Peter Gulia

Over the past 40 years, I’ve many times observed frustrations of the kind you allude to. Too many banking, insurance, investment-management, and related businesses face too many incentives to provide weak customer service. But in my experience, the people trying to provide some customer service often are doing the best they can in bad circumstances. And yes, they often invent explanations, and sometimes give wrong answers, without knowing the real content. For a retirement-plans practitioner, knowing when and how to cut past customer service is a valuable aptitude and skill. Especially if the plan lacks its own power. My earlier note was to suggest only that it can help to know the client’s rights, and the investment or service provider’s obligation, before asking for something.

If the contract permits the insurer or custodian to require a medallion signature guarantee, it would be about a person who has authority to instruct the requested distribution. To help your client evaluate how to get what it seeks, consider at least a possibility that the annuity contract or custodial account might not provide the ERISA-governed plan’s administrator authority to instruct a distribution. Some § 403(b) contracts limit a payout right to the individual. Just as some BenefitsLink mavens like to remind one to Read The Fabulous (plan) Document, sometimes with a 403(b) it helps to Read The F****** Contract. And don’t assume that a plan overrides a contract; it might not.

The webpage has an error in its citation of the ruling. IRS Letter Ruling 2001-10-005 (issued Nov. 14, 2000, released Mar. 9, 2001) http://www.legalbitstream.com/scripts/isyswebext.dll?op=get&uri=/isysquery/irl781f/1/doc. The pastor would have gross income when she receives the deferred compensation.

If the plan’s administrator finds that the plan-expenses account is a plan asset. For Schedule H’s asset statement, a balance of the plan-expenses account might fit 1c(15)? For Schedule H’s income-and-expense statement, a credit to the plan-expenses account might, depending on the arrangement and other facts, fit line 2c other income or be a negative amount for line 2i(11)? If the plan-expenses account’s balance includes a carry-over from before the reported-on year began (and preceding years’ reports omitted the asset), one might encounter difficulty reconciling the asset statement with the income-and-expense statement. Or the report might need an adjusting entry. If the plan’s administrator engages an independent qualified public accountant to audit the plan’s financial statement, consider collaborating with the CPA firm about what classifications they consider fair accounting.

Thanks, QDROphile and austin3515. I’m aware that a plan’s fiduciary sets general directions about what’s excluded from the brokerage accounts. I’m aware that a recordkeeper has no control over, and often little or no information about, what happens within the brokerage account. For some plan sponsors, that can be a feature, not a bug. After I asked my question about immediate or delayed crediting to the brokerage account, I found that it’s feasible, if needed, to use a money-market fund for processing without making that fund a designated investment alternative.

Would complaints to Ohio’s insurance regulator help get attention? Or would a need to respond to complaints divert resources from fixing the weaknesses?

For those recordkeepers that offer services regarding a retirement plan’s self-directed brokerage accounts, does a recordkeeper require that a contribution amount allocated to a participant’s account be credited first to an investment other than the brokerage account? Or may the participant’s contribution amount be immediately allocated to her brokerage account?

The employer is considering providing that the plan’s investment alternatives are the mutual funds in the brokerage window, and that there is no designated investment alternative. It’s mutual-funds-only because the firm prohibits its employees from trading individual stocks, bonds, and securities other than shares of SEC-registered funds. About expenses, the employer will pay both the recordkeeper’s fee and the broker-dealer’s fee (for those participants who are employees, not for those who left the employer). I know many retirement-plan practitioners don’t like an absence of designated investment alternatives, feeling it can be hard on some participants. But that policy concern aside, are there operations difficulties or other disadvantages in administering a plan with only nondesignated investment alternatives?

For an individual-account retirement plan that provides participant-directed investment, an employer seeks a mutual-fund-only window. It’s okay if the window is provided through self-directed brokerage accounts. But it must be limited to funds, and must preclude individual stocks, bonds, and securities other than shares of registered-investment-company mutual funds. The selection of mutual funds must not be limited by anything beyond the recordkeeper’s and the broker-dealer’s operations constraints. Which recordkeepers offer this?

If a business owner’s spouse’s or child’s work is not measured with time records, might one reach 1,000 hours of service by working once in each of six months of the year? 29 C.F.R. § 2530.200b-3(e)(1)(iv) https://www.ecfr.gov/current/title-29/part-2530/section-2530.200b-3#p-2530.200b-3(e)(1)(iv). 29 C.F.R. § 2530.200b-2(a)(1) https://www.ecfr.gov/current/title-29/part-2530/section-2530.200b-2#p-2530.200b-2(a)(1) But if a plan’s design lacks safe harbors, is there value in finding a spouse or child is eligible only as a long-term-part-time employee?

Thank you!

I'm thinking of suggesting a client amend its plan to specify this; any reason not to specify?

Albert Feuer (718) 263-9874 Totally a New Yorker, 45 years’ experience Top-rated https://www.martindale.com/attorney/albert-feuer-416689/ While high-educated and deeply knowledgeable, he is pleasantly down-to-earth.

If a measure of compensation relates to Form W-2 wages or § 3401 wages, whether with or without adjustments: For 2023, the educational assistance excluded from an employee’s income (at least for Federal income tax) under a § 127(b) educational assistance program does not count in Form W-2’s box 1 wages. But if some portion was not excludable (for example, because the employer provided more than § 127(a)(2)’s $5,250 limit, the excess is included in income and in box 1 wages. Internal Revenue Code § 127 https://irc.bloombergtax.com/public/uscode/doc/irc/section_127. Form W-2 instructions at page 10, right column, last paragraph, and page 18, right column, item 11 https://www.irs.gov/pub/irs-pdf/iw2w3.pdf. Using your example, ($7,000 - $5,250), $1,750 counts in box 1 wages. In some circumstances, an amount beyond $5,250 might be excluded from the employee’s income and wages to the extent of a working-condition fringe benefit or a required activity that is ordinary and necessary in the employer’s business. Consider testing the detail file against the W-2 file. After finding or confirming the “W-2” starting point, one would discern the meaning of the plan’s provision to exclude from compensation “taxable employee benefits” and apply that provision.

