Peter Gulia

ERISA section 732(a) states: "The requirements of this part (other than section 711 [mothers and newborns]) shall not apply to any group health plan (and group health insurance coverage offered in connection with a group health plan) for any plan year if, on the first day of such plan year, such plan has less than 2 participants who are current employees." Should "employees" be interpreted to follow the idea in 29 C.F.R. 2510.3-3(b) that a plan in which only business owners participate is a plan without employees? If the only thing an S corporation does is pay the individual health insurance premiums of the corporation's two shareholders (and there is no employee beyond the shareholders), do the Public Health Service Act market reforms apply?

The corporation has two shareholders, sisters, with an even 50% each. One of the shareholders has two children, both of whom are older than 21. Is mom's shares attributed to her adult sons?

Much remarked on in our news is that the idea of an employer paying for its employee's individual health insurance is over. But what if there is no group health insurance available for the employer to buy? Under the New Jersey Small Employer Health Benefits Program, an employer cannot get a group contract unless it has at least one "real" employee. For that purpose, an employee "excludes a sole proprietor, a partner in a partnership[,] and a 2 percent S corporation shareholder[,] as well as immediate family members of such individuals." If all of a corporation's employees are its shareholders and their children, must the business forego the tax advantages of employer-paid health insurance? Or is there a way for the corporation to pay the premiums for each worker's individual health insurance, without tripping on the several prohibitions and penalties we've been reading about?

The linked-to court decision explains a trial judge's finding that a complaint did not sufficiently allege facts that, if proven, could show that an English SPD was not understandable to "average" participants. Among other reasoning, the analysis says it's not about what language a participant speaks; rather, it's about whether participants READ a language other than English AND do not read English. http://www.mdd.uscourts.gov/Opinions/Opinions/13-cv-3684%20Melendez.pdf That said, there might remain a duty to provide some foreign-language assistance.

MoJo presents one clear outlook; any different views?

If a significant part of the problem is using a human being's time to compute the amounts of the restoration and its allocations among participants' accounts, should we ask SunGard Relius and other software developers to make this a routine function? Or is it already a routine computerized function?

Now that we've heard a range of views about what might or might not be reasonable expectations for how an employer keeps or discards documents and records, let's turn to a practical question for TPAs and other employee-benefits service providers: What (if anything) should a TPA tell its client about how long to keep a document or record the TPA prepared or furnished? Some say they like a cover letter or e-mail that transmits a report to include one sentence that describes a suggested minimum retention time. (For example: We suggest you keep the enclosed report about your plan's coverage and non-discrimination for 2013 until at least November 2020, and then get your lawyer's advice about whether destruction of the record is proper.) They like this because, when the client can't find a record it should have kept and whines 'why didn't you tell me?', the TPA will have some evidence that the employer's failure isn't the TPA's fault. Others say a TPA should not volunteer information beyond the services the TPA contracted. What do you think? Would including a suggestion about records retention be helpful or harmful?

For an interesting illustration of some employers joining with unions for a lobbying statement: http://www.solutionsnotbailouts.com/About/business-and-labor-support They suggest that a multiemployer pension plan's trustees might choose a set of cutback provisions that is somewhat more efficient than those that would result under the law that governs the plan's insolvency. In effect, they ask for an opportunity to impose a restructuring before the insolvency happens.

Please understand that my observation is not necessarily a suggestion against allowing securities accounts, but rather a caution about some difficulties in making it an investment alternative for less than all participants.

Is electronic delivery sufficient if the addressee has not consented to it and does not use any computer as part of his or her work for the employer?

Thanks, everyone, for the suggestions. I likely will engage an actuary to help me with the math analysis about (i) estimating how many years are likely to elapse before the plan becomes insolvent, (ii) whether (and how much) the plan's early-retirement reduction is steeper than just actuarial equivalence, and (iii) whether that difference is a logical risk premium for getting some payments before the insolvency cut. I expect to integrate that analysis with my political advice about the likelihood or unlikelihood of Congress changing the law.

Beyond Bill Presson's good point about tax-Code non-discrimination, the plan sponsor might think carefully about how each of the plan document and the summary plan description describes the class of participants whose investment alternatives include the thing that is not available to other participants. Consider too whether the extra thing is or isn't an investment alternative for a beneficiary or an alternate payee. Consider whether a classification is vulnerable to a challenge that it indirectly discriminates regarding race, national origin, sex, or in some other way precluded by Federal law.

Are we talking about a merger of the plans only, or also a merger of the business organizations that maintain the plans? If it's about buying a business organization, isn't it possible that the proper business purpose doesn't necessarily relate to the nature of any acquired business? For example, employees of BNSF Railway, Dairy Queen, FlightSafety International, Fruit of the Loom, Government Employees Insurance Company, Helzberg Diamonds, Lubrizol, and NetJets all are employees of ONE employer. If one were seeking to explain why a merger of business organizations is invalid as a sham, what facts would one look for?

