Peter Gulia

I have some suggestions about how to manage this liability, but they're not appropriate for public posting. Please feel free to call me (off the clock).

Some of the rules say that an electronic means must or should be designed to deliver the information in a way "that is no less understandable to the recipient than a written paper document." Considering this, some practitioners prefer a .pdf (over .html or other means) because a print-out from a .pdf is similar in appearance to the securities issuer's printed prospectus. If attaching a .pdf to the e-mail would be burdensome to the plan's administration, a link to an appropriate Internet or intranet site from which a user may download and print the .pdf might be enough if it's accompanied by clear explanations about how to use everything (in addition to the required explanation that a participant, beneficiary, or alternate payee may require the plan administrator to furnish a paper copy). Again, I believe in making "self-service" so easy that it's obviously more convenient than asking the plan administrator. A plan administrator should consider furnishing a link only to the plan's site (or a site that the plan administrator controls), and not to an investment provider's site. In managing plan communications, a plan's administrator must act as a prudent expert would act. Some believe that it's appropriate for a plan fiduciary to consider the likelihood of participants' irrational behavior. If a plan fiduciary believes that some participants would ignore a warning that the plan fiduciary is not responsible for a third person's communications, a fiduciary might consider participants' mistaken thinking in considering whether it's in the plan's and participants' best interests to provide a link to communications that the plan fiduciary can't control.

Do you represent the participant or the proposed alternate payee? If your client’s instructions or purposes would not be met by the plan’s denial of a QDRO claim, consider, along with other ideas, some steps to sort out the plan’s decision-making: • Use the plan’s summary plan description or a recent Form 5500 to check the identity and address of the plan’s administrator. (It’s unlikely that FESCO is named as the plan’s administrator.) • If you don’t already have the plan’s QDRO-decision procedure, request that the plan administrator send this to you. • If the procedure doesn’t describe requiring the affidavit Fidelity mentioned, consider challenging the plan administrator’s failure to follow its procedure. The Labor department has stated a view that an ERISA plan’s administrator need not “review the correctness” of a State court’s finding that a natural person is or was the participant’s spouse. Moreover, the Advisory Opinion stated a view that a plan administrator may rely on a court order’s description of a person as a former spouse notwithstanding the same court order’s decision that the person never was the participant’s spouse. ERISA Adv. Op. 92-17A (Aug. 21, 1992). Some lawyers consider the interpretation suggested by the Advisory Opinion unsound, and some advise clients not to rely on it if the court’s description of a relationship is obviously wrong or internally inconsistent. However, many plan administrators find it convenient to use the Labor department’s view as a way to avoid considering whether a proposed alternate payee is or was the participant’s spouse. If the plan administrator truly requires evidence beyond the court order, consider whether your client could present other evidence that the marriage exists or previously existed. As always, if you need advice about how you go about your lawyering, it’s often smart (and sometimes required) to consult an expert.

ERISA Advisory Opinion 2003-11A observed that the Labor department’s ERISA § 404© rule doesn’t define the word “prospectus”. Following this, the Opinion states an interpretation that IF the “most recent prospectus” in the plan’s possession is a profile prospectus, delivering it would meet the § 404© rule’s prospectus-delivery condition. The Opinion also states an interpretation that if the “most recent prospectus” is a Securities Act of 1933 § 10(a) [15 U.S.C. § 77j(a)] prospectus, the § 404© rule’s prospectus-delivery condition is met only if a fiduciary delivers that prospectus. Even if a retirement plan’s fiduciary is completely confident that the profile prospectus is the “most recent prospectus”, a cautious person shouldn’t rely on this strained interpretation. Because the Opinion isn’t a rule or regulation, a court need not defer to it. Further, ERISA § 404© is an affirmative defense against a fiduciary-breach claim; the burden of proof is on the defendant to show that every condition was met. Any ambiguity concerning whether the prospectus-delivery condition was met makes it too easy for a court to find that the ERISA § 404© defense doesn’t apply. A better practice is to deliver BOTH the “full” prospectus and a profile prospectus (if any) so that a participant has his or her choice about the way he or she prefers to read. The expense of delivering these securities documents can be a proper plan expense to be allocated among participants’, beneficiaries’, and alternate payees’ accounts,

My description above assumes an ERISA-governed plan. If a plan is governed by State law, it's more likely that a petitioner might be required to, or might prefer to, pursue the plan's relief in a State court. But except for church and governmental plans (which aren't often abandoned), it's uncommon for a plan to have a remaining participant or beneficiary other than the abandoning fiduciary and yet not be governed by ERISA.

