Peter Gulia

If there won’t be time to furnish the lifetime-income illustrations (or the individuals’ account statements) by October 17 but you’re confident the individuals’ December 31, 2021 accounts can be determined by late October, the plan’s administrator might consider then running the illustrations and furnishing them no later than with the summary annual report on 2021. If the lateness is a month or two in this first cycle, how likely is it that EBSA will pursue enforcement? A participant’s, beneficiary’s, or alternate payee’s enforcement might be remote. Furnishing illustrations run with December 31, 2000 account balances, 2000 mortality assumptions, and the December 1, 2000 interest rate might be a way to meet the ERISA § 105 command by a compliance date. But a plan’s fiduciary might evaluate whether such an outdated illustration would confuse some participants, beneficiaries, and alternate payees even more than an on-cycle illustration confuses them. Whichever, the plan’s administrator should choose and own the responsibility.

Thanks to Dare Johnson for showing us the linked-to resource. But understand that some elements of those priorities turn on the fact that the employer is the United States government. Some priorities one might infer from that regime would not be appropriate for another employer.

It’s easy to put taxes and garnishments ahead of voluntary wage reductions and deductions. And many people put retirement last (or near last) in a triage. The difficult choices are priorities among other employee benefits and some fringe benefits. For example, many employers put health ahead of disability and other welfare benefits. But some employers, especially with workers who don’t drive to the work location, might put a before-tax transportation fringe ahead of other benefits, perhaps even health. Why? A worker who can’t afford her travel expenses to get to the employer’s work location could quit or lose the job. And for those who think about a written procedure for this, does anyone know whether ADP, Paychex, and other big payroll-service providers have designed systems and methods for getting an employer customer’s instructions for dealing with this triage?

Some employers might prefer that plans’ documents would state priorities about what to do when a worker’s paycheck lacks enough money to meet (all of): Federal, State, and local taxes to be withheld; child-support and other wage garnishments; setoffs for amounts owed to the employer; wage-reduction “premiums” and contributions for health, disability, life-insurance, retirement, and other employee benefits; and wage reductions for dependent care, transportation, and other fringe benefits. This can work well if one widely knowledgeable professional writes or edits the documents for the full range of the employer’s benefits. (In theory, it also should work if one human-resources person oversees the full range.) But many employers use for each benefit a document from that benefit’s service provider. And even if all documents are from one service provider, IRS-preapproved and other off-the-rack documents typically don’t specify provisions of this kind. If it’s not feasible to specify the details in the plans’ documents, an employer, in its role as the several plans’ administrator, might make a written procedure. But who within an employer gets that task? And if an employer needs an outside professional’s work, how much is the employer willing to pay for this?

As I said, “Consider . . . .”. Practitioners and plans’ administrators have differing views, with some preferring to show the current identifying information, and others using the identifying information as it was on the last day of the year reported on. If the plan’s administrator prefers to show the current identifying information, the form has an element designed to report also the preceding information so EBSA and IRS are not confused.

Consider using the plan’s and its sponsor’s names as in effect when the administrator approves the Form 5500 report. To show the continuation and avoid a confusion, the Form 5500 Instructions specify a reporting for this: Part II Line 1a: “. . . . If the plan has changed its name from the prior year filing(s), complete line 4 to indicate that the plan was previously identified by a different name.” “Line 4. If the plan sponsor’s or DFE’s name and/or EIN [has or] have changed or the plan name has changed since the last return/report was filed for this plan or DFE, enter the plan sponsor’s or DFE’s name, EIN, the plan name, and the plan number as it appeared on the last return/report filed.” https://www.dol.gov/sites/dolgov/files/EBSA/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2021-instructions.pdf

An auditor must document her work thoroughly enough that a “cold” reader—an independent peer reviewer, or the Secretary of Labor—could see from the auditor’s work papers alone that the auditor met all ERISA § 103(a)(3)(C) conditions and other generally accepted auditing standards. About whether the company established a plan, has bzorc or another professional evaluated whether the human who signed a document had been authorized to adopt the document as the company’s act?

