AKowalski

Now that you have filed a claim, make sure you stay on top of deadlines under the plan's claims procedures (which are usually included in the SPD, which you haven't received yet) and this regulation: 29 CFR 2560.503-1. The employer's unresponsiveness (and especially their failure to provide a copy of the SPD) may lead a judge to excuse your failure to follow the claims procedures, but just in case, I would dot your Is and cross your Ts. When you receive a copy of the plan document and/or SPD, check to see if there is a provision that says that a lawsuit must be brought in a particular district court within a particular period of time (usually 1 or 2 years). The employer should give you the following documents upon request within 30 days, otherwise statutory penalties can kick in (at the discretion of the judge), although you may have to request certain documents specifically, and there is some disagreement among courts about whether certain types of documents are included in this list: (4) The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary,[2] plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated. The administrator may make a reasonable charge to cover the cost of furnishing such complete copies. The Secretary may by regulation prescribe the maximum amount which will constitute a reasonable charge under the preceding sentence. A lawsuit is probably not worth it, but the threat of a lawsuit gives you some leverage, assuming you have followed the claims procedures. If you were to sue, you could sue to recover your benefit with interest, collect statutory penalties for the plan's failure to provide the requested SPD (and possibly certain other documents, depending on what you have requested) within 30 days after receiving your request, and possibly obtain other relief. If you were terminated because the employer did not want to pay you some kind of enhanced benefit that kicked in at age 55, then you might have a claim for wrongful interference with protected ERISA rights under ERISA section 510 (29 USC section 1140). We have VCPs that have been outstanding at the IRS for a year or more without being assigned to an agent yet, and I expect the delays will only grow with all of the layoffs and resignations.

"The plan administrator again found that the DRO was not qualified, because the DRO indicated that the child could not be listed as alternate payee based on marital property rights, only based on child support obligations." If the problem is that the DRO was internally contradictory, you could just rewrite it to be internally consistent.

I think you can honor the contemplated second QDRO, if a state court is willing to issue it. The QDRO regulations specifically provide that a QDRO does not fail to be a QDRO merely because it alters a prior QDRO to reduce the amount of the benefit that is payable. 29 CFR § 2530.206(b): (b) Subsequent domestic relations orders. (1) Subject to paragraph (d)(1) of this section, a domestic relations order shall not fail to be treated as a qualified domestic relations order solely because the order is issued after, or revises, another domestic relations order or qualified domestic relations order. (2) The rule described in paragraph (b)(1) of this section is illustrated by the following examples: Example (1). Subsequent domestic relations order between the same parties. Participant and Spouse divorce, and the administrator of Participant's 401(k) plan receives a domestic relations order. The administrator determines that the order is a QDRO. The QDRO allocates a portion of Participant's benefits to Spouse as the alternate payee. Subsequently, before benefit payments have commenced, Participant and Spouse seek and receive a second domestic relations order. The second order reduces the portion of Participant's benefits that Spouse was to receive under the QDRO. The second order does not fail to be treated as a QDRO solely because the second order is issued after, and reduces the prior assignment contained in, the first order. The result would be the same if the order were instead to increase the prior assignment contained in the first order. A prior commenter noted that the contemplated DRO may not qualify as a QDRO because it does not technically assign any benefits to the AP. However, even if that is a correct reading of the law, you could effectively get around it by assigning $0.01/m to the AP (and then if you really wanted to get it to zero--which is probably not necessary as a practical matter when you are only worried about a Medicaid income threshold--you could simply have her disclaim the $0.01/m benefit). Or, if benefit payments have already commenced, you could argue that the new QDRO does assign a benefit--it assigns the monthly benefits that are payable through a particular cutoff date. You could also argue that the requirement is satisfied because the second DRO "recognizes" the existence of the AP's rights to any benefits that were previously assigned and which have already been paid, even as it revokes the AP's right to future payments. There are also several arguments you could make for simply recognizing the subsequent DRO directly. Three possible options occur to me: (1) permit the ex-spouse to disclaim her benefits under the QDRO, and take the position that the result is that the benefits are payable to the participant, rather than simply ceasing to be payable altogether (which is not immediately clear to me), (2) treat the new order as a new QDRO and determine whether it satisfies the requirements to be a QDRO, or (3) treat the new order as a modification of the prior QDRO and determine that the modification can be taken into account. Disclaimers of retirement benefits are generally permissible if permitted under plan terms/procedures which are complied with. The result is that the benefit is payable as though the disclaimant died prior to the date the benefit became payable. The original QDRO likely specifies what happens when the AP dies. Take a look at those terms and see if they would provide the desired result if triggered early. As a practical matter, who is going to sue? The parties agree on what they want to happen. It doesn't result in increased benefits payable from the plan. The IRS or DOL could theoretically take an interest on audit, but that seems unlikely. The biggest risk, from my perspective, is that the AP will turn around several years from now and argue that the second DRO was invalid, and thus she is entitled to the benefit payments after all. Given that the plan stopped paying the benefits to her at her express request when they see the complaint, the judge is likely going to raise several eyebrows (however many eyebrows they possess).

