The Pension Attorney. A Legal Resource for Defined Benefit Plans.

This article has been updated for 2024.

Your Defined Benefit Plan Attorney

Do you sponsor a Defined Benefit Plan? If so, a pension attorney is an important part of your team. Pension attorneys, also called ERISA attorneys, have expertise in the laws and regulations related to Defined Benefit Plans.

For small Defined Benefit Plans, pension attorneys work closely with Defined Benefit actuaries and TPAs. Collectively, attorneys, actuaries, and TPAs, ensure compliance and help business owners meet Plan objectives. Among other tasks, pension attorneys draft or review Plan documents, advise employers regarding Plan-related legal questions and help correct any Plan failures. Their experience and legal knowledge are often essential when complex issues arise.

The Pension Attorney: Plan Document Advisor

Pension attorneys generally have deep Plan document expertise.

What is a Plan document? At a high level, it is a written instrument that describes how a Defined Benefit Plan works. For example, the document describes when an employee “enters” the Plan, how the employer calculates the benefit, and under what circumstances the employer may pay out the benefit.

The Plan document must be clear. Defined Benefits should be “definitely determinable”. Additionally, the document must comply with current pension law and regulations. Meeting Plan document standards is a difficult task. For example, an attorney may draft a Plan provision that seems clear when written but is ambiguous or incomplete when consulted later. To ensure clarity, the pension attorney must be thoughtful and draw on his or her experience. Writing unambiguous language requires the attorney to consider the provision under a variety of possible circumstances and interpretations. This results in a “tighter” document.

In general, experienced pension attorneys are adept at ensuring Plan document compliance and clarity. Because of their legal and practical background, a pension attorney is an important Plan document resource.

Types of Plan Documents

Despite the complexities of Plan document work, attorneys need not draft all Plan documents. For example, it’s not typically necessary or cost-effective for an attorney to draft Plan documents for small Plans. On the other hand, large Defined Benefit Plans generally warrant an attorney’s involvement.

Small Defined Benefit Plans often use similar provisions. As a result, these Plans may use a “menu-style” document where the language and available options already have been approved by the IRS. So-called pre-approved documents are more straightforward than individually designed documents, but they may lack flexibility. However, pre-approved documents usually meet the needs of smaller employers. If the employer desires minor customization, they may add language not included in the “menu options”. In such cases, the employer should consult with a pension attorney.

Employers sponsoring large Defined Benefit Plans, on the other hand, usually want a more customized Plan. In these cases, a pension attorney drafts an individually designed Plan document. Although the attorney uses software to generate some “canned” language, he or she also drafts some of the Plan provisions from scratch. Ensuring that this language is clear, complete, and does not create unintended consequences is challenging. As a result, an experienced pension attorney can minimize issues.

A Pension Attorney Assists with Plan Amendments

Pension attorneys also assist with Plan amendments, especially if the employer uses an individually designed document.

Examples of Plan amendments are when the employer curtails future benefit accruals or “closes” the Plan to new participants. In these cases, the amendments are fairly straightforward for pre-approved Plans. However, attorneys must be very precise when drafting language for individually designed plans. In fact, in most cases, the Plan’s actuary and TPA also will review the amendment from an actuarial and administrative perspective.

Any time the employer amends the document, he or she must notify Plan participants. A pension attorney can assist the employer to ensure the content and distribution of required disclosures comply with applicable regulations.

The area of Plan documents is complicated, particularly when the employer wants to customize provisions. A pension attorney will help meet Plan objectives and ensure compliance.

A Pension Attorney Provides Legal Advice

Defined Benefit Plans are complex. They are governed by a vast array of statutes, regulations, and agency guidance. Your actuary and TPA have the experience to assist with Plan compliance. However, employers should resolve legal questions with an attorney.

