Peter Gulia

Some recordkeepers provide in-platform records of participant-directed broker-dealer accounts if the plan uses the broker-dealer the recordkeeper has an arrangement with. I express no view about whether to use these accounts, and observe only that it might be possible.

Last Friday, the United States filed its notice of appeal. Texas v. Garland, No. 5:23-CV-034-H, 2024 WL 814498 (N.D. Tex. Feb. 27, 2024), notice of appeal [document 113] filed Apr. 26, 2024. I express no view about whether the appealed-from decision is a correct or incorrect interpretation of the Constitution of the United States. Texas v Garland notice of appeal 177116797415.pdf

Or, if the limited-partnership interests are valued as at December 31, 2024, why not direct the plan’s trustee to deliver to the participant, on December 31, 2024 (or, if the participant prefers, in 2025Q1), a number of whole or fractional LP units that meets 2024’s minimum-distribution amount (or the greater portion the participant requests)?

Rather than amending the plan to legitimate only the troublesome rollover contribution, might the plan sponsor consider widely allowing a rollover contribution even if the employee has not met the age, service, and other eligibility conditions for a nonelective contribution, matching contribution, or elective-deferral contribution? Among other factors to consider: An advantage would be removing a fact-checking or decision about which the plan’s administrator or its service provider sometimes might err. A disadvantage could be that a rollover contribution might increase a count of participants with an account balance, which might matter for whether the administrator must engage an independent qualified public accountant. Likewise, a count of participants with a nonzero balance might matter for one or more other purposes.

If a plan’s administrator—following a reasonable record-retention (and destruction) plan—no longer has proof (beyond a presumption of regularity) that a distribution was paid, but the claimant lacks evidence that no distribution was paid, how do these situations resolve? If the Employee Benefits Security Administration opens an inquiry, what does EBSA ask for? And if the response is no records remain, do they close the file? Do any of these claimants bring a lawsuit? Something else?

One of the sadnesses of the IRS-preapproved documents regime is that IRS people set conditions on what will get an opinion letter, and often make those interpretations with no rulemaking procedure and even nothing in the Internal Revenue Bulletin.

Is this query about whether a set of IRS-preapproved documents may, regarding the participants of a collective-bargaining unit, provide an obligated contribution (or describe an intended contribution) by referring to a collective-bargaining agreement (rather than filling in something on an adoption-agreement form)?

Some employers and administrators use a dependent eligibility verification to find people not eligible for coverage under a health plan. These find participants who enrolled as a spouse someone who was not the participant’s spouse. But how often does this find participants who enrolled as one’s child someone who was not the participant’s child? BenefitsLink neighbors, any experiences you can describe (with anonymity)?

Just a curiosity: If a plan's sponsor and administrator decide (for whichever reason, or for no reason) not to correct a failure to obey the plan's governing documents, is there anything that must be shown in a Form 5500 report?

If the distributee was not the beneficiary: A transfer of plan assets to a party in interest might be a prohibited transaction. ERISA § 406(a)(1)(D), 29 U.S.C. § 1106(a)(1)(D) https://uscode.house.gov/view.xhtml?req=(title:29%20section:1106%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1106)&f=treesort&edition=prelim&num=0&jumpTo=true Was the aunt a party in interest? Unless the aunt was the employer’s employee or had some connection to the plan or the employer, the aunt might not have been a party in interest. ERISA § 3(14), 29 U.S.C. § 1002(14) https://uscode.house.gov/view.xhtml?req=(title:29%20section:1002%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1002)&f=treesort&edition=prelim&num=0&jumpTo=true This is not advice to anyone.

