Peter Gulia

As you already suspect, if the investment fund's computer facility is an all-or-nothing for which the fund's customer isn't permitted to specify exactly which tasks are or are not authorized, such an arrangement might leave you vulnerable to an argument about the effect of your powers. While you might argue that you and the plan had agreed to limits on your authority, others might argue that, once an authorization of you to use the computer facility is in effect, the investment fund had no duty or obligation to restrain you from exceeding the limits of your agreement with the plan. You might weigh the benefits and burdens of a computer facility after both you and your lawyer have read its documents and evaluated its risks. Many recordkeeper businesses price the services with some assumptions about the possibility that it might become necessary to defend against assertions that the recordkeeper's scope or duty was greater than its service contract. Some consider a risk of an assertion that the recordkeeper was a fiduciary as a normal or intrinsic risk of the business.

The hypothetical employer that wondered about whether listing the common-control group's employers really is necessary isn't concerned about privacy. Rather, they'd feel better about avoiding a work burden of compiling the information if they felt comfortable that the IRS doesn't really need the list because the IRS isn't asked to consider coverage or non-discrimination.

The Instructions for Line 6 of Form 5307 tell an applicant that is a member of a group under common control to "[a]ttach a statement showing in detail: 1. All members of the group, 2. The relationship of each member to the plan sponsor, 3. The type(s) of plan(s) maintained by each employer, and 4. Plans common to all members." If the application does not seek any assurance about whether the plan would meet any coverage or non-discrimination rule, is it really necessary to furnish this information? What (if anything) does the IRS do with the information?

If any trustee signature might be needed, what does the current trust document (before any amendment that now might be made) say about whether trustees may act by one of them, may act by a majority, or must act by a unanimity?

A plan fiduciary must make an effort that's reasonable in the circumstances to get a restoration of the plan's loss. But in considering how much effort to use (even to the point of almost none), a fiduciary may balance expense against the amount sought, discounted by the probabilities of successful action and collection. On the hypothetical situation that RCK described, if there is no collection from a wrongdoer, it seems doubtful that the employer must restore the loss because the facts suggest that there might not be any fiduciary that breached a duty to the plan (or that has personal possession of the plan's money, property, or rights). If the theft loss stays an unrestored loss, should it be allocated to the individual account of the one participant?

rocknrols2 presents some sensible suggestions about not being too quick to assume facts that might not be fully known. However, suppose that the employer doesn't volunteer to pay the plan's expenses. In meeting fiduciary duties to take on no more than reasonable plan-administration expenses, what factors should a plan fiduciary consider in deciding how much of the plan's money to spend on trying to uncover the facts of a particular theft loss? Further, might a plan fiduciary decide that - although there might be some value in investigating to the extent that it would find information that the plan fiduciaries could consider in designing the plan's controls to guard against future thefts - tracing where the money went after it left the plan seems unlikely to meaningfully benefit the plan?

Under the Labor department's interpretation, a blackout period doesn't include a restriction that occurs because of a QDRO or because of a time for deciding whether an order (or even an anticipated order) is a QDRO. 29 C.F.R. 2520.101-3(d)(1)(ii)©. However, consider whether the restrictions (if any) that apply because an order is submitted ought to be explained in the plan's summary plan description, QDRO procedures, and other notices.

frank1971, although there are some things that truly are permanent or indefinite records, I don't generalize that into an undifferentiated "keep everything". By focusing on the particular laws and business needs involved, it is possible to design a records-retention and records-destruction plan that keeps what you need but gets rid of what you don't really need. If you'd like to learn more, please feel free to call me.

A person seeking to help protect the retirement plan might remind the bankruptcy trustee that he, as the plan's administrator, has fiduciary duties to the retirement plan. However, it's unclear what a bankruptcy trustee should do if his or her duties to a retirement plan are in conflict with his or her duties to the bankruptcy administration. In those circumstances, a trustee might consider whether to ask a Federal district court to decide what to do.

I've seen a 401(a)/401(k) plan that had no provision for a participant to designate a beneficiary. Instead, the plan provided the death benefit to the participant's surviving spouse (and didn't allow any qualified election against that provision) or, on the absence of any surviving spouse, to the personal representative of the participant's estate.

In addition to Matt Bozek's suggestions, there are at least two further opportunities to help protect a non-ERISA plan (and its administrator): (1) Look carefully at the plan's choice-of-law and exclusive-venue provisions. Sometimes it's feasible to use these provisions to apply only the law of a State that doesn't have any deemed-revocation-on-divorce statute. (2) A deemed-revocation statute might say that its general presumption applies "unless it appears from the wording of the [beneficiary] designation ... that the designation was intended to survive the divorce." See, for example, 20 Pa. Consol. Stat. 6111.2. If a beneficiary-designation form had said, above the participant's signature: "I intend all of my beneficiary designations to survive my divorce from any person (including any person designated or mentioned above).", consider whether that might be enough to undo a deemed-revocation statute.

