When you work as an ERISA attorney for TPAs for nearly a decade, you get a front-row seat to some of the most creative interpretations of the law imaginable. I don\u2019t say that as an insult\u2014I say it as someone who spent ten years putting out fires that never should have been lit in the first place. Let\u2019s just say there were some plan administrators who could have benefitted from a crash course in ERISA basics, or maybe even a high school civics class.<\/p>\n
There was one guy, God bless him, who didn\u2019t know Puerto Rico was a U.S. Commonwealth. I wish I was making that up. To him, Puerto Rico might as well have been another country with its own ERISA rules and 5500 filing system. I tried explaining that Puerto Rico is as American as apple pie, but he didn\u2019t quite buy it. Maybe he thought you needed a passport to approve a loan distribution.<\/p>\n
Then there was the plan administrator who approved hardship distributions on 401(k) deferral earnings, twelve years after that practice was outlawed. He looked at me like I was speaking Klingon when I told him earnings weren\u2019t eligible for hardship withdrawal anymore. I didn\u2019t know whether to laugh, cry, or hand him a copy of the regulations with a highlighter.<\/p>\n
And who could forget the guy using a seven-year graded vesting schedule five years after EGTRRA eliminated it? I guess he thought \u201cEGTRRA\u201d was some kind of dinosaur. Every participant who terminated that year got a benefit statement straight out of 1995. I remember explaining that EGTRRA had changed vesting rules years earlier, and his answer was something like, \u201cWell, that\u2019s how we\u2019ve always done it.\u201d Famous last words in the ERISA world.<\/p>\n
But the one that will live in infamy for me was the plan administrator who proudly admitted\u2014without a hint of shame, that he reconciled a daily valued plan quarterly. I actually paused, thinking maybe I misheard. Nope. He was reconciling a plan that changed every single market day four times a year. That\u2019s not plan administration, that\u2019s wishful thinking.<\/p>\n
The moral of the story? If you\u2019re a plan sponsor, make sure the people administering your 401(k) plan know what they\u2019re doing. ERISA isn\u2019t a \u201clearn as you go\u201d area of law, it\u2019s a \u201cget it right or pay for it later\u201d business. A bad plan administrator doesn\u2019t just make mistakes, they create liabilities, trigger audits, and give participants reasons to file complaints.<\/p>\n
And for the love of compliance, make sure your administrators know that Puerto Rico is part of the United States.<\/p>\n
Because whether it\u2019s hardship withdrawals, vesting schedules, or geography, ignorance isn\u2019t bliss\u2014it\u2019s a DOL audit waiting to happen.<\/p>\n
<\/span><\/p>","protected":false},"excerpt":{"rendered":" When you work as an ERISA attorney for TPAs for nearly a decade, you get a front-row seat to some of the most creative interpretations of the law imaginable. I don\u2019t say that as an insult\u2014I say it as someone … Continue reading