Maybe it’s easier to ignore whichever document anyone suggests. If the plan’s provisions need not be written in the thing tax law calls “the” plan document until the end of a remedial-amendment period, why not wait? If a service provider requires an instruction on what to assume in performing its services, the plan’s administrator might deliver a service instruction (but the plan sponsor can avoid an unnecessary formality, and might avoid several premature obligations).

So austin3515 finds something to like in the long-term-part-time provision?!

In those ERISA fiduciary-breach complaints, the plaintiffs could assert a breach of exclusive-purpose loyalty because the plan’s governing documents granted the fiduciary discretion about how to use a forfeiture account. The plaintiffs assert that the fiduciaries selfishly chose to benefit their employers by offsetting employer-provided contributions when the fiduciaries could have chosen to meet plan-administration expenses, lowering the charges on participants’ accounts. But what if a plan’s document specifies the order in which to use forfeitures? For example: 1) offset contributions (if any); 2) pay or reimburse plan-administration expenses; 3) allocate the remainder among participants’ accounts. Observe that this does what the sued fiduciaries did, but makes it obedience to the plan’s document (rather than an arguably disloyal use of discretion). So I learn something: Are there reasons a plan sponsor would not want that provision? Are there reasons a fiduciary would not follow that provision?

Without questioning AlbanyConsultant’s or CuseFan’s reasoning: If Co1 always has a loss and Co2 has enough margin to pay its four executives more than $2 million a year, that suggests some tax-law questions about whether the companies are not separate or whether either lacks accounting that clearly reflects income. We presume you warn that your advice about whether Co1 and Co2 do or don’t constitute one employer is limited to I.R.C. § 414(b)-(c)-(m)-(n)-(o), and is based on the facts your client presents, with no inquiry about whether tax law would respect those facts.

Might the two statements you describe both be good enough? Each seems to involve a choice. The statements differ in which choice results if the user omits to specify its choice.

About the instructions’ use of the phrase “you know” for a code 2 “early” distribution that gets an exception under § 72(q)-(t)-(u)-(v), perhaps it’s fair to interpret that use according to the plan’s provisions for the distribution to be reported. For example, if the plan provided the distribution because the administrator followed the participant’s self-certifying statement, the payer (or the plan’s administrator that instructs the payer) “knows” that the distribution is of the kind the plan allowed. I don’t see that a payer ought to review, for tax-reporting, the plan administrator’s claims decision.

“[M]anaging beneficiary designations is important, can be complicated, should have clearly documented procedures[,] and should have clearly assigned operational responsibilities between the [employer that serves as the plan’s administrator] and its service providers[.]” As Bird alludes to, many employers imagine, often mistakenly, that a service provider will provide every service needed to administer the plan. But wishing won’t make it so. A plan’s administrator must read every service agreement and prudently evaluate whether the administrator can fulfill every needed task using only contracted services and the administrator’s internal capabilities. Further, a plan’s sponsor might consider an opportunity to narrow what the plan’s administrator needs to do: Even if a plan’s sponsor is constrained by its use of IRS-preapproved documents, provisions about beneficiary designations, including default beneficiary designations, are—except for required provisions for a surviving spouse—within “administrative” provisions a user may change and add to without defeating reliance on the IRS’s opinion letter. A plan sponsor that uses that opportunity regularly can avoid situations like a plan having different default-beneficiary provisions for different times (perhaps for no more reason than changing which service provider’s IRS-preapproved documents the plan sponsor uses). And custom beneficiary-designation provisions (independent of a service provider's IRS-preapproved documents) can get rid of, or make easier, some of the complexities and difficulties Paul I mentions.

Has the decision-maker evaluated doing reasonable restoration and allocations without seeking EBSA’s blessing? Instead of an awkward VFCP procedure that might expose information that otherwise neither participants nor the Labor department would likely find and prove, might a fiduciary consider offering some restoration without conceding a breach, and without revealing a reasoning for any amounts of restoration? Might a decision-maker want confidential advice and as much protection of those communications as can be had with the evidence-law privilege for lawyer-client communications? Might the business buyer want its lawyer’s advice about whether the buyer has a right to recover from the seller because the seller breached a warranty or representation made to the buyer?

rocknrolls2 is right: My illustration [above] that an advocate or negotiator might use uncertainty about whether SECURE 2022 is law could be useful for a defect about an LTPT employee who would be entered only if SECURE 2022 applies; it’s not useful for a defect about someone the plan makes eligible under SECURE 2019 without SECURE 2022’s changes. Thank you for noting that a plan sponsor could assert that an automatic-contribution arrangement is not a tax-law condition for a new § 401(k) arrangement. Perhaps there are more sometimes unwelcome SECURE 2022 changes one might argue against.

t.haley, if an imprudent choice might involve meaningful risks, consider suggesting to your client that it engage MoJo to advise the plan’s administrator.

Thank you, everyone, for your further thoughts. Fortunately, my client (without relying on the recordkeeper, and even without using my records) has kept and will continue to keep its own top-notch records on which changes, if any, it implemented, and exactly when; which changes it, so far, omits; and which changes it resolves to decide later.