Peter Gulia

David Rigby, thank you for telling me about another way actuaries work. Do you have a guess on the relative portions of actuaries who work 85% or more on one or the other of the two classes—db or dc—of retirement plans?

For my academic writing, I hope BenefitsLink neighbors will help me with some guesses or observations about what actuaries work on. How many actuaries work 85% or more of one’s time on defined-benefit pension plans? How many actuaries work 85% or more of one’s time on individual-account plans? For actuaries between those outer ranges, what’s the split between db and dc plans? Of work done for individual-account plans, how much (if any) requires an enrolled actuary’s certificate? Of work done for individual-account plans, how much (if any) requires math skills beyond those possessed by other educated people? And although I’m focusing on actuaries in this initial query, I might ask similar questions about people who hold another license or credential.

Under a Treasury rule, a payment a fiduciary makes (and uniformly applies regarding all similarly situated participants) when the fiduciary faces “a reasonable risk of liability” might be a restorative payment, treated as not an annual addition. 26 C.F.R. § 1.415(c)-1(b)(2)(ii)(C) https://www.ecfr.gov/current/title-26/part-1/section-1.415(c)-1#p-1.415(c)-1(b)(2)(ii)(C). A fiduciary’s breach need not be proven or conceded; it is enough that there is “a reasonable risk of liability[.]” (The rule is wider than the earlier Revenue Ruling. And a rule is more reliable than nonrule guidance.) Even if all related decisions were proper and prudent, selecting a stable-value contract or deciding to make it a designated investment alternative (or continuing either decision) might have been a breach (or might set up facts allowing a complaint plausibly to assert a breach) if the fiduciary then knew—or had it exercised the care, skill, prudence, and diligence then required, would have known—that there was more than a remote possibility that the business would be acquired, or even that an owner might seek to sell the business. (One might presume a prudent fiduciary knows that a careful business acquirer typically requires the target to end its retirement plan before closing.) Or, if the plan’s fiduciary finds there is no “reasonable risk of liability” and that the adjustment is an annual addition, allocations of the adjustment might fit within all or most participants’ annual-additions limit ($69,000 [2024]) and might comport with coverage and nondiscrimination conditions. Either way, be careful if the restoration or adjustment disproportionately favors highly-compensated employees or affects a decision-maker’s individual account.

Here’s an anecdotal observation about an effect of tax law’s top-heavy condition: Some plan creations might be lost because a business owner is unwilling to obligate her business to a safe-harbor design, and lacks tax-law advice from a smart person like those in this discussion. I remember a service provider that rejected prospective customers a salesperson had sold because the provider feared that a plan—if not reformed into a safe-harbor design—could become top-heavy, and that the customer would blame the service provider. (“Why didn’t anybody tell me . . . !!”) The business executives decided that no set of explanations and warnings—no matter how clearly, conspicuously, loudly, and onerously stated—would deter frustrated customers from blaming the service provider. The service provider operationalized this fear by setting a minimum number of eligible employees, below which any but a safe-harbor plan was rejected. Even with a skilled and motivated sales force, most of the rejected prospects were unwilling to adopt a safe-harbor design. Many refused even to consider it. I describe one illustration, but my experiences with many recordkeepers and third-party administrators reveals the business problem as common. For many reasons (including some the GAO report mentions), it’s impossible to know how many plan creations are lost because of the top-heavy condition. But is the number something more than zero? I don’t here mention my views about minimum-participation, coverage, nondiscrimination, and top-heavy positive laws or tax-law conditions. And I don’t mention my views about designing taxes or tax expenditures.

So, consider seeking a court’s order that names as the alternate payee the former spouse (using only that person’s name), and recites that the order relates to the former spouse’s marital property rights. Your client will want your advice about an executor's, administrator's, or other personal representative's powers to negotiate such a payment.

