Peter Gulia

Even if the credit might be correct, some might be reluctant, for such a small amount, to invite any IRS attention.

Even if one might find and get some records from CWM or a receiver, your client might consider whether it wants CWM’s records. Consider that those records might have little, no, or even adverse value. The linked-to news reporting suggests CWM might have been used for some frauds. How likely is it that your client would discern which of CWM’s records are true and correct, and which are false or incorrect? If it helps any, this hyperlink is to the Securities and Exchange Commission order that bars Mr. Couture from association with any securities-related business. https://www.sec.gov/files/litigation/admin/2022/34-96392.pdf With other information, the order shows the District of Massachusetts’ docket number for United States v. James Kenneth Couture—No. 21-cr-10172-NMG (D. Mass.).

As others say, a decision-maker might begin (and sometimes might finish) with RTFD—Read The Fabulous Document. Beyond questions about which person or artificial person (perhaps including an estate) might be the decedent’s plan beneficiary, consider also: Will a custodian seek some evidence that a person who submits the plan administrator’s or plan trustee’s instruction for a redemption or delivery of investments has a right or power under the custodianship agreement to instruct the custodian?

metsfan026, if your inquirer is a plan’s fiduciary and has responsibility for selecting, monitoring, or deselecting a service provider regarding the plan or its trust, she might insist on disclosures even if nothing in the 408b-2 rule requires a disclosure.

I’m with you. And my clients that have § 401(k) arrangements had many years ago switched to immediate eligibility with no service condition. (I recognize my clients have different circumstances than those many BenefitsLink neighbors remark on.)

Might the plan’s financial statements, including the notes, fully disclose the IRS’s examination and that the plan might have been tax-disqualified as at the financial-statements date and for the year then ended (and for preceding years too)? If so, might such a narrative let the independent qualified public accountant find that the plan’s financial statements are fairly stated?

I think austin3515 is onto something. My observation is perhaps not a fulsome Amen, but: If one presumes or assumes an employer won’t submit hours-of-service data with enough detail, frequency, promptness, and formatting to enable a third-party administrator’s or recordkeeper’s software to apply the plan’s § 401(k)(15) provisions (and the employer is unwilling or unable internally to apply those provisions), might such an employer make an informed choice to let go some relief from top-heavy provisions? Are there circumstances in which the incremental portion of a top-heavy contribution might be less expensive than the employer’s cost to apply a plan’s § 401(k)(15) provisions? (There are other choices I’m deliberately not remarking on or describing.)

Although the provision that became included in the Consolidated Appropriations Act was written in December (after the IRS’s October 21 release of inflation adjustments for 2023), it seems likely the text was based, as C.B. Zeller suggests, on other bills in the 117th Congress, perhaps with little editing. $6,500 [2022] x 150% = $9,750 < $10,000 If a curious person wants to test the idea that the $10,000 expression, even if inflation-adjusted, might never matter, one might read the full work that supports the Joint Committee on Taxation’s Estimated Revenue Effects of H.R. 2617, JCX-21-22 (Dec. 22, 2022). Those work papers might show the JCT’s assumptions about estimated inflation adjustments as they would affect fiscal years 2025 through 2032. I confess I’m not so curious.

If a would-be receiving plan persists in a refusal (and without any view about what is or is not prudent or reasonable for a receiving plan’s administrator or its agent to demand before the plan accepts a rollover contribution): A paying plan’s administrator might consider which persons are affected (and how) by a plan’s refusal to accept a rollover contribution. A would-be receiving plan takes on neither the to-be-rolled asset nor the related obligation. A distributee might be deprived of her first (and, perhaps, second) choice about which eligible retirement plan receives a rollover contribution. A paying plan might be burdened by a would-be receiving plan’s refusal if the would-be distribution is one that requires the distributee’s consent and the distributee withdraws her consent.

And a 2022 conversation. https://benefitslink.com/boards/index.php?/topic/69466-gross-pay-insufficient-to-deduct-401k-deferrals/

If a plan sponsor’s reason for a limit on either kind of elective deferrals is increasing the likelihood (not assuring) that a paycheck will have enough money to support not only tax withholding but also retirement, health, other welfare, and fringe benefits, one might consider this 2008 BenefitsLink discussion. https://benefitslink.com/boards/index.php?/topic/38395-401k-elective-deferral-hierarchy/

I only asked a question, hoping Brian Gilmore might guide us. And about the proposed rule mentioned, I have not thought about whatever interpretation it proposes.

