Peter Gulia

Your description of the facts describes father as the 100% owner. But might his son have become a partner or shareholder (and someone forgot to tell you)?

Since the mid-1980s, many people (including many with no lawyer) have proposed such a sentence in the text of the court’s order. Why? It might help support a plan administrator’s finding that an order “is made pursuant to a State domestic relations law[.]” It might help meet an element on a QDRO administrator’s checklist. (An absence of such a sentence might result in a kick-out to read the order and, in some circumstances, consider context information or relevant law to discern whether the order was made under domestic-relations law.) The sentence is especially helpful if the issuing court’s jurisdiction is not restricted to domestic-relations matters and the order’s text does not mention (as it often might not) the claim that was grounds for the court’s order. Some plans’ administrators might accept without question a judge’s finding that the order was made under domestic-relations law, unless the administrator knows the finding is obviously wrong.

No. The Form 5500 instructions state: “If the filing due date falls on a Saturday, Sunday, or Federal holiday, the return/report may be filed on the next day that is not a Saturday, Sunday, or Federal holiday.” If a Form 5500 return is only a tax return (and not a report under ERISA, or to the Pension Benefit Guaranty Corporation), the Treasury department’s tax-law rule for holidays, 26 C.F.R. § 301.7503-1, applies. That rule recognizes a holiday observed in the District of Columbia. Because Emancipation Day’s April 16 is in 2022 a Saturday, this holiday is observed on Friday, April 15. D.C. Code § 28-2701. But neither Emancipation Day nor Good Friday (nor any other day in April) is a Federal holiday. 5 U.S.C. § 6103(a) http://uscode.house.gov/view.xhtml?req=(title:5%20section:6103%20edition:prelim)%20OR%20(granuleid:USC-prelim-title5-section6103)&f=treesort&edition=prelim&num=0&jumpTo=true Because the EFAST2 software receives returns and reports for three agencies, one might imagine the Labor department having set the software to follow a combination of Federal holidays and the tax-law rule. But absent a Labor department document specifying the relief, my client would want to submit a report on an ERISA-governed plan by April 15.

Not only to keep each plan’s count of participants small but also for many business and plan-administration reasons, an employer might prefer to establish and maintain two or more distinct plans. One kind of distinction is between [PIN 002] “employees who are included in a unit of employees covered by . . . a collective bargaining agreement . . . , if there is evidence that retirement benefits were the subject of good faith bargaining[.]” and [PIN 001] employees not represented by any labor union. See Internal Revenue Code of 1986 (26 U.S.C) § 410(b)(3)(A) http://uscode.house.gov/view.xhtml?req=(title:26%20section:410%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section410)&f=treesort&edition=prelim&num=0&jumpTo=true

If the plan you ask about is Massachusetts Teachers' Retirement System (which also covers some non-teacher workers), here's a starting point: https://mtrs.state.ma.us/

Ananda, is your client considering limiting such a joint-and-survivor annuity to one that is the actuarial equivalent of the plan-provided annuity for the participant’s life alone?

And about anything that might ask the Internal Revenue Service for reasonable-cause relief, consider advising your client about the practical difficulties of getting the IRS even to process, and much harder to get a human to read, anything not submitted by e-filing.

Thank you for your further information. And thank you for your kind offer. So I can seek your help and you can advise Ascensus without either of us revealing his or her client’s confidential information on a website, I sent you an email.

Comparability of illustrations would result if plans’ administrators obey the rule. If two individual-account retirement plans (neither of which allows an annuity payout) furnish the rule’s required lifetime-income illustrations for: the same last day of the statement period, the same account balance, the same age for the participant, and neither participant is older than 67, the illustrations would show the same amounts if both plans’ administrators completely and accurately follow the rule. This is so because a plan’s administrator lacks discretion in setting assumptions for the required illustration. The rule sets those assumptions. The assumed interest rate is “the 10-year constant maturity Treasury securities yield rate for the first business day of the last month of the period to which the benefit statement relates[.]” For example, an illustration generated from a statement for the quarter-year ending December 30, 2022 would assume for the interest rate the 10-year CMT yield on December 1, 2022. 29 C.F.R. § 2520.105-3 https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/section-2520.105-3 Explanation https://www.govinfo.gov/content/pkg/FR-2020-09-18/pdf/2020-17476.pdf Some practitioners guess the first few years’ illustrations likely will involve several kinds of errors or other failures. That can happen with any new rule. But Congress decided it would be worthwhile to try something.