The ERISA Outline Book is probably the most comprehensive and trustworthy series, so it is an indispensable resource for an ERISA practitioner. However, if you manage a single plan and it is only part of your job as an employee at a company that sponsors that plan, then perhaps you want a shorter and more digestible resource that you can use to more easily tackle common problems, leaving the complex ERISA research to your ERISA counsel. In that case, the 401(k) Answer Book may be a better fit.

I haven't seen or heard of it happening, but my guess is that the IRS would only invoke that provision to deny an otherwise-EPRCS-sanctioned self-correction in rather extreme cases. Two categories come to mind: (1) intentional schemes by people who are obviously trying to game the tax code with plans that clearly violate at least the spirit of the law; or perhaps the overall plan is in good faith, but the taxpayer appears to have intentionally committed the specific error in question and was counting on the validity of the EPCRS-sanctioned self-correction to further an abusive tax scheme (the IRS deals with people like this all the time; I would be shocked if there aren't examples in this category where the IRS has thrown the book at the taxpayer, so to speak), and (2) plans that may not have intentional compliance failures, but where fundamental negligence is apparent (e.g., a plan that is being operated without a plan document, a plan whose assets are being intermingled with employer assets or being used as a piggy bank/source of loans by the CEO; plans (especially large or midsize plans) that lack a fiduciary committee, where the board is nominally the fiduciary, but in reality it is being run on a day-to-day basis by people who do not have any formal grant of fiduciary duty, who are not operating the plan consistently, and who are not regularly identifying and correcting plan errors). I doubt the IRS will invoke that provision in the case of a plan that is appears to be operated in good faith, with a fiduciary committee that meets regularly and addresses a variety of potential compliance questions at each meeting, that generates substantive minutes and has periodic discussions with ERISA counsel that routinely result in self-corrections when errors are identified. As part of a VCP submission, you have to include a statement about how you are fixing your procedures to avoid similar errors occurring going forward. As a rule of thumb, I think it is prudent to save everything you would have submitted as a VCP submission in a self-correction file, including a narrative description of the failure, how it occurred despite your reasonable procedures, and a description of how diligent you were in fixing the problem and correcting your procedures once you discovered the failure.

What is a "401(a)(b) failure"? Do you mean 401(a)(5)(B)?

