Peter Gulia

For some employers' health plans, a practical method might be to e-mail the .pdf file. Although the administrator must furnish paper on a participant's request for it, in my experience almost no one requests it. For the one or two people who do request a delivery of paper, use a laser printer to print the eight pages double-sided on four sheets. This method works less efficiently (or even might be counterproductive) if the workforce includes some employees who are not required to use e-mail as a work condition. If the number of employees who are not required to use e-mail is significant, it might be less expensive to do an old-fashioned paper delivery.

austin3515, here's one way to illustrate that a vendor's statement isn't something that your client can rely on (even if the statement might happen to be correct). Suggest to your client that it ask: 'Vendor, if you're so confident that the employer is not responsible for your selection of investment alternatives, why don't you issue me an indemnity contract that commits you to pay the plan's losses that result from the employer's reliance on that statement?' (This kind of rhetorical question works especially well if the vendor is an insurance company, and it or its affiliate is licensed to do a liability insurance business.) Even the weak variation of asking the vendor to make the doubtful statement as a representation and warranty in a service agreement usually gets a simple No (once the question moves past the sales guys to an executive who has authority to commit the vendor's money).

Another circumstance to consider is whether the records were destroyed, and (if so) whether they were destroyed in compliance with or contrary to the plan administrator's and the recordkeeper's records-retention procedures.

I heard about Revenue Procedure 2012-6 from an opposite perspective - that the IRS no longer PERMITS a user to get a determination letter if the user has not changed anything from the "pre-approved plan". To work around that constraint, some practitioners find a provision to delete, change, or add (and even with the best of what's available from the document providers, there are some non-tax-oriented provisions that can bear an improvement) so that one can file Form 5307 or Form 5300 to get a determination letter.

Again, thanks for helping me. I told the inquirer no more reasoning than that I don't like the smell. The inquirer decided that it need not act as a fiduciary in doing the settlor act of deciding the plan's provisions. From my smell advice alone, the inquirer decided to provide QDRO distributions for ALL alternate payees without regard to the participant's severance or age. (So no worry about whether a dependent was deprived of something because of his or her lack of resources.) But here's the employer's next question: Is there any reason why it cannot or should not amend the plan to get rid of all forms of distribution other than a single sum?

Thank you all for your help. When I was asked about this (and I haven't yet answered the inquirer), my initial reaction was similar to what Belgarath describes. However, the inquirer (an employer that has the usual roles of sponsor and administrator) explained that the purpose is to get the set of QDRO provisions that results in the least plan-administration expenses. Moreover, the inquirer explained that this matters because the plan (not the employer) pays the plan's expenses; there are unusual volumes of not only QDROs but also failed QDRO attempts; and it is impractical to allocate all of the QDRO-administration expenses to the accounts of the participants and alternate payees involved, resulting in some expenses being charged against all individual accounts (including participants who generate no QDRO activity). While I worry that the provision doesn't seem even-handed, the inquirer's view is that ERISA section 206(d)(3)(E)(i)(I) {Internal Revenue Code section 414(p)(4)(B)} gives a plan settlor a choice between providing for a QDRO distribution before the participant's earliest retirement age or not so providing. And the inquirer doesn't see on the face of the statute anything that requires a plan settlor to make that choice the same way for all QDRO distributions. If the only reason I can give for not writing the provision is my nose test, I can go with that. But it would be nice to have a little more detail. Any further ideas from the BenefitsLink mavens?

May an individual-account retirement plan provide that a QDRO distribution to an alternate payee is permitted before the participant's earliest retirement age IF the QDRO provides its distribution to the participant's spouse or former spouse, BUT also provide that a QDRO distribution before the participant's severance from employment or age 50 is NOT permitted if the distribution would be payable to the participant's dependent (including the participant's spouse or former spouse as a fiduciary for a dependent)?

On draper1's hypothetical, consider the possibility that the decedent's obligation to serve as the plan's administrator might have become the obligation of his or her estate. If so, the estate's personal representative should administer the plan, or should appoint someone to administer it. Also, if it happens that such an estate's personal representative and the participant's beneficiary are the same person, he or she might choose between a termination and continuing to administer the plan until the beneficiary chooses or is required to take a distribution.

rcline46 is wise to remind us that those who enforce fair-competition laws (and others) might pick up on an Internet conversation. But consider that much of the information might be readily available. One might ask people among your family and friends to share with you the summary plan description, summary of material modifications, 404a-5 information, and other disclosure documents they received from other retirement plans. You might want to study how different sets of lawyers and businesspeople solved the same exercises. Along the way, you'd see some descriptions about how plan-administration expenses are allocated to an individual's account.