Any participant or beneficiary of an abandoned plan could sue. Although such a plaintiff eventually should be awarded a reimbursement of court costs and attorneys’ fees from the breaching fiduciary (if found and able to pay) or from the plan’s assets, in my experience few participants pursue their rights. If an EBSA investigation confirms the abandonment and EBSA is unsuccessful in getting a fiduciary to take charge, the Secretary of Labor sometimes files in a Federal court an action asking the court to appoint an independent fiduciary to wind up the plan. On an action for equitable relief, such as removing a breaching fiduciary and appointing a successor fiduciary, the Federal courts have exclusive jurisdiction (even if all parties are citizens of the same State and the amount in controversy is tiny). ERISA § 502(e)&(f). Usually, the EBSA office has lined-up its proposed independent fiduciary before the Solicitor’s office files the complaint. Some lawyers who serve as an abandoned plan’s independent fiduciary agree to serve for a limited fee that’s way below normal fee rates, and sometimes below the fiduciary’s out-of-pocket expense. Some of us are exploring doing it in a public-charity form. Because of the many thousands of abandoned plans, EBSA officials choose which cases have enough bad facts or public-relations value to use the DoL Solicitor’s office for this litigation. Also, EBSA prefers cases in which it’s not feasible for a bank or insurance company to volunteer to serve as the abandoned plan’s qualified termination administrator. However, because the vast majority of eligible financial institutions don’t accept the QTA role, after EBSA has exhausted its cajoling efforts EBSA evaluates those cases for litigation. As pro bono work, some private lawyers are willing to file a complaint without a fee, or for no more than whatever the court in its discretion awards. If you’re thinking about a particular plan and I might help you or a participant evaluate your or his or her choices, please feel free to call me.

Even without the participant's consent, a plan administrator may deliver to a participant's worksite e-mail address a return-receipt e-mail that explains that its attachments (in .pdf) are the retirement plan's summary plan description, automatic-contribution notice, default-investment notice, and the prospectus for the default investments. 29 C.F.R. 2520.104b-1©. Such an e-mail must explain the significance of the documents furnished. This means also must include "notice" (which might be one sentence) of the addressee's right to request a paper copy of a document. But if the attachments are in .pdf and a printer is nearby, those who want to read will print a document and not bother with a request.

To get QDIA relief concerning a default-invested participant, beneficiary, or alternate payee, a fiduciary must deliver to the person the QDIA notice and at least the prospectus required by the ERISA § 404© regulations – even if the fiduciary doesn’t follow other aspects of the ERISA § 404© regulations or doesn’t follow the ERISA § 404© regulations concerning other persons. 29 C.F.R. § 2550.404c-5©(4). So to get QDIA relief, a plan fiduciary (or its agent) must furnish the prospectus to the default-invested participant, beneficiary, or alternate payee “immediately following” or “immediately prior to” the defaulted-invested person’s “initial investment” in the default option. 29 C.F.R. § 2550.404c-1(b)(2)(i)(B)(1)(viii).

Some (not all) plans permit a qualified election without a spouse's consent if "it is established to the [plan administrator's] satisfaction ... that the [spouse's] consent ... [can't] be obtained ... because the spouse cannot be located[.]" ERISA 205©(2)(B). Although ERISA doesn't expressly require a court order as a condition of this exception, a careful plan administrator would not rely a participant's statement that his or her spouse can't be located, and instead would want clear and reliable independent evidence. In the absence of a divorce (or a court order of abandonment), a plan administrator that performs to ERISA's prudent-expert standard of care might insist on a Federal court order. (The testimony of an expert investigator explaining how he or she was unable to locate a person might support a court's finding.) Alternatively, a participant might find that it's easier to get a State court's order of divorce or abandonment.

