Peter Gulia

And your firm might want your lawyer’s advice about when and how to end your services while managing risks of your exposures to, if not liabilities, at least defense and other expenses.

Yes, I am asking about owners-only plans. How often does it happen? Is an owners-only plan a regular aspect of a TPA's practice?

Does the plan provide any contribution beyond a participant's elective-deferral contribution or rollover contribution?

Is the issuer of the employer securities a C corporation or an S corporation? Does the issuer's certificate of incorporation restrict stock ownership to employees? What does the plan provide about whether a distribution is, to the extent an account has employer securities, a delivery of the employer securities (and not a payment of money)?

Leaving aside your question about a lag between a discontinuance or termination date and the plan’s final distribution: Following your idea that the plan’s documents “must be fully up to date” when the plan terminates, wouldn’t at least some provisions in a cycle 3 restatement be needed for the plan’s termination? Wouldn’t the plan’s sponsor want the cycle 3 restatement and whichever further amendments are needed to make the user’s document up-to-date for the termination?

Recently, I was asked for advice on State-law fiduciary issues about a retirement plan. The plan’s sponsor, a profit-seeking limited-liability company (treated as a partnership for Federal income tax purposes), has no employee, and no intent to hire an employee. Everyone who works in the business is an LLC member. And yes, I checked that the LLC interests are real, and not a sham to evade treating a worker as an employee. How often does this happen—that every worker is a partner, an LLC member treated as a partner, or otherwise an owner treated as not an employee? Does it happen often enough that a service provider would plan for these situations?

JM, thank you for pointing us to California’s Family Code § 1101. https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?lawCode=FAM&sectionNum=1101 That California or another of the States with a community-property regime (or a State with provisions for dispositions of community property acquired under another State’s regime) has such a statute, or even that the statute is classified under California’s Family Code or another State’s title for domestic-relations law, might support, but does not control, whether such an order always is a domestic-relations order within the meaning of ERISA § 206(d)(3)(B)(ii). That question involves interpreting Federal law. For those who don’t disdain legislative history as sometimes a possible indicator of what a legislature meant, one might consider Congress’s purposes for the Retirement Equity Act of 1984, including its portions that amended ERISA sections 205 and 206. And even an interpreter who considers only an enacted statute would interpret the whole statute, including (at least) ERISA sections 2, 3, 205, 206, 404, and 514. Even ignoring the intent of the participant, the nonparticipant spouse, and the court that issued the order, and without failing to accept the State court’s factual findings and application of State law, a plan’s administrator could decide that a reordering of the spouses’ property unrelated to a divorce or separation action is not a domestic-relations order. Or an administrator could decide that it is a DRO and, if other conditions are met, a QDRO. Either way, a court reviewing an administrator’s decision should defer to the administrator’s discretionary decision-making unless it was so lacking in reasoning that it was not an exercise of the plan-granted discretion.

I hope BenefitsLink neighbors will help me by responding to this survey about methods and customs in delivering documents for a managed-account service. Assume an individual-account retirement plan that provides participant-directed investment. Assume the plan’s top fiduciary approves a registered investment adviser’s offer of its managed-account service. The service is provided only to a participant (or other investment-directing individual) who agrees to the extra service, and agrees that the investment adviser’s fee is charged against her plan account. Does the adviser deliver its investment-advisory agreement: 1) as a paper document? 2) as a pdf attached to an email? 3) by showing a hyperlink that points to a webpage on which the agreement is hosted? 4) by some other means, and if so what? Does the participant/advisee sign the agreement: 1) with ink on paper? 2) using an electronic-signature service? 3) by clicking an “I approve” button in the plan’s or the adviser’s website? 4) by some other means, and if so what? When the adviser later must deliver a required disclosure, is it: 1) paper sent by US mail? 2) a pdf attached to an email sent to each participant/advisee? 3) a notice-and-access email with a pointer to the website on which the document is hosted? 4) notice in a quarterly statement? 5) by some other means, and if so what? Thank you for your good help and practical observations.

Among other possibilities: If a participant dies, what distribution might a surviving spouse or other designated beneficiary be entitled to? Which valuation would the plan’s administrator use to determine the beneficiary’s right or the plan’s obligation? If a participant quits her job after the intra-year valuation is available (and before the close of the year), which valuation would determine such a participant’s after-severance distribution?

