Plan Termination - Distribution to Trustee

[Zoey]

Every plan termination we've done, the trustee is the last person to receive their distribution. This has never been a problem in the past, but we have a plan that is terminating and the trustee wants to rollover his account to an IRA and wants know if there is a cite that states that the trustee's assets are to be distributed last.

I explained that it would be like a captain jumping ship and leaving the crew to fend for themselves, but that wasn't a good enough explanation for him.

Is this just some companies policies, or is it written somewhere? I can't find anything on it.

Thanks so much.

[ETA Consulting LLC]

As a participant in the plan, he is assured of the same rights to distribution as anyone else. If such cite requiring him to receive his distribution last existed, it would be included in the plan document. He's still responsible for ensuring the other participants rights are protected until the final assets are distributed.

Good Luck!

[Zoey]

Thanks so much for your response!

That's probably why I couldn't find anything on it...

However, I do wonder then, how investment companies such as American Funds and John Hancock require the trustee be distributed last. I guess I will have an argument with them if this issue arises again. (This particular plan isn't with either of those investment companies.)

[rcline46]

It is really quite simple - if the trustee/owner takes their benefit, what incentive do they have to see that all other distributions are made? To chase down missing participants? To make decisions on non-responders? NONE.

Therefore, the asset holder has funds they cannot distribute because they are not a fiduciary. The TPA cannot make distributions because the TPA is not a fiduciary. I will gladly tell the owner/trustee (and I have) that if they do not like my holding up their distribution, they can call the DOL and complain. I have even offered to try to conference them in, and let the person explain why they won't do their duty.

Of course this does not apply to everyone, but how do you know?

[K2retire]

I've also encountered service providers who won't process ANY distributions until they have the paperwork to do them all claiming that to do them at different times has the potential to be discriminatory. That arguement might make sense if the assets are pooled, but certainly not in an idividual account plan.

[rcline46]

What if there are subject to CDSC?

[Jim Chad]

How will John Hancock or American Funds get the last of their fees? From my experience it has been form the assets of the last Participants in the plan. It sure seems to me that it is the trustees duty to NOT take his money out before all fees are deducted.

[Zoey]

Oh, I whole heartedly agree that the trustee should receive their distribution last, and that has always been our practice as well. In the 17 years I've been doing pension, no other trustee has ever debated it (believe it or not). But without Regs enforcing it, I just don't see how I can deny this trustee, if he really wants to push the argument. Though I am glad to know that others have followed the same practice, and it is not just us.

Thank you all for the responses! It is much appreciated!

[Lou S.]

You could try having him sign a letter (under penalty of perjury maybe?) that no administrative fees will be paid by the trust after he takes his money, that he personally guarntees all Plan fees will be paid by him and that if he understands if fails to exceute any documents required to be signed by the Plan Trustee in a timely maner, you'll be forced to report him to the DOL.

Or tell him fine if he wants his money now, you'll resign as a service provider to the Plan and he'll have to hire someone else to complete the termination.

Not sure either would work or if you'd want a lawyer to draft the letter but it would most likely cover you if he should bail after taking his cash.