Peter Gulia

Must one keep a thief’s secret? Professions’ conduct rules include a general principle of keeping confidential information one learned while working for one’s client. Those rules recognize an exception for giving testimony or producing documents as compelled by law. Some might wonder whether a citizen must report a crime. The answer might be No. There is a Federal statute, enacted in 1790 during the first Congress, for misprision of felony. “Whoever, having knowledge of the actual commission of a felony cognizable by a court of the United States, conceals and does not as soon as possible make known the same to some judge or other person in civil or military authority under the United States, shall be fined under this title or imprisoned not more than three years, or both.” 18 U.S.C. § 4 http://uscode.house.gov/view.xhtml?req=misprision&f=treesort&fq=true&num=4&hl=true&edition=prelim&granuleId=USC-prelim-title18-section4. Courts have interpreted this statute to find no crime unless one both has knowledge of the felony and actively concealed it. A practical point about such a former client: Be careful not to destroy records any sooner than is regularly done under your firm’s records-retention and records-destruction procedures. Keeping your records regularly available shows you did not conceal anything. If someone might plausibly assert the TPA or actuary is or was a fiduciary regarding the plan, consider one’s co-fiduciary responsibilities under ERISA § 405(a)(1)-(3). ERISA § 405, 29 U.S.C. § 1105 http://uscode.house.gov/view.xhtml?req=(title:29%20section:1105%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1105)&f=treesort&edition=prelim&num=0&jumpTo=true. About all these and several other points, an observing former service provider needs its own lawyer’s confidential advice.

Congress’s Act states many changes to the Internal Revenue Code of 1986 by specifying additions to, insertions in, and deletions from specified subparts of that Code. For many of these changes, comprehending a change’s meaning or effect depends on seeing how the change integrates with the text that was in the Code before SECURE 2022. The enrolled bill does not show that. What Belgarath asks is whether we know a source that shows the Internal Revenue Code as changed by SECURE 2022?

To return to youngbenefitslawyer’s question, before 2025 is not the relevant time for whether a “new” § 401(k) arrangement was “established”. The exception Internal Revenue Code of 1986 § 414A(c)(2)(A)(i) provides is for a § 401(k) arrangement “established” by December 28, 2022. An arrangement established after that date need not provide an automatic-contribution arrangement for 2023 or 2024, but must for 2025 meet Internal Revenue Code of 1986 § 414A(a)’s condition. That’s so if a § 401(k) arrangement became established, for example, on December 30, 2022—a closing date used for many 2022 transactions. If this afternoon one is an employee-benefits lawyer advising on a merger, acquisition, or other deal scheduled to close in seven business days on January 31, one must render her advice as best she can without waiting for Treasury’s or its Internal Revenue Service’s interpretation. Some lawyers rendered that advice in December 2022.

If the plan is ERISA-governed, New York’s or any State’s law about how a divorce might affect a beneficiary designation is superseded. ERISA § 514, 29 U.S.C. § 1144; Egelhoff v. Egelhoff, 532 U.S. 141, 25 Empl. Benefits Cas. (BL) 2089 (2001). As Lou S. mentions, a plan’s governing documents might or might not provide that a divorce revokes an earlier beneficiary designation. See Kennedy v. Plan Adm’r for DuPont Sav. & Inv. Plan, 555 U.S. 285, 45 Empl. Benefits Cas. (BL) 2249 (2009). To the extent that an ERISA-governed individual-account plan does not provide ERISA § 205 survivor annuities, such a plan provides that the participant’s surviving spouse gets the account, unless that spouse consented to a different beneficiary designation. ERISA § 205(b)(1)(C), 29 U.S.C. § 1055(b)(1)(C). A qualified domestic relations order may provide that an alternate payee who is a former spouse of the participant be treated as the participant’s surviving spouse for all or some ERISA § 205 purposes. Such a provision could wholly or partly deprive the participant’s actual surviving spouse of a benefit to which the surviving spouse otherwise might become entitled. ERISA § 206(d)(3)(F)(i), 29 U.S.C. § 1056(d)(3)(F)(i). A contingent beneficiary designation has no effect until all spouse benefits under ERISA sections 205 and 206 are exhausted. Anything on BenefitsLink is only general information, not advice, and might not fit your situation.

