and observing an absence of code 3C on line 8a.

If your client is the distributing plan or its administrator (and not the receiving plan), is your client's risk (beyond seeing to good transfer and delivery of the property) mostly about the tax-reporting of, and an absence of withholding from, the distribution? If so, try to imagine what arguments the IRS could make for why the plan's administrator should have tax-reported the distribution as not a direct rollover. Then, think of how the administrator would explain that it had not known that the plan the distributee instructed the plan to deliver a distribution to was not an eligible retirement plan. Another mode of analysis: If the administrator were to refuse the participant's instruction to deliver his distribution as a direct rollover to the plan he named, what proper explanation would the administrator give for not following the plan provision that allows a participant to instruct a direct rollover? If the administrator needed or wanted to put the explanation in the form of a claim-denial letter that meets all elements of the claims-procedure regulations under ERISA 503, how would the administrator describe its finding that the plan named as the recipient is not an eligible retirement plan? Likewise, a good claims-denial letter describes what further information the claimant could furnish that would "perfect the claim" or persuade the decision-maker to change its analysis. What further information would persuade the distributing plan's administrator that the receiving plan is an eligible retirement plan?

Isn't the fiduciary (not necessarily tax) correction making prudent efforts to collect the interest the plan (and, one assumes, each participant's account) was entitled to? (Isn't the plan entitled to the amounts the borrower agreed to pay? Or did the service provider also generate mistaken loan agreements?) Is the correction category "Loans Failing to Comply with Plan Provisions"?

As a variation against the general principle jpod and I mentioned, there is one non-precedential letter ruling in which the IRS allowed 403(b) contributions for employees of a limited-liability company because, among other facts, the company was a disregarded person for Federal income tax purposes.

For a church plan that did not elect to be governed by ERISA, consider also whether a State's law statutory and common law of trusts and other fiduciary relationships might apply.

What did the automatic-contribution arrangement's notice say about the period allowed for an election different from the presumed election? What did the notice say about when the presumed contributions would begin?

Consider 26 C.F.R. 1.403(b)-2(b)(8)(ii): "... a subsidiary or other affiliate of an eligible employer is not an eligible employer under paragraph (a)(8)(i) of this section if the subsidiary or other affiliate is not an entity described in paragraph (a)(8)(i) of this section."

Consider whether the remaining fiduciary might engage in a self-dealing prohibited transaction because the fiduciary has some personal interest involved. Of all the possible buyers in the world, why is the ex-wife the best buyer? And if selling to the remaining fiduciary's ex-wife really is the best deal for the plan, consider whether one might remove doubt about a possibly self-dealing or indirect prohibited transaction by using an independent fiduciary.

dv13, for the deferred compensation and the employer might become willing to divide, how much of it is no longer subject to a forfeiture risk (beyond the employer's inability or unwillingness to pay what becomes due)?

Is the employer a church?

K2retire, thank you for the help. BenefitsLink mavens, any different or further observations? Is there an argument for automatic Roth contributions under an assumption that an eventual retiree's income tax rates are not likely to be lower than current rates?

An employer presumes that retirement savings is good for the employee who doesn't opt out. But how does an employer decide whether Roth or non-Roth contributions are better for such an employee?

If a 401(k) retirement plan allows a choice between Roth and non-Roth elective deferrals and provides an automatic-contribution arrangement, how often is the default Roth elective deferrals and how often is the default non-Roth elective deferrals?

Consider 26 C.F.R. § 1.457-4(d), which under some conditions might allow deferrals from compensation that will be paid after the participant's employment ends if the compensation is paid within 2½ months after the employment ends and is payments for accrued bona fide sick, vacation, or other leave if the former employee could have used the leave if his or her employment had continued; or is payments that would have been paid to the former employeee while he or she continued in employment with the Employer and is regular compensation for services during the Employee’s regular working hours, compensation for services outside the Employee’s regular working hours (such as overtime or shift differential), commissions, bonuses, or other similar compensation. But this does not allow a deferral from other pay that is paid because of severance and that would not have been paid or used by an employee.

If the risk you fear is significant, the payer might get its lawyer's advice about how much or how little responsibility the payer's bank has, and how much responsibility the payer has.

I didn't say it's a winning argument, only that I can imagine someone constructing the argument.

rcline46, perhaps you're thinking of this bit from ERISA section 104(b): "The administrator shall furnish to each participant, and each beneficiary receiving benefits under the plan, every fifth year after the plan becomes subject to this part an updated summary plan description described in section 102 [that] integrates all plan amendments made within such five-year period[.]" And even if there has been no plan amendment, section 104(b) calls for a republication of the SPD "every tenth year after the plan becomes subject to this part." The idea of requiring an integrated summary plan description only on a periodic basis might reflect assumptions of a time before word-processing software was in wide business use. For an ERISA-governed plan, a proliferation of tack-on amendments without restatement (especially if some amendments, instead of revising only the originating document, revise a preceding amendment or some succession of them) arguably might call into question whether the plan is "established and maintained pursuant to a written instrument" as required by the first sentence of ERISA section 402(a).

austin3515, as you consider the different suggestions, consider at least one more related point: The way an application or other account-opening document describes the account holder might drive what a bank or broker-dealer asks in applying its know-your-customer and anti-money-laundering procedures. Also, if (for whatever reason) the Employer/Taxpayer Identification Number furnished is not different than the employer's EIN, it might be too easy for a disappointed creditor of the employer to argue that the purported trust never was separate from the employer. And an attempted provision that only the Treasurer has authority to direct the disposition of the corporation's money and other property or other exercise the corporation's rights might be legally unenforceable. A rabbi-trust intent might be defeated if a bank or broker-dealer believes that a corporation's president has inherent, delegated, or implied power to direct the disposition of the corporation's assets. To return to jpod's question, is there a reason why it might be unwise to check the undifferentiated "Trust" box and truthfully answer whatever information about the trust or its trustee the application calls for?

Thinking of non-frozen IRC section 401 plans, what do BenefitsLink mavens guess as the percentages for: plans using only individually-designed documents; plans using a few custom add-ons, but mostly using a preapproved document; and plan using only preapproved documents?

Is the copy at least a certified copy? If so, who certified it as a true copy of the original? How much money or insurance supports the certifier's certificate?

If the trust (really, the trustee) has at least one employee (including a person who is a deemed employee under IRC 401©) who might become a participant, I'm unaware of any special reason why such an employer could not establish a retirement plan. There can be non-nefarious reasons why a trust creator might want a trustee to operate a business. If the corporation has S corporation flow-through treatment and the trust would be a grantor trust that has the trust's income taxed to the grantor, it's possible that the Federal income tax treatment might not be too much different. tbp, consider being extra careful about the scope of your advice or service.