And whichever way your client, the law firm, decides, do what lawyers do for everyone else—insist on “get it in writing” (whether their writing to you, or your email to confirm what you were told) so the plan’s administrator bears responsibility.

Further, a practitioner might read the law firm’s partnership agreement and consider an interpretation of the retirement plan that’s logically consistent with the partnership agreement and the firm’s tax accounting.

If the plan’s year and the employer’s tax year are the same, some practitioners read this rule as some support for treating a worker as a deemed employee for the whole of the year. “For purposes of section 401, a self-employed individual who receives earned income from an employer during a taxable year of such employer beginning after December 31, 1962, shall be considered an employee of such employer for such taxable year. Moreover, such an individual will be considered an employee for a taxable year if he would otherwise be treated as an employee but for the fact that the employer did not have net profits for that taxable year. Accordingly, the employer may cover such an individual under a qualified plan during years of the plan beginning with or within a taxable year of the employer beginning after December 31, 1962.” 26 C.F.R. § 1.401-10(b)(1) (emphasis added) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR6f8c3724b50e44d/section-1.401-10#p-1.401-10(b)(1).

Although ERISA § 408(b)(2) and Internal Revenue Code § 4975(d)(2) might exempt from prohibited-transactions consequences the transaction of providing necessary services for reasonable compensation, the Labor and Treasury departments have (at least since 1976) interpreted that exemption as not providing relief for self-dealing. “If the furnishing of office space or a service involves an act described in section 406(b) of the Act (relating to acts involving conflicts of interest by fiduciaries), such an act constitutes a separate transaction which is not exempt under section 408(b)(2) of the Act. The prohibitions of section 406(b) supplement the other prohibitions of section 406(a) of the Act by imposing on parties in interest who are fiduciaries a duty of undivided loyalty to the plans for which they act. These prohibitions are imposed upon fiduciaries to deter them from exercising the authority, control, or responsibility which makes such persons fiduciaries when they have interests which may conflict with the interests of the plans for which they act. In such cases, the fiduciaries have interests in the transactions which may affect the exercise of their best judgment as fiduciaries. Thus, a fiduciary may not use the authority, control, or responsibility which makes such person a fiduciary to cause a plan to pay an additional fee to such fiduciary (or to a person in which such fiduciary has an interest which may affect the exercise of such fiduciary’s best judgment as a fiduciary) to provide a service. Nor may a fiduciary use such authority, control, or responsibility to cause a plan to enter into a transaction involving plan assets whereby such fiduciary (or a person in which such fiduciary has an interest which may affect the exercise of such fiduciary’s best judgment as a fiduciary) will receive consideration from a third party in connection with such transaction. A person in which a fiduciary has an interest which may affect the exercise of such fiduciary’s best judgment as a fiduciary includes [and is not limited to], for example, a person who is a party in interest by reason of a relationship to such fiduciary described in section 3(14)(E), (F), (G), (H), or (I).” 29 C.F.R. § 2550.408b-2(e)(1) (emphasis added) https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-F/part-2550/section-2550.408b-2#p-2550.408b-2(e)(1). Accord 26 C.F.R. § 54.4975-6(a)(5)(i) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-D/part-54/section-54.4975-6#p-54.4975-6(a)(5)(i). {Except for references to ERISA or tax Code sections, the Labor and Treasury rules are almost identical.} If the son is the retirement plan’s fiduciary, his father might be a person in whom the fiduciary has an interest that could affect the son’s best judgment as a fiduciary.

Belgarath, thank you for your kind help.

If the employer, without waiting for Friday’s payment of after-reductions net wages, processes the wage reductions on Tuesday, why not pay over the contributions on Tuesday (or on Wednesday morning)?

Does anyone know which plan-documents supplier—Relius, ASC, ftwilliam, someone else—Ascensus/FuturePlan licenses from?