I am unaware of any later ERISA Advisory Opinion that undoes the reasoning of Opinion 90-46A (Dec. 4, 1990). An agency’s document that is not a rule or regulation (and usually is made with less process than a notice-and-comment rulemaking) is an interpretation a court need not defer to; instead, it gets only “respect” and only if the interpretation is persuasive. For example, Christensen v. Harris County, 529 U.S. 576 (May 1, 2000) (rejecting an argument that the Court should give Chevron deference to a Labor department opinion letter); Bussian v. RJR Nabisco Inc., 223 F.3d 286, 25 Empl. Benefits Cas. (BL) 1120, 1127-1128 (5th Cir. Aug. 14, 2000) (rejecting the Secretary of Labor’s argument that the court should give Chevron deference to a Labor department interpretive bulletin). For an example of a case in which a State court denied a DRO, your lawyers might read Jago v. Jago, 2019 Pa. Super. 246 (Pa. Super. Ct. 2019) https://casetext.com/case/jago-v-jago?sort=relevance&resultsNav=false&q=. The petition did not ask for a divorce, or for any relief other than entry of an order to be directed to a retirement plan. The court “h[e]ld that absent a divorce or other domestic relations matter pending between spouses, they cannot obtain a QDRO for the sole purpose of moving funds in the participant/spouse's ERISA plan out of the plan to the non-participating spouse.” The opinion reflects the court’s reasoning because only one attorney appeared, and he presented the argument for allowing the domestic-relations order. I am unaware of any similar case involving spouses under a community-property regime. Beyond the merits of whether the court’s order is or isn’t a DRO, your lawyers also might consider whether the plan’s governing documents provide deference to an administrator’s decision about whether a court’s order is a QDRO or even a DRO. And your lawyers might evaluate the extent to which a court should or would defer to the administrator’s plausible interpretations of the plan’s governing documents (including interpretations of ERISA sections 3, 205, 206, 404, and 514) and discretionary findings.

If your client has made that considered choice, you'll want to read carefully (and consider the perspective of a challenger who seeks to invent an ambiguity) to catch everything and negate all the unwelcome interpretations. I've done documents of the kind you describe. It can work if you sweat the details.

ERISA Advisory Opinion 90-46A, https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/advisory-opinions/1990-46a.pdf. It concludes: “[I]t is the view of the Department of Labor that Congress intended the QDRO provisions to encompass state community property laws only insofar as such laws would ordinarily be recognized by courts in determining alimony, property settlement and similar orders issued in domestic relations proceedings. We find no indication Congress contemplated that the QDRO provisions would serve as a mechanism in which a non-participant spouse’s interest derived only from state property law could be enforced against a pension plan.” But others might construe or interpret the statute differently.

Many employers, acting as an administrator of a group health plan (whether with or without health insurance), seek some evidence that a person a participant seeks to cover as one’s spouse is the participant’s spouse. If a plan provides coverage for a same-sex spouse, one convention is to ask (or not ask) for certificates equally for same-sex and opposite-sex marriages. Some plans recognize a declaration of informal or common-law marriage. If a plan recognizes an uncertificated marriage, one convention is to recognize it equally regarding same-sex and opposite-sex marriages. Increasing numbers of plans use dependent-eligibility audits to catch a range of frauds.

One cannot confidently answer your questions without reading the several agreements involved: (at least) the TPA’s service agreement, the recordkeeper’s service agreement, the custodian’s service agreement, the trustees’ agreement, and the documents governing the plan. If you are the TPA, consider starting with the TPA’s service agreement and how much or how little it obligates the TPA to do, and how much or how little protection the agreement provides for relying on others’ instructions. Also, one might read the documents, especially the trustees’ agreement, to discern whether ending one’s employment with the employer that appointed the trustee results in a resignation or removal from the plan trusteeship (or did nothing to change a trusteeship). A trust agreement might include or lack such a provision. There can be risks—regarding the employer, the administrator, a trustee, a participant, and a participant’s spouse or other beneficiary—for (either) processing a claim that was not properly approved, or failing to process a claim that was properly approved.

If one makes documents using word-processing software: What efficiencies do you gain by putting distinct employers’ obligations under one document? Might a drafter’s added sentences to make clear that each employer/service recipient has obligations only for the deferred compensation of that employer’s service providers be more work than using a document that refers to only one obligor? Might a drafter’s added sentences to make clear that a creditor of one employer has no right regarding the assets of another employer be more work than using a document that refers to only one employer? If the plans’ provisions truly are identical (but for the identity of the obligor), isn’t making separate documents little more than editing the name of each employer? Or is there some other business reason why one or more of your clients might like putting the several employers’ obligations under one document?

ERISA § 206(d)(3)(B)(ii)(II) recognizes that community-property law might, in some contexts, also be domestic-relations law. But that does not negate § 206(d)(3)(B)(ii)(I)’s condition that a domestic-relations order must “relate[] to the provision of . . . alimony payments, or marital property rights to a spouse, former spouse . . . of a participant[.]” The QDRO-deciding administrator should read carefully the exact text, and the whole text, of the court’s order. Also, which court and division of the court issued the order might be a relevant aid to help consider whether the order is a domestic-relations order.

You might want to buy (inexpensively) Gary Lesser’s and Larry Starr’s Life Insurance Answer Book: For Qualified Plans and Estate Planning. Although the book ended with its third edition (2002), it explains the law you need. A web search on “Life Insurance Answer Book” shows, on the first page of results, used-book sources. But look carefully at which edition.