I have a few points to add: (1) SECURE 2.0 section 305 opens with "Except as otherwise provided in the Internal Revenue Code of 1986, regulations, or other guidance of general applicability prescribed by the Secretary of the Treasury or the Secretary’s delegate". This seems to give the IRS/Treasury pretty broad discretion to issue guidance saying that self-correction is not permissible in certain specific contexts. As a technical matter, it could be read literally to mean that self-correction has not yet been extended at all, because the existing EPCRS program is "guidance of general applicability prescribed by the Secretary of the Treasury or the Secretary’s delegate". However, it seems pretty apparent from the context of SECURE 2.0 that Congress intended to expand self-correction, so most people seem to be operating under the assumption that self-correction is broadly expanded unless and until the IRS clarifies that it is not. That said, it seems pretty clear that the IRS could issue guidance tomorrow and say that no document failures can be self-corrected. So, "what the IRS allows" is quite relevant. (2) Even before SECURE 2.0 was passed, EPCRS permitted some document failures to be self-corrected. If correction of the scrivener's error would favor participants, correction is fairly broadly available. Have you reviewed the Rev. Proc. to see whether you can self-correct under pre-SECURE 2.0 rules? (3) I think SECURE 2.0 reads most naturally to say that you can self-correct any eligible inadvertent failure, so long as you act promptly after you discover it to implement the substantive correction prescribed by EPCRS. There are a handful of limited exceptions: (i) if the IRS discovers the failure on audit before you take steps that demonstrate a specific commitment to self-correction, (ii) if the self-correction is not completed within a reasonable period of time after the failure is discovered, (iii) if an exception prescribed in the IRS guidance that hasn't yet come out applies, (iv) if the failure is not an "eligible inadvertent failure" (plan fails to maintain appropriate practices and procedures, or failure is egregious, intentional, abusive, etc.), then self-correction is not permitted. But I don't see any exception in SECURE 2.0 saying that you can't self-correct plan document failures or nondiscrimination failures. (4) The main reason to utilize VCP at this point is to obtain certainty regarding the correction approach you are selecting. If the correction is clear under EPCRS, and none of the limited exceptions to self-correction applies, then there is no reason to file a VCP submission. However, if the client wants to move forward with a correction approach that is not clearly correct under EPCRS, then an IRS submission can offer an opportunity to obtain certainty that your correction approach is not going to be challenged by the IRS down the road. Of course, participants could still sue, and their claims would not be bound by an IRS compliance statement anyways.

Where is it labeled "pension funds"? In your first paragraph, you say that the employment agreement says that the amounts are to go into the 401(k). Did you misspeak? Also, 401(k) plans are a type of "pension plan" (using the ERISA definition), so it is technically not incorrect to refer to 401(k) funds as pension funds, even though that is not consistent with how most people use the term "pension". I agree that employment contract language has nothing to do with the plan. Your client needs to comply with the plan terms to the extent consistent with law, and they also need to separately comply with their employment contract obligations (at least to the extent that those terms are consistent with law). Is your concern that your client may have contradictory obligations, which are guaranteed to result in a breach of at least one duty? Generally, if you breach a contract, the remedy is that you have to pay the person the monetary value of what they should have received but did not due to your breach. So, worst case scenario, your client has to pay this employee cash rather than putting money into the plan. Perhaps they have to pay him a bit extra to account for the value of the tax advantages that he would have had if he had received the promised tax advantaged benefits rather than the cash. Setting aside the employment contract, it seems like the main question you are asking is whether the plan can comply with both the employment agreement and the plan terms simultaneously without running into tax qualification issues. 401(k) plans are permitted to offer one-time irrevocable elections provided that they meet certain strict requirements. If the requirements are met, the amounts are treated as employer contributions rather than employee contributions, and they do not count against the 402(g) limit. However, they can still raise nondiscrimination issues, the same as any other employer contribution that is going to some employees and not others. However, in this case, it appears that the client wants to treat (or has been treating?) these amounts as elective deferrals, notwithstanding the fact that they are subject to an irrevocable election. If the client has not been trying to take advantage of the one-time-irrevocable election rule (and it isn't provided for in the plan document), then I think it is pretty unlikely that they have conformed to those difficult rules by accident. I'm not saying you shouldn't look into it, but my guess is that treating the amounts as elective deferrals is probably correct. For reference, here's the text of the one-time irrevocable election rule from Treas. Reg. section 1.401(k)-1: (v) Certain one-time elections not treated as cash or deferred elections. A cash or deferred election does not include a one-time irrevocable election made no later than the employee's first becoming eligible under the plan or any other plan or arrangement of the employer that is described in section 219(g)(5)(A) (whether or not such other plan or arrangement has terminated), to have contributions equal to a specified amount or percentage of the employee's compensation (including no amount of compensation) made by the employer on the employee's behalf to the plan and a specified amount or percentage of the employee's compensation (including no amount of compensation) divided among all other plans or arrangements of the employer (including plans or arrangements not yet established) for the duration of the employee's employment with the employer, or in the case of a defined benefit plan to receive accruals or other benefits (including no benefits) under such plans. Thus, for example, employer contributions made pursuant to a one-time irrevocable election described in this paragraph are not treated as having been made pursuant to a cash or deferred election and are not includible in an employee's gross income by reason of § 1.402(a)-1(d). In the case of an irrevocable election made on or before December 23, 1994 - (A) The election does not fail to be treated as a one-time irrevocable election under this paragraph (a)(3)(v) merely because an employee was previously eligible under another plan of the employer (whether or not such other plan has terminated); and (B) In the case of a plan in which partners may participate, the election does not fail to be treated as a one-time irrevocable election under this paragraph (a)(3)(v) merely because the election was made after commencement of employment or after the employee's first becoming eligible under any plan of the employer, provided that the election was made before the first day of the first plan year beginning after December 31, 1988, or, if later, March 31, 1989.

