Peter Gulia

An employer has an EIN ending in 6. Its ESOP has a determination letter dated April 2014. So far, no one offers a useful prototype or volume-submitter document to restate the plan on. If concerning an individually-designed plan an Internal Revenue Code change makes a tax-qualification amendment necessary (and Congress's Act doesn't provide a special remedial-amendment period), when must the plan's sponsor complete the amendment? According to the regulations' ordinary remedial-amendment period without an extension or other administrative grace?

What happens if an employer responds to CMS (truthfully, one hopes) that the employer lacks requested information and is willing to cooperate with CMS's effort to obtain the information from the source of the information?

If one assumes, hypothetically, that those of the trust's terms that are different than the preceding document's terms are ineffective, might the remaining plan and trust terms be sufficient to state a plan that meets all conditions of Internal Revenue Code section 401(a)?

Professor Wolk's selection is designed to accompany a coursebook, whether his or Professor Medill's, for a law school's course on introduction to employee benefits. Many practitioners use the CCH/Wolters Kluwer sets described above. Among other advantages, a rule or regulation usually is placed just after the ERISA or Internal Revenue Code section the rule or regulation interprets. (EBSA's interpretive bulletins, which (because they are reprinted in the Code of Federal Regulations) CCH treats as though they were regulations, don't get a perfect fit because their CFR numbering isn't keyed to ERISA sections. Also, bulletins interpret several ERISA sections.) If you're buying now (before the 2016 edition is available), call a sales rep to ask if on buying the soon-to-be-outdated 2015 edition CCH will give you the 2016 edition without another charge.

Is the rule you're thinking of 12 U.S.C. section 1701j-3(d)(8)? https://www.gpo.gov/fdsys/pkg/USCODE-2014-title12/pdf/USCODE-2014-title12-chap13-sec1701j-3.pdf If so, its exemption doesn't apply concerning every trust but rather a trust that meets (at least) the two conditions stated by the statute. Just curious: How is the retirement plan's trust affected by the application or non-application of a mortgage's due-on-sale provision?

Concerning a proposed change under a cafeteria plan (which does not necessarily follow through to other matters), the plan's administrator might ask for its lawyer's or other tax practitioner's advice about whether the participant's claim sufficiently describes "[a] change in the place of residence of the [participant's] spouse" within the meaning of 26 C.F.R. 1.125-4©(2)(v).

Perhaps this is an opportunity for BenefitsLink readers to ask ourselves a professional-conduct question: If a retirement plan's sponsor prefers not to correct the plan's tax-qualification defects, may a practitioner: (1) inform his or her client about the exposures, risks, and consequences [see 10 C.F.R. 10.21]; (2) insist that the practitioner will not sign or otherwise be associated with a return or report that is less than complete and accurate; (3) do nothing else (if his or her client does not ask for further work)?

Beyond the IRC 414 and other issues that Doctors Group considers, each of the four workers with the corporations that are not shareholders of Doctors Group might ask for his or her lawyers' advice about the possible applications of Internal Revenue Code sections 269A, 482, and 7701(o).

If "there is no cash in the plan", what are the plan's remaining investments (beyond the loan receivable and the claim for restoration and disgorgement on the prohibited transactions)?

Does the plan provide trustee-directed investment or participant-directed investment? If it's participant-directed, how confident are you that the plan's fiduciaries could prove all conditions needed to support an ERISA section 404© defense? Would the fiduciaries' position be weakened by a participant's allegation that, for many quarters, she had not received statements, and that the plan's administrator had actual knowledge of non-deliveries?

Consider that a choice of January 1, rather than December 31, might have been a considered choice. For an analysis of exactly when the seller became no longer an owner, one might consider affected taxpayers' logical consistency of positions across all tax treatments.

