Peter Gulia

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

Carol Calhoun’s originating post asks about individual annuity contracts. Under a typical individual annuity contract, even when used as a § 403(b) contract, the owner’s or annuitant’s employer (or former employer) is not a party to the contract and has neither rights nor obligations under the individual’s contract. Even if an insurer administering its contract might properly request evidence of an annuitant’s severance from employment beyond the annuitant’s claim or further statement, it’s unlikely that a typical individual annuity contract obligates an employer to furnish that information. As I mentioned above, it is possible an annuity contract states provisions more restrictive than those needed to tax-qualify as a § 403(b) contract. But such a fact alone might not obligate an employer.

Bri, that your firm’s clients call for your ERPA designation only once a year is among the results of your good guidance. The five kinds of practitioners recognized for practice before the IRS are (a) an attorney-at-law, (b) a certified public accountant, (c) an enrolled agent, (d) an enrolled actuary, and (e) an enrolled retirement plan agent. For a retirement-services worker with none of those credentials, is the answer to my first question 0.00%? Or are there circumstances in which the IRS will recognize as a representative someone not eligible under § 10.3(a)-(e)?

Belgarath, thank you for your helpful information. Others with different experiences? Would correction-program submissions be the most frequent activity to require a Form 2848?

Beyond seeing to the plan’s and the trust’s governing documents: Remember, a custodian, recordkeeper, or other service provider might have contract rights that allow the provider to rely on information previously furnished until the plan’s administrator or other customer delivers notice to update the information. A person might deliver such a notice if the person prefers that the provider no longer be authorized to rely on an instruction from the to-be-removed trustee.

Do people concur that: Considering the $1 and $17 amounts described (or the sum of them), a prudent fiduciary might put no effort on trying to allocate an amount to an individual? A prudent fiduciary may apply the $18 toward meeting the plan’s expenses?

I hope BenefitsLink neighbors will help me with an unscientific survey. Any results will be used only for a research project. And I’ll use responses only anonymously and in the aggregate. What percentage of your work time is used in a proceeding that requires you to file a Form 2848 or other notice of an appearance before the IRS? (For example, my estimate for 2006-2021 is about 3/100 of one percent. That is, about 99.97 of my work time did not involve defending an IRS examination or presenting a request for a ruling or determination.) What is your estimate of the percentage of people who regularly provide advice about retirement plans who have never filed a Form 2848 or other notice of an appearance before the IRS?

Although the 408b-2 rule allows a standing disclosure until there is a change, some service providers make one's own business decision to furnish a yearly disclosure even when nothing changes.