There are several areas where the employer may consult a pension attorney, including:

• Coverage and nondiscrimination testing
• Controlled Groups (“CGs”) and Affiliated Service Groups (“ASGs”)
• Qualified Domestic Relations Orders (“QDROs”)
• Interpretation of pension law or regulations
• Interpretation of the Plan document
• Participant disclosures

Coverage and Nondiscrimination Testing

Generally, Defined Benefit Plans cannot only cover business owners and high-paid employees. In fact, coverage and nondiscrimination rules describe the extent to which lower-paid, non-owner employees must be covered and benefit relative to business owners and high-paid employees. Pension attorneys can provide assistance when applicable law is not clear. They can help business owners understand the options available to them and any risks involved for a given interpretation.

Controlled Groups and Affiliated Service Groups

In some cases, employers must aggregate businesses for purposes of coverage and nondiscrimination testing. For example, if someone has complete ownership in two or more businesses, the employer likely will need to regard them as one business for various pension rules. In some cases, it is clear the businesses must be aggregated. In other cases, it is not. Determining the amount of ownership and the relationship between entities can be complex. In complicated scenarios, a pension attorney can provide an oral or written opinion to the business owner. This can help reduce the risk of noncompliance.

Qualified Domestic Relations Orders

When a Defined Benefit participant divorces, a judge may issue a court order dividing the benefit between the participant and the former spouse. This order is called a Domestic Relations Order. However, for this order to be enforceable, it must meet certain requirements. For example, the Order cannot require the Plan to pay out more than it would have had the judge not issued the Order. The Order also cannot require a form of benefit payout (e.g., single sum payout) if the Plan does not provide for it.

Whether the Order meets pension requirements, must be determined. In many cases, a pension attorney opines on whether the Order is “qualified” so that it becomes a Qualified Domestic Relations Order (“QDRO”). The attorney may also work with the actuary to interpret the provisions of the QDRO so that the actuary can calculate the benefit split.

Legal Interpretation

Pension attorneys also provide legal interpretations. In general, actuaries and TPAs should not make legal interpretations. Rather, they should suggest the advice of a qualified pension attorney.

Typically, attorneys assist with the interpretation of pension laws, regulations, and Plan document provisions. Additionally, pension attorneys can help interpret QDRO provisions, as described above.

Participant Disclosures

ERISA requires employers to provide certain notices and disclosures to Plan participants. Notices keep employees informed of how the Defined Benefit Plan operates and their rights in the Plan. The employer also must send participant notices when certain events occur.

Sometimes government agencies prescribe the disclosure language. In other cases, agencies only provide general guidance. Where guidance is not prescriptive, a pension attorney can suggest language to ensure clarity and compliance.

A Pension Attorney Corrects Defined Benefit Plan Issues

On occasion, a Defined Benefit Plan needs to be corrected. For example, the Plan document may not have complied with pension law or the Plan may not have been administered in accordance with the Plan document. In such cases, pension attorneys can assist the Plan sponsor to correct the issue.

Defined Benefit Plans must be corrected through the Employee Plans Compliance Resolution System (EPCRS). In some cases, employers may make self-corrections without government reporting. In other cases, employers must submit a description of the issue with the proposed correction to the IRS. EPCRS provides guidelines regarding the appropriate approach. In determining the correction approach, employers can consult with pension attorneys for guidance.

Assuming the employer must report the issue, a pension attorney, in conjunction with the Plan actuary and TPA, can help the employer draft the submission.

In other cases, issues are discovered as part of a Plan audit conducted by a government agency. Depending on the nature and scope of the audit, an attorney may assist the employer with government interactions. If the auditor discovers any issues, the attorney can help negotiate the steps for correction. In both of these capacities, the attorney helps the employer navigate these complex communications.

In Conclusion

Pension attorneys are an invaluable resource to employers with Defined Benefit Plans. They provide legal guidance in a variety of areas including Plan document work, interpretation of pension law, participant disclosure, and Plan correction. Although your TPA and actuary will assist you in many areas, pension attorneys bring a unique skill set and should be consulted as appropriate.