katdmin Posted March 2, 2021 Share Posted March 2, 2021 I recently took over the admin of a pooled profit sharing only plan. And as it seems with every plan I start to work on, there's an issue. It looks like once a participant terminates, they stop sharing in the gain/loss. For an example, there's a term whose balance hasn't changed since the PYE 6/30/2014. I looked through the doc (it's the lovely Datair IDP) and I couldn't find any language confirming either right or wrong. If the plan sponsor is consistent, is it ok to NOT allocate earnings to terms with balances? Thanks! Link to comment Share on other sites More sharing options...
Bill Presson Posted March 2, 2021 Share Posted March 2, 2021 There is a section in that document that specifically says how the earnings are allocated. I would find it very odd (likely impossible) for a plan to allow this. William C. Presson, ERPA, QPA, QKA bill.presson@gmail.com C 205.994.4070 Link to comment Share on other sites More sharing options...
katdmin Posted March 2, 2021 Author Share Posted March 2, 2021 Thanks Bill! Well, the doc says this: 3.1.3 Allocation of Earnings Gains and Losses. As of each Valuation Date, the net income of the Trust Fund recognized since the prior Valuation Date will be allocated among Participant Accounts in a nondiscriminatory manner according to policies established by the Trustee. Net income is the interest, dividends, net gains or losses from the sale of investments, and unrealized appreciation (depreciation) in Trust Fund assets, less investment expenses of the Trust Fund. The portion of a Participant's Account held in a Controlled Account shall not participate in the allocation of earnings of this Section, but instead shall be credited with the actual earnings of such Controlled Account. In the event that the Participant's Accounts (or portion thereof) are invested in assets that are valued on a daily basis, his Account balance shall reflect the daily activity of such assets and the method of allocating earnings described in this paragraph shall not apply. Then it also says this, which makes me think this is my answer because "Participants Accounts" would include terminated until they take a distribution: 2.1.4 Termination of Participation. An Eligible Employee who becomes a Participant shall remain a Participant until his entire vested and non-forfeitable Account balance is distributed to him, or his Beneficiary, in the event of his death. The only reason why I hesitate is because of the wording "in a nondiscriminatory manner according to policies established by the Trustee" thinking they could have a policy that states they won't allocate to terms but to me that would be discriminatory. Link to comment Share on other sites More sharing options...
Bill Presson Posted March 2, 2021 Share Posted March 2, 2021 Yeah, I don't see anything there that would allow terminated participant accounts to be kept from receiving earnings. Luke Bailey 1 William C. Presson, ERPA, QPA, QKA bill.presson@gmail.com C 205.994.4070 Link to comment Share on other sites More sharing options...
ESOP Guy Posted March 2, 2021 Share Posted March 2, 2021 I think it is against the law also. I would think this would violate the substantial determent rule in 1.411(a)11(c)(2)(i) https://www.law.cornell.edu/cfr/text/26/1.411(a)-11 I would think this would violate some kind of fiduciary obligation to act in the best interest of all participants. I don't think the fiduciary rules would allow for you to discriminate in favor of the current employee over the terminated participants. Eve Sav and Luke Bailey 2 Link to comment Share on other sites More sharing options...
katdmin Posted March 2, 2021 Author Share Posted March 2, 2021 thanks, you guys are the best! I had a feeling it was not correct, but of course i couldn't find the exact wording i needed to have that conversation with the client. Link to comment Share on other sites More sharing options...
Bird Posted March 3, 2021 Share Posted March 3, 2021 (screaming) who was handling this in the past - the client, a CPA, or I hope not a TPA?! acm_acm and Bill Presson 2 Ed Snyder Link to comment Share on other sites More sharing options...
katdmin Posted March 3, 2021 Author Share Posted March 3, 2021 Bird, I don't even want to go there (screaming). I just started at this new company 2 months ago. My husband is tired of me sighing constantly (everytime I find something wrong). I truly think the people here just haven't been trained properly. Everytime I find something, I research it to death thinking I've been doing it wrong all along (almost 20 years in admin!). I was told when I started and kept finding document errors "The documents may not be correct. We can't go back to the client and tell them it's wrong or they'll get mad." Link to comment Share on other sites More sharing options...
Bird Posted March 4, 2021 Share Posted March 4, 2021 That's a tough situation, but the good news is that you are probably more valuable. Good luck. Ed Snyder Link to comment Share on other sites More sharing options...
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