If the employer does not volunteer to pay the plan's administration expenses and the plan's administrator has adopted a written procedure for charging the expenses of locator efforts to the account of the individual to be located, should it be prudent for such an administrator to omit using a locator service if the expense of it is more than (or equal to) the individual's account balance?

While MoJo describes an additional reason why a plan's administrator might decline to reinstate a participant's account, it seems to me that the court's opinion squarely supports a view that - even in the absence of any conspiracy or collusion - neither the plan nor its administrator is responsible if the administrator designed and operated prudent identity and security procedures. As a part of an explanation that its efforts to seek a return of the plan's money are enough to be prudent in the circumstances, an administrator might support its decisions with its finding that the plan might encounter difficulty proving the theft. In the absence of the thief's admission, some circumstances might involve inconclusive evidence that the human who caused a few sets of digits to be received by the plan's computer was anyone other than the participant. Moreover, even with solid proof of what happened, a plan's administrator, trustee, or other fiduciary might decide that prudence calls for not spending other participants' accounts to pay for a still uncertain opportunity to obtain an uncertain recovery. I think that the court's reasoning would support similar findings that the plan's administrator is not responsible in other situations, including Mojo’s moving-out example (whether selling a house or ending a rental). Is it unfair to make a participant responsible for controlling his or her address and changing his or her password?

The attached court decision found no responsibility to reinstate a 401(k) account that an ex-wife stole from her former husband. The participant neglected to change his address in the plan's records when he moved from the marital residence. The ex-wife used a plan mailing with information about identity-control procedures to change the participant's password. Comments? Foster_v_PPG_Industries.pdf

This is a good illustration of why ERISA ought to require that all fiduciaries, including a plan's administrator, ought to be independent of the plan-sponsor employer.

If your client’s only purpose is to satisfy an IRS reviewer, consider simply deleting the plan’s definition for spouse. In the absence of a special definition, the word means what it means in context. For a provision that’s in the plan because a tax-qualification rule requires it, a use of spouse means what it means according to the relevant statute. To the extent that 1 U.S.C. § 7 applies, it affects every Federal statute’s use of spouse.

Read Revenue Rulings 68-123, 77-290, 83-126, and 83-127. Based on this and anything else that you and your lawyer find, consider whether the compensation is or is not the nun's income for Federal income tax purposes. If it is not (and there is no other compensation), ask for your lawyer's advice on whether it might be a good-faith interpretation to not count the nun in either part of the fraction or ratio.

Even if relevant law does not require plan provisions about insurer refunds, might we prefer plan document provisions so that deciding what to do with dividends, demutualization proceeds, medical-loss-ratio rebates, and similar payments need not be a discretionary decision? If so, can a plan provide that all such payments belong only to the employer?

shERPA's observation reminds us of one of the soft spots of the rules for a hardship (or unforeseeable-emergency) distribution - recognizing that the fungible nature of money can interfere with distinguishing between allowed and unallowed purposes and how they affect a participant's claim to use her retirement account. A plan's administrator sees the claim before it, but ordinarily lacks information on the complete picture of the participant's uses of money. A participant who submits an unpaid bill for something that the plan recognizes as a hardship might have used up money that could have gone toward that unpaid bill on paying for something that the plan does not recognize as necessary. But it's the administrator's job to apply the plan's terms to the claim that is submitted.