Not having seen the webinar you mention, I don’t suggest a conclusion. Your general premise is right: For most IRC § 403(b) plans and participants, there are only two kinds of investments allowed: a custodial account that holds shares of SEC-registered “mutual” funds, and an annuity contract. A church plan may include retirement income accounts. A “grandfather” rule allows a life insurance contract if it was issued before September 24, 2007 and provides only incidental death-benefit protection. There are other transition rules concerning some State retirement systems’ investments. For more information, see my chapter 6 in 403(b) ANSWER BOOK, published by Wolters Kluwer Law & Business. Despite the general premise, an insurer might design a variable annuity contract and its separate account to obtain deposit insurance coverage. See 12 C.F.R. § 330.8. As always, read carefully (at least) the contract, the prospectus, and the statement of additional information. A bank, insurer, insurance agency, broker-dealer, or investment adviser should get its lawyers’ advice.

Revenue Ruling 2002-45 [http://www.irs.gov/pub/irs-drop/rr02-45.pdf]describes a restorative payment (the ruling’s antidote against counting an amount as a contribution) as a payment “made to restore losses to the plan resulting from actions by a fiduciary for which there is a reasonable risk of liability for breach of a fiduciary duty under title I of the Employee Retirement Income Security of 1974 (ERISA)[.]” Beyond the examples given in the ruling, the IRS in practice has treated a payment as restoration if the employer made a written finding that the selection or negotiation of the insurance or investment contract was (or might have been) a breach of the employer’s fiduciary responsibility, whether under ERISA or other law, and the finding is plausible. The Treasury department’s interpretation requires also that “plan participants who are similarly situated are treated similarly with respect to the [restorative] payment.” For a limitation year that began or begins on or after July 1, 2007, the ruling’s principle is included in the annual-additions-limit rule. 26 C.F.R. § 1.415©-1(b)(2)(ii)©. The Treasury adopted my suggestion about looking beyond ERISA to other Federal law, and to State law. The key driver is that there is “a reasonable risk of liability”.

Some clients ask for advice about whether volunteering optional or additional information might help support a statute-of-limitations defense or a laches defense or argument. Advice could include reasons for furnishing information and reasons for not furnishing it. Tom Poje, thank you for the practical information about one software application.

Will the software permit a filer to answer the questions if the filer wants to?

I've seen experiences similar to some possible reactions austin3515 alludes to: An employer includes for an unfunded plan's select-group employees some who have (unreduced) compensation less than the 401(a)(17) limit. One of those employees makes a salary-reduction deferral under the unfunded plan, and expresses surprise when he discovers that reducing his salary lost him a portion of a nonelective contribution to a funded plan. In the experiences I've seen, the TPA was in a position to prove that plain-language descriptions, for both plans, explained how the deferral under the unfunded plan affects the contribution under the funded plan. But the complaining participant diffidently asserts that someone should have explained the point orally; 'don't you know I'm too busy to read anything?' An employer can diminish this kind of problem by providing a continuation of the nonelective contribution under the unfunded plan.

My 2 cents, thank you for the interesting observation about tax-law nondiscrimination. While it isn't about harm to the plan, at least not the kind that ERISA sections 406 and 408 try to manage, it reveals some of the intellectual challenges of the tax-law nondiscrimination rule. Belgarath, although 12% interest isn't a participant loan provision I would recommend, a fiduciary might reason that it might not have been so obviously outside what ERISA section 408(b) calls for that past acts must be treated as clear nonexempt prohibited transactions to be undone. Also, in the comparison to a commercial lender's hypothetical similar loan, what kind of loan does the fiduciary look to as its proxy measure? A participant loan has some attributes of some security, but also several attributes involving a lack of security. Mike Preston is right that a new fiduciary entering the scene must not ignore a predecessor's acts. After setting new participant-loan provisions "going forward", could there be some room to find that past decisions were not "clearly" imprudent?

Many prohibited-transaction exemptions are worded in terms of making sure the plan receives no less than fair value. How is a plan harmed if the plan receives more than fair-market value?