CDEsq., you mention that you seek to protect yourself: Among some simple and usually effective ways to do so is to limit the scope of your work. For example, your engagement letter might state that your work is restricted to drafting an order that, if properly made an order of the domestic-relations court, should be approved by the plan administrator as a QDRO that it should follow under ERISA § 206(d)(3). Moreover, because the circumstances suggest that you should not assume that the divorcing person who is your client (or your client’s client) is a savvy user of lawyers’ services, you might affirmatively warn that your drafting is not an indication that an order would be a QDRO for any Federal, State, local, or foreign tax purpose. Likewise, you might affirmatively warn that you express no view about any tax treatment, and urge your client to get the advice of an expert tax lawyer. (If anyone renders tax advice, he or she might want to (i) decline to render an opinion - in either direction, (ii) legend the writing as advice that can’t be relied on to avoid any penalty or additional tax, and (iii) explain that the IRS or another tax authority could unravel the subterfuge.) If you were engaged, or introduced, by another lawyer, you might want to satisfy yourself that the other lawyer has given his or her client correct and thorough advice about whether what the divorcing persons want to do is in the client’s interests. In particular, I’d want to discern why and how the client considers it wise to use inalienable (and usually bankruptcy-excluded) assets to pay debts. It’s possible that there’s sensible reasoning behind such a choice, but I’d want to feel that the client received sound information and thought it through. If paying down debt is primarily about the mortgage, I’d want to feel that my client had exhausted opportunities for a reform, novation, or other relief concerning the mortgage. If the client has no lawyer other than you, consider whether (or on what terms) you really want such a client. Even if you do a super-careful job of limiting the scope of your engagement and warning about risks and consequences, one never escapes the possibility that an unhappy former client might allege that you failed to advise him or her. Even if one can quickly defeat such a claim, it costs something. And a public record is forever. If you decide to take on a risky client, add a risk premium to your fee. Please feel free to call me if I can help more specifically.

Even if a SEP plan is an ERISA-governed plan, an IRA is exempt from Part 2 of Subtitle B of Title I of ERISA. The survivor-annuity or spouse’s-consent rules of ERISA § 205 don’t apply to an IRA. ERISA § 201(6). ERISA § 205 doesn’t apply to a SEP-IRA. See, for example, Cline v. Industrial Maintenance Engineering and Contracting Co., 200 F.3d 1223 (9th Cir. 2000). For more information about beneficiary designations (and restraints against them) in the context of SEP and SARSEP plans, read chapter 16 of SIMPLE, SEP, and SARSEP Answer Book – available at www.aspenpublishers.com.

Bearlee, if the plan administrator and the plan trustee (we assume that it's the same person as the participant and the business owner) has not instructed a distribution, why is a service provider seeking to pay something that hasn't been asked for? If the concern is about avoiding a need to perform services that might not be paid for, there are other ways to manage the service provider's obligations or other responsibility. (If you'd like a little help, I'll advise about that without fee.) And if the service provider is considering some moral aspects of this situation, consider whether it might be unhelpful to pay money to a person who hasn't asked for it and is in "a deep depression".

Interpretive Bulletin 94-2 – even if a court chooses to consider it – describes a PWBA (EBSA) view on figuring out which fiduciary votes a plan’s shares. (There are also some letters and court decisions about the circumstances in which a directed trustee must, may, or must not follow an instruction.) But this view doesn’t consider a situation in which a plan’s documents state that a specified set of shares in a specified security is not to be voted by anyone. So a question remains about whether a settlor’s “don’t-vote” provision might be so contrary to a retirement plan’s purpose that a fiduciary must ignore the provision as contrary to ERISA. Apart from this, even if the terms of the shares (including any related shareholder agreement) don’t restrict the shareholder’s right to vote, a retirement plan’s “don’t-vote” provision might call into question whether the shares truly are employer securities that meet relevant ERISA and tax conditions. For stock not traded on an established market, meeting these conditions often requires that the shares have voting power that’s no less than that of the class of common stock with the greatest voting power. If a plan’s and employer’s circumstances are such that those persons don’t need the shares to meet any definition of employer securities, a question about whether a fiduciary should follow or must ignore a settlor’s “don’t-vote” provision could remain.

