At one of my former companies, if a new TPA (or a new record keeper or even the client) wanted copies of work that was already sent to the client, we would have an hourly charge and postal costs (if mailed, obv.) for the retrieval and duplication of the material. The charge was higher for documents stored off-site. (This was before most things were kept electronically). Work was only delivered after invoice was paid.
I see no problem with that practice, as long as the charges are reasonable (and ours were).
Not having kept adequate records itself, sorry to say but the first place for the plan to complain is while standing in front of a mirror!
Is there a reason why the former TPA is not being cooperative?
I think it's one of those questions that needs to be asked inversely: "Is there any IRS publication or reference that I can use to confirm that the cash value should NOT [my emphasis] be included in the RMD calculation?"
The answer is "no." Can't think of any reason at all to exclude that.
Some recent news on the VEBA front which doesn't seem to appear in these boards:
From the 2000 Annual ASPPA Conference:
22. Company A has 11 nonexcludable employees; one HCE and 10 NHCs. Four of ten NHCs leave employment during year after working more than 500 hours. Plan requires end of year employment for allocation. Coverage ratio is therefore 60%, which meets the non-discriminatory safe harbor at 1.410(b)-4(c)(2). Plan also passes the average benefits percentage test of 1.410(b)-5 (e.g. on a cross-tested basis). Plan still must cover reasonable class per 1.410(b)-4(b) to pass the average benefits test of 410(b)(2).
Question: is “those employed on the last day of the plan year” a “ reasonable classification” for purposes of 1.410(b)-4(b)?
From the 2001 Annual ASPPA Conference:
46. The average benefits test for coverage testing consists of the nondiscriminatory classification test and the average benefits percentage test. To satisfy one part of the nondiscriminatory classification test, it is necessary to determine if the classifications are reasonable based on objective business criteria. Do participants employed at the end of the plan year constitute a “reasonable classification” under Treasury regulation 1.410(b)-4(b)?
IRS: No. Our opinion is that it is not a reasonable classification.
To answer your question, yes, there would be a successor plan - and the issue is as Tom points out - the establishment of a successor plan (withing the 24 month period beginning 12 months before the plan termination and ending 12 months after) would mean there would not be a "distributeable event" from the terminated plan for any of it's participants.
That would leave two options - 1) maintain the existing plan (and any evil it contains - which in my mind would be the only reason to consider it's termination); or 2) merge the plan into the new one (which would merge the evil into the new plan, tainting it). Now, you arguably could give participants the option of leaving balances in the old plan or "rolling over" to the new plan (but not taking a distribution), but in effect, that is a "partial" merger of assets which a good lawyer could/would argue taints the new plan as much as a complete merger.
My recommendation: If there is a problem with the existing plan - FIX IT. Everything can be fixed - the only variable is the time and money it takes - but IF ITS BROKEN, IT NEEDS TO BE FIXED.
Then, don't worry about "termination" and new plan set up and successor plan issues....
And just for fun, note that if you are really giving 4.4000000000000000% as a gateway you will fail gateway if it is based on 1/3 * ($35,000/$265,000) = 4.4025157%. There are some that use rounding techniques that make it appear that it will pass, but for sake of an additional $1 or 2 why take that chance?
And to be real clear about this, it doesn't matter if it is a DB or DC plan, the answer would be the same.
The reason the answers are what they are is because all the QDRO rules tell you is if you have a valid QDRO. There are no QDRO rules that tell you what a QDRO has to say that isn't related to it being a valid QDRO or not.
As such the plan benefits are just property that can be negotiated over in a property settlement during a divorce. So if one party is willing to give up a part of their pension benefits as part of the property settlement, so be it from the plan's perspective (as long as there is a valid QDRO).
It all comes down to what the document says. I could certainly see this being an outcome, in fact the likely outcome, unless steps were taken in advance to keep them out. It's possible the document could have been drafted to accomplish all your goals, but that's water under the bridge at this point, you have to go by what the document says.
I haven't read the link, but just a couple of thoughts:
1. "Scheme" is typically used in England like we use "plan" in the US. Not sure that applies here, but that was my first thought.
2. I see that Nationwide is listed and I know that it's very common for insurance agents that are independent contractors (for all other purposes) to be "statutory" employees for retirement plans.
I would be very careful with self certification even after memo. It doesn't make self certification compliant, but says you should treat it as if it was compliant if certain steps are taken. If you fail to take those steps, you are once again not complaint.
I spoke to some ERISA attorneys and auditors at luncheon last week and none are recommending self certification.