The tax-law condition about a required beginning date is a no-later-than condition. Meeting § 401(a)(9) does not preclude an earlier required beginning date. A plan’s sponsor may set a younger age if it does not compel an involuntary distribution before the participant’s normal retirement age, and comports with other tax-qualification conditions. Tax law recognizes a plan’s administration contrary to its current documents if that administration later becomes legitimated by a remedial amendment. But what if a plan’s administrator doesn’t yet know what an anticipated amendment will be? And doesn’t know even what the plan’s sponsor intends for a later amendment? (I recognize that getting this information often is about an employer talking within itself, at least for many single-employer plans. But to see an awkwardness that results from tax law’s remedial-amendment tolerance, let’s follow ERISA’s distinction between a plan’s sponsor and the plan’s administrator.) Imagine a plan for which the current documents set a required beginning date in relation to age 70½. Imagine that the plan’s sponsor has not communicated to the plan’s administrator that the sponsor intends to amend the provision to refer to some other age. In those circumstances, the plan’s administrator might interpret 70½ to mean 72, 73, or 75 (as fits the particular participant), but also might interpret 70½ to mean 70½. Some service providers have blithely assumed every plan’s sponsor intends to amend a plan to provide for a required beginning date’s age the latest age § 401(a)(9) permits. Perhaps that’s almost universally so. But shouldn’t a service provider ask the question? Even if it’s the ubiquitous “we assume you want x, unless your written instruction tells us otherwise.” Or even, “we provide our service assuming your plan provides x. If your plan provides something else, you must administer your plan without relying on our service.”

I express no view about who is or isn’t a participant for Form 5500 reporting. The line 5 instructions include this: “Participant” for purpose of lines 5a–5c(2) means any individual who is included in one of the categories below. 1. Active participants (for example, any individuals who are currently in employment covered by the plan and who are earning or retaining credited service under the plan) including: . . . . , and Any nonvested individuals who are earning or retaining credited service under the plan. . . . . https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2023-instructions.pdf

If a plan accepts an individual’s rollover contribution and credits the amount to the individual’s account, she is a participant, at least within ERISA § 3(7)’s meaning. That an individual has not met the plan’s conditions for sharing in a nonelective contribution or matching contribution, or even for eligibility to elect an elective-deferral contribution, does not mean that the individual is not a participant. A textualist, but acontextual, reading of the line 5 instructions might support a different finding for Form 5500 reporting. But caution suggests counting an individual who has an account balance, even if she has not entered the plan for anything other than the rollover contribution.

The Instructions for a 2023 Form 5500 report include this: Line 6g. Enter in line 6g(1) the total number of participants included on line 5 (total participants at the beginning of the plan year) who have account balances at the beginning of the plan year. Enter in line 6g(2) the total number of participants included on line 6f (total participants at the end of the plan year) who have account balances at the end of the plan year. For example, for a Code section 401(k) plan, the number entered on line 6g(2) should be the number of participants counted on line 6f who have made a contribution, or for whom a contribution has been made, to the plan for this plan year or any prior plan year. Defined benefit plans do not complete line 6g. https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2023-instructions.pdf Perhaps a reading of that text is that either count includes only a person who fit both conditions: she had an account balance and, at the specified time, was a participant. A few potential lines of reasoning: Even if a person has an account balance, that does not make her a participant. That an amount is mistakenly credited does not mean the individual had (in the sense of possessed) an account balance. That an employer paid a contribution into the plan’s trust does not mean that any portion of that contribution was for a person who was not a participant. This discussion is not advice to anyone.

