Peter Gulia

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.

BG5150's query leads to a preceding question: Why is the loan provision not explained in the SPD?

Without answering Chaz's question, could a properly behaving practitioner describe to her client the practitioner's view that it is unlikely that the Internal Revenue Service would pursue enforcement against an employer that treated the plan amendment as if it were a section 1.125-4©(2) change in status?

Kevin C, thank you for the follow-up. David Rigby, thank you for the idea about talking with the auditor. Before putting this query on BenefitsLink, I had checked with the audit firm's engagement partner and eb quality-control chief. They said either effective time works for them. Likewise, I've had clients go in different directions on this point - even after considering the difficulty of a plan year that begins and ends in one day.

Bird and Kevin C, thank you for your good help. In this situation, doing two annual reports might be unimportant because Smaller's plan has much fewer than 100 participants and does not need an independent qualified public accountant's report. The recordkeeper (for both plans) does not have a separate fee for Form 5500 preparation. Does that change your analysis about whether December 31 or January 1 is preferable?

A big business will acquire a smaller business (this summer or autumn). Big intends to merge Smaller's safe-harbor 401(k) plan into Big's (non-safe-harbor) 401(k) plan. (Assume both businesses have a calendar year for accounting and tax. Assume both plans have a calendar plan year.) If the merger of plans happens before December 31, 2014, would that defeat the Smaller plan's safe-harbor treatment? If to avoid such a concern (or for other reasons) one suggests that the merger of retirement plans wait for year-turn, does it matter whether the merger is effective as of December 31, 2014 or January 1, 2015? Which of those do you like better? What are your reasons for why you prefer it?

Yes, of course, a responsible plan fiduciary must evaluate the service provider and its compensation; and should consider whether to disengage the provider, or to renegotiate the provider's arrangement. Further, a responsible plan fiduciary should consider whether to demand that the provider restore to the plan the provider's excessive or unapproved compensation. In addition to doing those things, reporting updated information might help might a fiduciary's duty of communication.

While I don't presume to give any advice, one can imagine as a possible reason for filing a revised Schedule C (and perhaps other aspects of a report) a desire to start the knowledge clock on ERISA section 413's statute of limitations for a breach or violation that the plaintiff could have discerned by reading the revised report.

Rather than a particular payment that turns on a particular condition, what if an employer decides individually concerning each employee (if there is no collective-bargaining unit) the salary or wages the employer offers to each?

Some practitioners suggest that a plan's administrator (and the plan's service providers) might prefer not to have any information that might lead one to wonder whether an order's division is inconsistent with an agreement that the order is supposed to be based on. A few have written in the QDRO procedure that, except for the claimant's claim form and a submitter's transmittal letter, the administrator will not read any document other than an order. To emphasize the point, the procedure has the administrator send a letter to all claimants and representatives stating that documents other than the order were not read (and were discarded). I can see advantages and disadvantages to this; what do BenefitsLink mavens think about this procedure?

To the extent that a plan requires investment-related decisions, the plan might also engage a 3(38) investment manager (and might select that manager with court approval). But a plan must have an administrator. So if no one associated with the employer will serve as a plan's administrator, could appointing (with court approval) a 3(16) service provider as the plan's administrator help?

Let's refocus the query. Assume circumstances in which, following the change in service providers, nothing in the Internal Revenue Code (including rules, procedures, and other interpretations under the tax Code) requires a change to a document that was stated using a no-longer service provider's prototype or volume-submitter document. But the employer is willing to restate the plan because the employer wants to make the current service provider's work more efficient by letting it look to a form of document on which the service provider has a developed base of knowledge and experience. In those circumstances, is the expense of restating the plan an expense that is reasonable in the plan's administration because it enables the plan to obtain the current service provider's services (or obtain them more efficiently)? For those who worry about whether an otherwise unnecessary restatement can be a proper plan-administration expense, would it change your analysis if the superior service provider were unwilling to accept an engagement unless the plan is restated using the document that the service provider prefers?

A recent BenefitsLink discussion considers whether a "3(16)" service for an organization unaffiliated with a plan's sponsor to serve as a plan's administrator would or wouldn't result in a meaningful reduction of liability that an employer-associated fiduciary otherwise might bear alone. Assume a situation in which the employer's owner and chief executive is restrained by a court order that bars him or her from serving as a fiduciary of any ERISA-governed employee-benefit plan. Assume further that none of the employer's employees is willing to serve as a plan's administrator. In those circumstances, could appointing (with court approval) a "3(16)" service provider as a plan's administrator help? What do BenefitsLink commenters think about this?

How much discretion should a deferred compensation plan's administrator have in deciding whether a participant's circumstances result in a "termination of employment" (as 26 C.F.R. 1.409A-1(h)(1)(ii) describes it)?

http://www.groom.com/media/publication/1423_FATCA_Compliance_Challenges.pdf

What do BenefitsLink mavens think about the idea of naming as trustee the plan sponsor business organization itself (if State law permits, or does not preclude, the organization from serving as trustee regarding its plan for its employees)?

If one tries to enter more than one name for line 6a, will the computer system accept the entries? If one tries to enter more than one EIN for line 6b, will the computer system accept the entries? Is it possible to add a .pdf attachment related to this line 6? I ask because a filer might choose to list all trusts that the plan uses, doing so to support a later statute of limitations or statute of repose defense.