For what purpose are you asking whether it would be treated as dated? A document obviously is signed on the date that it is signed. So, if your question is simply whether the document would be considered to have been signed on the date that it was, in fact signed on (and there is clear evidence that it was, in fact, signed on that date), then of course the answer is yes. For example, if a judge is asked to determine on what date was this document signed, they are going to look at the clear digital trail and determine that it was signed on the date that it was actually signed on. If your question is whether the document would be considered "dated" when the "date" field was left blank (but there is extraneous evidence regarding the date of the signature), then that is a more complicated question. For example, a plan document might include a provision saying, "any purported amendment to this plan will be invalid unless it is in a signed and dated writing by an authorized representative of the plan sponsor". Then the question is whether this counts as a "signed and dated writing", when the date field was left blank, which might arguably be treated as an ambiguity subject to discretionary interpretation by the plan administrator. Or, a law might refer to documents that are "signed and dated", in which case the question is what counts as "dated" for purposes of that law (which might have a very different answer, because the person deciding is different). Another question is whether the document would be treated as effectively "signed" at all, given that the signature block (which includes the date field) was not entirely filled out. I suspect most people would say that a document is signed if it has a signature on it, even if there are blank fields in the signature block. But I can't say that no one has ever taken a contrary position, and that assumption would be overridden by a specific provision saying that a document will not be treated as signed unless the entire signature block is filled out.

Download the enrolled version of the bill from Congress.gov. That's the version the President signed after all amendments were incorporated.

First of all, you need to read the applicable plan provisions very carefully. Some plans provide that a beneficiary designation is only valid if it is transmitted by the participant to the plan (in my opinion, it is a best practice to include such a provision precisely to avoid this question). The participant could never transmit a beneficiary designation after death so under those plans it would fail regardless of whether it is a forgery. If the plan is silent on that point, the plan's fiduciaries could adopt a formal plan interpretation that would likely be respected by courts under an arbitrary and capricious standard of review. Another important plan term to look at is whether there is a plan limitations period and exactly how that provision is framed. If the limitations period says that no claims may be filed more than 1 year after a claim accrues, and it defines accrual as having information sufficient to give rise to the claim, then notifying the potential claimant that you are giving the benefit to someone else may be enough to trigger the commencement of the limitations period. If the claim accrues only when a formal claim for benefits is submitted and denied (after exhaustion of administrative remedies), or if accrual is defined by reference to common law ERISA accrual concepts, then it may be much harder to get the period to begin accruing by sending someone a notice (that they ignore). As a practical matter, of course, reaching out to the estate and telling them they have a specified deadline to submit a claim could get the ball rolling. Another option would be to file an interpleader lawsuit. Correct me if I'm wrong, but I don't think you need to wait until both potential claimants have actually filed claims before you can file an interpleader lawsuit. The point of an interpleader lawsuit is to force everyone into one lawsuit who might have inconsistent claims against you. You "join" them to the lawsuit and force them to either bring or forfeit their claims before you pay out the benefit. You might consider (1) talking to the estate to see if they think the beneficiary designation is legitimate, whether it lines up with the default beneficiary, etc., (2) adopting a formal plan policy, (3) issuing a claim determination denying the benefit in reliance on the policy, (4) denying the appeal, and then, (5) filing (or converting a lawsuit that the claimant files into) an interpleader lawsuit in which you force all of the parties to the table to firmly resolve all claims before you actually pay out the benefit to anyone. Or, you could file the interpleader at an earlier point in time before the plan takes any formal action.