Does the default IRA’s custodian have a name, taxpayer identification number, and address to which the custodian sends the custodian’s IRA account statements and tax-information reports?

Evaluate whether SixFifty’s software and services might help you. https://www.sixfifty.com/products/privacy/all-us-privacy/ Also, are you sure Thomson Reuters Practical Law’s Data Privacy & Cybersecurity suite lacks the information you seek? https://content.next.westlaw.com/practical-law/data-privacy-cybersecurity/health-medical?transitionType=Default&contextData=(sc.Default)&navId=CCC952ED890C38386C41083B4FE14C15

Whichever course you choose, consider engaging a service provider that, like MoJo's employer, has an inside lawyer who understands the issues and potential failure points.

What CuseFan explains is why my note said: “If new ERISA § 113 requires a notice[.]” ERISA § 113(a) applies only when a pension plan’s sponsor “amends the plan to provide a period of time during which a participant or beneficiary may elect to receive a lump sum, instead of future monthly payments[.]” I reminded us about ERISA’s spouse’s-consent and QDRO regimes because the inquirer’s law practice is domestic relations.

For this, one needs a subscription with one of the commercial law publishers. For example, Bloomberg’s Bloomberg Law, Reed Elsevier’s Lexis, ThomsonReuers’ Westlaw, or Wolters Kluwer’s VitalLaw.

Since the Retirement Equity Act of 1984, an ERISA-governed defined-benefit pension plan’s participant does not elect against a qualified preretirement survivor annuity or a qualified joint and survivor annuity without the participant’s spouse’s consent. ERISA § 205 [29 U.S.C. § 1055] http://uscode.house.gov/view.xhtml?req=(title:29%20section:1055%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1055)&f=treesort&edition=prelim&num=0&jumpTo=true Also since the Retirement Equity Act of 1984, a qualified domestic relations order may provide a benefit to a participant’s spouse or former spouse. ERISA § 206(d)(3) [29 U.S.C. § 1056(d)(3)] 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 Neither SECURE 2019 nor SECURE 2022 impairs those provisions of the Employee Retirement Income Security Act of 1974. If new ERISA § 113 requires a notice or disclosure, it must, among other requirements, compare a single sum to a qualified joint and survivor annuity. As before, how a participant and a spouse negotiate their division of property happens, subject to the QDRO conditions, under law external to the ERISA-governed pension plan.

part-time workers.pdf

For an ERISA-governed plan, there are complexities about how ERISA § 202(c)(1)(B)’s provision for long-term employees interacts with Internal Revenue Code of 1986 § 403(b)(12)(A)’s nondiscrimination conditions as they apply regarding employees “who normally work less than 20 hours per week.” Under new Internal Revenue Code of 1986 § 403(b)(12)(D), a plan need not allocate a nonelective or matching contribution to an employee eligible for § 403(b) elective deferrals “solely by reason of” ERISA § 202(c)(1)(B). If a plan provides contributions beyond elective-deferral contributions, the employer may elect not to count the ERISA § 202(c)(1)(B) long-term part-time employees in coverage and nondiscrimination measures, but counts the employees “who normally work [at least] 20 hours per week.” https://irc.bloombergtax.com/public/uscode/doc/irc/section_403 With no advice (not that anything I put on BenefitsLink is advice), that’s my first (and cold) read. Do BenefitsLink mavens concur?

Below Ground describes having trained a retirement plan’s administrator to call the TPA before making a particular kind of plan-administration decision. Perhaps some processes would function more efficiently and effectively if an employer didn’t appoint itself as the plan’s administrator.