A mid-year amendment to the match formula is prohibited under 1.401(k)-3(e)(1). The modifications to that rule in Notice 2016-16 provide that the only mid-year formula changes allowed are ones made with at least 3 months remaining in the year and that increase the safe harbor contribution. See Section D of the notice. The amendment under discussion would result in lower SH amounts for at least some individuals. So, if they do the amendment mid-year, they would fall under the rules for reducing or suspending the SH contribution under 1.401(k)-3(g) and lose the SH for the year.
check the document and see how 'limitation year' is defined.
if it is defined as 'the plan year', then you are limited
if it is defined as 'the 12 month period ending on the last day of the plan year' then no proration of the 415 limit.
same with compensation, if plan uses 12 month period for compensation there is no proration. (for example, the calendar year ending in the short plan year) [see ERISA Outline Book item 7 of Chapter 15, Part f]
Here’s a question to ponder:
If a corporation invites an arm’s-length investor to purchase 100% of the corporation’s original-issue shares before the corporation has any customer, any business activity, any franchise right, any intellectual property, any other property, any money, or any other asset (beyond the corporation’s right to be a corporation), how much should the investor pay for the shares?
If your answer is anything more than $0.00, why?
I have always understood it was for facts like this that there was the April 1 following rule. People who terminated late in a year it might take a while to determine they are due an RMD. Obviously, there is no practical way to hand him an RMD check as he walks out the door.
I think he is due 4/1/2017. That is how I have always recommended it to my clients. He terminated in 2016.
I am assuming the amendment was not written to answer these questions which it should have been done.
If the amendment doesn't answer this question then all plans give the Plan Administrator the power to make reasonable interpretations of the plan that don't discriminate. The PA needs to use that power to answer these questions.
To me I don't see how you don't grandfather the existing loans. It might even be a protected benefit since it exists.
The next two I can make a case for either one and the PA would seem reasonable. What I mostly see is you can't refinance in either case. You might have 2 loans but any change needs to result in 1 loan after the change. Likewise in 3 any change needs to result in zero loans.
If the plan allows for catch-up contributions and the participant elects 7%, and 7% is within the allowable limits for the participant, can you justify not doing 7%?
Are the instructions/forms clear on the issue when the participant elects what to defer?
If you vendor cannot do what your plan permits, you need a different vendor...
I have added a new "stream" to display the results you've described.
I've called the new stream "Topics Recently Added or Commented On".
It appears in the menu at Activity (tab) -> My Activity Streams -> Topics Recently Added or Commented On.
Another way to get there would be to bookmark this URL:
(though it works only if one has not previously logged out).
I wish the menus were more straightforward, especially the "stream" business. Tonight I took a stab at simplifying and clarifying things (an amendment and restatement, if you will):
Starting at the horizontal menu that appears when one clicks on the Activity tab:
Recent Topics and Comments -- is a list of all recently added topics and all recently added comments. In the case of comments, the list shows the title of the topic in which the comment appears, so it's confusing though comprehensive because the same title shows up several times if several comments have been added in the past day or two. (Used to be called "All Activity.")
Unread Topics and Comments -- is the same as "Recent Topics and Comments" but the list does not contain any topics upon which the user has clicked ("read") since the last time the list was generated. So, if the user clicks on the topic titled "401(k) plan document was lost", then spends however much time is desired to read that topic, and then clicks the browser's "previous page" arrow/button, the list no longer includes links to any of the comments to "401(k) plan document was lost" (or to the original "401(k) plan document was lost" entry).
My Activity Streams -> Topics Recently Added or Commented On -- is the same as "Unread Topics and Comments" except that no topic title appears more than once. In other words, the most recently added comment to a particular topic will be the first and only one listed, the idea being that when the user views that topic, he/she'll be able to scroll and read all of its comments at one go.
(More precisely, that one could be called "Unread Topics Recently Added or Commented On" because the list contains only topics that are both (i) unread, and (ii) recently added or commented on. But I'm thinking the shorter title probably works better.)
Finally, the Portal tab is the same as "Topics Recently Added or Commented On" except that it only shows recently added topics (in the order they were added), not the titles of topics which have been recently commented on.
In a stock acquisition where the buyer is an existing business with its own 401k plan it is almost always standard operating procedure to require the target's plan to be terminated prior to closing. This is not that scenario, however. I see two possible explanations here. (1) The advisor is very green and not able to draw this distinction; or (2) there are in fact lots of problems with the plan and it is felt that this is an opportunity to stop the bleeding and allow the statute of limitations period clock to run, while at the same time starting up a fresh and clean new plan.