From Roger Madison’s originating post: “The plan administrator determined that the [order] was not qualified, because a spouse’s estate is not among the list of acceptable alternate payees under IRC § 414(p)(8) [ERISA § 206(d)(3)(K)]. A second [order] was then entered by the state court on 2/29/24, this time designating the [former spouses’] adult daughter as the alternate payee. . . . . The plan administrator again found that the [order] was not qualified, because . . . the child could not be listed as alternate payee based on marital property rights, only based on child support obligations.” What Roger Madison describes involves a possible interpretation of ERISA § 206(d)(3). For an ERISA-governed retirement plan: “The term ‘alternate payee’ means any spouse, former spouse, child, or other dependent of a participant who is recognized by a domestic relations order as having a right to receive all, or a portion of, the benefits payable under a plan with respect to such participant.” ERISA § 206(d)(3)(K), 29 U.S.C. § 1056(d)(3)(K). “[T]he term ‘domestic relations order’ means any judgment, decree, or order (including approval of a property settlement agreement) which— (I) relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant, and (II) is made pursuant to a State or Tribal domestic relations law (including a community property law).” ERISA § 206(d)(3)(B)(ii), 29 U.S.C. § 1056(d)(3)(B)(ii). http://uscode.house.gov/view.xhtml?req=(title:29%20section:1056%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1056)&f=treesort&edition=prelim&num=0&jumpTo=true One court reasoned that an order can be a QDRO only if it restricts its alternate payee—including a successor-in-interest to an original alternate payee—to a spouse, former spouse, child, or other dependent of the participant. In re Marriage of Janet D. & Gene T. Shelstead, 66 Cal. App. 4th 893, 78 Cal. Rptr. 2d 365, 22 Empl. Benefits Cas. (BL) 1906 (Cal. Ct. App. 1998) (interpreting ERISA § 206(d)(3), and applying ERISA § 206(d)(3)(K). Recognizing that something like that might be the plan administrator’s finding, my earlier post suggests a potential path of least resistance—seeking a court’s order that names as the alternate payee the former spouse (using only that person’s name), and recites that the order relates to the former spouse’s marital property rights. (I recognize that this path might trade difficulty with the retirement plan’s administrator for difficulty with a bank if it questions the decedent’s estate’s administrator’s deposit of a check payable to the decedent.) If what Roger Madison describes is more than a mere clerical reaction and rather is the administrator’s considered decision (after a claimant exhausts reviews under the plan’s QDRO and claims procedures), getting the plan’s check payable to the former spouse might be less expensive than asking a court—likely a Federal court if the plan administrator is not subject to personal jurisdiction in the State court, or wins removal to Federal court—to countermand the plan administrator’s interpretation. Getting a court to countermand an ERISA-governed plan’s administrator’s finding might be difficult. That’s especially so if the court reasons that an arbitrary-and-capricious standard of review applies. Usually, a court finds an interpretation capricious if it could not have resulted from reasoning. But if an administrator’s finding follows the logic in a court’s reasoned opinion, how would the finding—even if the court thinks the finding is incorrect—be so lacking in reasoning that it must be capricious?

And if one looks to the proposed rule, some might read it to call not only that the noncompete must be real but also that the period for which the employee must perform the services against which she must not compete is itself “substantial.”

There are many possibilities—including those CuseFan and Gadgetfreak allude to, and many more—about how provisions of the kinds you describe could be what a plan’s sponsor thoughtfully intends. But even if you see the provisions might be, or even likely or certainly are, tax-disqualifying, here’s another outlook. For a service provider that lacks discretion to administer the plan and denies that it provides tax and other legal advice, there can be legitimate business reasons to accept a client’s or customer’s document (or instruction for making a document), even one the service provider believes to be contrary to the plan sponsor’s proper interests. While a service provider might politely ask its client or customer whether it has fully thought about its document or instruction, there is a range in which too much questioning suggests the service provider, despite its denials and disclaimers, really provides tax or other legal advice. For many service providers, that might cross a line into the unlawful practice of law, which is a crime in almost every State of the United States. Even if one worries not at all about a criminal prosecution, a nonlawyer that provides legal advice is liable for its inaccurate or incomplete advice if it did not meet a competent lawyer’s standard of care. Often worse, someone seeking to pin a fiduciary’s breach on a service provider might use facts about too much involvement to assert that the service provider exercised discretion about the plan’s administration and so was a fiduciary, which had duties not to enable, participate in, conceal, or fail to make prudent efforts to remedy, another fiduciary’s breach. In my experience, the more established the recordkeeper or other service provider is, the tighter and harsher are the constraints about what a worker must not say. As just one example, a recordkeeper might have told its employees not to refuse an adoption agreement unless it is obvious on the face of the document alone that the user’s choice or use of a fill-in line is contrary to the adoption agreement’s instructions. And consider this: If other service providers did not mention an issue, is that an opportunity to show or remind your new client why it needs justanotheradmin’s services?