If your firm is engaged by the plan or its administrator, and that administrator has both A and B as its shareholders, members, or partners (and both A and B are trustees), get your lawyer's advice about whether your service contract obligates you to furnish information to both A and B (or, even if that is not obligated, whether doing so might help you protect yourself). Likewise, look to your service contract (and the insurance company's contract) to consider what is or isn't a proper instruction. Perhaps a subpoena is not much of a threat, because even if it is valid and commands you, a subpoena can't require one to furnish a document that does not exist. This post isn't legal advice. If you want advice (which I won't bill for), feel free to call me at 215-732-1552. Don't let A's difficulty with his or her spouse become your problem.

Is there a limit on how many characters one can put in the relevant name field of the form? A convention sometimes used for situations of this kind is "Newname fka Oldname".

Although PensionPro might refer to something else, "IRM" is a customary abbreviation for the Internal Revenue Manual. http://www.irs.gov/irm/index.html For some topics, a practitioner might read a portion of the Internal Revenue Manual as a way to help consider how an Internal Revenue Service examiner or supervisor might think about a point of tax law.

Imagine that your client is an individual who is a vested participant in a multiemployer defined-benefit pension plan. He is entitled to a pension, which the plan estimates as $1,958 per month, beginning at his age 65. But he also is entitled to claim his pension as early as age 55, with a plan-specified early-retirement reduction. He is 56 now. His employer is no longer a participating employer, and does not maintain any retirement plan. Although the individual does not need the pension money now, he is considering claiming his (reduced) pension now. Why? He believes the plan will become insolvent. He has seen his employer and several others withdraw from the plan; much of the industry's business goes to non-US providers; most of the US business does not require union labor. We have read the pension plan's Form 5500 reports for the past few years. The plan, although not reported as "critical", has not obtained (even with PPA surcharges) the contributions needed to fund the plan. Asking for contribution rate increases when a collective-bargaining agreement expires has resulted in yet more participating employers withdrawing from the plan. What professional methods should one use to help this individual evaluate his choices? I consider the early-retirement reduction of the pension as a kind of "premium" that buys some insurance against the risk that the individual's pension would be cut (or eliminated) in the plan's insolvency. Is this a logical way to think about it? If one assumes that the plan becomes insolvent before the individual turns 65, how does one estimate how deeply his normal pension would be cut? What other risks and trade-offs should a professional consider?

While we now look back at over-use of “Circular 230” warnings, it’s worth recalling why it happened. 1) The inconvenience, time, difficulty, and risk of analyzing why a writing isn’t a covered opinion would be disproportionate to the subject of the writing. 2) If a writing might be a covered opinion, it was practically impossible to obey the covered-opinion standards when the expected reader is not the practitioner’s client. 3) Recognizing those ideas, big law firms – and many non-professional businesses (see the next two points) – used warnings intended to meet an exception to the definition of a reliance opinion or a marketed opinion, two of the likelier kinds of covered opinion. 4) Many non-professional businesses used a warning because a lawyer employed by the business recognized that the business’ communications might include tax advice and the lawyer, as an individual, might be responsible for his or her compliance with 31 C.F.R. Part 10. 5) Many non-professional businesses used a warning because it made a communication look more “professional” or credible. 6) Although Treasury people expressed displeasure about over-cautious (and mind-numbing) “legending” of routine communications, they offered (until recently) no relief against the consequences of “guessing wrong”. To respond to PensionPro’s query, a service provider (to the extent that it does not rely on the proper practice of a lawyer, certified public accountant, enrolled agent, enrolled actuary, or enrolled retirement plan agent) might consider (if truthful) a general warning that it does not provide accounting, tax, or legal advice.

Had the plan's administrator thought about the need before November 2013, it could have subtracted from participants' accounts a prudent reserve for plan-administration expenses, including an amount for the independent qualified public accountant's fee.

Beyond the Labor and Treasury departments' civil penalties for failing to file a Form 5500 report, a willful failure to file can be punished by a fine up to $100,000 and imprisonment up to ten years.

One imagines that the plan's administrator (usually, the employer) should lawyer-up to protect itself and to pursue the non-actuary and the actuarial company to make good all of the plan's losses and expenses (including expenses of redoing past valuations and annual reports). Doing something before engaging the lawyer and considering her advice risks inappropriate acts that might weaken the protection and recoveries.

Brian, thank you for this useful information. In your experience, what information (if any) does a judge consider to satisfy herself that a trustee selected by the judge results in "employers ... [being] equally represented in the administration of [the plan]" within the meaning of 29 U.S.C. section 186©(5)(B)?

Before you evaluate correction alternatives, are you certain that there is a defect to correct? Assuming you treat the payment that was made as a distribution, did the terms of your plan require a qualified election with spouse's consent for that distribution?

The Form 5500 Instructions suggest (on page 6) that if the plan's administrator is a non-natural person (for example, the corporation, company, or partnership that sponsors the plan), the signer can be a natural person who has authority to sign on behalf of the administrator. But if the natural person who normally would sign requests a further agent to sign, how does such an agent satisfy herself that the Form 5500 report has been adopted as the administrator's true act?

There are experienced yet unretired ERISA lawyers who are ready to serve as an employer-side trustee for a fee and expenses.