Yes, I understand the problem. It’s a result of employers expecting to get all plan documents from nonlawyer service providers. And of a documents regime not built for promptness. If you can produce your SECURE/CARES amendment for a fee your client doesn’t choke on, that’s likely ten times more efficient than asking the recordkeeper.

If the plan is an individual-account (defined-contribution) plan: If something must or may be distributed based on a beneficiary’s life expectancy: Could the plan provide for each beneficiary’s entitlement to be a separate share, so each beneficiary’s minimum is measured by his or her life expectancy?

I have no experience that would help answer your question. But your description of what a Fidelity rep said seems consistent with what Fidelity’s website (at least a subpage for small-business retirement plans) says: https://www.fidelity.com/retirement-ira/small-business/termination-guide “Am I going to receive additional amendments for the CARES and SECURE Acts? Any applicable amendments related to the CARES and SECURE Acts will be included in the next plan restatement cycle in approximately 6 years. In the interim you will receive good faith amendments for the preapproved plans for both pieces of legislation. These amendments will be distributed in accordance with the applicable amendment schedule.” And Fidelity’s “Summary of Changes” to accompany its plan and trust documents states: https://www.fidelity.com/bin-public/060_www_fidelity_com/documents/retirement/dcrp-summary-of-changes.pdf “Good-Faith Amendments: Legislative and regulatory changes since calendar year 2017 that impact your Defined Contribution Retirement Plan will be adopted as part of the next six-year restatement cycle. In the interim you may receive or be asked to complete good-faith amendments for your plan. You will be receiving certain good-faith amendments for both the SECURE and CARES Act.” One imagines Fidelity’s service agreement doesn’t obligate Fidelity to anything. Even if a retirement-services provider had its interim or good-faith amendment at the ready, such a text would have no IRS opinion letter and no assurance from the provider.

Has anyone from ftwilliam.com furnished an interpretation about what the adoption-agreement choice might mean?

An order to pay a person other than an alternate payee is not a QDRO. But a QDRO may direct payment to an alternate payee in an amount that reflects attorneys’ (or a guardian’s) fees within the child support ordered. See Trustees of Directors Guild of Am. Producer Pension Benefits Plans v. Tise, 234 F.3d 415 (9th Cir. 2000), amended by 255 F.3d 661 (9th Cir. 2001); see also Orlowski v. Orlowski, 459 N.J. Super. 95, 208 A.3d 1 (N.J. Super. 2019) (including in an amount awarded to a former spouse alternate payee an amount for the portions of attorneys’ and accountants’ fees allocable to their work in enforcing rights that could themselves be a subject of a QDRO). The smarter lawyers figure this out before one sends you a draft order. Others learn how to do it after you say an order that calls for a payment to a person other than an alternate payee would not be approved.

If the plan’s provision is no more restrictive than the tax-law rule: One hopes the claim form has the claimant state, under penalties of perjury and other false-statement crimes, that the hardship distribution is for: “Costs directly related to the purchase of a principal residence for the [participant][.]” 26 C.F.R. § 1.401(k)-1(d)(3)(ii)(B)(2) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR6f8c3724b50e44d/section-1.401(k)-1#p-1.401(k)-1(d)(3)(ii)(B)(2) I read the phrase’s syntax to set a condition that the property bought, or to be bought, be or become the participant’s principal residence. I do not read it to require that the participant be or become an owner of that property. Others might interpret the rule differently. I do not give advice to anyone.

For the micro market (in the 1990s), I saw fidelity-bond insurance contracts that stated the coverage limit not by an amount but by a formula. For example: The Coverage Limit is the lesser of $500,000 or 10 percent of the funds the Insured handled, but no less than $1,000. Is it still done that way?

The American Institute of Certified Public Accountants’ Auditing Standards Boards’ Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, Statement on Auditing Standards No. 136 (July 2019) applies only for audits of the financial statements of an ERISA-governed employee-benefit plan. Its first numbered paragraph states: “This SAS should not be adapted for plans that are not subject to ERISA.” If your engagement’s scope is only an audit of a church plan’s financial statements with no added agreed-upon procedures, your firm might evaluate whether it is necessary or appropriate to consider whether the plan meets or fails an Internal Revenue Code § 403(b)(1)(D) non-discrimination condition. Even a failure of such a condition might be immaterial, insignificant, or even irrelevant, in some circumstances, to a plan’s financial statements. Consider also, in a particular church plan’s facts and circumstances, whether a § 403(b)(1)(D) nondiscrimination condition applies. See I.R.C. (26 U.S.C.) §§ 403(b)(1)(D), 403(b)(12)(B), 3121(w)(3)(A) (referring to “an elementary or secondary school which is controlled, operated, or principally supported by a church or by a convention or association of churches”).