Are you asking who makes the final decision, or who decides for the company whether to treat an error as properly corrected? The second question is a practical matter that every company will have to resolve for itself. With respect to the first question, the IRS would generally be the final arbiter of whether self-correction was properly completed if/when they happen to notice the issues on audit. In theory, there could be a fiduciary or ERISA breach underlying just about any operational or documentary failure, which would need to be separately corrected to the extent possible under DOL procedures (which are rather lacking in this regard). The DOL could determine that a self-correction was insufficient under IRS procedures and therefore give it no credit with respect to the underlying ERISA/fiduciary breaches (to the extent that it would receive credit in the first place), and thus impose further penalties. There could also be a participant lawsuit, but that would generally be grounded on Title 29 ERISA violations, not on breaches of the tax code, and in any event, EPCRS corrections technically offer no protection against participant lawsuits (except, perhaps, to the extent that the participant has been substantively made whole as part of the correction) regardless of whether the correction complied with EPCRS.

I read the 180 day requirement to apply only to the principle correction, not lost earnings. I.e., you can't have been more than 180 days delinquent, otherwise you need to do a regular VFCP submission. But if withholdings were only 10 days delinquent, you can self-correct the lost earnings piece two years later. If you are filing a comment letter, can you ask them to clarify over what time period the $1,000 limit is measured? I think they intended it to apply annually, or perhaps on a per-submission basis (which would be ripe for abuse but for the fact that you have to file a notice with the DOL every time you correct, so they would presumably pick up on abuse quickly), but it isn't clearly stated anywhere in the proposed text.

Because this is a 402(g) issue, I would suggest following the EPCRS correction that specifically addresses section 402(g) failures, which is generally to process a corrective distribution. There is some complication because the 402(g) issue resulted from the participant's failure (failing to coordinate between multiple employers' withholdings) rather than a plan administrative error, but I don't think that changes the correction approach endorsed under EPCRS. I note, however, that EPCRS does not address the correction for a plan administrative failure whereby more is withheld from a participant's paycheck than the participant elects (within the 402(g) limit). In that context, it would make sense to analogize to the 402(g) correction and process a corrective distribution. However, an arguably more conservative correction approach would be to move the excess amounts to a forfeiture account and have the employer pay the employee the error amounts plus earnings on the side (e.g., through payroll), based on the EPCRS general principle that a correction should generally keep assets in the plan, when possible, while still placing the participant in the position they would have been in had no failure occurred.

Your client needs to decide whether these individuals are employees or contractors, review the factors under federal and applicable state law, and make sure that the business arrangement is structured in a way that reflects the factors favoring the classification chosen. If they would otherwise be considered contractors except that they are being treated as employees for purposes of eligibility to participate in an employee benefit plan, then a state regulator or class action lawsuit might pop through the door and challenge their treatment as contractors for other labor law purposes. As others have mentioned, there are options to cover non-employees through a MEP. Or you might be able to come up with a structure whereby they are treated as leased employees, co-employees, etc. But it can get very complicated very quickly when your client is trying to have their cake and eat it too on an issue like this. You have several interacting legal regimes from different jurisdictions that you need to sort through to make sure there is no issue.