Peter Gulia

Aside from nice questions about what does or does not invite difficulty for IRC 401(a)(4) non-discrimination (on which the Treasury department still hasn't furnished guidance despite many questions over the past 30 years), an employer (usually acting both as a plan's creator, and as a plan's fiduciary) might consider whether a provision about which directing persons may direct an investment other than a designated investment alternative is one that can be definitely expressed and can be administered using only the plan's records. How about a much simpler way: The plan permits any participant to direct investment using a securities "brokerage" account. Whether a broker-dealer desires to keep an account for an individual is the broker-dealer's business decision.

An employer maintains a health plan. For the plan's eligibility provisions, the plan defines a full-time employee as one who regularly works at least 40 hours a week. Being a full-time employee is among the plan's conditions for eligibility. A consultant told the employer that it cannot maintain the 40-hours condition, and must change it to 30 hours. The employer replied that it is fully aware of the play-or-pay excise tax, and nonetheless prefers to maintain its 40-hours condition. The consultant continued to assert that the employer MUST change to 30 hours. Apart from offering coverage so as not to attract a play-or-pay excise tax, is there some other law that constrains an employer's choice about which of its employees is eligible for its health plan?

If the transferring-out plan is a multiemployer plan, that might involve some concerns that fiduciaries might not have concerning some other kind of plan. Consider whether it's possible that the trust agreement was the only document in which a change to support the transfer is needed.

What if the person who has authority to act for a health plan's administrator does not have a Social Security Number?

Now that the government has delayed enforcement, it might be a while before anyone figures out an answer to my query.

Were these dealings negotiated with a person who was independent of the CEO? If so, why wasn't everything in writing? If not, should an advisor be concerned that the CEO might have complete control over the timing of his compensation?

Beyond considering how a change might affect a participant's tax treatment and each business organization's tax treatment, consider how much right the plan's sponsor has (or lacks) to change which person is obliged to pay the deferred compensation. Although an employer might seek broad powers, sometimes a well-advised participant succeeds in negotiating one or more provisions that restrain her employer from changing terms without the participant's consent.

Is this new question about whether a plan was "timely amended" much different than the Form 5500 schedules' queries that ask about a failure to have fidelity-bond insurance, a theft loss, or a nonexempt prohibited transaction?

Leaving aside questions about what summary of a plan is necessary, prudent, or wise, what does the plan's document say about what act the plan's sponsor must do to amend the plan?

To be clear, I'm asking about a situation in which the plan has no need to communicate with anyone beyond the participant who submitted a claim. A part of why I'm asking is that a client asked how the U.S government would detect that the plan lacks the identifier? The same employer asked what liability or penalty could result from failing to use or obtain the identifier?

Much has been written about a requirement that a non-insured group health plan obtain a health plan identifier [HPID]. But if the only thing the plan does is pay or deny a claim submitted by a participant, when (if ever) does such a plan use this new identifier?

jpod, that was my immediate and highest-order concern when first I heard about this situation. I advised my client that each employer must make truthful, accurate, and complete insurance applications from now on. I advised also about duties and obligations to inform the insurer about previous misstatements. Once the insurer has the true information, will the insurer retroactively cancel the coverage? Or will the insurer increase the premiums for past periods to what they ought to have been had each (separate) group contract been rated using the true information?

Does the mistaken request happen often enough that one should write a "form letter" to respond to it?

It's often helpful, at least in analyzing the administrator's rights and responsibilities, to separate the concepts of guardianship and conservatorship. That a person is presumed, or court-ordered, as a minor's guardian of the person does not necessarily make that person a conservator or guardian of the minor's property. It's at least possible that a minor's surviving parent is a guardian of the minor's person but lacks authority concerning all or some of the minor's property. On your questions about how much care a plan's administrator might use in satisfying itself that a proposed payee is a proper payee, what do the plan's documents say the administrator must do, and what do the plan's documents say the administrator may do? And if the plan is ERISA-governed, is what the plan's administrator is thinking about doing (or omitting doing) within the standard of care set by ERISA section 404(a)(1)?

If the actuary's services include making or keeping records that the plan's administrator relies on to perform its accounting for the plan's assets, income, or expenses, an independent qualified public accountant might request (and usually should request) a SSAE 16 report on the actuary's controls for those records. If the actuary's services are limited to actuarial reports based on information furnished by others, there might be no system of records or controls that an actuary's independent CPA could report on.

KJohnson, thank you for the further help. I had thought about ERISA section 3(5)'s different definition of employer. The businesses in my not-entirely-hypothetical do not have (and never had) 25% common ownership, and were not otherwise previously related. I considered too the possibility that an applicant's false statement might be grounds for an insurer to cancel coverage. But am I right in guessing that the arrangement is a MEWA at least until the coverage is cancelled or expired?

Austin Powers, in which publication should I look for your article?

Chaz, thank you for your response, and for helping me feel that I didn't miss something obvious. Which other facts could affect whether the arrangement is or isn't a MEWA? Because the Federal and State governments' fight against MEWAs has been about an arrangement that tries to avoid insurance regulation and that involves risks of the claims payer's insolvency, it seems odd to apply MEWA reporting to plans that are fully insured.

Two businesses that are not commonly controlled, affiliated, or otherwise related under Internal Revenue Code section 414(b)-©-(m)-(n)-(o) acted together and applied for group health insurance as though they were one employer. Have they created a multiple employer welfare arrangement?

Has ASPPA published anything about this?

Or invite the plan fiduciaries to evaluate some investment alternatives that pay a little less indirect compensation.

For a typical partnership (including a limited-liability company) or S corporation, pass-through tax treatment might mean that the employer's marginal tax rate is (or approaches) zero. For a C corporation, a marginal tax rate can be substantial, especially for the portion of the business that is done in Boston, New York, Philadelphia, or San Francisco. Does the proposal software also have an aspect for a pass-through business owner's marginal tax rate (which might vary following residences and business locations)?

Does anyone know about any court decision that found an actuary was a plan fiduciary, or at least that a complaint sufficiently alleged that an actuary was a plan fiduciary?

I haven't reached any conclusion. Rather, I've enjoyed the opportunity to learn from you.

But does paragraph (a)(1) make it unnecessary to use (d)(4)?