Without condoning any plan or service provisions and without suggesting a lack of other ways to manage the problem, there might be a practical way for an employer to avoid an unwise or unfortunate effect of what’s described above. In the data the employer uploads to the recordkeeper, might the employer wait to record an employee’s severance-from-employment date? For example, an employer might wait until the later of: n weeks, pay periods, or months after the internally recorded severance-from-employment date; when the employer decides that all after-severance pay has been paid. Such a plan-administration procedure would be designed only to slow down an involuntary cash-out distribution. The procedure would include an escape to upload a severance-from-employment date if doing so becomes needed to support processing of a participant’s requested distribution. I do not suggest a retirement plan’s employer/administrator even consider this idea unless it gets advice from its labor-and-employment lawyer and its employee-benefits lawyer.

Beyond checking your service agreement, consider also: If you are a practitioner before the Internal Revenue Service: 31 C.F.R. § 10.28 Return of client’s records https://www.ecfr.gov/current/title-31/subtitle-A/part-10/subpart-B/section-10.28. If you are a member of the American Retirement Association or one of its “affiliate organizations”: “When a Principal has given consent for a new or additional professional to consult with a Member with respect to a matter for which the Member is providing or has provided Professional Services, the Member shall cooperate in assembling and transmitting pertinent data and documents, subject to receiving reasonable compensation for the work required to do so. In accordance with Circular 230, the Member shall promptly, at the request of the Principal, return any and all records of the Principal that are necessary for the Principal to comply with federal tax Law, even if the Member is not subject to Circular 230. The existence of a fee dispute generally does not relieve the Member of this responsibility except to the extent permitted by applicable state Law. The Member need not provide any items of a proprietary nature or work product for which the Member has not been compensated. ARA Code of Conduct rule 8.B https://www.usaretirement.org/code-conduct Even when applying rules of this kind, many practitioners distinguish between records and a professional’s work product. And even about records, one might distinguish between original records and copies. In another BenefitsLink discussion, Larry Starr suggests deliberately not possessing the original of a client’s record. (One might lack a duty or obligation to make copies of copies of records already in a client’s possession.) And as Larry observed in 2020’s discussion, a prospect of incurring fees might motivate a former client to become less lazy about looking for what it already has. https://benefitslink.com/boards/index.php?/topic/65925-circular-230-ethics/ Would you like a retaining lien so you need not deliver work your client hasn’t paid for? Would you like a copying fee? An assembly fee? A delivery fee? What’s in your service agreement? Now that March 15 season is over, is it time for some spring cleaning?

I have not considered how that law and whatever funding might be provided affects a participant’s benefit rights. But in the theory of ERISA § 206(d)(3), one might write an order to provide an alternate payee alternative shares and payments following the occurrence or non-occurrence of a contingent event. What matters is whether the order “clearly specifies” the command the plan’s administrator is called to act on. “A domestic relations order meets the requirements of [ERISA § 206(d)(3)(C)] only if such order clearly specifies— . . . (ii) the amount or percentage of the participant’s benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined, [and] (iii) the number of payments or period to which such order applies[.]” ERISA § 206(d)(3)(C)(ii)-(iii), 29 U.S.C. § 1056(d)(3)(C)(ii)-(iii) (emphasis added). 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 If I were advising the plan’s administrator, I might tell them not to accept an order unless it leaves the administrator in no doubt about exactly what to do or not do.

Here’s a hyperlink to the eCFR’s display of 29 C.F.R. § 2520.105-3(b) https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/section-2520.105-3#p-2520.105-3(b) While I don’t give advice to anyone, in my view it’s safer to reissue the statement and include in it the required lifetime-income illustration.

