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I'm requesting input from the daily plan administration community.  We are trying to minimize risk and not tak on too much fiduciary responsibility in our actions.   In our practice as a daily record keeper we direct the trade orders.   Some in our firm would like a client affirmation prior to processing ADP corrective returns.  Others know practically, involving the client or participants in this process is a frustrating process that only creates anxiety and has its own monetary risks and service problems.    What are others doing? Processing without approval?  Explaining the process upfront and not asking approval at the time of processing?  Asking for approval and processing after a # of days regardless? Asking for approval and not processing until approval is received even at the risk at missing the corrective distribution deadline?

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Just my thoughts.....

I would not like to see my client miss the corrective distribution deadline if we have the ability to get it done timely.  I know my plans that are most likely to fail and hammer those in the first wave of testing.  Because I've got my eye on those, if they fail I usually give the client the heads up they fail and let them know when we will be issuing refunds.  We do not look for a formal approval. 

I would guess that there are providers that send the refund checks asap with no approval of any kind. 

I have seen electronic signatures that say the census is correct as given so it is processed right away and refund checks would be issued right away.

Our census package indicates that if we don't receive the census by x-date, we cannot guarantee the refund deadline.  With that said, if I can still get the test ran and refunds completed, I try to do so.

17 hours ago, JGarbot said:

Some in our firm would like a client affirmation prior to processing ADP corrective returns.

Ok... what's the goal here? Client satisfaction? Supposed risk mitigation?

I have a example that kind of fits the scenario of worst case.  Multiple issues involved, but applies anyway.  We had a plan come to us in middle 2015.  Testing was completed in Feb 2015 by previous TPA and refunds needed to be issued.  The TPA sent out required distribution paperwork to employer for signature.  Plenty of time to have processed before deadline.  We take over plan and process the next year's census for 2016 testing.  2016 testing fails and refunds are needed.  I send an email letting them know refunds are needed.  They send back email asking about the 2015 refunds.  I process 2016 refunds.  2015 distribution paperwork was never signed and processed.  Guess who got to fix via one to one correction method the 2015 refunds?  You guessed it.  It wasn't cheap to the employer.

I said all this, to say that good people with a good process will mitigate a lot of risk.

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To the extent that the goal is for the TPA to avoid any sort of fiduciary status or potential liability, wouldn't sponsor approval of the refunds be necessary?  Otherwise, it looks as though the TPA is making benefit payment decisions, which confers fiduciary status on them.

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We take a fiduciary position with the plans that we service.  However, we do notify the employer of their refund and QNEC options and tell them that we will process the refund if no response by X date.  As a note, ordering a distribution from the plan would fall under the operational fiduciary responsibilities so determine if you are authorized to order the distribution if you are not a fiduciary.  

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Wouldn't calculating the ADP test imply a fiduciary responsibility?

So if I calculate the ADP test and the employer signs off on the refunds, I have no fiduciary responsibility?

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I thought that the ADP test was an objective test, requiring no degree of plan interpretation or other fiduciary actions to carry out.  If you think of the TPA as conducting the ADP test for the plan administrator, with the plan administrator having the authority and responsibility to direct the actions of the TPA based on the results of the ADP test, how does the TPA pick up fiduciary standing? 

Providing TPA services to a plan at the behest and direction of the plan administrator should not entail the TPA having to accept fiduciary standing.

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10 minutes ago, Mr Bagwell said:

Wouldn't calculating the ADP test imply a fiduciary responsibility?

So if I calculate the ADP test and the employer signs off on the refunds, I have no fiduciary responsibility?

It has always been my understanding the answers in order are:

No

Yes, but you have a professional responsibility if it is wrong.  It would be an E&O claim not a breach of fiduciary claim. 

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In fact ever since I started working in this industry one of the things consistently drummed into me is don't do anything that makes the TPA I work for a fiduciary. 

For example we never say a DRO is a QDRO.  We recommend the PA accept the DRO as a QDRO.  We don't authorize a payment we send the PA the information they need to make the payments or ask for authorization to make the payments.  Back when I worked on 4k plans we recommend the PA accepted the hardship as one of the safe harbor reasons and recommend the payment be made we never accepted the hardship request. 

The difference may seem small but it is my understanding legally the differences are huge. 

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We provide in our services agreement what we do, and how we do it (spelling out the high level "ministerial" process we undertake), obtain approval in that agreement (or agreements for ancillary services) that 1) the process is appropriate, 2) the process is ministerial, and 3) if the process produces x result, we do y additional.  So, we perform required testing (a ministerial function) and we provide the results to the client (with an "informational" only discussion of alternative corrective actions) and set a deadline for them to provide a desired solution or we will "ministerially" process corrective distributions.  We do not seek "authorization every year for the distributions to be processed.  It's negative consent (and virtually all of them just go with the flow).

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Interesting stuff.... honestly never been into the weeds like this about refunds.  :)

I have not worked for an actual "TPA".  I have been more of a full bundled approach provider employee.

 

 

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2 hours ago, Mr Bagwell said:

Wouldn't calculating the ADP test imply a fiduciary responsibility?

So if I calculate the ADP test and the employer signs off on the refunds, I have no fiduciary responsibility?

 

2 hours ago, ESOP Guy said:

It has always been my understanding the answers in order are:

No

Yes, but you have a professional responsibility if it is wrong.  It would be an E&O claim not a breach of fiduciary claim. 

Calculating the test is ministerial function delegated to you by the PA.  No fiduciary liability.

If the trustee signs off on the refunds, you have NO fiduciary liability.  You could have an E&O claim if you did not process the refunds as directed, but not a fiduciary claim.

 

 

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26 minutes ago, PamB said:

 

Calculating the test is ministerial function delegated to you by the PA.  No fiduciary liability.

If the trustee signs off on the refunds, you have NO fiduciary liability.  You could have an E&O claim if you did not process the refunds as directed, but not a fiduciary claim.

 

 

And you could have an E&O claim if you calculated the test incorrectly but still not a fiduciary liability 

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