Although ERISA's fiduciary standard of care includes the idea that a fiduciary follows the plan and trust documents, ERISA 404(a)(1)(D) also says that a fiduciary does so "insofar as [the] documents ... are consistent with the provisions of [ERISA's title I]." For readers of this board (and especially those who often advise plans that invest in employer securities that aren't publicly traded), what's your outlook on whether (and in what circumstances) a settlor's "don't-vote" provision might be so contrary to a retirement plan's purpose that a trustee or other fiduciary must ignore the provision as contrary to ERISA? Does the fact that a question is important enough to be put to the shareholders' vote suggest that the decision fundamentally affects the shares' value?

Sorry for the wait (clients who keep the lights turned on come first). Federal courts’ decisions under ERISA § 206(d)(3) include several cases in which a Federal court ordered a plan administrator to pay an amount (or provide something) based on a State court’s order that the court found was a QDRO for ERISA purposes. Some of these opinions found a QDRO when an employee-benefits practitioner would find (and sometimes a plan administrator had decided) that the order was not a QDRO. (For discussion, we’ll ignore the worse problem of California and its Federal court, which said that a State court can have jurisdiction to declare that an order is a QDRO.) If a proceeding is about an ERISA claim (and not a dispute about a Federal tax assessment or claim), usually the Secretary of the Treasury or the Commissioner of the Internal Revenue Service is not a party to the court proceeding; most involve competing claimants, the plan, and the plan administrator. Even if collateral estoppel arguably might preclude the participant or the alternate payee from asserting a tax position that’s inconsistent with the Federal court’s decision on a similar issue, it won’t preclude the IRS if it wasn’t a litigant in that proceeding. While a Federal court’s finding on whether an order is a QDRO under 29 U.S.C. § 1056(d)(3) could be argued as some information that’s relevant to whether the order is a QDRO under 26 U.S.C. § 414(p) for Federal income tax purposes, it doesn’t necessarily control the plan administrator’s or payer’s tax-reporting. Without more, I’d feel uncomfortable advising a plan administrator to tax-report a payment as a QDRO distribution if the plan administrator’s evaluation did not conclude that the order is a QDRO within the meaning of IRC § 414(p). (That’s not to say a plan administrator wouldn’t do it; I just wouldn’t advise it.) This discomfort has at least some sense because ERISA’s QDRO statute and the Internal Revenue Code’s QDRO statute have different legislative purposes and effects. ERISA affects whether an amount is paid to a nonparticipant or isn’t; IRC § 414(p) affects also whether a payment is an exception to the general rule against pre-retirement distribution, whether an extra 10% tax on a before-59½ distribution applies, and which person recognizes income because of the payment. Some of the cases in which the Labor department has helped find an ERISA QDRO as a way to let a plan pay money to a nonparticipant are less sympathetic if one considers income-shifting and even the non-application of a tax. This tax-reporting question is a difficult one because Form 1099-R and its Instructions don’t readily recognize that a retirement plan might pay an amount in ambiguous circumstances. This question gets easier if a plan pays on an order when no one (not even the State court) finds that the order is any kind of QDRO: this sometimes happens with a non-ERISA plan. Let’s all hope that we don’t need to think about these questions.

While I don't know your client's issues and preferences or the underlying facts and circumstances, are they such that it might be feasible to include in a settlement agreement a clause that conditions the settlement's effect on the employer's and the plan administrator's receipt of an IRS tax-qualification determination and an EBSA Advisory Opinion, together with the court's approval of everything? Or is that so obviously inapt that you've already ruled it out?