Applying different points of law, there are several differing counts of participants—at least two for Form 5500 reports, and a few more for other ERISA title I or tax law purposes. Maintaining distinctions and records about those who are participants with an account balance and all participants, including those with no account balance, might matter for many purposes. Think about how many ERISA title I and tax law notices and disclosures a plan’s administrator must furnish to participants, often including all or many with no account balance. For ERISA § 104(b)(4) rights to request information and for other provisions that refer generally to a participant (which ERISA § 3(7) defines), that term includes (at least) “‘employees in, or reasonably expected to be in, currently covered employment’” [and] former employees who ‘have . . . a reasonable expectation of returning to covered employment’ or who have ‘a colorable claim’ to vested benefits[.]” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117, 10 Empl. Benefits Cas. (BL) 1873 (Feb. 21, 1989) (citations omitted).

For an ineligible deferred compensation plan, a participant’s compensation counts in her gross income for her first tax-accounting year in which there is no substantial risk of forfeiture of her right to the compensation. I.R.C. (26 U.S.C.) § 457(f)(1)(A). Section 457(f)(3)(B) defines: “The rights of a person to compensation are subject to a substantial risk of forfeiture if such person’s rights to such compensation are conditioned upon the future performance of substantial services by any individual.” If one doubts that the conditions IM4ERISA describes result in a substantial risk of forfeiture, how one acts (or refrains from acting) on such a doubt might turn on whether one is the tax-exempt organization, a participant, or some third person with some role about the plan. Likewise, if one is a lawyer, certified public accountant, or other adviser, how one advises one’s client or other advisee turns on the client’s or advisee’s rights, duties, obligations, and other interests. For example, a participant might like lax conditions on her right to the deferred compensation plan—even if that means tolerating some risk that the compensation counts in income before it becomes payable. A participant might reason that the employer won’t tax-report the deferred compensation if the employer assumes that the conditions are substantial. Why burden one’s right to compensation with any more restraint than is necessary? But a tax-exempt organization (or a person the IRS or another tax agency might find was or is a “responsible party”) might dislike lax conditions if that could result in a liability exposure for having failed to tax-report deferred wages. A practitioner might dislike lax conditions if someone might assert that the practitioner did not meet a lawyer’s standard of care to inform one’s advisee about all the risks. That’s especially a risk exposure if the someone might plausibly assert that it or she was the adviser’s client or otherwise was invited to rely on the practitioner’s advice. The Treasury department has made no rule interpreting what is a § 457(f)(3)(B) substantial risk of forfeiture. Some might consider the Treasury’s proposal. Deferred Compensation Plans of State and Local Governments and Tax-Exempt Entities [notice of proposed rulemaking], 81 Federal Register 40548-40569 (June 22, 2016), https://www.govinfo.gov/content/pkg/FR-2016-06-22/pdf/2016-14329.pdf. The notice states: “Taxpayers may rely on these proposed regulations until the applicability date [of a final rule].” A tax-exempt organization’s select-group executive who evaluates her own participation under a deferred compensation plan should get her lawyer’s or other IRS-recognized practitioner’s advice. This discussion is not advice to anyone.

First, if you were a lawyer who advised the could-be alternate payee not to object to a divorce decree entered before he had obtained payment from the participant’s retirement plan or at least had obtained the plan administrator’s approval of an order as a qualified domestic relations order, you might your lawyer’s advice about your professional conduct. Also, you might want your liability insurer’s guidance about what steps to take or avoid to not prejudice your defenses against claims. If the could-be alternate payee’s divorce lawyer was someone else, you might consider whether the scope of your engagement includes or omits evaluating your client’s claims against that lawyer. If it’s omitted, consider some writing to inform your client that it’s omitted, and to suggest that your client get that advice from another lawyer. About a repair, consider seeking a court’s order that names as the alternate payee the former spouse (using only that person’s name), and recites that the order relates to the former spouse’s marital property rights. But consider this after considering the advice and guidance from the preceding steps. This discussion is not advice to anyone.

