Peter Gulia

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.

karl’s description of the facts suggests the participant’s ex- is neither a current nor former spouse of the participant. And the ex- might not be a child of the participant, and might not be a current dependent of the participant. The court with jurisdiction of the participant and the ex- might be acting under law other than domestic-relations law. And the court’s order might not “relate[] to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of [the] participant[.]” 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. A court’s order that is not a domestic relations order (as the statute, and so the plan, defines it) would not be a qualified domestic relations order. Congress in 1984 might not have anticipated how often State courts are called to reorder money, contract rights, and other property rights between nonspouses in circumstances that otherwise seem somewhat similar to domestic-relations proceedings.

The description of the facts suggests some possibility that the two workers who are not W-2 employees might be self-employed individuals who are deemed employees who have compensation to the extent of one’s earned income—net earnings from self-employment, as Internal Revenue Code § 401(c) defines and adjusts these points. With investment-related businesses, it’s common for many workers to be partners rather than employees. Are the two partners of an investment fund they manage?

Under ERISA § 3 [29 U.S.C. § 1002], an “employee benefit plan”, including a “pension plan”, is “established or maintained by an employer[,] or by an employee organization, or by both[.]” It’s possible a trust is an employer. Not every operating business is organized as a corporation, limited-liability company, partnership, or similar organization; some are organized as a trust.

About how quickly or slowly an investment or service provider processes and pays on an instruction is up to the plan’s procedures and service arrangements. That even a next-day distribution might not be quick enough could be among the reasons someone uses a credit card, and hopes the retirement plan’s check arrives in time to pay off the credit-card charge. About awkwardness in deciding what is or isn’t a hardship, wouldn’t many questions vanish if the plan’s administrator relies on the claimant’s certification as Internal Revenue Code § 401(k)(14)(C) permits?

If the participant yesterday or today charged an expense on her credit card, she might have not yet paid the lender for that expense. Consider whether circumstances of that kind might mean the participant still has a need 26 C.F.R. § 1.401(k)-1(d)(3) describes.

A few points you might consider: Internal Revenue Code § 401(a)(9)’s tax-qualification condition sets a restraint about how much delay a plan may allow before the plan provides some involuntary distribution. Except as ERISA § 203 commands otherwise, a plan may provide an involuntary distribution sooner than a participant’s applicable age described in IRC § 401(a)(9). For example, a plan might provide an involuntary distribution by the last day of the year in which the participant reaches a 60-something age (if the participant then has reached the plan’s normal retirement age). A sponsor of an employee stock ownership plan might have plan-design or other reasons for providing a distribution in January rather than April 1. But if the ESOP’s shares are not publicly traded on a national securities exchange, consider whether January 1 is practical in the plan’s administration. Among other factors, how likely is it that the plan’s trustees will have read their appraiser’s report and concluded a December 31 valuation by January 1 or 2?

About my questions: Did this claimant have a physical or mental disability that interfered with meeting the claims-filing due date? Did this claimant misunderstand the due date by relying, reasonably, on misinformation provided by someone who had authority to speak on behalf of the plan’s administrator? I have not had an occasion to research whether either circumstance might be a reason for a welfare-benefit plan’s fiduciary to consider equitably adjusting a claims-filing due date.

Thank you, Brian Gilmore, for your great explanations. Current § 125 was added to the Internal Revenue Code by the Revenue Act of 1978. To interpret § 125, most of the agency law we look to is proposals, not rules. And much of that was proposed in the 1980s. Decades later, a lawyer properly cites proposed rules as the substantial authority. For that sad state of play, some might blame the Internal Revenue Service and the Treasury department. I don’t; those tax officials, executives, and lawyers do the best they can with the circumstances they’re given. 1981640914_1984-05-0719320-19329.pdf 1646025742_1989-03-079459-9504.pdf

Many people conflate the legal effects of not increasing the debt limit and of not providing appropriations. They are different things with different legal consequences. That’s why my originating post’s second and third paragraphs distinguish between them. Not increasing the debt limit does not require a government shutdown, but might lead some agency employees to reevaluate one’s career choices. And it might otherwise indirectly disrupt or delay the Labor and Treasury departments’ rulemaking and other guidance activities. One also might fear that the two events could both happen. Imagine that a delay from the US Treasury’s use of so-called “extraordinary measures” runs out in September. If the 118th Congress by September 30 remains at an impasse (not only about debt but also about spending), some political strategies could result also in not continuing appropriations after September 30.