One can’t discern how to divide the executive’s rights, or even whether that’s possible, without reading, for each of the plans you mention, the plan’s governing documents. If you have a particular situation to work on, the former spouse’s lawyer might consider engaging the article’s author, Karen Field https://rsmus.com/people/karen-field.html.

pwitt, while recognizing Melton (if you find nothing that overrules, questions, or distinguishes it), consider these possibilities: Might an action seeking an equity remedy that the former spouse restore to the decedent’s estate property that in good conscience does not belong to the former spouse at least begin in a State’s courts? Might such an action proceed in a State’s courts? Or are the would-be litigants citizens of different States? If so, would the former spouse seek a removal to a Federal court? Might the former spouse and her lawyers be unaware of Melton (and of the several Federal district court decisions that follow Melton)? Might a judge be unaware of Melton (if neither litigant briefs it)? If an action proceeds in a State’s court, might a judge recognize that Melton does not control the States’ courts? Of Federal courts’ decisions, only a decision of the Supreme Court of the United States can be a precedent that controls a State’s courts. A decision of an inferior Federal court, while it usually gets “respectful consideration”, does not control a State court’s interpretation. Bryan A. Garner, Carlos Bea, Rebecca White Berch, Neil M. Gorsuch, Harris L Hartz, Nathan L. Hecht, Brett M. Kavanaugh, Alex Kozinski, Sandra L. Lynch, William H. Pryor Jr., Thomas M. Reavley, Jeffrey S. Sutton & Diane Wood, The Law of Judicial Precedent §§ 79-80 [pages 679-693] (Thomson Reuters 2016). If an action proceeds in a State’s court, is the decedent’s estate’s advocate excused from citing Melton because it is not “legal authority in the controlling jurisdiction”? Model Rules of Pro. Conduct r. 3.3(a)(2) (Am. Bar Ass’n 2024). Whatever might be a persuasive authority in a State’s court or even a precedent for a Federal court in the Seventh Circuit, is the decedent’s estate’s lawyer free to present “a good faith argument for an extension, modification[,] or reversal of existing law”? Model Rules of Pro. Conduct r. 3.1 (Am. Bar Ass’n 2024). Might each of the decedent’s estate and the former spouse recognize uncertainties about the other’s claims, uncertainties about remedies, and each’s burdens of litigation as reasons to settle on a partial amount to be restored to the decedent’s estate? This is not advice to anyone.

Pwitt, if you seek particularly a decision of the U.S. Court of Appeals for the Seventh Circuit, read Melton v. Melton, 324 F.3d 941, 943–945 (7th Cir. 2003) (ERISA preempts a State-law constructive-trust remedy), available at https://casetext.com/case/melton-v-melton. Trial courts in the Seventh Circuit have applied Melton’s reasoning. See, for example, Reliastar Life Ins. Co. v. Keddell, No. 09-c-1195, 2011 U.S. Dist. LEXIS 3164, 2011 WL 111733, at *3 (E.D. Wis. Jan. 12, 2011) (“A constructive trust would violate ERISA’s preemptive force even if it applied after the funds from the [plan] were actually distributed.”). You’d use your citator tools to find whether any Seventh Circuit decision questions or distinguishes Melton’s reasoning. I have not researched this point recently. This is not advice to anyone.

I don’t suggest any conclusion about what is or isn’t a “reasonably equivalent basis”. I suggest only that a decision-maker consider the point if it seeks either of the statutory prohibited-transaction exemptions.

Beyond whatever Federal income tax law might call for as a plan’s tax-qualification conditions, for a plan governed by ERISA’s part 4 (fiduciary responsibility) of subtitle B of title I or with transactions that can result in an excise tax or other consequences under Internal Revenue Code § 4975, consider that the rule implementing the statutory prohibited-transaction exemptions requires that participant loans “[a]re available to all such participants and beneficiaries [those who are a party-in-interest or disqualified person regarding a plan] on a reasonably equivalent basis[.]” 29 C.F.R. § 2550.408b-1(a)(1)(i) (emphasis added), https://www.ecfr.gov/current/title-29/part-2550/section-2550.408b-1#p-2550.408b-1(a)(1)(i).

And for those who want to advise about retirement, health, other employee benefits, and executive compensation challenges that come from a business deal, buy Ilene’s book: Employee Benefits in Mergers and Acquisitions, 2023-2024 Edition https://law-store.wolterskluwer.com/s/product/employee-benefits-in-mergers-acquisitions-20232024-misb/01t4R00000PBNhKQAX

And let’s consider: Many plans’ sponsors and administrators will interpret what the tax-law condition requires or permits and how to administer a set of partially or ambiguously written plan provisions about two or more years before those provisions might be stated by what tax law calls “the” plan document.