A few court decisions about a fiduciary’s decision-making regarding a security that is no longer an employer security after a spin-off are: Young v. Gen. Motors Inv. Mgmt. Corp., 325 F. App’x 31, 32 (2d Cir. May 6, 2009) (a fiduciary’s duty of diversification applies to the plan as a whole). Usenko v. MEMC LLC, 926 F.3d 468 (8th Cir. June 4, 2019) (applying a presumption that a publicly-traded security trades at efficient-market prices; allegations were insufficient to make plausible an assertion that it was imprudent to continue a security, no longer an employer security, as an investment alternative). Schweitzer v. The Investment Committee of the Phillips 66 Savings Plan, 960 F.3d 190 (5th Cir. May 22, 2020) (Construing the present-tense word “acting” in ERISA § 3(5)’s definition of an employer, the former employer’s stock no longer was employer securities of the spun-off employer) (For a plan that provides participant-directed investment, a fiduciary need only provide investment alternatives that enable a participant to create a diversified portfolio; the fiduciary need not ensure that participants actually diversify their portfolios.), cert. denied, No. 20-1255 (Dec. 13, 2021). Stegemann v. Gannett Company, Inc., 970 F.3d 465 (4th Cir. Aug. 11, 2020) (The complaint alleged enough facts to assert a plausible claim that a fiduciary failed to monitor a nondiversified investment alternative.), petition for rehearing en banc denied, No. 19-1212 ECF No. 48 (Sept. 22, 2020), cert. petition filed sub nom. Gannet Co. Inc. v. Quatrone, No. 20-609 (Oct. 30, 2020) {On April 19, 2021, the Court invited the Acting Solicitor General’s brief. On November 9, 2021, the United States filed a brief arguing that the Fourth Circuit’s decision was correct (at least on the particular alleged facts), and that what the fiduciary described as a circuit split did not need review.}, cert. denied sub nom. Gannett Co., Inc. v. Quatrone, No. 20-609, 142 S. Ct. 707 (Dec. 13, 2021), Civil Action 1:18-cv-325-AJT/JFA, 2023 U.S. Dist. LEXIS 216644, 2023 WL 8436056 (E.D. Va. Dec. 5, 2023) (by Judge Anthony J. Trenga) (after a bench trial, finding no breach of diversification or prudence) (“[A] prudent fiduciary considering the timing and other circumstances of divestiture would have weighed the risks of single stock fund holdings against the risks of forced and/or rapid divestiture.”). Snider v. Administrative Committee, Seventy-Seven Energy, Inc. Retirement & Savings Plan, No. Civ-20-977-D, slip op. pages 14-17 (W.D. Okla. Oct. 8, 2021) (Rule 12(b)(6) permits a dismissal of a claim as barred by an affirmative defense only when the complaint and properly considered materials admit all elements of the affirmative defense by alleging the factual basis of those elements.).

Your observation about how to find the facts is just what I need to advise the plan-administration committee. Thank you.

BenefitsLink neighbors, what do you think about this not-repaid loan story? On February 13, 2023, the participant took a $10,000 loan. The participant received the check and the promissory note, showing that her first payment was due on April 7, 2023. The recordkeeper sent the loan file. The employer admits it erred in not uploading the loan file to payroll’s systems. No loan repayment was taken from the participant’s wages. On August 14, 2023, the recordkeeper sent the participant a letter informing her that, if she does not pay, her loan will default. The participant does not admit she received this letter. Yet, the address is the same address to which the $10,000 check was sent, and, one assumes, received—because the check was deposited. The recordkeeper’s record shows the participant loan defaulted on September 29, 2023. In early 2024, the participant received a Form 1099-R, reporting the unpaid loan. The participant is 62, and works part-time. The plan treats the participant as not severed from employment. The plan does not provide a distribution on age 59½. The plan provides none of the SECURE 2019 or SECURE 2022 early distributions. The participant is ineligible for any further loan. The participant asserts she has no computer. That includes lacking a mobile device beyond an old flip phone. The participant asserts that she never looks at her pay confirmations. The participant asserts that she was unaware of any problem about the loan until she received the Form 1099-R report. The participant complains that she lacks money to pay even her Federal income tax (there is no State income tax) on the extra $10,000 income. If the plan’s administrator (a committee of the employer) believes the participant’s statement that she did not notice any problem about the loan until she received the Form 1099-R, should the administrator direct the recordkeeper and trustee to reverse the loan default?