Is anyone interested in finding out why it doesn't reconcile? I'd be concerned about an underlying problem unless it can be proven where the mistake on the 5500 happened. Too many years of reconciling trusts for 401(k)s that never allowed for even a penny's difference. But I do understand that investigation takes time and money.
How big is the difference and is it too much or too little?
Not an expert to be relied upon, but it seems to me that there could be issues involving
Prohibited transaction - might be. Is the son, who does not work for the sponsoring company, considered to be a party in interest?
Failure of the company president to discharge his duties prudently and according to fiduciary standards. Under what reasonable process did the president reach the conclusion that his son should handle the plan's investments?
While it might constitute a conflict of interest, is that something that ERISA and applicable regulations address? Would the son be working under a conflict of interest, or is the concern here that the father would be? I suspect that the father is aware of any conflict of interest that the son might have (it should not be necessary for the son to inform the president that he, the investment advisor, happens to be the president's son). If the father is operating under a conflict of interest, how could it be cured? The biggest problem here with respect to conflict of interest could involve questions as to whether the president is choosing an investment advisor prudently and in accordance with the fiduciary standards.
if you were to 'self-correct', that would mean following the terms of the document, which means moving the $ from Roth to regular deferral, but that involves tax issues so would require VCP
so the other option would be retro amend the plan to permit Roth, but you can't really self- correct something like that without IRS approval, so again going through VCP. I would suspect the IRS would permit that, especially if the deferral election form indicated either deferrals or Roth (as opposed to 'only the owner did this')
at least that is my understanding.
Doesn't the inclusion/exclusion of the cash tendered depend on who is selling the stock? If the stock is being sold by the company (i.e., treasury stock) the amount paid will end up on the balance sheet of the company and to ignore it when it is material to the value of the company seems ludicrous to me.
What is far more likely to me is that the purchase of the stock would include a premium of some sort. The company may not have hard assets before the transaction, but it should have, at the least, a business plan. If that plan has merit then the stock price should reflect that value. Let's assume that said value is $50,000. Somebody wants to purchase 99% of the company. What should the amount of cash be that changes hands? It depends on the price per share after the transaction that the buyer thinks is fair.
Before the transation there was 1 share, valued at $49,999/share. After a $200,000 cash infusion the company would be valued at $250,000. If 199999 shares were issued by the company in this transaction then the fair-market value of each share after the transaction would be $250,000/200,000 = $1.25. Now, if I were the owner of that 1 share valued at $49,999 I would think there would have to be compelling reasons for me to go along with the scheme to issue treasury stock such that the value of my share would decrease by $49,998. Unless I were issued some sort of preference I would think the better course of action would be to liquidate the company. This can get very complicated.
Mathematically, it is not hard to go through the above with a pre-transaction value of $1 for the one share of stock.
I've never looked for any regs or guidance on this, but I would treat the plan, for all practical purposes, as having a plan year end as of the last day of February. If leap year, then February 29th. Other years, February 28th. Until someone convinces me otherwise.
I have a hard time imagining that an IRS auditor would give you trouble on this.
Easy for us to say, and I agree, but in the real world there are no consequences for such errors, unless it comes down to a monetary issue. The plan sponsor sees it as us arguing with the p/r company over how many angels fit on the head of a pin.
I though Pammie57 just wanted to know if the QNEC can also be used to satisfy the Top Heavy required minimum contribution. The answer is yes. From Treas. Reg. 1.416-1:
M-18 Q. May qualified nonelective contributions described in section 401(m)(4)(C) be treated as employer contributions for purposes of the minimum contribution or benefit requirement of section 416?
A. Yes. This is the case even if the qualified nonelective contributions are taken into account under the actual deferral percentage test of § 1.401(k)-1(b)(2) or under the actual contribution percentage test of § 1.401(m)-1(b).
Just to get back to the OP's query and the very correct commentary concerning the reasonableness of the fee. We currently charge either a flat fee of $250 or an hourly rate of $150 (depending on our service agreement with the plan) for complete QDRO outsourcing service (the "Q" determination, letters, etc., everything up to an alternate payee requesting a distribution - which is handled as a regular distribution). I think that is low. Average time to complete is about 5 hour - with half of that being "professional" time, and half being more clerical/systems related. Factor in risk, and the price could, and possibly should, be $700 - but market forces being what they are, I think that wouldn't fly.