The only dumb question is the one we didn’t ask. For a governmental § 457(b) plan, a governmental plan is not governed by ERISA’s title I. For an ERISA-governed plan, an administrator of an unfunded plan of deferred compensation for a select group of management or highly-compensated employees might avoid the ERISA § 105 requirement for a lifetime-income disclosure if the administrator met the conditions of the “alternative method of compliance” for such a select-group plan. ERISA § 110, 29 U.S.C. § 1030 (empowering the Secretary to “prescribe an alternative method for satisfying any requirement of this part [part 1 of subtitle B of title I, ERISA §§ 101-111] with respect to any pension plan, or class of pension plans[.]”). http://uscode.house.gov/view.xhtml?req=(title:29%20section:1030%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1030)&f=treesort&edition=prelim&num=0&jumpTo=true 29 C.F.R. § 2520.104-23 (Alternative method of compliance for pension plans for certain selected employees). https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/subpart-D/section-2520.104-23#p-2520.104-23(a)

A few cautions: If the plan is a governmental plan, check the plan’s documents and State law. If the plan is a church plan, check the plan’s documents. Even if no external law calls for a particular provision, a sponsor might decide that providing for a participant’s spouse (or, at least, not depriving a spouse of an interest without the spouse’s consent) follows the church’s faith. If a plan is neither a governmental plan nor a church plan and the charitable organization believes it is not a plan within the meaning of ERISA’s title I, consider that a disappointed surviving spouse might assert that the plan is an ERISA-governed plan. A Federal court decides a defendant’s motion to dismiss a complaint for failure to state a claim considering only the complaint’s alleged facts, with no opportunity for a defendant to introduce facts. Because of this, a defendant might not persuade a judge that a complaint is so implausible that it asserts no claim. Even if a plan is unquestionably not ERISA-governed, read the annuity contract or custodial-account agreement. In my experience, some older annuity contracts provide a survivor annuity, absent the spouse’s consent, and provide this even if no plan the contract was purchased under imposes such a provision.

The lifetime-income disclosure is an element of an ERISA title I command for a pension-benefit statement. ERISA § 105(a)(2)(D), unofficially compiled as 29 U.S.C. § 1025(a)(2)(D) http://uscode.house.gov/view.xhtml?req=(title:29%20section:1025%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1025)&f=treesort&edition=prelim&num=0&jumpTo=true This ERISA provision does not apply to: a plan that is not an individual-account plan, a one-participant or no-employee plan, a governmental plan (including a public-schools employer’s plan), a church plan (if the plan did not elect to be ERISA-governed), or a voluntary-only § 403(b) plan if the employer’s involvement is so limited that there is no plan for ERISA title I’s purposes.

ERISAGirl, thank you for the helpful information on ASC. Barbara, thank you for double-checking on Datair. It seems these four document providers’ consensus is showing a user a choice, and setting as the default undoing a beneficiary designation that would provide for a former spouse.

If ERISA governs the retirement plan, the plan’s administrator decides the plan’s distributee applying ERISA and the plan’s governing documents. ERISA supersedes States’ laws, at least for administering the plan. Some (but not all) courts have held that ERISA does not preempt a State court’s order—if the order does not involve the plan or any fiduciary of it—about ordering property interests between the plan’s distributee and others who might have a property interest. Such an adjustment happens after the ERISA plan has paid or delivered the plan’s benefit (or does not constrain the ERISA-governed plan’s administration).

Belgarath, thank you. We now have information on Datair, FIS, and ftwilliam. Beyond ASC, is there another widely used documents provider we're missing?

Barbara and cathyw, thank you for your helpful information about ftwilliam and Datair documents. Especially helpful is the information that the choice in ftwilliam processes into a summary plan description. Does anyone know what the ASC documents do?

Even if one imagines an audit of a retirement plan trust’s financial statements that report no asset (beyond a right to collect a contribution if the employer declares one), no income, and no expense, don’t be surprised if an independent qualified public accountant seeks a minimum fee it charges for any ERISA audit, no matter how little work the IQPA anticipates. And don’t be surprised if the IQPA requests some writing in which “management” confirms that no contribution was declared.

If the IRS-preapproved documents allow a user plan sponsor to choose or negate a provision that a divorce undoes a beneficiary designation, does the software for assembling other documents to follow the user’s choices: put a conditional text in, or omit a text from, the summary plan description? put a conditional text in, or omit a text from, the beneficiary-designation form?

Belgarath, thank you. Just curious, if either an adoption agreement or an appendix (or some call it an addendum) invites a user-specific provision, is there some legal, procedural, or document-specific difference between such an appendix and an adoption agreement? Neighbors, has anyone seen an IRS-preapproved document in which a divorce revokes a beneficiary designation but the user is not offered a check-the-box or fill-in line to vary that provision?

