Belgarath Posted August 19, 2013 Share Posted August 19, 2013 Here's the situation: DC plan has individually directed investments. Participant has brokerage accounts. Assume all other disclosures - annual, SPD, etc., are correct and timely. The participant takes an in-service withdrawal, for which there is a $125.00 fee. This fee is deducted from the brokerage account, and the statement to the participant shows the fee, but only says "check to TPA XYZ" - it does not specify what the check is for. The question that came up was whether this, in conjunction with the withdrawal request form which clearly states that there is a $125.00 fee which will be deducted from the participant's account, qualifies as appropriate notice and therefore doesn't require a "redundant" quarterly notice? I can see both sides of this. This compliance part of me doesn't think this satisfies the letter of the regulation, (because the brokerage statement doesn't identify what the $125.00 is for) but the everyday practical side says that "darn it, this ought to qualify." The compliance side of me is winning. Just wondering what others think? The regulation provides: (ii) At least quarterly, a statement that includes: (A) The dollar amount of the fees and expenses described in paragraph ©(3)(i)(A) of this section that are actually charged (whether by liquidating shares or deducting dollars) during the preceding quarter to the participant's or beneficiary's account for individual services; and (B) A description of the services to which the charges relate (e.g., loan processing fee). The preamble says: To the extent such a charge is otherwise disclosed during a particular quarter, for example by a confirmation statement after a charge is deducted from an account, that charge would not have to be disclosed again on the subsequent quarterly statement. Link to comment Share on other sites More sharing options...
GMK Posted August 19, 2013 Share Posted August 19, 2013 FWIW, I agree with your compliance side. The brokerage account statement should specify both the amount and the reason for the deduction after the actual fee amount was deducted ... unless after the deduction, they sent the participant a separate letter or e-mail listing the amount and reason. Link to comment Share on other sites More sharing options...
MoJo Posted August 19, 2013 Share Posted August 19, 2013 I also agree with your compliance side..., but the view of your everyday practical side is what (perhaps, maybe, possibly - and every other hedge I can think of) is what a certain TPA that I'm familiar with does. Unfortunately, those darn brokerage houses just don't pay attention to us when we asked them to be more specific. Link to comment Share on other sites More sharing options...
Bird Posted August 19, 2013 Share Posted August 19, 2013 I share everyone's concerns...but at the end of the day, my practical side says that's going to have to be good enough. Ed Snyder Link to comment Share on other sites More sharing options...
Belgarath Posted August 20, 2013 Author Share Posted August 20, 2013 Thank you for the responses. A follow-up question - What are the specific penalties involved IF the DOL were to determine that not providing the quarterly notice nder the "common sense" approach doesn't satisfy the requirement? Seems like the only thing I can come up with is it is a fiduciary breach under the general fiduciary requirements of ERISA 404a? I don't think it falls under the civil penalties for failing to provide a quarterly statement under PPA, although I suppose the DOL could attempt to assert that. And I guess the fiduciary would lose 404c protection. But I'm still struggling with the specific penalties for this as a fiduciary breach, if indeed that is what it is. Certainly all potential outcomes are bad, if adverse determination is made, but it would be nice to understand just HOW bad... Link to comment Share on other sites More sharing options...
K2retire Posted August 20, 2013 Share Posted August 20, 2013 Does this fall into the category that once I plan sponsor realizes they are not getting adequate disclosures from a provider they must terminate the relationship? Link to comment Share on other sites More sharing options...
BG5150 Posted August 20, 2013 Share Posted August 20, 2013 Annual notice: We're gonna charge you $100 for a loan, $50 for a distribution and $150 for a QDRO. Participant takes distribution. There's a $50 fee on the statement. Why is that a problem? QKA, QPA, CPC, ERPATwo wrongs don't make a right, but three rights make a left. Link to comment Share on other sites More sharing options...
Belgarath Posted August 20, 2013 Author Share Posted August 20, 2013 I go back to the specific wording of the regulation. (Mind you, this type of overkill is absurdity in my opinion, but I'm concerned about the specific requirements of the regulation - and the DOL isn't noted for being reasonable on such issues...) - the statement I specified, while it satisfies the the requirement in (A), does not satisfy the literal requirements of (B) as it does not describe the service. The regulation provides: (ii) At least quarterly, a statement that includes: (A) The dollar amount of the fees and expenses described in paragraph ©(3)(i)(A) of this section that are actually charged (whether by liquidating shares or deducting dollars) during the preceding quarter to the participant's or beneficiary's account for individual services; and (B) A description of the services to which the charges relate (e.g., loan processing fee). Link to comment Share on other sites More sharing options...
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