Considering a tornado’s harms to people and places in Alabama, do we need to know now whether a plan allows a qualified disaster recovery distribution? For a provision tax law permits but does not require, remedial-amendment periods make it impractical to look to what many people call the plan document as a reliable source to discern whether the plan allows or omits the provision. To deal with those situations, recordkeepers, third-party administrators, and other service providers use less formal writings to ask a plan’s sponsor which provisions it wants. Some of these might state an implied instruction: absent a written response, the plan’s administrator is deemed to have instructed its service provider to provide its services assuming the plan provision (or omission) the service provider’s request for an instruction specified as a presumed choice. Some service providers might have hoped much of 2023 would elapse before it became necessary to ask for instructions about optional provisions under the SECURE 2.0 Act of 2022. But if a service provider knows or suspects a plan’s participants could include some with one’s principal place of abode in Alabama’s Autauga and Dallas counties, should we ask the plan’s sponsor whether the plan allows a qualified disaster recovery distribution? A plan may, following Internal Revenue Code of 1986 § 72(t)(2)(M) and 72(t)(11), provide such an early-out distribution. The incident period began January 12. https://www.whitehouse.gov/briefing-room/statements-releases/2023/01/15/president-joseph-r-biden-jr-approves-alabama-disaster-declaration-3/ https://www.fema.gov/disaster/4684

So we learn something together: Imagine a defined-benefit pension plan provides a normal retirement age of 55. Imagine the plan’s sponsor asserts that age “is not earlier than the earliest age that is reasonably representative of the typical retirement age for the industry in which the covered workforce is employed[.]” 26 C.F.R. § 1.401(a)-1(b)(2)(iii) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR6f8c3724b50e44d/section-1.401(a)-1#p-1.401(a)-1(b)(2)(iii). May an actuary do her work assuming the plan-specified normal retirement age? Or do professional standards require an actuary to make her own estimates about when the plan’s participants are likely to retire?

If the plan’s administrator has not yet instructed a distribution to an alternate payee and has not yet instructed a segregation of accounts between the participant and an alternate payee, consider doing now whatever notices and other procedural steps ought to have been done when the administrator first received the domestic-relations order. Further, the administrator might want its lawyer’s advice about whether to allow the participant a reasonable time to present whatever factual information or legal argument the participant wishes to present to assert that the order is not a qualified domestic-relations order. In my experience, few participants assert that a court’s order is not a qualified domestic-relations order.

The “reasonable period” does not refer to how long the failure remained undiscovered. Rather, it’s about how promptly the failure is self-corrected “after such failure is identified.” SECURE 2022 § 305 undoes the Internal Revenue Service’s time limit on which failures are eligible (if otherwise eligible) for self-correction. Congress’s statute provides no special definition for the word “inadvertent”. Merriam-Webster says inadvertent means unintentional or inattentive. https://www.merriam-webster.com/dictionary/inadvertent In VirtualTPA’s story, one might imagine the plan’s tax-qualification failure could have resulted from its administrator’s unintentional or inattentive lack of knowledge of the plan’s provisions. (Isn’t that a way many failures happen?) The administrator (the one responsible under ERISA and the tax Code, not the TPA) might not have known the plan compels an involuntary minimum distribution to a participant who was at a relevant time a more-than-5% owner. (I observe nothing about how responsibilities sort out between and among the participant, the administrator, and the third-person service provider.) If the Internal Revenue Service later pursues something under the IRS’s finding that a plan was tax-disqualified and not self-corrected, whoever asserts the failure was self-corrected must persuade a finder of law and fact that the failure was eligible for self-correction. One can imagine at least plausible, and perhaps persuasive, arguments that a failure of a kind VirtualTPA’s story describes was inadvertent. If it was, the passing of a few or many years does not by itself make a failure that otherwise was inadvertent necessarily less so. A plan’s administrator that errs by not knowing the plan’s provision that applies to a participant who was a more-than-5% owner might continue its ignorance for years or decades. Likewise, inattentiveness too sometimes persists over stretches of time. I concede there is a separate problem about whether the plan’s administrator had procedures reasonably designed to cause the administrator to administer the plan correctly. If an organization really wants rules obeyed, one must supplement written procedures with compensating controls designed under an assumption that some or many people won’t read the written procedures they are told to follow, especially if the rules are many or complex (or, worse, both). But I’ve never seen the IRS push such a point. Instead, the IRS treats the procedures condition as met, even if everyone strongly suspects no one read the procedures. We’re not getting the full facts of the story. If we had them, there could be a discussion about whether the failure was inadvertent, not egregious, and otherwise fits conditions for a failure that could be a subject of self-correction. But that a failure happened more than two or three years ago does not by itself make the failure ineligible for self-correction.