BenefitLink is a great forum for venting some frustrations. And while I wouldn’t describe Bill Presson’s smart observation as a rant, reading and learning from neighbors’ intelligent observations and criticisms is among the reasons I use BenefitsLink. But we can learn by thoughtfully considering the observations. (My note above is an observation about an observation.) For a field that involves many professions and special-focus workers—third-party administrators, recordkeepers, lawyers, public accountants, actuaries, consultants, investment advisers, and many others, we can do better by being mindful of other perspectives. For example, there are many things recordkeepers do that are profoundly frustrating to me and my clients. Yet, by understanding why recordkeepers do it the way they do, I can provide better advice and help my clients manage problems that result from recordkeepers’ business methods.

Even when that alternative-plan rule applies, it might not preclude a new organization from creating a retirement plan, even one that includes a § 401(k) arrangement. Rather, the consequences fall on the “old” plan. That plan might have paid a too-soon distribution—absent some circumstance (perhaps including age 59½) that under the “old” plan’s provisions allows a distribution from the participant’s elective-deferrals subaccount. That plan’s supposed cash-or-deferred arrangement might be treated as not a § 401(k) arrangement. And that plan might be tax-disqualified if, in approving a too-soon distribution, the plan’s administrator acted contrary to the plan’s written provisions. Further, a too-soon distribution from a tax-disqualified plan might not be an eligible rollover distribution. But none of those consequences by itself precludes a new organization from creating a retirement plan, even one that includes a § 401(k) arrangement. The challenges are about administering the “old” plan. And the new organization’s plan might refuse an attempted rollover contribution if the would-be-receiving plan’s administrator knows the distribution from the “old” plan was not an eligible rollover distribution. 26 C.F.R. § 1.401(k)-1(d)(4)(i) https://www.ecfr.gov/current/title-26/part-1/section-1.401(k)-1#p-1.401(k)-1(d)(4)(i). This is not advice to anyone.

Because advice about what to do with retirement plans, and even health and other employee-benefit plans, was not in the scope one’s client allowed. Or, even was contrary to one’s client’s instructions. Or, a lawyer advised about what to do with employee-benefit plans, yet the client didn’t follow the lawyer’s advice. Or, tolerating a retirement-plans exposure was the client’s choice, after considering its lawyers’ advice. Or, the retirement-plans exposure would no longer belong to one’s client. Or, one’s client had no choice to make. There are many ways a retirement-plans exposure can be left behind despite a client’s lawyers having done good or even perfect work.

Is your query about 2023? If so, has the former partner received her K-1 reporting her share of the partnership's items of income, deduction, and credit? Might the tax preparer have already done the apportioning, including figuring the former partner's shares of items based on the portion of the year for which she was a partner?

If a retirement plan’s circumstances include the trust’s investment in an employer security or a significant stake in a security beyond pooled investment fund shares, some TPAs drop a courtesy hint or reminder. Some might do this quietly with the plan fiduciary’s lawyer, if the TPA has a working relationship with that lawyer. Otherwise, a TPA might suggest to the plan’s fiduciary that it ask its lawyer. While many TPAs gives tons of legal advice (and on some topics know much more than many lawyers), the Corporate Transparency Act might be better suited for a handoff.

PS, what instructions (if any) have you received from the retirement plan’s administrator or trustee? Or is your recordkeeper, third-party-administrator, or consulting business a subsidiary or affiliate of a financial institution that applies an OFAC-administered law?

MoJo, lawyers in AmLaw 200 law firms and employee-benefits boutiques “keep book” on which recordkeepers have inside counsel who think about the service recipients’ interests. We hope you’ll stick with it.

If the common shares of the plan-sponsor corporation were transferred to the participant’s former spouse, consider that some right or interest in the reversion might belong, legally or equitably, to the former spouse. The State law that governs the corporation might include law for reviving even a dissolved corporation to take title to its property not collected and disposed of before the dissolution. Also, the State law that governs the divorce or a settlement agreement might include rights and responsibilities. The plan’s trustee should not dispose of or use the plan’s assets until the trustee gets the trustee’s lawyer’s advice. This is not advice to anyone.