John Simmons, you’re way smarter than the average bear, so the following sources – some ERISA Advisory Opinions and one court decision – should give you enough background. At least one court [see my last source below] has interpreted the “pursuant to … law” phrase to mean little more than “under color of law” or “court having jurisdiction”. Further, the Labor department doesn’t mind if a plan administrator “looks the other way” on many DRO conditions as long as the result “feels” comparable to what domestic-relations law would or could provide. A State domestic-relations law includes community-property law “only insofar as such laws would ordinarily be recognized by courts in determining alimony [sic], property settlement[,] and similar orders issued in domestic relations proceedings.” A community-property division after the nonparticipant’s death (and not incident to a divorce or other family-status proceeding) is not made under domestic-relations law. ERISA Adv. Op. 90-46A (Dec. 4, 1990). A plan administrator need not review the correctness of a State court’s decisions. A court order described its purported “alternate payee” as the participant’s “former spouse” (and designated her as the “surviving spouse”) despite the fact that the same court’s order annulled the purported “marriage” as void from the beginning. The purported “alternate payee” had been married to the participant for 38 years and bore him six children. Perhaps because these facts were sympathetic, the Labor department struggled to reason away the condition that a QDRO must provide for a spouse or former spouse. (The order didn’t purport to describe its alternate payee as a dependent.) Likewise, the Opinion ignores the condition that an order must provide “child support, alimony payments, or marital property rights[.]” The opinion notes that “the [c]ourt approved the property division prior to granting an annulment ab initio of the marriage between the parties.” But such a fact shouldn’t mean anything because an annulment means that there never was a marriage and there never were spouses. t is the view of the Department that, to the extent [that] the Order was executed by a court of competent jurisdiction pursuant to Michigan domestic relations law, neither the determination under the Order that Y is a “former spouse,” and thus meets the requirements to be an “alternate payee,” for purposes of section 206(d)(3)(B) of ERISA, nor the determination that Y is a “surviving spouse” for purposes of section 206(d)(3)(F) of ERISA, are [sic] required to be reviewed by the plan administrator. ERISA Adv. Op. 92-17A (Aug. 21, 1992). In its opinion about sham “divorces”, the Labor department suggested that a plan administrator’s general fiduciary duty might require it to make some effort to avoid acquiescing in an obvious fraud. ERISA Adv. Op. 99-13A (Sept. 29, 1999). f the plan administrator has received evidence calling into question the validity of an order relating to marital property rights under State domestic relations law, the plan administrator is not free to ignore that information. Information indicating that an order was fraudulently obtained calls into question whether the order was issued pursuant to State domestic relations law, and therefore whether the order is a “domestic relations order.” …. When made aware of such evidence, the administrator must take reasonable steps to determine its credibility. If the administrator determines that the evidence is credible, the administrator must decide how best to resolve the question of the validity of the order without inappropriately spending plan assets or inappropriately involving the plan in the State domestic relations proceeding. The appropriate course of action will depend on the actual facts and circumstances of the particular case and may vary depending on the fiduciary’s exercise of discretion. However, in these circumstances, … appropriate action could include relaying the evidence of invalidity to the State court or agency that issued the order and informing the court or agency that its resolution of the matter may affect the administrator’s determination of whether the order is a QDRO under ERISA. Appropriate action could take other forms, depending on the circumstances and the fiduciary’s assessment of the relative costs and benefits, including actual intervention in or initiation of legal proceedings in State court. The plan administrator’s ultimate treatment of the order could then be guided by the State court or agency’s response as to the validity of the order under State law. If, however, the [plan] administrator is unable to obtain a response from the court or agency within a reasonable time, the [plan] administrator may not independently determine that the order is not valid under State law and therefore is not a “domestic relations order” … but should rather proceed with the determination of whether the order is a QDRO. This last quoted sentence tells us the Labor department’s view that ERISA plan administrators should review a court order almost exclusively for offense against the plan’s terms, without considering the truth or falsehood of the assumed facts or findings that support the order. Although the Labor department wanted to help the plan administrator combat fraudulent divorces, it didn’t want to break the line that State courts decide State-law issues and plan administrators decide plan/ERISA issues. The Labor department’s guidance tells a plan administrator to rely on the status and characterization findings stated by a court order, even if they’re openly suspect or wrong. The background of this Advisory Opinion was the United Air Lines plan’s exposure to a use of a divorce as a way to defeat a § 401(k) plan’s distribution restriction and extra 10% tax on early distributions. After UAL’s attorney received the Opinion, the plan administrator informed the domestic-relations judges; the State courts changed nothing. At least one court has found that a plan administrator need not determine whether a court order violates State law. “ERISA does not require, or even permit, a pension fund to look beneath the surface of the [state-court] order.” It observed that the fact that an order violates State law does not cause the order to fail to qualify as a QDRO. The court further explained a reason to defer to plan administrators’ need for administrative certainty: ERISA’s allocation of functions--in which state courts apply state law to the facts, and pension plans determine whether the resulting orders adequately identify the payee and fall within the limits of benefits available under the plan--is eminently sensible. Pension plan administrators are not lawyers, let alone judges, and the spectacle of administrators second-guessing state judges’ decisions under state law would be repellent. Unsuccessful litigants would refile their briefs from the state litigation with pension administrators, in the hope that lightning may strike as laymen review the work of judges. Far better to let the states’ appellate courts take care of legal errors by trial judges. Pension plans are high-volume operations, which rely heavily on forms, such as designations of beneficiaries. Administrators are entitled to implement what the forms say, rather than what the signatories may have sought to convey. [citation omitted] So, too, plans may mechanically implement orders from state courts. Reviewing the substance of these orders would increase the costs of pension administration (costs ultimately passed on to beneficiaries), increase the error rate (to the detriment of participants and their loved ones), and cause delay as plans carried out the additional inquiries (again to the detriment of beneficiaries, who may need the income quickly). Blue v. UAL Corp., 160 F.3d 383, 22 EBC (BNA) 1941 (7th Cir. 1998). One last point: an order that’s a QDRO for ERISA purposes isn’t necessarily a QDRO for Internal Revenue Code purposes. A plan administrator should tax-report a QDRO distribution following its evaluation of whether the order is a QDRO within the meaning of 26 U.S.C. § 414(p).