If the plan’s administrator might consider anything submitted to the broker-dealer, among many factors one might consider: What do the plan’s governing documents require? What do the plan’s governing documents permit? How much discretion do the plan’s governing documents grant the administrator? Is there a written agreement, one the administrator has rights to enforce, that makes the broker-dealer the administrator’s agent? What records-retention obligations does that agreement mandate? What controls does the broker-dealer impose on the beneficiary-designation form to lower the risk of fakes? Does the broker-dealer reliably date-and-time stamp the writings it receives? What reporting does the broker-dealer provide to the administrator? When the administrator instructs the broker-dealer to furnish the writing it received, will it be the original showing the participant’s ink-on-paper handwriting? Or is it merely a scan of the writing received? For a beneficiary designation that requires the spouse’s consent, will the administrator be able to examine the notary’s seal or stamp? If the plan’s administrator does not itself have enough expertise to evaluate the soundness, legal effect, and prudence of what would be its agreement with the broker-dealer, has the administrator used outside help to evaluate the agreement? Does the broker-dealer have enough financial capacity and casualty and other liability insurance to respond to the inevitable errors and lapses in its performance?

Gilmore, thank you for your sortable spreadsheet!

In 2019, I helped an administrator file twenty old years’ Form 5500 reports. EFAST worked. I found it useful to begin with the oldest year, and proceed in chronological order. Doing so set a preceding year’s ending balance as the next year’s presumed opening balance.

If Congress abolished an individual-account retirement plan’s coverage, nondiscrimination, and top-heavy rules would that solve most of the difficulties about long-term part-time employees?

I like some of the new opportunities. (I especially like removing, almost completely, the employer/administrator from evaluating a participant’s circumstances.) Yet, I recognize many complexities, and imagine there are some I won’t see until there is a problem in play. Yesterday, a client decided to do nothing on all permitted provisions until after it concludes its search for a recordkeeper.

And yet, at least some of the lobbyists were people who say they speak for retirement-services providers.

If an ERISA-governed retirement plan provides participant-directed investment, the 404a-5 rule specifies three kinds of information changes that call for 30 days’ notice “unless the inability to provide such advance notice is due to events that were unforeseeable or circumstances beyond the control of the plan administrator[.]” 29 C.F.R. § 2550.404a-5 https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-F/part-2550/section-2550.404a-5#p-2550.404a-5(b) Often, recordkeepers trot out this rule—even when it doesn’t apply. An unadvised plan administrator just falls in with what its recordkeeper says. Further, many service providers’ agreements require notice (often, 60 days) to the service provider before it has an obligation to provide a service regarding an investment-related change. A plan sponsor or consultant with purchasing power can negotiate the notice period and which circumstances invoke it; others are stuck with a rack provision.

MoJo, your recent BenefitsLink explanation that being available as a recordkeeper is a deselection game—because one must build every new feature lest any desired customer or to-be-satisfied consultant want it or even just ask for it—is right on. Do you see the software build you describe (and the people power needed for the inevitable data weaknesses and processing errors) as another factor that could move some (more) insurance, investment-management, and other financial-services businesses to sell off recordkeeping businesses? (I don’t seek any nonpublic information; I ask only about a general trend.) Could we be headed yet a little more toward having a “big five” do a vast majority of the recordkeeping?