Peter Gulia

Beyond what one thinks about the public policy of what Congress enacted, it might soon be time for some actuaries to think about how the new law relates to professional considerations. Among the many conditions that must be met to invoke a cutback regime, the plan's actuary must have certified the sufficient looming insolvency as provided by the statute. Perhaps trustees disappointed by an absence of a certification they desire might go shopping for a new actuary. Or retirees whose benefits are lowered under a cutback might pursue malpractice and other claims. Even winning a motion to dismiss can be expensive. And what should the professional societies think about granting a professional so much practical control over her client's fates?

Beyond the concerns QDROphile identifies, does the inquiring partner think that the transfer he proposes avoids taxes on his disposition of his securities?

Although a governmental plan’s fiduciaries who select service providers might be relieved from monetary liability under sovereign, governmental, or public-officer immunity, a governmental plan, its trust, and participants and beneficiaries might have remedies against those that receive excessive compensation. If a fiduciary of a governmental deferred compensation plan allows a direct or indirect payment (or use of the plan’s property or rights) that results in a service provider receiving more than reasonable compensation, the service provider must restore the excess (with income) to the plan if the service provider knew, or should have known, that what was allowed was more than reasonable compensation for the proper services provided. This principle — that even a nonfiduciary third person has duties concerning a trust — has been recognized in the common law since at least 1471. For this equitable principle, a person should know of a trustee’s or fiduciary’s breach when (i) he, she, or it knows facts that under the circumstances would lead an intelligent and diligent person to inquire into whether the trustee or fiduciary is breaching his, her, or its duty, and (ii) an inquiry, pursued with intelligence and diligence, would lead to knowledge (or reason to know) that the trustee or fiduciary is breaching his, her, or its duty. A service provider that receives a too-generous fee or other compensation might consider an old adage, “if it seems too good to be true, it probably is.” In applying this idea, reasonable compensation might be something more, perhaps considerably more, than fair-market compensation. And differences in the services, and in the persons that provide them, can make the comparisons untidy. Moreover, if the facts are that similarly situated governmental plans are paying similar compensation, it might be difficult to prove that the compensation is unreasonable. So far, the few settlements on litigations about governmental plans don’t give us enough information about how these claims would play if America’s plaintiffs’ lawyers pursued more of them.

I advised on these issues in the early 1990s. (Employers' payroll methods and recordkeepers' systems then were considerably less capable than nowadays.) Whichever course the employer chooses, the thing is to communicate it consistently and conspicuously. Even beyond a fiduciary's duty to communicate information that it should know a participant needs, an employer needs a ready answer to the employee's rhetorical question 'why didn't you tell me you would do {whichever course the complainer says he didn't expect (and neglected to ask about)}?

If the disqualified person doesn't file an excise tax return, what would start the running of a statute of limitations concerning the assessment or collection of the excise tax?

If the church plan is not governed by ERISA, get a lawyer's advice about whether the plan's provisions are contrary to, or could result in a violation of, a relevant State law. In some instances, that advice might be nuanced by considering the church's free-exercise-of-religion rights.

Does the software allow you to undo or override the rounding rule so you can enter and show the exact amounts?

What denomination is the church? Will the provision about who is or isn't a spouse apply only to ministers, or to all participants?

Beyond a little monetary relief, the proposed settlement with Nationwide would include a little extra disclosure. Would this disclosure do anything to help your clients?

If the vendor asserts the usual stance that it is not the plan's administrator, not a fiduciary, and does not render accounting, tax, or legal advice, is there any reason the plan's administrator does not politely decline to follow the vendor's suggestion and instead use the advice of someone who is professionally responsible for his or her legal advice?

Could the summary plan description be one of "the documents and instruments governing the plan" within the meaning of ERISA section 404(a)(1)(D) and also a part of "a definite written program and arrangement which is communicated to the employees and which is established and maintained by an employer" within the meaning of 26 C.F.R. 1.401-1(a)(2)?

