Peter Gulia

Imagine that in November or December 2014 an employee tried to include her same-sex spouse in group ("self-insured") health coverage. The employee had married her spouse in a State that provides common-law marriage but purported to preclude same-sex marriage. Mistakenly believing that the same-sex spouse was not its employee's spouse, the employer denied the requested enrollment. After the Supreme Court's June 2015 decision, suppose it turns out that the U.S. Constitution precluded the State from not providing common-law marriage for a same-sex couple if the State provides common-law marriage for an opposite-sex couple. So the employee was married when she requested her spouse's enrollment. In July, should the employer allow a spouse enrollment retroactive to January 1, 2015?

Stacey Schuett's complaint against FedEx is a reminder about some difficulties that come from uncertainty about law. In Windsor, the Supreme Court decided that a statute enacted in 1996 never was law because it is contrary to the Constitution. Although the IRS can say it won't tax-disqualify a plan for having treated a same-sex spouse as not a spouse for some plan-administration acts done before summer 2013, a participant's surviving spouse may claim she was a spouse, and is entitled to the rights an ERISA-governed plan must provide for a spouse. Could the Supreme Court's summer 2015 decision also lead to some "effective date" and transition issues?

This summer, we expect decisions from the Supreme Court of the United States on whether a State must provide same-sex marriage (if the State provides opposite-sex marriage) and whether a State must recognize a same-sex marriage that was made under another State's law. These decisions matter greatly to someone who now must travel to be sure of making a same-sex marriage, and to someone who faces uncertainties about whether a court of a State in which he or she is domiciled or resides would recognize his or her marriage made under another State's law. But for employee-benefits practitioners, I wonder if the news already happened. After the 2013 decision and administrative-law guidance, an administrator of an employee-benefit plan that has any provision that turns on the presence or absence of a spouse, has to be ready to apply the provision knowing that a same-sex marriage is at least possible. That's so even if the plan's sponsor and participants are so geographically limited that everyone resides in a State that neither provides nor recognizes same-sex marriage; an ERISA-governed plan usually recognizes a marriage that was valid under the law of the State in which it was made. (We recognize that church plans and governmental plans have quite different paths.) Are there follow-on effects of 2015's same-sex marriage decisions that employee-benefits practitioners would need to do something about?

Some practitioners wonder that EBSA's more recent interpretations have given charitable-organization employers too much false hope about somehow making available 403(b) contracts without doing anything to establish or maintain a plan. If an employer has discretion in administering a retirement plan (which seems inevitable if a participant must not decide her own claims, and an insurer or custodian is unwilling to decide claims), shouldn't a participant get the disclosure and reporting that Congress in 1974 provided for? And if a small business with three employees can file a Form 5500 report on a salary-reduction-only 401(k) plan, why is it too hard for a small charity with three employees to file a Form 5500 report on a salary-reduction-only 403(b) plan?

Belgarath, your example isn't absurd; those possibilities are why some executives negotiate for deferred compensation that's not measured by the employer's investments, but rather by a specified formula (sometimes as straightforward as accumulating amounts with a specified rate of interest), or according to the executive's investment instructions. How an employer and an executive negotiate concerning time value of money and investment risks is just one more dimension of the overall negotiation of deferred compensation.

If the pension plan really is a pension plan and has not elected to be governed by ERISA, the non-application of ERISA means that ERISA does not preempt State law. The common law of trusts and other fiduciary relationships includes duties for a trustee or other fiduciary to communicate to its beneficiaries. Depending on the facts and circumstances, one might interpret such a duty to call for a fiduciary to furnish to participants some summary, rather than the pension plan's governing instrument. This is especially so if the plan allows a participant some choices about the time or form (and indirectly amounts) of her pension benefit. Consider inviting the fiduciaries to seek their lawyer's advice about what means of communicating the plan's provisions is prudent in the plan's and its participants' circumstances.

One imagines that a plan's document doesn't state any approximation method beyond the equivalencies and other methods stated in the 2530.200b regulations (because an attempt to provide something else likely wouldn't have obtained an Internal Revenue Service determination). If so, doesn't inventing an approximation method mean that at least one fiduciary fails to administer the plan "in accordance with the documents and instruments governing the plan[.]"?

That a plan is not governed by Parts 2, 3, and 4 of subtitle B of title I of ERISA, does not mean that the plan is not governed by ERISA. If it's an employer's pension-benefit plan or welfare-benefit plan and is not a church plan, governmental plan, unfunded excess-benefit plan, or other plan excluded under ERISA section 4, ERISA governs, and preempts State law as ERISA section 514 provides.

If the charity indulges an assumption that it received good advice and drafting when it made a document, it is possible that later tax-law changes have been modest enough that the document still follows the employer's intent. But one really can't know that but for reviewing the document and the employer's circumstances. Consider also that the plan might have been made under a set of assumptions about the employer's and its employee's facts and circumstances, and that later events might have changed the facts.

If a participant really is a select-group executive, shouldn't she have the ability to negotiate contract provisions that make any fiduciary responsibility unnecessary?

For different kinds of employee-benefit plans and benefits under them, there are differences about whether the existence or non-existence of a marriage helps or hurts a claimant on his or her particular claim. For example: For a health plan, a participant might want to say that he or she has a spouse, to obtain coverage (or ostensible coverage) for the person described as his or her spouse. For a retirement plan, a participant might say that he or she does not have a spouse, so the participant may elect against a survivor annuity or name a beneficiary other than the participant's spouse. How a participant's or other claimant's statement affects a benefit is among the factors a plan's administrator might consider in reasoning how much evidence and evaluation is prudent.

