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Proper 401K plan entry date in TPA records?

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12 replies to this topic

#1 410b


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Posted 11 October 2012 - 12:16 PM

What is the legally correct Plan Entry Date that should show on reports, such as an employee census data recap, provided by the third party administrator to the plan administrator as part of an annual report package?

(and depending on answers below, I may have another question about getting changes in records held by a successor third party administrator)

The date the plan agreement says an employee enters the plan?
The date the plan agreement allows an employee to submit a wage reduction agreement?
The date the plan administrator allows an employee to begin deferrals?


#2 BG5150


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Posted 11 October 2012 - 12:19 PM

The date the person becomes a participant.

The other dates are merely administrative procedures.

(And item #3 better not be after the first payroll date after #1.)


Two wrongs don't make a right, but three rights make a left.

#3 410b


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Posted 11 October 2012 - 12:50 PM

(And item #3 better not be after the first payroll date after #1.)

It is because of number two.

#4 K2retire


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Posted 12 October 2012 - 06:56 AM

(And item #3 better not be after the first payroll date after #1.)

It is because of number two.

Number 1 and number should be the same.

#5 410b


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Posted 12 October 2012 - 09:59 AM

Now I have two different things going on here. (please excuse some of my typing, I still have a splint from some hand surgery)

My original question, which I am not getting an answer to and a critique of the elements of my question. I will try to come up with a different way to ask my question because I really want an answer to discuss with my plan administrator and anuditor.

Particularly because of communication misunderstandings that posts and answers exposed for me in another thread, I think there is something here I need to understand better first, and maybe this will also help in getting to why I have the questions in the first place.

If I understand Administrator, Third Party Administrator, andTrustee correctly, I have an 18 year old plan that has had 3 administrators, 2 or 3 TPA's, 2 Trustees, and 3 plan documents. The plan currently contains participants that came in when the plan was started, as well as participants that were addded during each of the documents timeframes.

I am assuming the response was meant to read 1 and 2 should be the same. They are not in the records recieved from the TPA and I will pursue that further when I can figure out how to ask the question better; but....

I am also assuming that response is based on current IRS rules. Could you concede that it is possible an 18 year old initial plan document could legally define those dates as 3 different occurences? If not, I am going to have to do some lengthy typing of text to get some understanding of what I am misreading.

#6 Bird


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Posted 12 October 2012 - 10:29 AM

If you're talking about participants who entered the plan a while ago, and you're trying to get historical entry dates right, then I'd take my best shot and move on. I'm not quite sure what you're getting at, but going back to the first response, I agree it is simply the date of participation specified in the document, e.g. if the plan says entry is after 1 year with quarterly entry dates, and an employee was hired 2/1/2011, the entry date is 4/1/2012.

Option #3 is a little troubling if it is later than #2.

#7 rcline46


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Posted 12 October 2012 - 10:40 AM

A fast education:
1. the plan document must define when an employee becomes a participant in the plan. This is fixed, immutable and not subject the whims of the employer or the employee.

2. If there is an employee deferral aspect to the plan, there are rules as to when the employee must be provided information sufficient for her/him to make a decision. THis provision date is tied to the date the employee will become a participant.

3. the employee is in control as to when they make a decision. If before they become a participant, then their decision becomes effection on the participation date. If after their participation date, the documents again will define when the employee's decsion is effective.

Not one of these items is dependent on the TPA or recordkeeper. THe TPA and recordkeeper must first follow the terms of the document, and then the decison of the employee. Nothing in respect of these items has changed since 1978 when 401(k) was added to the code, or the 1930's when 403(b)s came into existence.

Does this help?

#8 410b


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Posted 12 October 2012 - 12:31 PM

From the initial plan summary:

You will begin to participate in the Plan after you have completed one elibility period.
An eligibility period is a period of 12 consecutive months, starting on your first day of work or any anniversary of that day, in whifh you are credited with at least 1,000 hours of service.

you will become a participant on the effective date of the plan if you satisfied the plans's service requirement at that time and you were an employee in an eligible group at that time. Otherwise you will begin to participate in the plan on the firstday of the month in which you satisfy the service requirement in question 3. (I'm reading this as Date 1.)

After you become a participant, you can enter into a salary reduction agreement as of the first business day of each plan quarter. (My date 2) Your election will become effective as soon as administratively feasible after you enter into a salary reduction agreement. ( My Date3 which does not necessarily match date 2.)

