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Doc says participant directed, plan is pooled


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Plan Doc says participants will have investment direction over their accounts, but all the money is pooled into one account.

I think the easiest fix is to retroactively amend the plan to say it's pooled an move one.  (The population is owner, spouse and one low-paid employee who only gets a small SH & PS each year).

Can they do that?  SCP even though that's not explicitly one of the reasons to have a retroactive amendment under EPCRS?

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Check the document. I will bet you that it has a provision that basically says if a participant who otherwise has the right to individually direct their funds declines to do so then those funds can be invested essentially as a pooled fund. Bet you bet you.

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On ‎7‎/‎10‎/‎2020 at 2:53 PM, Mike Preston said:

Check the document. I will bet you that it has a provision that basically says if a participant who otherwise has the right to individually direct their funds declines to do so then those funds can be invested essentially as a pooled fund. Bet you bet you.

I agree it probably says that, but for it to work 100% you will have to take position that the NHCE was aware and declined in accordance with plan provision. In any event, if the plan is not amended the owners should certainly reach out to the employee and document his/her decision not to self-direct now. That would be especially the case if the owners have invested the funds idiosyncratically, which they probably didn't, but I would want to know that. Who knows what will happen down the road.

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If the plan’s governing documents allocated investment responsibilities to participants or they had a right to direct investment, might the plan’s administrator have breached an ERISA § 404(a) responsibility if the administrator did not meet the disclosure requirements of 29 C.F.R. § 2550.404a-5 for 2012 and later years.

 

Even if the liability exposure to the one employee is both slight and remote, an employer/administrator might consider getting its lawyer’s advice about opportunities to reform, or at least amend, the document to state a plan that is not participant-directed (if that was, or is, the true intent).

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8 hours ago, BG5150 said:

Plan was effective 1/1/16.  What about retroactively amending to conform to the way the plan was being run and coincidental to the ERs original intent?

How would this help? It's not within the remedial amendment period and outside the zone where you can self-correct through plan amendment under EPCRS, so seems to me to only highlight/compound IRS problem. And the real problem (to the extent there is one, and there may not be one) is (a) employee becomes disgruntled and is terminated and (b) claims his own investment choices would have been better than what plan did. Probably better to just fix going forward, clarify employee communications, and move on.

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I think I'd amend currently and move on.  I don't see a self-correcting fix for this and am not sure what is accomplished by a VCP submission; I mean, ok you can pay a price for a clean bill of health but is that price less than the price if it is "caught?"  

I guess I am agreeing with Luke Bailey; just read that post more carefully.

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