Atila, some employers use a set of plans' designs and elections that run in the opposite direction: Before the beginning of a year, a participant irrevocably elects deferrals under an unfunded nonqualified deferred compensation plan. That plan provides that the amount that is the lesser of the year's deferrals or the amount that could be allocable to the participant's account under the 401(k) plan is distributed to the participant by March 15 of the year after the year for which the deferral was made unless the participant had irrevocably elected (before the beginning of the year for which the participant earned the compensation) to treat that amount as deferrals under the 401(k) plan. Parallel provisions govern the matching contributions. IRS Letter Rulings 95-30-038, 97-52-017, 97-52-018, 1999-24-067, 2000-12-083, 2001-16-046. An employer considering such a design should consider that not everyone who is a highly-compensated employee for the 401(k) plan necessarily can be a select-group employee for an unfunded plan. A participant considering the elections described above should carefully evaluate the risks of the employer's unsecured promises and creditors' access to amounts not held under the 401(k) plan. Also, this requires picture-perfect drafting of the documents and elections.

29 C.F.R. 2550.408b-1(e) states: "A loan will be considered to bear a reasonable rate of interest if [the] loan provides the plan with a return commensurate with the interest rates charged by persons in the business of lending money for loans [that] would be made under similar circumstances." Could the fiduciary 52626 describes have found that a 12% loan meets that condition because the loan provides commensurate interest within the possibly greater interest the 12% rate provides?

Is the plan ERISA-governed? If so, did the plan's investment in the partnership result in, for any of the preceding plan accounting years, the plan's qualifying plan assets having been less than 95% of the plan assets? If so, did the plan fiduciaries have ERISA fidelity-bond insurance with coverage no less than the value of the non-qualifying plan assets. If neither set of conditions for a waiver of an independent qualified public accountant's examination was met, did the plan's administrator engage an IQPA? If an IQPA was engaged, what did the IQPA's report say about the valuation of the plan's partnership interests? If an IQPA was engaged, what did the IQPA's report say about related-party transactions and prohibited transactions? Is the plan's partnership interest allocated only to the accounts of one or two directing participants, or is it allocated to all participants' accounts?

In Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, the Supreme Court decided an interpretation of law for courts to apply in their findings on whether relief a litigant seeks is or isn’t provided under ERISA § 502(a)(3). The Court’s holding: If a person had money or property that in good conscience belonged to the employee-benefit plan but dissipated that money or property on nontraceable items, a fiduciary cannot under ERISA § 502(a)(3) attach the person’s general assets. The Montanile rule might not preclude a pension plan from getting remedies for overpayments if the payee did not consume all the money and some amount remains traceable. An answer to my question might help a fiduciary think through a discretionary decision about relative fairness regarding consequences of a mistake. For example, a fiduciary’s thinking about how much value to put on burdens from unsettling a beneficiary’s reasonable expectations might be influenced by considering whether some of that burden is ameliorated by the beneficiary’s enjoyment of some proceeds from the overpayments. I do not suggest any conclusion, or even that these are relevant considerations. It’s only that I imagine someone might choose to consider the information among several kinds of information and several modes of analysis. By the way, the health plan’s case against Robert Montanile is (as much as I know) not yet decided. On the first try, both the trial court and the intermediate appeals court found that the plan could enforce its equitable lien even had Montanile dissipated all the money. The do-over now calls for fact-finding about how much is dissipated and how much remains in Montanile’s possession, including in traceable money or property.

If the plan's provision is the regulations' deemed-need provision, it refers to "[p]ayments necessary to prevent the eviction of the employee from the employee's principal residence or foreclosure on the mortgage on that residence[.]" The plan's administrator might ask for information so it can decide whether a foreclosure on the brother's property would result also in eviction of the participant from the participant's principal residence.

Is it at least possible that the participant's surviving spouse might have proceeds from the pension plan's overpayments to the participant because the surviving spouse is a beneficiary, legatee, or other taker from the decedent's money and property?

Internal Revenue Code section 72(m)(10) states: “Under regulations prescribed by the Secretary, in the case of a distribution or payment made to an alternate payee who is the spouse or former spouse of the participant pursuant to a qualified domestic relations order (as defined in section 414(p)), the investment in the contract as of the date prescribed in such regulations shall be allocated on a pro rata basis between the present value of such distribution or payment and the present value of all other benefits payable with respect to the participant to which such order relates.” More than 31 years after the 1984 enactment of the quoted statute, no rule or regulation to interpret section 72(m)(10) has been adopted, or even proposed.