If a taxpayer obeys the Notice and keeps her records, including the physician’s certification, as Internal Revenue Code § 6001 directs, her recontribution opportunity ends before the records-retention period ends. See 26 C.F.R. § 1.6001-1(e) https://www.ecfr.gov/current/title-26/part-1/section-1.6001-1#p-1.6001-1(e).

The Internal Revenue Service’s nonrule interpretation includes this: Q. F-15: If a qualified retirement plan does not permit terminally ill individual distributions, may an employee treat an otherwise permissible in-service distribution as a terminally ill individual distribution? A. F-15: Yes. If a qualified retirement plan does not permit terminally ill individual distributions and an employee receives an otherwise permissible in-service distribution that meets the requirements of both the permissible in-service distribution and a terminally ill individual distribution [see Q&A F-1], the employee may treat the distribution as a terminally ill individual distribution on the employee’s federal income tax return. As part of the employee’s tax return, the employee will claim on Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts, that the distribution is a terminally ill individual distribution, in accordance with form’s instructions. The employee must retain the physician’s certification that meets the requirements of Q&A F-6 and F-13 of this notice in the employee’s tax files (as required by [I.R.C. §] 6001) in case the IRS later requests the certification. The terminally ill individual distribution, while includible in gross income, is not subject to the 10 percent additional tax under section 72(t)(1). If the employee decides to recontribute the amount to a qualified retirement plan, the employee may recontribute the amount to an IRA. For example, on May 15, 2024, Participant B, age 50, goes to the doctor and gets a certification of terminal illness that meets the requirements of Q&A F-6 of this notice. Participant B’s plan, a section 401(k) plan, does not permit terminally ill individual distributions but does permit hardship distributions. On June 10, 2024, Participant B applies for a hardship distribution in the amount of $15,000. When Participant B files his tax return, Participant B indicates on Form 5329 that the distribution is excepted from the 10 percent additional tax as a terminally ill individual distribution under section 72(t)(2)(L). Participant B retains the physician’s certification, dated May 15, 2024, with Participant B’s files as part of Participant B’s tax returns for tax year 2024. Participant B does not owe the additional $1,500 (representing the 10 percent additional tax of the amount includible in gross income). Unlike a hardship distribution, Participant B may also recontribute the $15,000 to an IRA following rules similar to qualified birth or adoption distributions. Miscellaneous Changes Under the SECURE 2.0 Act of 2022, Notice 2024-2, 2024-2 I.R.B. 316, 327 (Jan. 8, 2024), https://www.irs.gov/pub/irs-irbs/irb24-02.pdf. I read Q&A F-15, including its example, as allowing a distributee the exception from the too-early extra tax (and a limited recontribution opportunity) even if the claim for the distribution did not furnish the physician’s certification. BenefitsLink neighbors, do you concur? If the plan’s claims procedure for a hardship distribution normally does not receive any evidence beyond the participant’s self-certifying statement on the electronic or paper claim form, am I right in thinking a plan’s administrator need not receive a physician’s certification? If a plan’s administrator need not receive a physician’s certification, might an administrator deliberately not receive it, to avoid privacy and security risks about the individual’s information?