Here's what 403(b) Answer Book says: Q 6:30 How may a state retirement system fund be a Section 403(b) investment? An investment under a state teachers' retirement system generally is not a permitted Section 403(b) investment. Likewise, an investment under a separately funded employee retirement reserve governed by the state insurance department's supervision generally is not a permitted Section 403(b) investment. [Rev. Rul. 82-102, 1982-1 C.B. 62, revoking Rev. Rul. 67-387, 1967-2 C.B. 153; Rev. Rul. 67-361, 1967-2 C.B. 153] But a contract under a plan that was established on or before May 17, 1982 in good-faith reliance on either of the revoked rulings may continue to cover those participants covered on May 17, 1982 if the plan and the investment meet all conditions required by current Treasury regulations. If either transition rule applies, the contract may continue to cover those participants covered on May 17, 1982, including “an employee who becomes covered for the first time under the plan after May 17, 1982.” [Treas. Reg. § 1.403(b)-8©(3)] As Tom Geer notes, a question about what investment is or isn't permitted is separate from a question about which person may administer a 403(b) plan. As Matt Bozek observes, section 1.403b-3(b)(3)(ii) is mostly about restraining a plan's documents from allocating to each participant alone responsibility to administer the plan. Any non-natural person that considers whether to accept an appointment to serve as a plan's administrator should get its lawyer's advice about how non-tax law might affect the service. To return to what I suspect was joel's original inquiry, the Internal Revenue Code does not preclude a State government agency from arranging a 403(b) plan for those State and local government employees who are public-schools employees (if the arrangement is proper under State law). If the transition rule described above does not apply, the arranger would limit the investments to annuity contracts and custodial accounts that hold regulated investment company shares.

Given the difficulties and frustrations that several posters have described, another step that a TPA might consider to protect itself is to make sure that its service agreement with the plan or its administrator does not obligate the TPA to furnish anything beyond what the TPA has received from the insurers and investment funds. It's not a wholly satisfactory solution. (We recognize that, no matter how clearly and loudly a TPA warns an employer and plan administrator about what services are not included, it's impossible to control what a plan's administrator wants.) But when a client or customer is upset about what didn't get done, it's still better to start that conversation without worrying about the TPA's contract responsibility or other liability.

On #2, the rule puts the duty on the plan's administrator. (That was a change that commenters on the proposed rule requested.) Paragraph © recognize that a plan's administrator may designate a person to act on its behalf in furnishing the information. However, if such an agent doesn't do what's required, the plan's administrator remains responsible.

I consider unwise some of the choices that EBSA made about which pieces of information to present (for all investment alternatives). And the rule's analysis and writing quality isn't 'A' work in very respect. But the reg writers did consider differences between SEC-registered and unregistered investments. For a few of these points, the rule includes specific provisions, and others show clear recognition of differences for unregistered funds. The rule's preamble explains the Labor department's reasoning for seeking symmetry between registered and unregistered investments. Moreover, the ERISA rule doesn't always give in to the securities-law way of doing things, sometimes requiring (for all investment alternatives, including registered investments) that information be presented differently than what securities law calls for. It might be work for trustees who are not in the business of being trustees to pull together the information to be disclosed. But if a plan asks a participant to choose between a trustees-managed fund and other funds, shouldn't a participant get the same base information on every investment alternative so that one could make an informed choice?

On #1, while I don't give advice, let me suggest a way that you and your lawyer might think about it. If the menu of mutual funds has 17 funds, the plan you've described has 18 investment alternatives. The one investment alternative that is not a registered investment company happens to have the plan trustees as its manager. The "pooled account" seems to be within the rule's definition: "Designated investment alternative means any investment alternative designated by the plan into which participants and beneficiaries may direct the investment of assets held in, or contributed to, their individual accounts."

alisonr, it's not clear whether you advise the claimant or the plan's administrator, but either way you might consider giving advice about the plan's claims procedure and the effects of it. For the claimant, working with the claims procedure might be an opportunity to find out what evidence would satisfy the plan's administrator. Or if the administrator's decision doesn't change, exhausting the plan's claims procedure (including all reviews and appeals) might be a condition that must be met before a court would consider a claim for the benefit. For the administrator, using the claims procedure might be an opportunity to double-check the soundness of the decision. And if an administrator has a correctly designed claims procedure and has used it properly and fairly, courts usually defer to the administrator's decision. On the underlying question, what explanation did the decision-maker furnish for why it believes that the evidence the claimant furnished is insufficient to prove the marriage?

By the way, I've been successful in making a bank that received a payment eat the fraud loss if the bank lacked good evidence that the receiving account belonged to the plan's payee, or lacked good evidence that the purported account holder is the same person as the one who opened the account.

How does the plan's administrator know that it was not the participant who changed the banking information? Is there any independent evidence to corroborate the participant's description of what happened? I imagine that the recordkeeper's computer knows that the participant's identity credentials were used, but doesn't know which human caused those digits to become entered into a computer. Or is there more to the mechanics than I know about?