Does that adoption agreement also limit non-Roth elective deferrals to 50% of compensation?

If it's not feasible to get all the years aligned, is aligning the cafeteria plan's and health flexible spending account's year with the health-coverage year more important than alignments about other benefits?

A person may get a notarial act (such as a notary’s certificate of having taken an acknowledgment of, or having witnessed, a spouse’s consent to support a participant’s qualified election) at the US consulate. And if there is no consular official, the Secretary of State may authorize others to do notarial acts. Such an act done by a consular official or other US-authorized person has the same effect as a notarial act done by a US State’s notary. 22 U.S.C. § 4215 http://uscode.house.gov/view.xhtml?req=(title:22%20section:4215%20edition:prelim)%20OR%20(granuleid:USC-prelim-title22-section4215)&f=treesort&edition=prelim&num=0&jumpTo=true 22 U.S.C. § 4221 http://uscode.house.gov/view.xhtml?req=(title:22%20section:4221%20edition:prelim)%20OR%20(granuleid:USC-prelim-title22-section4221)&f=treesort&edition=prelim&num=0&jumpTo=true

No one in this discussion suggests a plan’s administrator use “Can I get away with it?” as a way to form a discretionary finding. And no one here suggests an administrator form its finding by considering that IRS or EBSA might lack resources to examine or investigate the administrator’s decision-making. Everyone recognizes that a plan’s administrator decides in the first instance. A plan’s administrator must make its finding when needed to decide a participant’s claim, or to decide the amount of an involuntary distribution. If there is a claim to decide, an administrator must not wait for a government agency’s review. Paul I suggests a plan’s administrator use ERISA § 404(a)(1)(D) obedience in following the plan’s governing documents. And I suggest a plan’s administrator use ERISA § 404(a)(1)(B) prudence in recognizing that a fiduciary who lacks complete skills or experience might want the advice of someone specially trained in how to read and interpret an ambiguous text, and in how to apply law—public, private, or both—to ambiguous facts. A rule mentioned above expressly states that “whether a complete discontinuance of contributions under the plan has occurred” turns on “all the facts and circumstances in the particular case[.]” The rule describes three factors to be considered, but states those are not the only factors to be considered. 26 C.F.R. § 1.411(d)-2(d)(1) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR686e4ad80b3ad70/section-1.411(d)-2#p-1.411(d)-2(d)(1). A plan’s administrator decides its interpretation of the plan’s provisions, including those one interprets to follow an applicable or relevant statute or regulation. And after discerning the plan’s provisions, an administrator decides how to apply those provisions to the particular facts. Even fact-finding involves discretion. That an administrator recognizes that no bright-line test completely governs the finding and that one’s decision-making involves discretion does not mean anyone seeks to defeat the application of public law or a plan’s governing documents.

And might a disqualified person prefer to file an excise tax return to start the statute-of-limitations period?

Did the employer pay plan-administration expenses the employer was not obligated to pay? If so, might the employer want the plan’s trustee to reimburse the employer? Would ERISA § 404(a)(1) and the plan’s governing documents permit such a reimbursement?

But what if there is no Internal Revenue Service examination, and no Employee Benefits Security Administration investigation? In the first instance, the plan’s administrator decides whether to administer the plan with a finding that a discontinuance happened, or with a finding that it has not happened. A plan’s administrator might want its lawyer’s advice to support a finding. A court might defer to an administrator’s discretionary finding if it has a plausible reasoning.

For ERISA § 206(d)(3)(B)(ii), a domestic relations order might include an order one that “relates to the provision of . . . alimony payments, or marital property rights to a [current] spouse[.]” Recognize that even if the separation agreement’s “language that specifically says that neither party can take a distribution from their respective ERISA retirement accounts” bind the parties to that agreement, it likely does not constrain an ERISA-governed plan’s administrator. Rather, what would defeat a participant’s qualified election is that it lacks the spouse’s consent. And as you say, there might be nothing a plan’s administrator need do until it receives a claim to approve or deny, or a court order to treat as a QDRO or not a QDRO.