The plan administrator (likely with your help) might want to review the SPD, other expense-allocation procedure (if any), QDRO-determination procedure, and any other documents that relate to this expense allocation to consider whether they're clear or ambiguous concerning whether the QDRO-review expense is charged before or after the segregation of the participant's and alternate payee's portions, and what portion of the expense is allocated to the alternate payee.

Although not necessarily required by ERISA’s Part 4, the better practice is for a sole fiduciary who also has a personal interest in a decision to recuse himself or herself from that particular decision, handing it off to a temporary fiduciary who is not a subordinate of, and free of any material conflicting interest concerning, the conflicted person and the decision. Some employee-benefits lawyers and other practitioners are comfortable serving in this plan-fiduciary role. Avoiding a conflict that could affect a fiduciary’s exercise of his or her best judgment solely in the interests of the plan can be a “necessary” service in the sense of one that’s “appropriate and helpful to the plan” within the meaning of 29 C.F.R. § 2550.408b-2(b). Thus, the reasonably incurred expense for this service can be a proper plan expense. It may be allocated among all individuals’ accounts if that’s what the plan, or a prudently-decided expense-allocation procedure, provides. A second-best way is Kim Sheek’s idea of enabling the conflicted person to defend his or her decision by saying that he or she relied on what he or she assumed to be objective advice from an expert lawyer. (This is second-best because rendering advice is not the same thing as making the decision.) The terms of the engagement or task should make clear that the lawyer advises the decision-maker as plan administrator, not personally. The lawyer should be one who is unassociated with any lawyer who advises the participant regarding divorce or domestic relations. Further, the terms should seek to remove conflicting interests by, among other things, paying the lawyer his or her full fee before he or she begins work. The plan’s expense may be allocated as generally described above. That said, a conflicted decision (using neither of these methods) to approve a court order as a QDRO is unlikely to draw an objection from the alternate payee (even if the order is not a QDRO). But if a participant who also acts as the sole fiduciary decides that a submitted court order is not a QDRO, it’s much more likely that the alternate payee might raise objections. In facing such a challenge, the conflicted person should fare much better if he or she: (1) was correct in the decision; (2) sent a denial letter that cited the relevant plan or ERISA provision concerning each defect, and explained how the submitted order failed to meet the requirement; and (3) made his or her decision following an expert lawyer’s advice. Some people might think that it’s somehow unfair for a plan’s other participants to bear their pro rata share of an expense for a situation like this. But remember, those participants have generally enjoyed the reduced expense (perhaps with some disadvantages too) of having an unpaid volunteer serve as the plan’s administrator: from inception or at any time, the business owner could have named a paid plan administrator. If the fee for a temporary fiduciary’s service is less than, or not significantly more than, the fee for an expert lawyer’s advice, acting in the plan’s best interests might mean that the conflicted fiduciary should prefer the temporary fiduciary. Further, some lawyers who are available to serve in either role sometimes have lower rates for serving as a plan fiduciary.