From the Internal Revenue Manual: 5.11.6.1 (01-22-2010) Retirement Income Use discretion before levying retirement income. Also see Delegation Order 5-3 (Rev-1) at IRM 1.2.44.3. A notice of levy is continuous for wages and salary. Other levies only reach property a third party is holding when the levy is received. Reminder: References to property include rights to property. As long as the taxpayer has a fixed and determinable right to property, a levy attaches that right. Therefore, a levy on retirement income can reach payments in the future whether or not the taxpayer has begun receiving payments when the levy is served. This often means that a levy on retirement income reaches future payments. Because this type of levy may begin attaching payments long after the levy is served, follow-up when the taxpayer is expected to become eligible to receive payments. Also see IRM 5.11.5.6.2(7) regarding input of TC 971 AC 687 and IRM 5.11.7.2.5.1, FPLP and Paper Levy, for discussion regarding the Federal Payment Levy Program (FPLP) and paper levies. Consider setting a mandatory follow-up for Bal Due accounts reported currently not collectible. If the taxpayer has the right to receive future payment but has not opted to do so, the levy attaches that right. A levy served while the taxpayer is receiving periodic payments reaches payments due then, as well as payments as they become due later, as long as there is already a fixed and determinable right to the future payments. A levy on a fixed and determinable right to receive future payment (e.g., retirement or pension income, Social Security benefits), made within the statutory period for collection, remains enforceable to the extent of the value of the property levied even if the property itself is not turned over within the statutory period for collection. In other words, a levy prior to the expiration of the statutory period for collection on a fixed and determinable right to receive future payment is still enforceable after the expiration of the statutory period for collection. http://www.irs.gov/irm/part5/irm_05-011-006.html

The attachment, New York's rules for a State or local government employer's deferred compensation plan, includes some law on whether a plan's lead fiduciary may select one person as a service provider for more than one of three roles - Administrative Service Agency (recordkeeper and plan administrator), Trustee, and Financial Organization (investment). Of course, this is merely one example, and another State's law might be meaningfully different. NYSDCB_Rules.pdf

Which State?

About half the States have a statutory law of trusts based on the Uniform Law Commission's Uniform Trust Code (in addition to the common law of trusts).

However, an appointing fiduciary must use procedures to monitor and evaluate the performance of each appointed fiduciary. And if, for any of the subjects, an appointing fiduciary lacks enough knowledge, experience, and expertise to evaluate the appointed fiduciary's performance as a prudent expert would evaluate it, the appointing fiduciary must get enough advice to be able to do its evaluations to that standard of care.

The rule is 26 C.F.R. 1.415©-1(b)(2)(ii)©. A "restorative payment" made to restore a plan's losses if there was a reasonable risk of fiduciary liability is not an annual addition. Conversely, paying up a loss for which there isn't a reasonable risk of liability is an annual addition. It's easy for me to remember because the Treasury department adopted my comment that the liability an employer meets by paying restoration should not be limited to ERISA fiduciary liability (as it would have been under the proposed rule) but should recognize liability under other applicable law. 72 Federal Register at page 16887 (April 5, 2007). To support a position that paying up a "surrender" or contingent deferred sales charge is not an annual addition, an employer might seek its lawyer's written advice that the plan's fiduciary responsible for the selection or approval of the contract with that charge breached its fiduciary duty - or at least that a claimant could plausibly allege a fiduciary breach and that there is a "reasonable risk" of that liability.

Using the Delinquent Filer Voluntary Compliance Program, a small non-governmental tax-exempt organization may file the 104-23 statement (rather than Form 5500 reports) and pay a penalty of only $750. http://www.dol.gov/ebsa/regs/fedreg/final/2002007514.pdf I don't use Corbel/Relius/Sungard documents (or those of any document packager); so I don't know enough about such a document to guess whether it might be sufficient. If the employer and the executive are ending the plan, they might decide that the risks of an error are smaller than the expense of finding out whether there is an error. But I'd preserve a writing that those were my client's instructions.

I misunderstood the originating post, and I'm sorry if I confused anyone. A rule recognizes a post-severance plan-to-plan transfer of assets and obligations from a non-governmental 457(b) plan to another. 26 C.F.R. 1.457-10(b). Some of this transfer's practical consequences are similar to a rollover.

Is the desire for the art enough that the would-be buyer would pay for some professional help to apply for a prohibited-transaction exemption and negotiate the plan's sale of its property?

If the right exceptions are met, ERISA Parts 2, 3, and 4 don't apply, but ERISA Parts 1 and 5 do apply. A practitioner should be guided by his or her client's direction on how much time and money to spend. But because so many charitable organizations' deferred compensation plans have significant defects, I'd be inclined to suggest a glance at the administrative provisions to consider whether there are some that are easy and worthwhile to improve while one is otherwise touching the documents. And if a client instructed me not to pursue this ("why spend effort on a terminating plan?"), I'd preserve a writing that those were my client's instructions.

Pension Girl, in addition to jpod's suggestions, a caution that you might consider. An otherwise supposed provision of a document might be void (and so ineffective) if making the provision is beyond the governmental person's powers under applicable law. An agency, instrumentality, or political subdivision of a State has only those powers that State law grants. A housing authority often is restricted by State (and local) law and the conditions of Federal grants. Perhaps because governmental plans aren't a big class of frequent flyers in the IRS's correction programs, there isn't much IRS guidance on what to do about a situation in which the plan's administration is contrary to a document's ostensible provision that, although consistent with IRC 401(a), is contrary to law. This situation doesn't work well in the IRS's standard correction programs, but can be negotiated using other means. Of course, it's best to get the provisions right before the governmental person adopts a document.

epaley, thanks for your update. Your last two sentences (including Pain In The Administration) are a nice illustration on why the Supremes ought to decide that ERISA preempts San Francisco's ordinance.

Not quite correct; it's the unfunded and select-group conditions plus the filing under 29 C.F.R. § 2520.104-23 that excuses ERISA's annual-report requirement.

But if the employer hasn't filed a return to self-assess the excise tax, is the IRS computer smart enough to generate something that causes the IRS to pursue the excise tax?