ERISA Summary Expenses of Fiduciary Already Receiving Full Time Pay: Roadmap What Lies Ahead. Trustee Expenses & Gifts

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1 Trustee Expenses & Gifts Jim Cole Groom Law Group (202) electrical training ALLIANCE National Training Institute August 2, 2016 Roadmap What Lies Ahead Trustee Expenses What Can the Plan Pay for? Business Entertainment What Can Third Parties Pay for? Forms LM-10 & LM-30 What Must Be Reported? 2 ERISA Summary Expenses of Fiduciary Already Receiving Full Time Pay: In the interest of participants and beneficiaries Used to defray a reasonable plan expense Not for the personal account of the fiduciary The direct expense was properly and actually incurred 3 1

2 What Can the Plan Pay For? Plan Administrative Expenses Challenged by DOL in Audits Voluntary Compliance Letters Flowers to sick or grieving employees? Alcohol? Holiday Parties? Bagels to staff? Charitable Donations by plan? Retirement Bonus to Training Director? HOW TO SOLVE? Employment Contracts/Policies 4 What Can the Plan Pay For? Properly Incurred: Remember, must be in interests of participants and beneficiaries Not for the Fiduciaries personal account No Personal Expenses (even if away on plan business) In-Room Movie? Golf Outing? Alcohol? In sundries toiletries; gift shop; newspapers etc.? 5 What Can the Plan Pay For? Properly Incurred: Remember, must be in interests of participants and beneficiaries Reasonable In Amount & Frequency Not Extravagant Type of Room? Extra Nights? Type of Restaurant? Paying for Other Person (Taking turns)? Number of Conferences? 6 2

3 What Can the Plan Pay For? Not for the Plan Fiduciary s Personal Account No Spousal or Family Expenses Additional Meals? Extra Room Charge? Travel? 7 Plan Decision DON T: Decide after the fact Have the Trustee being reimbursed decide (must fully recuse himself) DO: Adopt a written policy beforehand Be Consistent 8 Plan Decision Expense Reimbursement Policy Educational Conferences Number per year? Approval Process? Location? Number of Fiduciaries or Employees Going? Who Goes? Follow-Up Reporting? Decide Which Seminars? 9 3

4 Plan Decision Expense Reimbursement Policy (continued) Meals and Lodging How Much? Maximum Per Diem? How Many Nights? 10 Plan Decision Expense Reimbursement Policy (continued) Travel Allowance First Class vs. Coach? Driving vs. flying? Car Rental? Taxis? 11 Plan Decision Expense Reimbursement Policy (continued) Lost Time Not if Full-Time Salaried Employee of Union Chapter or Employer Hourly Employee Actual Loss of Compensation 12 4

5 Documentation of Expenses Proof of Expense Itemized Receipts if possible even if less than IRS limit Contemporaneous record of agenda, identity of attendees, & topics discussed Internal Review Process 13 Mechanics of Advancement Advancement is reasonable No more than 30 days prior to actual expense Later written accounting for expense and/or reimbursement of excess What if I get mugged? personal expense 14 Business Entertainment from Service Providers What can a third party pay for? Recent developments Applicable law Analysis 15 5

6 Prior DOL Zero Tolerance Policy Zero Tolerance Policy DOL Enforcement March, Speech to Investment Advisors Statements made by DOL Chief of ERISA Enforcement Nothing to do with the plan paying for educational conferences for trustees Casts doubt on prior standards regarding business entertainment from service providers 16 DOL Enforcement Manual DOL Enforcement Policy Not everything we asked for but an improvement from the Zero Tolerance Policy DOL Enforcement Manual October 8, 2008 Section Reporting & Exemptions Final Form 5500 Schedule C Apprenticeship Funds do not file Form 5500 if they have made a one-time filing Final Section 408(b)(2) Regulations (do not apply to apprenticeship plans since welfare plans are currently excluded) 18 6

7 Recent Developments DOL National Enforcement Initiative EBSA ERISA Audits of apprenticeship plans in all regions of the country 300 DOL investigators trained Non uniform positions across the country DOL Memoranda of Understanding EBSA & OLMS Coordination EBSA & IRS Coordination 19 Not Just ERISA 18 U.S.C Bribery of Plan Fiduciaries & Employees Honest Services Act Taft-Hartley Act Strict Payment Prohibition Bribery Prohibition 20 Kickbacks... ERISA Section 406(b)(3) Prohibited transaction for a Fiduciary to receive any consideration for his own personal account from any party dealing with such plan in connection with a transaction involving the assets of the plan. 21 7

8 406(b)(3) Violation Consequences for Recipient (Trustees) Pay to Plan under ERISA 409 Loss, if any, to plan from fiduciary decision Value of the kickback (disgorgement) Pay to IRS excise tax - IRC % of amt involved per year until corrected Removal as fiduciary; injunctions Pay 20% of recovery if DOL involved ( 502(l)) (b)(3) Violation Consequences for Payor (Provider) If payor is not a Fiduciary Potential non-fiduciary liability. Saloman Bros. If payor is a Fiduciary Co-fiduciary liability under 405 Impact of DOL challenge on current business relationships and future opportunities (b)(3) Elements: For His Own Personal Account An Argument: if payment related to plan business and plan assets could have been used, argue no violation because payment benefits plan and not fiduciary personally. DOL Adv. Ops ,

9 Service Provider Gratuities What Might Be a Technical Violation of ERISA 406(b)(3)? Meetings with Meals? Gifts to Charities? Educational Conferences? Party or Reception for all Clients? 25 Service Provider Gratuities What Might Be a Technical Violation of ERISA 406(b)(3)? Golf? Sporting & Theatre Tickets? Occasional Gifts? Raffles? Trinkets? 26 LMRDA / Landrum-Griffin Act Union Officer Imposes fiduciary duties on union officers and employees Solely for the benefit of the union In accordance with the constitution, bylaws & resolutions of the governing bodies Do not act as adverse party Account for profit Form LM-10 & LM-30 reporting 27 9

10 Form LM-30 s & LM-10 s: Where ERISA and Labor Law (LMRDA) Collide LM-30 s = union officers & union employees LM-10 s = anyone who employs Employers of union members Service Providers Employee Benefit Trusts Not for 2007 Final LM-30 Regulations & FAQs Published Filing a Form LM-30 or Form LM-10 does not necessarily mean a violation of ERISA, the Taft- Hartley Act, or Form LM-30 s & LM-10 s: Where ERISA and Labor Law (LMRDA) Collide What Must PLANS File? Plans do not have to file LM-10 s until additional LM-10 guidance is issued Obama Administration LM-30 regulations and form finalized LM-10 persuader guidance finalized LM-10 Filers may continue to rely on the old FAQs 29 Service Provider Gratuities What Might Be a Technical Violation of ERISA 406(b)(3)? Meetings with Meals? Gifts to Charities? Educational Conferences? Party or Reception for all Clients? 30 10

11 Service Provider Gratuities What Would a Service Provider or Union Recipient Have to Report on a Form LM-10 or LM-30? Golf? Sporting & Theatre Tickets? Occasional Gifts? Raffles? Trinkets? 31 Service Provider Gratuities What Would a Service Provider or Union Recipient Have to Report on a Form LM-10 or LM-30? Union officer & employee mortgages? Advertisements at union event? Trade booths at union event? Payments not reimbursed by employer? Payments for Union spouses or children? 32 Trustee Expenses & Gifts Jim Cole Groom Law Group jcole@groom.com (202) electrical training ALLIANCE National Training Institute August 2,