Could the deal-makers first (or simultaneously) reorganize each corporation as a limited-liability company or limited-liability partnership, and then adjust the nuances of capital interests, loss interests, and income interests so that there's insufficient shared ownership?

I'm confused; beyond a forfeiture or non-allocation of a matching contribution, does the vendor suggest a forfeiture of the elective deferral, rather than a return of the wages that ought to have been paid?

Even if the plan's administrator might have acted under a good faith mistake of fact, hasn't too much time passed?

austin3515, one way you might lower your liability risks on what your client asked you is to persuade your client to file a Form 5307 to request the Internal Revenue Service's determination that, even with a minor modification from the volume-submitter documents, the plan is tax-qualified in form. The $300 user fee and a fee for your time on the Form 5307 submission together might be less expensive than your written advice otherwise might be.

If you're providing for several trusts and trustees under one plan, does your prototype or volume-submitter adoption agreement allow enough choice to specify the details?

There is another reason to consider the design that Bird describes - a separate plan and trust for each individual who will serve as trustee for just the one participant's account. ERISA section 405 co-fiduciary responsibility applies only regarding fiduciaries who serve the same plan (or trust). Also, an advantage or disadvantage (turning on one's perspectives and tastes) is that a plan for which the only participant is also his or her employer might be governed by State law rather than ERISA. While a separate plan and trust for the founder (if he is not his employer) might be governed by ERISA, the one participant is the one who can enforce the trustee's responsibility.

FWIW, I think a plan design of each-participant-is-a-trustee is not contrary to ERISA's Title I. Before accepting a trusteeship, a participant might consider that a fiduciary who has knowledge of another fiduciary's breach has some responsibility to prevent, correct, or remedy a co-fiduciary's breach.

If a TPA prepares a draft Form 5500 that answers the prohibited-transaction query Yes and the plan's administrator changes the answer to No, does the non-fiduciary TPA have any remaining responsibility?

austin3515, a few ideas for you to think about: Staff of the Employee Benefits Security Administration have unofficially expressed a distaste for a plan design under which each participant would serve as trustee of his or her account. See, for example, Q&A 10 in http://www.americanbar.org/content/dam/aba/migrated/jceb/2007/2007dol.authcheckdam.pdf Consider whether anything in the plan, a trust or subtrust, or an allocation of responsibilities would lead the Internal Revenue Service to question whether the plan is “established” or “maintained” by the employer. Consider whether a change in the plan or trust documents is one that calls for refreshing the plan’s IRS determination letter. If one or more of the participants permitted to avoid having another person serve as trustee for his or her account is a highly-compensated employee, and the plan denies this opportunity to a nonhighly-compensated employee, consider whether the circumstances of these trusteeships involve a feature that is a subject of a nondiscrimination rule, whether under IRC § 401(a)(4) or something else. If the fiduciaries decide (or the plan’s sponsor decides) to allow what’s asked, do a thorough criminal-background check on the participant to meet ERISA section 411.

pookah, is it possible for the employer to meet its purpose by providing a differential wage for those of its employees who are on military absence and applying the plan's (current or amended) contribution and allocation provisions counting the differential wages?

While I respect the desire to find a fully thought-through answer, consider also a practical question: Which better serves the service-provider business: Restraining an employer's desire to pay a plan-amendment expense from the plan's assets (so that the service provider can avoid blame for having "allowed" its customer to give an instruction for what later might turn out to have been an unwise decision)? Accepting the fiduciary's decision to pay a plan-amendment expense from the plan's assets (so that the employer does not perceive the service provider as imposing the expense on the employer)?

When the employer established these plan provisions, did it also receive a practitioner's written opinion or advice that the coverage and non-discrimination results are those the employer desired? If so, might the employer choose to reveal that writing to the auditor?

K2retire, are you seeing recordkeepers approve a loan or distribution by following a procedure adopted by the plan's administrator? Or are you seeing a recordkeeper act on its own without following such a procedure?

Recently, the Employee Benefits Security Administration and the Internal Revenue Service released guidance that makes it feasible to use an annuity as an aspect of a target-year investment fund. Has any investment manager announced a product?