If a document provider missed a point like this when designing a document for governmental plans’ use, one wonders what else the provider missed? (Or if the IRS required this, one wonders what other inapt provisions the IRS required?) Does the document state other provisions unnecessary for a desired tax treatment? Does the document state provisions contrary to the user’s State law? Does the document state provisions the user does not intend? How much professional time would it take to find, and negate, the provisions the user does not intend?

If BenefitsLink neighbors can help with an informal survey about IRS-preapproved documents: Is a provision that divorce revokes a beneficiary designation (to the extent it names the participant’s former spouse) in the basic plan document? Is a provision that divorce does not revoke a beneficiary designation (even if it names the participant’s former spouse) in the basic plan document? Does the adoption-agreement form display a choice about whether a divorce revokes a beneficiary designation? If a few answer, even on just one document, until we’ve described the most widely used documents, we’ll have a useful sense about how plans’ documents handle this point.

Form 990 Part VII (Compensation of Officers, Directors, Trustees, Key Employees, Highest Compensated Employees, and Independent Contractors) includes deferred compensation. For an amount not yet paid, other compensation includes amounts accrued under a deferred compensation plan. “Deferred compensation to be reported in column (F) includes compensation that is earned or accrued in one year and deferred to a future year, whether or not funded, vested, qualified or nonqualified, or subject to a substantial risk of forfeiture.” https://www.irs.gov/pub/irs-pdf/i990.pdf Further, the organization’s accrual-basis financial statements will, somehow, show the deferred compensation obligation.

We don’t know why a particular IRS-preapproved document includes that text. But if using the document might state (or even purport to state) a provision a plan sponsor does not intend, the plan sponsor might reevaluate whether it is wise to use the document.

Do we assume both plans’ benefit-accrual year, limitation year, nondiscrimination year, and other measurement periods all are calendar years? What is the employer’s or service recipient’s tax-accounting year? Are you confident the worker is an employee? Might she be a shareholder, partner, or member who is a deemed employee? Might she be a statutory employee? Do any circumstances suggest the payment or a portion of it is a disguised dividend? Is the pay unconditional? Does the worker keep the whole pay even if she does not perform services for the whole of the anticipated period? Perhaps what leads you to think twice is this phrase in a rule about what counts in § 415 compensation: “amounts received . . . for personal services actually rendered in the course of employment[.]” 26 C.F.R. § 1.415(c)-2(b)(1) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR686e4ad80b3ad70/section-1.415(c)-2#p-1.415(c)-2(b)(1). But might services rendered include availability? If the payee does not perform her services through June 2023, does she have an obligation to return some amount to the payer? If there is no such obligation, was the amount paid for services, including availability? I don’t know an answer to that question; but it seems likely at least one BenefitsLink maven knows.

Yes. My added point is that, even if a trustee’s resignation or removal took effect, a custodian or other service provider might not be responsible for a harm that results from the provider’s good-faith reliance on the apparent authority of someone the provider does not yet know is no longer a trustee or other fiduciary.

About what’s required: “Every employee benefit plan shall . . . provide a procedure for amending such plan, and for identifying the persons who have authority to amend the plan[.]” ERISA § 402(b)(3), unofficially compiled as 29 U.S.C. § 1102(b)(3). Yet, the Supreme Court holds that stating as little as “[t]he Company” may amend the plan is enough to meet ERISA § 402(b)(3)’s two requirements—that a plan “provide a procedure for amending [the] plan, and [a procedure] for identifying the persons who have authority to amend the plan[.]”). Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 18 Empl. Benefits Cas. (BL) 2841 (Mar. 6, 1995). For a restatement or other amendment, one looks to the governing documents (as they exist just before the restatement one is about to adopt) to find what the documents require for an amendment of them to be effective. An IRS-preapproved document likely allows almost anything as an amendment. About “each partner with their own corp.”, check whether each corporation is a participating employer or a participant. (For situations in which the corporations comprise the partners of the partnership, either configuration is possible.) If a corporation is a participating employer, check that it signs whatever the documents require for an organization to join as a participating employer. Likewise, if the adoption agreement doesn’t name the participating employers, one might add something to show the plan sponsor’s assent. Whether to do something more than what ERISA, the Internal Revenue Code, and the governing documents require is up to the organizations’ business judgment.

CuseFan, thank you for the observations about work related to a cycle, and about plan terminations. C.B. Zeller, thank you for the reminder about a return preparer. https://www.irs.gov/instructions/i2848#:~:text=An unenrolled return preparer is,or regulations) to sign the