Problem client: wants to retroactively reduce benefits.

[Lori H]

a client, who in the past tried to have his ex wife's account balance distributed to HIM, is now wanting to go back and reduce the employer match from 100% up to 3 to 100% up to 2% of comp deferred for several plan years. What is a gentle way of saying, "sorry you can't do this?" He claims he told us this in the past, but it just was not the case.

[GBurns]

I doubt that there is a gentle way.

Your post reminded me of why I stopped doing business with small employers. They want to do things their way, regardless of what any law or legal document states (assuming you can even get them to read it) and then you are faced with the fact that the company is not large enough for there to be any senior executive etc who might be able to give some advice to the owner.

This is not to say that I have not seen similar bull headedness among senior executives of large companies but aside from the possibility of going around or above them (even directly to the Board), at least the greater money offsets the aggravation.

[Guest Sieve]

George is right. I think all you can say "sorry, you can't do this" -- or maybe "sorry, you can't do that". And then wave "goodbye" as he leaves to find someone who'll violate the law for him. Of course, you could hope to keep him by saying "Well, at least let's amend the plan right now so that we don't have this problem in future years."

And George, just as you've seen some large employers who are bull-headed, I've seen plenty of small employers--most of them, in fact, in my practice--who want to do it right and will not even consider something that is too aggressive (or illegal). I think a lot of it has to with VERY early and consistent education by a whole host of advisors: attorney, TPA, actuary, etc.

[GBurns]

A problem with the small employers seem to stem from less or limited exposure and/or training. As a result most that I ran across did not have any way of determining what was aggressive or illegal. As for advisors, the small employer usually has no way to evaluate the merits of the advisors. tschotland in the other threads makes a fine example, except that he made the very unusual step of questioning his advisors by seeking other input. This is, in my experience, very unusual for a small employer to have done.

[Peter Gulia]

Lori H’s question reminds us of an idea that we should be talking about more among employee-benefits practitioners:

When a practitioner is an advice-giver or service provider but not a plan fiduciary, how much effort should one put into persuading a client to “do the right thing”?

And if a client, after getting the practitioner’s advice, persists in doing the wrong thing, how much effort should one put into trying to prevent the wrong thing?

Some believe that a practitioner is responsible only for the accuracy, completeness, and understandability of his or her advice.

Others believe that upholding the ideals that make one a practitioner includes volunteering some effort to stop the wrongdoing.

BenefitsLink readers, what do YOU think?

[Lori H]

I kindly sent the gentleman a fax, as I wanted to tangibly document our position, and explained that we could not go back and reduce benefits, yet could do so going forward.

It blew my mind a few years ago when this guy just upped and decided he was going to and did take 40K from his ex wife/terminated participants account balance. I had to send him a terse letter to get that money back in the trust post haste. He still has not paid her out and I doubt she knows she has the funds despite us filing SSA's on the plans behalf.

[Guest Sieve]

I would agree that we, as professionals, need to try to convince the employer to do the right thing. But our view of "right" may be different from the employer/client's view of the right thing. As long as what the employer wants to do is within our own belief of what is reasonably right--i.e., a good argument can be made for the correctness of the client's chosen position--then we can (and must) go along with the transaction (probably with an appropriate CYA letter/memo) and feel OK. But, we should resign from the engagement and fire the client if the client's desired action is clearly incorrect and beyond any reasonable interpretation of the law--and, we also should do what is necessary to prevent the wrongdoing from occurring. But, we are not requried to be insurers of the absolute cleanliness of our clients' plans, nor can many of us, under our profession's ethics laws, always take the necessary action to alert appropriate parties of inappropriate employer activity.

[Guest mjb]

I would agree that we, as professionals, need to try to convince the employer to do the right thing. But our view of "right" may be different from the employer/client's view of the right thing. As long as what the employer wants to do is within our own belief of what is reasonably right--i.e., a good argument can be made for the correctness of the client's chosen position--then we can (and must) go along with the transaction (probably with an appropriate CYA letter/memo) and feel OK. But, we should resign from the engagement and fire the client if the client's desired action is clearly incorrect and beyond any reasonable interpretation of the law--and, we also should do what is necessary to prevent the wrongdoing from occurring. But, we are not requried to be insurers of the absolute cleanliness of our clients' plans, nor can many of us, under our profession's ethics laws, always take the necessary action to alert appropriate parties of inappropriate employer activity.

There is federal case law where a spouse who adminstered his HR-10 plan prevented his ex-spouse from collecting her benefits under the Plan. The court not only ordered payment of the benefits but made the owner pay the spouse's legal expenses.