“Twenty-eight suits—approximately a third of the total suits in 2022—were filed concerning plans with under a billion dollars in assets. Of those 28 suits, 19 concerned plans with under $750 million in assets, 14 concerned plans at or under $500 million, and three concerned plans under $250 million.” So, somewhat down-market from the earliest waves, but still not nearing small-business plans. From the courts’ decisions (despite that almost all of them are about before-trial phases), advisers—whether lawyers, investment advisers, or others—have a wider range of stories to use in showing fiduciaries ways to meet their responsibilities.

EBECatty, thank you for your helpful sorting! Even in the universe described, fiduciaries are not sued for almost 80% of plans. If we filter for individual-account retirement plans but not by plan-assets size, might the percentage approach 99%? How many fiduciary-breach lawsuits have there been on retirement plans: below $300 million? below $100 million? below $50 million? I’m an advocate for all plans’ fiduciaries putting more attention on one’s decision-making. But I hope also that advisers might put the numbers of lawsuits, and which plans’ fiduciaries are likelier to be sued, in a sensible context. Fiduciaries should “do the right thing” because it’s the right thing.

Many practitioners recognize the wave of lawsuits asserting a retirement plan’s fiduciary’s breach in allowing unreasonable expenses began with the Schlicter firm’s first few in 2006. An insurance business’s infographic BenefitsLink helpfully points to shows an average of 83 fiduciary-breach lawsuits a year for 2019-2022. https://www.sompo-intl.com/wp-content/uploads/Fiduciary-lines-Excessive-Fee-Litigation-0323.pdf And it shows 625 lawsuits for 2010-2022. For 2009-2021, the Labor department’s EFAST database shows an average of 833,722.4 Form 5500 reports a year. https://www.efast.dol.gov/5500search/) Year by year, some plans enter that count, some plans exit that count, and many plans continue over many years (and decades). Further, not all plans are pension or retirement plans, and of those not all are individual-account (defined-contribution) plans. (I confess I didn’t even try to sort the database.) But extrapolating from these numbers and filling-in or assuming other facts, what’s our guesstimate of the percentage of individual-account retirement plans’ fiduciaries not sued? Is it 99%?

A separated spouse is a spouse, and might consent as an unseparated spouse may consent. A court order of separation is rare. A separation agreement (even without a court order) could include a qualified election and spouse’s consent. The plan’s administrator has nothing to decide until the participant submits her claim and its supporting documents.

A separated spouse remains a spouse for survivor-annuity or spouse’s-consent purposes. No matter how long a separation continues, a marriage does not end until a court orders the divorce (or a spouse dies). For example, Davis v. College Suppliers Co., 813 F. Supp. 1234 (S.D. Miss. 1993); see also Board of Trustees of the Equity-League Pension Tr. Fund v. Royce, 238 F.3d 177, 25 Empl. Benefits Cas. (BL) 2394 (2d Cir. 2001) (although a husband and wife were separated for at least the last 15 years of their 19 years of marriage, they remained spouses until the participant’s death; and a written separation agreement had no effect concerning the plan’s or ERISA’s survivor-annuity provisions). Likewise, a division of spouses’ marital property does not end their marriage. For example, Callegari v. Scottrade, Inc., No. 16-1750, 2016 U.S. Dist. LEXIS 105468 (E.D. La. Aug. 10, 2016) (court-approved consent judgment to separate community property did not end the marriage); Gallagher v. Gallagher, No. 12-40027-TSH, 57 Empl. Benefits Cas. (BL) 2648, 2013 U.S. Dist. LEXIS 26061 (D. Mass. Feb. 26, 2013). But as with any continuing marriage, a spouse might consent to waive a survivor annuity, and might do so in a way that meets ERISA § 205’s and the plan’s conditions. Although it’s infrequent, I’ve seen separation agreements that include a qualified election and spouse’s consent even a cautious fiduciary would accept. (It can work if at least one of the separating spouses gets really good lawyering.) If the participant says a separation agreement includes the spouse’s consent, the plan’s administrator might consider that claim when the participant submits her counterpart of the separation agreement, showing the notary’s certificate and seal or stamp. The plan’s administrator would read at least the part of the agreement that might state the spouse’s consent and decide whether it is sufficient under ERISA § 205’s and the plan’s conditions. Or, a plan might (but need not) excuse a spouse’s consent “if the participant is legally separated . . . (within the meaning of local law) and the participant has a court order [not a mere separation agreement] to such effect[.]” But, a plan must not excuse a spouse’s consent if a qualified domestic relations order “provides otherwise[.]” 26 C.F.R. § 1.401(a)-20, A-27.