At least since 1960, the Treasury department has a rule: “A qualified pension, profit-sharing, or stock bonus plan is a definite written program and arrangement which is communicated to the employees[.]” 26 C.F.R. § 1.401-1(a)(2) (emphasis added) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR6f8c3724b50e44d/section-1.401-1#p-1.401-1(a)(2) The tax-law worry is that a plan isn’t really a plan if employees beyond the owner or top executives don’t know the plan exists. Whatever ostensibly non-discriminatory provisions a plan has aren’t practically real if employees don’t know they have legally enforceable rights. Since the late 1970s, IRS examiners have looked to delivery of a summary plan description as a way (and perhaps a presumed normal way) to “communicate” a plan. Also, an accrued benefit statement might be another way an employee could learn about a plan’s existence and her potential right under the plan. The Internal Revenue Service might consider the quoted rule (and some related tax-law rules) as supporting some information requests that otherwise lack a particular tax-treatment hook. And even for unsupported information requests, your client will want your advice about whether it’s wise or unwise to object. An ERISA rule confirms that “in-hand delivery to an employee at his or her worksite is acceptable.” 29 C.F.R. § 2520.104b-1(b)(1) https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/section-2520.104b-1 If some SPDs, benefit statements, and other communications were hand-delivered, your client might want your help in drafting or editing an affidavit that states what your client did. And an affidavit might describe the employer/administrator’s regular practice for mailing communications not delivered in the worksite.

Here’s two relevant texts from the regulations: “Exempt Employer” means an Employer that . . . (ii) maintains or contributes to a Tax-Qualified Retirement Plan[.] “Tax-Qualified Retirement Plan” means a retirement plan that qualifies for favorable federal income tax treatment under Sections 401(a), 401(k), 403(a), 403(b), 408(k), or 408(p) of Title 26 of the United States Code. An employer-provided payroll deduction IRA program that does not provide for automatic enrollment is not a Tax-Qualified Retirement Plan. https://www.treasurer.ca.gov/calsavers/regulations/final-regulations.pdf

If you or other counsel for the seller don’t persuade the purchaser to relent, there are some methods for lessening an exposure. Among them: Depending on the statement to be made, offer a representation but not a warranty. Or offer a warranty but not a representation. It’s unclear what consequences might result from these distinctions, but some lawyers believe there are possibly different remedies for an inaccuracy in one or the other and that the lingo used might influence a court’s or arbitrator’s interpretations about remedies. Even better, specify exactly which remedies do or don’t apply for an inaccuracy of either (or any) kind of statement or promise. Limit a warranty or a representation to its maker’s actual knowledge. Define what is in out of the maker’s knowledge. Rewrite an assurance as a statement about not knowing. For example, compare “The Plan warrants that the Seller’s agreements with the Customers are legally enforceable according to their written terms.” with “The Plan warrants that the Plan has no Knowledge that the Seller’s agreements with the Customers are not legally enforceable according to their written terms.” Put a time limit on remedies for a breach of a warranty or representation. In the text, recite: “Each warranty or representation made by the Plan is void to the extent ERISA § 410(a) provides.” While that law applies even if the text is silent, it might help to preserve an argument that a party to the agreement knew that ERISA § 410(a) might affect something. And consider whether a remedy against the seller’s plan might be impractical, especially if the seller will terminate the plan before the asset-purchase closing or soon after.

I concur. And I didn't and don't blame anyone for what happened with the plan my client administers. Rather, my observation is that the layers and steps in the intermediated way in which a retirement plan buys shares of an investment pool sometimes leaves a plan fiduciary lacking information.

Bri, the rule Bird points us to distinguishes between a plan that provides a survivor annuity and a plan that need not and does not provide a survivor annuity: . . . . If, because of [Internal Revenue Code of 1986] section 401(a)(11)(B), the plan is not required to distribute in the form of a QJSA to an employee or a QPSA to a surviving spouse, the plan may distribute the required minimum distribution amount to satisfy section 401(a)(9) and the consent requirements of sections 411(a)(11) and 417(e) are deemed to be satisfied if the plan has made reasonable efforts to obtain consent from the employee (or spouse if applicable) and if the distribution otherwise meets the requirements of section 417. 26 C.F.R. § 1.401(a)(9)-8/Q&A-4 (emphasis added) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR6f8c3724b50e44d/section-1.401(a)(9)-8. An individual-account retirement plan (if not subject to funding standards, and not a transferee of such a plan) need not allow an annuity, nor even any periodic payout option. I see many plans that allow a participant a choice only between a voluntary single-sum distribution of the entire account balance and an involuntary distribution (only once a year) of the minimum-distribution amount.