I don’t know what might be correct or incorrect on the underlying question. But here’s an observation: In situations in which a recordkeeper seeks to impose its rule despite the plan administrator’s readiness, after it considers a lawyer’s or other practitioner’s advice, to deliver a written instruction (one within the service agreement) and even expressly indemnify the recordkeeper for following the instruction, we sometimes remind the recordkeeper that: they say they do not give tax or other legal advice, and they say they lack discretion to administer the plan. In my experience, the recordkeeper’s reluctance to process a proper instruction fades quickly.

While the governing law might be a State’s law, don’t assume that it’s the law of a State in which the IRA holder is or was a domiciliary or resident. Many IRA trust or custody agreements include a choice-of-law provision. Putnam’s chooses Massachusetts law. Another reason to read the agreement: Many allow the trustee or custodian to delay a payment until potentially interfering claims are resolved. Some allow the trustee or custodian to honor a transfer incident to a divorce or separation. If seeking a court’s order becomes necessary or helpful, consider whether the court will have or lack personal jurisdiction regarding the custodian. Some trust companies carefully avoid contacts with any more than one or two States. Putnam Fiduciary Trust Company, LLC, is a New Hampshire limited-liability company, with its office in Boston, Massachusetts. A trustee or custodian might follow a court’s order made with enough jurisdiction to bind all the competing claimants. But a court’s order is stronger if binds the trustee or custodian.

As Paul I suggests: Beyond whatever ERISA and the Internal Revenue Code call for, labor-relations law might require that this be done under collective bargaining or some other labor-relations process. During a collective-bargaining agreement’s term, an employer doesn’t change terms or conditions of employment without the union’s assent. And this might need three parties’ assent or accord. A retirement plan is a person separate from the employer or employee organization that establishes or maintains the plan. While there often is some overlap between a labor union’s executives or other employees and a retirement plan’s trustees, it is not necessarily the same people. And even if is, the roles and responsibilities differ. Further, if the union-oriented plan is a multiemployer plan, it might have some trustees elected or appointed by employers. It would do little for an employer and a labor union to agree on a spin-off if the transferee plan might not accept the transfer. Some union-oriented retirement plans evaluate not only that the transfer would be proper, but also that it would be practical in the circumstances. (I’ve seen a union’s retirement plan reject a plan-to-plan transfer when that transferee’s recordkeeper disliked the data feeds that would come from the transferor’s recordkeeper.) I don’t say that any of this is difficult to do. (In my experience, it’s easy—except for getting the recordkeepers to play nice.) Rather, everyone should seek to follow the processes to do it right.

Thank you. As often happens with fiduciary questions, many answers are Be Prudent.

Imagine this (hypothetical) example: A $1 billion plan has plan-administration expenses—a recordkeeper, an administrator (not the plan’s sponsor), a CPA firm, a law firm, and an investment consultant—around $1.5 million a year. If this were charged to the 20,000 individual accounts by the heads, that would be a $75 charge ($18.75 each quarter-year) on each account. That could burden beginner and other low-balance participants. Instead, the fiduciary decides to charge accounts 15 basis points, so bigger-balance participants subsidize lower-balance participants. The charges on individuals’ account are imposed and collected only quarter-yearly, and so a little less often than the plan pays some service providers. Further, the plan’s capacity to meet dollar-measured expenses using asset-measured charges is vulnerable to sometime dips in investment markets. Considering both these factors, the fiduciary leaves a prudent reserve in the plan-expenses account so money is there when needed to pay service providers. Imagine that, as at a December 31, the plan-expenses account’s balance is $1 million, and that amount then is around one-tenth of one percent of the plan’s assets. Is that too much? Or, perhaps after some runups in investments, is $2 million too much? What if the fiduciary prudently finds that money might be needed toward expenses? What if the fiduciary seeks to guard against two or three years of a downturn in investment markets? Or what if the employer’s business might call for layoffs, with many participants taking their account balances when they leave? Has either agency published even nonrule guidance about how much of a plan-expenses reserve is too much? Or is it just what some people in EBSA or the IRS think? Paul I and other BenefitsLink neighbors, your thoughts?