Peter Gulia

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.

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?