Duty to Collect Amendment from Relius/Sunguard

[Guest FourOone]

As a M&P prototype sponsor we received information from Relius regarding the DOL's recent enforcement and attention to a trustee's "duty to collect". Relius has made available language to amend at an individual plan level - after reviewing I am not sure that it is worth our time to implement this for all of our clients, but at the same time want to provide the best service. Just curious if anybody could share what their approach is/will be regarding implementing this type of amendment?

THX!!

[Bill Presson]

Got the same thing from Accudraft.

What a waste of time. (not directed at Accudraft or Relius, but our stupid government.)

[Guest Peggy806]

There are three options on the amendment from Relius. One of the options is "amend plans only if requested by the DOL to make such an amendment."

Doesn't it make sense not to spend the time sending out this amendment unless audited and then wait for the next document revision, where it will be included? I don't see an option for a TPA to adopt the plan on behalf of the employers like we can for so many other amendments.

Thoughts?

[Belgarath]

This is the first I've heard of this issue. "Duty to collect" what? What is this really all about? Thanks!

[DMcGovern]

I'm with Bill on this one. It's only a FAB from the DOL that is creating this "need", which seems to be directed more toward larger plans (correct me if I'm wrong on this) that have custodial arrangements, a directed fiduciary, or other assigned person(s) handling the receipt and allocation of contributions. That doesn't apply to our smaller plans, so we are not using the amendment at this point.

[Bird]

I'm with Bill on this one. It's only a FAB from the DOL that is creating this "need", which seems to be directed more toward larger plans (correct me if I'm wrong on this) that have custodial arrangements, a directed fiduciary, or other assigned person(s) handling the receipt and allocation of contributions. That doesn't apply to our smaller plans, so we are not using the amendment at this point.

Right. I think it stems from a court case involving plan language that absolved the trustee from having to collect contributions (but how does the trustee know the contributions are there to collect?). If I'm right about this, it was addressed in asap 09-23.

[Peter Gulia]

At least for retirement plans sponsored by a smaller business, using plan documents to clarify which fiduciary must collect contributions isn’t likely to help much. If a bank trustee doesn’t assent to a duty to collect contributions, who’s left? One imagines that another writing won’t cause an employer organization or a natural person who is an owner of, or subordinate to, the employer to enforce paying over the contributions.

But even if one believes that a plan amendment won’t help, a TPA or recordkeeper might prefer to inform plan sponsors about the Relius or Accudraft document:

(1) Although enforcement is almost none, some service providers choose to be cautious in steering clear of the unauthorized practice of law. One reason for that caution is that, even in the absence of criminal or administrative enforcement, engaging in anything that a claimant (including its plaintiff’s lawyer) could describe as the practice of law increases the service provider’s exposures for civil liabilities. At least Florida’s supreme court has found that there is a range of allowable plan-documents practice for those who are permitted to practice before the Internal Revenue Service. But there are court decisions that support the idea that exercising discretion about which document to use, or about whether a document is or isn’t appropriate for a potential user, is the practice of law. Being able to say that you passed through every document that your Relius or Accudraft license made available might help defend against an assertion that you engaged in the practice of law.

(2) When contributions go unpaid, participants sometimes sue the recordkeeper. When you’re defending such a lawsuit (or arguing why the court should dismiss it), wouldn’t you like to have more evidence that shows you reminding the employer about its fiduciary duties to pay over the contributions?

(3) If your written or oral understanding with a plan sponsor includes a general sense that you’ll ‘keep the plan up-to-date’, how would you defend your decision not to furnish an available plan amendment?

Some of the observations above mention a TPA’s or recordkeeper’s business expense, and there is always a business decision for you to make. But what if you can manage your incremental business expense so that it’s a dollar or two per plan (because you mail Relius’ or Accudraft’s materials with your short cover letter, and you don’t follow up on whether the plan sponsor completes an amendment)?

Would a contained effort help you answer a ‘why didn’t you tell me’ claim?

[DMcGovern]

Peter,

Thank you for your informative post. We are going to discuss the amendment with our ERISA attorney.

Have to ask the question, though - if you were a plan sponsor would you willingly assign yourself as the person responsible for collecting the contributions? I would imagine that for the most part, the only people that would willingly take on this responsibility are the ones that are not making delinquent contributions in the first place.