Thank you for explaining the reasoning.

I have several experiences with abandoned plans, including responding to EBSA investigations, advising a natural person when EBSA asserts that she is responsible to administer the plan, advising service-provider businesses about whether to serve as a QTA, and serving as a plan's court-appointed fiduciary. I can help you think through how to address your inquirer's questions (and some protections your firm, if engaged, should get), but doing so involves more facts, and some observations that I don't want to publish on a website, especially one that EBSA employees read. You're welcome to call me.

Concerning claims to a retirement plan, a question about whether a common-law or informal marriage existed most often arises after a participant's death as competing claims between a claimant who asserts he or she is the participant's spouse and a claimant who would be a beneficiary if the participant did not have a spouse. If your participant is alive and choosing his or her form of distribution, does the plan provide a subsidized survivor annuity or some other benefit that is better for having a spouse? Could an incorrect finding that the participant has a spouse harm the plan? If not, is there some other reason the retirement plan's administrator must or should decide whether the participant does or does not have a spouse?

The administrator's plan for what to do with the $0.06 might lead you to an answer about whether a report on a 2015 plan year is needed, or whether the report on 2014 can be the final report.

Leaving aside the public policy about the cutback regime itself, my concern is about dumping on the plan's actuary an unwelcome responsibility of serving as a partial arbiter of whether to invoke a pre-insolvency restructuring. The new law allows the multiemployer plan's trustees to invoke cutbacks not because the plan is insolvent, but rather because an actuary predicts it is probable that the plan will become insolvent at a future time up to 20 years hence. Because a consequence of that professional finding can allow a plan to impose an insolvency restructuring before the insolvency happens, the actuary faces an awesome responsibility. Unlike many employee-benefits lawyers, I sometimes serve as a plan's fiduciary, with all of the legal and moral responsibilities involved. I am not afraid of that responsibility when I deliberately choose to take it on. But I would feel put upon if responsibility of that kind was attached to my normal work as a mere lawyer. Even using the idea of a pre-insolvency restructuring as a way to manage a multiemployer plan's mismatch of assets and obligations, Congress could have designed a different trigger. For example, the plan's trustees who find that a restructuring is needed could petition a court. A judge can consider other evidence, including reports from competing experts, and from experts independent of those who have a stake in the proceeding. The experts might include not only actuaries but also economists. Yes, the decision-making might be a little slower; but the cost might be worthwhile to help make sure society makes a sound decision that a restructuring is necessary. At least, the plan's actuary might be comforted by knowing that it is not her estimate alone that allows the plan to cut pensions. Or maybe I have it all wrong; maybe an actuary is accustomed to the weight of the world.

The litigations I mentioned were not about getting remedies from the plan fiduciaries, and deliberately did not name any of them or other governmental actors as a defendant. Rather, the claims were about seeking disgorgement from a service provider that received compensation so obviously excessive that it could not have been within the range of reasonable compensation. With a governmental plan, it's feasible for the plan's fiduciaries (even if many or all of the current fiduciaries are still the same as those who decided the imprudent approvals of the defendant's compensation) to support the plan's claim because the fiduciaries don't fear monetary liability and, if any counter-claim is brought against a fiduciary, will have a defense with attorneys' fees and expenses paid by the government. As I mentioned, there are very few cases. And it's not easy for a plan to find a good plaintiff's lawyer who both understands how to pursue the plan's claim and is wiling to provide her services on no more compensation than a hope of producing a settlement that results in a class-counsel fee. Further, it's often difficult to prove that the compensation was unreasonable.

Effen, in my experience, actuaries are rather good at resisting pressures; my rhetorical point is that it's a shame that they need to. It's so that actuaries have had significant practical control concerning a pension plan's funding. But that degree of practical control concerning a participant's rights wasn't nearly as much as what this new cutback regime allows. Even working within the professional standards, there are plenty of opportunities for an actuary to exercise professional discretion. So is it fair to ask an actuary to impliedly decide whether a pension plan does or doesn't get a cutback regime? I just think it's very unfair what Congress has asked of actuaries.

britoski, is your client the buyer or the seller? What do the deal documents tell you about which one will bear the economic burden of this tax settlement?

Without wading into a discussion about whether the provision is or isn't disqualifying, here's a related question for some of us to ponder: Imagine a user asks for the volume-submitter publisher's assurance that what the user has written is sufficiently within the adoption agreement's form and instructions and does not lose the user's reliance on the IRS's letter issued to the volume-submitter publisher. The publisher gives the user that assurance, putting it in writing. Later, the IRS tax-disqualifies the plan. (Assume, hypothetically, that the IRS is unquestionably correct, and the publisher was unquestionably wrong.) Is the publisher liable to the user? Or would a court say that it cannot have been reasonable for the user to rely on the statement of a person that is not an accounting, actuarial, or law firm and warned the user that it does not render tax or legal advice? I know how this would settle with the IRS and in the business world. But if such a situation didn't settle and instead were litigated fully, would the volume-submitter publisher be liable on its assurance?

Why does the employer desire to exclude those who happen to be younger than 25?

I recently saw a provision: the lesser of 100% of compensation or the largest amount that, after applying all wage reductions and deductions, results in net pay no less than $0.01.

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.