Peter Gulia

Your firm should buy Derrin Watson’s Who’s the Employer? The first time you use it will save you from incorrect advice or missed opportunities, either of which can be malpractice. Each next time, you’ll work more efficiently so you and the partners won’t waste unbillable time.

ERISA § 404(a)(1)(D) commands a plan’s administrator to administer the plan according to the written plan. And Internal Revenue Code § 401(a) or § 403(b) too in concept calls one to administer such a plan according to its written plan. Yet, tax law’s so-called remedial-amendment regimes tell a plan administrator not to rely on the written plan but rather to follow one’s assumptions about a to-be-written plan the plan sponsor might not make until December 31, 2026. The document “with an approval date of 8/7/2017” one imagines has text that states provisions no later than those of 2016. For about ten years, a plan’s administrator must discern which provisions of the written plan remain applicable and which provisions one presumes will be retroactively changed or added, discerning these differences with nothing in the text of the written plan say which is which. What purpose does “the” plan document serve?

Is the distribution-processing fee $100? Or is some other expense charge also involved? What does the plan’s governing document provide? What does the summary plan description explain? What does the most recent 404a-5 communication disclose? Does the recordkeeper process, and the payer tax-report, a Form 1099-R showing a distribution of $0.00? For each service provider involved, what does its service agreement provide?

I know those who do the TPA, recordkeeping, or operations work abhor the PLESAs. But my note above isn’t an idle hypothetical; its question is a live one from a real employer (not my client, but my client’s client). Although my client tried to talk the employer out of providing PLESAs, the employer persists in seeking to provide it (and has its own business reasons for desiring to do so). Is it proper to charge the PLESA accounts a bigger share of plan-administration expenses than is charged against non-PLESA accounts?

It’s regrettable that an IRA’s beneficiary let a custodian combine accounts with different histories and attributes. (Did the beneficiary, whichever one is your advisee, assent, expressly or impliedly, to the combination of accounts? Has the time for objecting to an account statement or transaction confirmation run out?) An adviser might warn one’s advisee that an individual remains responsible for correct minimum distributions, even if a custodian’s accounting no longer provides needed information. Yet, an adviser who’s comfortable with full-picture counseling might explain also that the IRS has little resources to detect mistakes in the amounts of minimum distributions. An adviser would provide advice that fits with one’s professional conduct. This is not advice to anyone.

A plan sponsor, an employer, or a plan administrator might prefer to show as its address an address at which the person wants to receive mail. It could be bad if EBSA or IRS sends a notice to the address shown on the most recently filed Form 5500 report, the employer or administrator does not get the notice, and is charged with having failed to respond timely to the notice. I have worked on matters in which the plan’s administrator, as a safety caution, was unwilling to show an address of where the employer or administrator worked. In one, the Form 5500 reported a lawyer’s office address. In another, the administrator rented a Post Office box and put that address on the Form 5500. This is not advice to anyone.

Imagine an individual-account (defined-contribution) plan for which the employer never pays any plan-administration expense; all is borne by individuals’ accounts. Imagine the plan includes an arrangement for pension-linked emergency savings accounts. Assume the ERISA § 801(c) conditions for a PLESA make it more expensive to administer those accounts than the non-PLESA accounts. While honoring the constraint against a charge for a PLESA account’s distributions, may the plan’s fiduciary set different plan-administration expense allocations between the PLESA and non-PLESA accounts?

“A partner’s distributive share of any item or class of items of income, gain, loss, deduction, or credit of the partnership shall be determined by the partnership agreement, unless otherwise provided by section 704 and paragraphs (b) through (e) of this section.” 26 C.F.R. § 1.704-1(a) https://www.ecfr.gov/current/title-26/part-1/section-1.704-1#p-1.704-1(a). A partnership agreement of a professional-services firm, especially an accounting or law firm, often includes allocations with formulas designed so an allocation regarding the firm’s pension expense approximates the expense attributable to each individual partner. For pension expense attributable to people other than partners and their beneficiaries, an allocation might be general regarding a whole firm or a whole department of a firm, or might be particular regarding those associates and other employees accounted for in the partner’s cost structure.

Perhaps another reason for a plan's administrator or its service provider to design a claim form that recites, with text following the tax law rule, the allowable reasons, and calls the claimant to certify she meets one.

Brian Gilmore, thank you for giving so generously to our learning. Even if one accepts the executive agency’s rule as a reasoned interpretation of Congress’s statute: 29 C.F.R. § 1630.14 has 30 uses of the word employee, but no use of spouse, dependent, beneficiary, or participant. If one reads only the text of this rule, there might be some ambiguities about whether an employee-benefit plan’s condition regarding a medical examination of an employee’s spouse is, in particular circumstances, “a subterfuge for violating the [equal-employment provisions of the Americans with Disabilities Act] or other laws prohibiting employment discrimination[.]” 29 C.F.R. § 1630.14(d)(1) https://www.ecfr.gov/current/title-29/part-1630/section-1630.14#p-1630.14(d)(1). Further, ERISA, the Public Health Service Act, the Internal Revenue Code, the Affordable Care Act, and other Federal and (not superseded) State laws might affect the plan sponsor’s choices. These and other laws might matter in how an employer and plan sponsor thinks about questions of the kind Bcompliance2003 describes. It’s complex enough that one would want information and advice from a team of employment, employee-benefits, and other lawyers.