Did this claimant have a physical or mental disability that interfered with meeting the claims-filing due date? Did this claimant misunderstand the due date by relying, reasonably, on misinformation provided by someone who had authority to speak on behalf of the plan’s administrator?

2023’s autumn might bring at least two possibilities for disruptions and delays in some activities of some Federal agencies, including the US Labor and Treasury departments. Not increasing the debt Congress authorizes the United States to incur might indirectly disrupt or delay the Labor and Treasury departments’ rulemaking and other guidance activities. Not continuing appropriations after September 30 and a resulting government shutdown would make it unlawful for the Labor and Treasury departments’ employees to work on rulemaking and other guidance activities. (If history is some guide about what could happen next: After November 1995, US government shutdowns have averaged about 19 days. The most recent was 35 days.) If 2023’s autumn brings a slowdown or shutdown, would a delay in rulemaking and other guidance activities matter for retirement plans and service providers?

Even to explain one plan, the Employee Retirement Income Security Act of 1974 permits a plan’s administrator to use more than one summary plan description, making them distinct by clearly identified classes. Each SPD may omit information that cannot apply to the class of participants or beneficiaries to which that SPD is addressed. 29 C.F.R. § 2520.102-4 https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/subpart-B/section-2520.102-4. But your focus on which benefit a participant enrolled in seems inapt. Rather, an SPD must describe each benefit its addressee could elect.

Paul I, thank you for your kind words and thoughtful observations. I asked a commenter to assume the work is Professional Services so the focus would be on my question about which person is a Member’s Principal. The Code’s definition for Professional Services also is awkward. Although the defined term “includ[es] the rendering of advice, recommendations, findings, or opinions related to a retirement or other employee benefit plan”, that phrase, set off with a comma, might be illustrative but nonrestrictive. Arguably, Professional Services is any “services provided to a Principal by a Member[.]” (I recognize other possible interpretations, including some under text-interpretation presumptions that the expression of one thing sometimes suggests the exclusion of others, and that one interprets a text so every word or phrase has some effect.) If we exclude from Professional Services a recordkeeper’s employee’s nondiscretionary services, eight of the Code’s twelve rules might have no application. If a Member does not provide Professional Services, the Code’s rules 2 (advertising), 3 (communications), 5 (confidentiality), 6 (conflicts of interest), 7 (control of work product), 8 (courtesy and cooperation), 10 (professional integrity), and 11 (qualification standards) do not apply. What’s left? A Member must not use an ASPPA or other ARA Credential or Title untruthfully [rule 12]. A Member must disclose her and her “firm’s” compensation [rule 9]. A Member regulated by a profession (such as the “three As”—accountant, actuary, and attorney) must obey those conduct rules [rule 13]. (Rule 4 requires only that a Member “be knowledgeable about” and obey the Code.) Many interpreters, even many textualists, might reason that the American Retirement Association did not intend a Code that would have almost no application for many Members.

Thanks. I'm unaware of an ASPPA publication that describes an interpretation that says much beyond the Code of Conduct's one-sentence definition. That's why I seek the thinking of our BenefitsLink neighbors.

I’ll try my answer at my question. Let’s reject interpretation #3 because it would leave many ASPPA Members with no Principal, and so no particular person to which a professional-conduct duty is owed. While the Code of Conduct has a few rules (2, 12, 13) that do not depend on a relation to a particular person, applying only those would leave little of the confidence-building standards a professional code is meant to communicate. Let’s reject interpretation #2. About looking to the employee’s employer, the restrictive or defining clause “where the Member provides retirement plan services for their employer’s plan” isn’t met for a recordkeeper’s many employees who work only regarding external clients’ plans. And if one ignores the clause and looks to a Member’s employer as her Principal, the Code of Conduct wouldn’t do anything not already in the law governing the employee-employer relationship. I’m left with #1, using the idea that one favors a textually permissible interpretation that furthers, rather than obstructs, the text’s purpose. That would treat the recordkeeper’s clients (or some of them) as also the recordkeeper’s employee’s clients. If a third-party administrator provides its services for about two hundred plans and the TPA’s employee regularly works on about twenty of them, perhaps such an employee might know her Principals. But imagine a recordkeeper provides its services to 60,000 plan sponsors (with at least as many plans). Should an ASPPA Member treat as her Principal: all plan sponsors the recordkeeper serves? only those plan sponsors the employee knows the identity of? only those plan sponsors the recordkeeper has assigned the employee to work on? Or is there some other reason or context one uses to discern whether, or the circumstances in which, a plan’s sponsor or administrator is the Member’s Principal? BenefitsLink neighbors, what do you think?