QDROphile, thanks for the reminder about that decision. Like you, I've cited it (in books and elsewhere) to support the idea that a plan administrator might reduce its liability exposure by not writing or speaking information beyond a required decision on whether an order is or is not a QDRO. In Templeman/Dahlgren/U.S. West, the court held that a lawyer's state-law claim (if any) against a nonlawyer who gave legal advice to the lawyer was not ERISA-preempted, and sent it back to a state court. The Federal court did not consider whether that third-party plaintiff had alleged sufficient facts to state the claim - leaving that issue to the state court (which then did not have an occasion to decide whether a lawyer could reasonably rely on a nonlawyer's legal advice). But even the strained reasoning of that opinion was grounded on an allegation (accepted as undisputed for the purposes of the summary-judgment motions) that the plan administrator had given advice. The court did not consider whether the plan administrator had any duty. Again, in the interests of "equal time", has anyone seen a case in which a court suggested that a plan administrator could be responsible for a failure to provide advice or information (beyond the required QDRO decision)?

The last post particularly, and this thread generally, remind me to ask a request of the practitioners who read these boards: Does anyone know of a court decision in which a court found a plan administrator liable (or potentially liable) for failing to inform an alternate payee that an order, although qualifying as a QDRO, does not protect the alternate payee in circumstances not provided for in the order? One would like to think that there should be no such liability, because the plan administrator's task is only to make a correct decision on whether an order presented to it is or is not a QDRO. But any of us who's had even modest exposure to courts and judges can imagine ways that they'd put an extra duty on a plan administrator. Still, I haven't found any court decisions; have you read or experienced any? Even if there is little or no risk of liability, are there "best-practices" arguments for or against the idea that a plan administrator should tell an alternate payee, a participant, or both about circumstances not provided for in an order?

In some States, whether a lawyer is or isn't a member of a bar association is a choice of voluntary association. In other States, there is an "integrated" or "unified" State Bar, in which membership is mandatory if one wants to be a licensed lawyer. A "unified" State Bar often has some governmental powers, and sometimes is recognized as an instrumentality of the State. If a State Bar is an instrumentality of a State, it's an eligible employer under IRC 457(e)(1)(A). Although a 501©(6) business league (which a voluntary bar association might be) also is an eligible employer (under IRC 457(e)(1)(B)), the governmental-or-not distinction matters for some important differences: A nongovernmental employer's plan is unfunded (see IRC 457(b)(6)); a governmental employer's plan must use an exclusive-benefit trust, custodial account, or annuity contract (see IRC 457(g)). A nongovernmental employer's plan that's not a church plan must limit participation to a "select group" so that ERISA Part 4's funding requirement won't apply.

Sorry to hear that. So far, it seems that BenefitsLink readers don't have obvious magic for your (hypothetical) client's situation. And one imagines that Y might not be in a good mood to hear that it should have considered the true expense of the job before taking it. In the right circumstances, a carefully written request for a review of the accuracy of the plan trustees' withdrawal-liability demand (done with all the right ERISA/MEPPAA details, and leaving behind some traps for the plan's vulnerabilities) could set the stage for a negotiation. Although in theory the plan trustees aren't supposed to accept less than the true withdrawal liability, in the real world they weigh the risks (and there is some law support for the idea that it can be proper and prudent for them to do so). More than a few of us have had some success with getting a satisfaction on a compromised amount. At this stage, the hardest part is for a client to decide how much professional effort is worthwhile.

This isn't an answer to your question; but: Before making the agreements, did Y ask a lawyer for advice about the effect of the agreements? If so, what was the advice?

For Pennsylvania's personal income tax, a benefit under an IRC-qualified cafeteria plan might or might not be compensation (one of Pennsylvania's eight classes of income) depending on the terms of the plan, whether the plan is discriminatory, and the nature of the benefit. For example, a health-care arrangement usually is not compensation, but a dependent-care arrangement is taxable compensation. The attached regulations explain the rules. 061_0101.pdf