I imagine the questions are about whether “the normal retirement age is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed.” 26 C.F.R. § 1.401(a)-1(b)(2)(iv) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)-1#p-1.401(a)-1(b)(2)(iv). Even if this plan is for only one worker, might the employer’s business—and the “industry” in which the business operates—be a little wider than just boxing prizefights? For example, does the worker intend, after retiring from being a boxer, to become a teacher, coach, or trainer? If so, might that business, even if done by a separate business organization, be regarded as the same employer and “industry” (whatever that word might mean in the context) as the prizefighting employer? I have no experience with an issue of this kind, so look to other BenefitsLink neighbors for practical guidance.

Paul I and Bill Presson, thank you for your impressive thinking.

Until recently, many employee-benefits lawyers advised an employer not to provide an automatic-contribution arrangement. Why? Because an employer might administer the arrangement imperfectly, sometimes missing some people, and that would call for corrections and expense. Have law changes made those worries smaller? Are the exposures smaller? Are the fixes less expensive? Here’s why I’m thinking about this: A charity, unadvised until now, provides an automatic-contribution arrangement for its § 403(b) plan. The default is 3% of pay, with yearly increases until 6% of pay. I believe the charity will have lapses and errors that result in failing to start elective deferrals for people to be auto-enrolled. I believe the charity is unable to design and implement work methods to avoid inevitable lapses and errors. The automatic-contribution arrangement is not needed to meet any coverage or nondiscrimination rule. Internal Revenue Code § 414A does not require an automatic-contribution arrangement because the plan’s elective-deferral arrangement was established before December 29, 2022. Should the plan sponsor continue, or get rid of, the automatic-contribution arrangement? If you suggest keeping the arrangement, what can I say about why the charity’s exposure to corrections is only a small risk?

The news release cites sources about which acts might get a delay. Those include: 26 C.F.R. § 301.7508A-1(c) https://www.ecfr.gov/current/title-26/part-301/section-301.7508A-1#p-301.7508A-1(c). A health plan’s administrator might want its lawyer’s or certified public accountant’s advice to find that the PCORI “fee” is an excise tax and is administered by the Internal Revenue Service (unlike a firearms tax or harbor maintenance tax, which are administered by other agencies). This is not advice to anyone.

Another consequence might be an unavailability of a professional—lawyer, accountant, actuary, enrolled retirement plan agent, third-party administrator, or otherwise. Some professionals might accept such a client if one is paid her advance retainer in an amount one estimates as enough to cover more time than one expects to work, after carefully considering the extra difficulties of working for a troublesome client. With the advance retainer periodically replenished, to avoid a risk of nonpayment for the next bit of work. Others might be unavailable no matter how big a fee one might earn.

The Notice points to a rule about the meaning of “officer”. 17 C.F.R. § 240.16a-1(f) https://www.ecfr.gov/current/title-17/part-240/section-240.16a-1#p-240.16a-1(f).

Thank you!!!

Based on your experience and your recent observations, what percentage of retirement plans use a balance-forward method to allocate participants’ individual accounts?

I’ve never needed to think about funding formulas regarding a cash-balance pension plan. If the value of the gold is meaningfully down as at a year’s close, could that increase the employer’s funding obligation?

That an employer’s obligation to contribute to a multiemployer pension plan ends in circumstances not of the employer’s choosing is not by itself an excuse from withdrawal liability. Your client needs to lawyer-up, yesterday.

Consider also that what Congress directed the Treasury/IRS to do might not be published before 2024 ends.

Patty, thank you for your useful reminder. Many courts would say: An expression of some Members of Congress, even if they are four ranking Members, does not state the intent of the Congress. Something written after the enactment does not state what was the intent of the Congress when the Members voted. A technical-corrections “discussion draft” has no effect until the Congress enacts it as law (which seems unlikely in the 118th Congress). If nothing is done this year, there’s another four Congresses (eight years) before the ambiguity might result in an involuntary distribution that might have been unnecessary.

A disclosure under ERISA § 408(b)(2) is a service provider’s communication to the fiduciary responsible for deciding whether to engage or continue the service provider. The fiduciary considers the information in the fiduciary’s evaluation of whether the service provider’s compensation is reasonable. Even if a service provider might not be a covered service provider because it expects compensation less than $1,000, could it be simpler to do the disclosure anyhow? Don’t you want a “paper trail” showing the fiduciary approved, at least impliedly by nonobjection, your compensation? Further, consider that the rule’s text might not measure the less-than-$1,000 by a year (a word that nowhere appears in the rule). Rather, it is what the service provider expects “pursuant to the contract or arrangement[.]” 29 C.F.R. § 2550.408b-2(c)(1)(iii) https://www.ecfr.gov/current/title-29/part-2550/section-2550.408b-2#p-2550.408b-2(c)(1)(iii) If your service agreement, instead of only a one-year term, continues until either party gives notice to end the agreement and you “reasonably expect” your open agreement might continue for a few years, might the compensation “pursuant to the contract” be $1,000? This is not advice to anyone.

Some aspects of what you ask involve the public and private law of the business organizations involved. A parent, intermediate parent, or even ultimate parent acting for a direct or indirect wholly-owned subsidiary is usual for many business groups. But you (or your client’s inside counsel) would trace through the ownership interests, formation documents, and bylaws, LLC, or partnership agreements to satisfy yourself that A has power to act for B. If the plan sponsor would use IRS-preapproved documents, consider how to make A’s acts and B’s acceptances fit the form of the documents. A service provider’s plan-documents set might impose conditions beyond those applicable public law calls for. I’m unaware of an on-point court decision. Observe that ERISA § 3(5) defines “employer” to include “any person acting directly as an employer, or indirectly in the interest of an employer[.]”

If the business that established the retirement plan no longer does business, is a remaining participant severed from employment? If so, is such a participant entitled to a distribution (even if the plan is not ended)? Has a remaining participant submitted to the plan’s administrator a claim for a retirement distribution?