To help me sort out how to interpret and apply ASPPA’s Code of Conduct, I ask for BenefitsLink neighbors’ thoughts about who is an ASPPA Member’s Principal when the Member is a nonowner employee of a service provider and does not control its relations with its customers. The Code’s definition for Principal is “any present or prospective client of a Member or the employer of a Member where the Member provides retirement plan services for their employer’s plan.” Imagine an ASPPA Member (under ASPPA’s Code, “[a]n individual”) who is an employee of a big recordkeeper. This employee never works on any employee-benefit plan the recordkeeper maintains for the recordkeeper’s employees. Rather, the recordkeeper uses the employee’s work to provide the recordkeeper’s services to the recordkeeper’s customers. Assume the work is, if provided to a Principal, “Professional Services” as ASPPA’s Code defines this. https://www.asppa.org/member/code-conduct 1. Is each of the recordkeeper’s customers the employee works on a Principal? Why or why not? Would whether the employee works on a dozen plans, a few hundred plans, or a few thousand plans affect your reasoning? Does it matter whether the employee knows some identity or information of a particular customer? What if the employee works on a process the recordkeeper uses in performing its services for many, most, or almost all its customers, but the employer seldom sees information on a particular customer? 2. Is the recordkeeper its employee’s only Principal? Why or why not? 3. Does this employee have no Principal, because she does no work on her employer’s plan and the recordkeeper’s customer is not the employee’s client? 4. Do you have some different way to interpret who is or isn’t the employee’s Principal? (As always, I own complete responsibility for whatever guidance or information I provide.) What are your thoughts?

If you continue with this client, make and keep records of the written advice you provide. Your descriptions of the client’s behavior suggest the client might assert it did not receive, or did not understand, your advice.

DMincevich, I imagine the hypothetical situation you describe has typical small-business facts under which the employer that sponsors a retirement plan also is the plan’s administrator. The employer might want its lawyers’ advice about the employer’s duties under the Immigration Control and Reform Act of 1986, other Federal laws regarding employment, States’ laws about employing workers and paying wages, and Federal, State, and municipal laws about reporting wages for tax and other purposes. In particular, the employer might want advice about whether it must or should file Form W-2c and W-3c corrected wage reports for wages paid in 2022 and earlier years, and Form 941-X returns for periods with incorrectly reported wages. The administrator might want its lawyers’ advice about the Employee Retirement Income Security Act of 1974, the Internal Revenue Code of 1986, and other Federal laws. That might include advice about how to correct carefully the plan’s records about a participant’s identity, and how to do it to not alter, discard, or conceal earlier records. That a worker was an alien an employer ought not to have employed does not defeat the worker’s rights as a participant under an ERISA-governed retirement plan.

The ten-year budget-reconciliation period for the Consolidated Appropriations Act, 2023, of which SECURE 2022 is a division, is fiscal years 2023-2032—that is, October 1, 2022 to September 30, 2032. The change to age 75 applies “[i]n the case of an individual who attains age 74 after December 31, 2032[.]” Internal Revenue Code § 401(a)(9)(C)(v)(II). Someone born in 1960 would reach age 74 in 2034, age 75 in 2035, and might have a required beginning date as soon as April 1, 2036. For someone born in 1960, an applicable age of 73 would result in a required beginning date no sooner than April 1, 2034 and a first distribution calendar year no sooner than the year ended December 31, 2033—1¼ years after the budget-reconciliation period ends. While I haven’t read the whole report, I imagine the revenue estimators could have assumed the change to an applicable age of 75 for those born in 1960 and later would bear no revenue loss in the budget-reconciliation period ending September 30, 2032. The Joint Committee on Taxation estimate scored the combination of both increases in applicable age for a required beginning date as a revenue loss of only about $7 billion for fiscal years 2023-2032. JCX-21-22 2022-12-22.pdf