I think subsequent plan revisions start to align more closely with ideas expressed above, but this is how I derived my comments of 3 dates in relation to employees who entered under the original document.

if Participate and Enter are not the same thing, then I could relate to the comments in previous posts.

#9 masteff


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Posted 12 October 2012 - 12:41 PM

What is the legally correct Plan Entry Date

This is where you went astray.... plan entry date is not a legal term although it might be a defined term in your plan. What I'm guessing is that it's a term used in your TPA's software or on your auditor's check list.

From your last post, what you're really trying to get at is "participation date" (which also is not a legal term).

You quoted two paragraphs that begin w/ "you become a participant on".... that is your answer. Stop there and don't overthink it unless you can come back to us w/ a definition of "Plan Entry Date" that comes from your plan document.

Edited by masteff, 12 October 2012 - 12:42 PM.

Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra

#10 410b


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Posted 12 October 2012 - 01:38 PM

Now I can ask my question again. ( And I am not looking for this to get off on a discussion of incorrect plan administration, I am wanting to find out if I have the right to get a specific set of records corrected.)

In plan version one the correct plan entry date is date of participation. In Plan versions 2 and 3, the plan entry date is specifically stated and is NOT the date of participation.

I work for plan administrator # 3 and with third party administrator (TPA)/recordkeeper #2. TPA2 has presented a document containing plan entry dates to plan adminstrator 3. The listed plan entry dates are an amalgamation of employee hire dates, miscellaneous dates between the plan effective date and first deferral date, various firsto of the month dates (most of which are the plan's deferral date rather than enrty date), and some dates between the first and the 15th of the month. After the discussions above, I would estimate that well over 50% of the plan entry dates in TPA2's files do not match the plan specified entry date. Those dates are based on information TPA1 provided to TPA2.

My question is, can my company require TPA2 to change their records to match the various plan documents rather than continue to carry the information received from TPA1?

Edited by 410b, 12 October 2012 - 02:05 PM.

#11 masteff


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Posted 12 October 2012 - 04:34 PM

You're the plan administrator. It's ultimately your data, not the TPAs. Instruct them on how to clean up the entry dates. Don't be surprised if they ask for it in writing or ask you to provide what you want the dates to be corrected to. (I personally would just determine the correct dates and send them in a spreadsheet to the TPA w/ instructions to update their records.)

However I would be curious to hear any thoughts from any TPAs on the topic.
Kurt Vonnegut: 'To be is to do'-Socrates 'To do is to be'-Jean-Paul Sartre 'Do be do be do'-Frank Sinatra

#12 Peanut Butter Man

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Posted 12 October 2012 - 05:12 PM

I think what you have are two different dates - the Entry Date (date defined in the plan document on which eligible employee becomes a Participant) and the Elective Deferral Date (first date that a Participant makes an elective deferral into a 401(k) plan. I've seen Elective Deferral Dates which are more than 5 years after the Entry Date because, for whatever reason, the Participant decided they didn't want to defer for several years after they entered the plan, and then changed their mind and started deferring.

The Entry Date is contained in the plan document - don't rely on the Summary Plan Description for the entry date because the SPD is trying to take the information contained in the plan document and describe it in an easy-to-understand manner using language an 8th grader would understand.

The Entry Date can also change from plan document to plan document as restatements and amendments are completed, so over the history of the plan, one document may have one entry date and another document can have another entry date, as long as the existing employees were grandfathered when the change was made.

If you have the other TPA restate the entry dates for individual participants to confirm with when they first deferred, you run the risk of creating an operational failure for failing to comply with the Entry Date contained in the plan document. You also run the risk of failing to comply with Code section 410(a)(4) and Treas. Reg. 1.410(a)-4(b).

#13 410b


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Posted 13 October 2012 - 11:01 AM

Astute observation - except I am going the other way.

That is why I was trying first to get the "legally correct" definition of plan entry. The quantity of errors is so large I figured that i didnt understand something correctly. One revision uses only the word participation. The others use both participation and entry and they are separate dates.

Most of the plan entry dates in the document i am concerned about are the first deferral date allowed by the plan administrator ( or a slightly later date because emplyees wont get their paperwork back when they are supposed to) rather than a real entry date defined by previous posters.