PS Posted June 21, 2022 Share Posted June 21, 2022 Hi, I've encountered a very unique situation. One of the terminating plan has a stable value fund and the client does not want to wait for the 12 months PUT period they want the MVA adjustment done and also they would pay the market value directly to the IRA provider where the participants will rollover. I've never come across something like this, how can the participants can get paid or what would be a better approach? Link to comment Share on other sites More sharing options...
Peter Gulia Posted June 21, 2022 Share Posted June 21, 2022 From context, I guess the plan you ask about is an individual-account (defined-contribution) plan. If a fiduciary (such as the employer in its role as the plan’s administrator or trustee) pays an amount “to restore losses to a plan resulting from actions by a fiduciary for which there is reasonable risk of liability for breach of a fiduciary duty under title I of the Employee Retirement Income Security Act of 1974 . . . or under other applicable federal or state law,” such a payment is not an annual addition for Internal Revenue Code § 415. For the details and conditions, see 26 C.F.R. § 1.415(c)-1(b)(2)(ii)(C) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR686e4ad80b3ad70/section-1.415(c)-1#p-1.415(c)-1(b)(2)(ii)(C). If there is no risk of liability, an employer could pay the plan an amount that adjusts the stable-value contract’s values, but would do so within annual-additions limits, and within coverage and nondiscrimination constraints. Either way, the employer pays the restoration or other adjustment into the employer’s retirement plan. When the stable-value insurer or bank gets the money, it and the recordkeeper adjust the individual accounts’ balances before the plan pays its final distributions (whether rolled to an IRA or not). Luke Bailey 1 Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
PS Posted June 21, 2022 Author Share Posted June 21, 2022 1 hour ago, Peter Gulia said: From context, I guess the plan you ask about is an individual-account (defined-contribution) plan. If a fiduciary (such as the employer in its role as the plan’s administrator or trustee) pays an amount “to restore losses to a plan resulting from actions by a fiduciary for which there is reasonable risk of liability for breach of a fiduciary duty under title I of the Employee Retirement Income Security Act of 1974 . . . or under other applicable federal or state law,” such a payment is not an annual addition for Internal Revenue Code § 415. For the details and conditions, see 26 C.F.R. § 1.415(c)-1(b)(2)(ii)(C) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/subject-group-ECFR686e4ad80b3ad70/section-1.415(c)-1#p-1.415(c)-1(b)(2)(ii)(C). If there is no risk of liability, an employer could pay the plan an amount that adjusts the stable-value contract’s values, but would do so within annual-additions limits, and within coverage and nondiscrimination constraints. Either way, the employer pays the restoration or other adjustment into the employer’s retirement plan. When the stable-value insurer or bank gets the money, it and the recordkeeper adjust the individual accounts’ balances before the plan pays its final distributions (whether rolled to an IRA or not). Ok, here the plan sponsor does not want to wait for the 12 months PUT and just want to force out the unresponsive participants funds to an IRA provider. Hence the stable value provider state they will pay/make the adjustment once its rolled over to the IRA provider is this something doable? I've never seen this happen. Link to comment Share on other sites More sharing options...
Pam Shoup Posted June 21, 2022 Share Posted June 21, 2022 Is this a Stable Value Fund within an insurance product where the MVA is actually an option? Mechanically, the insurance company should be able to give you an estimate of the MVA and that amount could be deposited and pro-rated to the affected participants prior to their distributions as an earnings amount. All affected partcipants should be credited with the MVA amount. If it has a true stable value fund, have you applied for the waiver of the PUT? It will most likely not be granted, but it will start your 12 month clock. If it is a true stable value fund, there will not be an option for a MVA. With regard to your question above, on a plan conversion, we have seen Stable Value Funds accept assets from one recordkeeper to another, as long as it was either a transfer in kind for the SV fund, or some sort of transfer where they could put the money into the stable value fund, but maybe another share class. Maybe this is what they are referring to for those that transfer to their auto IRA or to an IRA provider that leaves the money in the stable value fund. In this case though, you still have the issue of those who choose to cash out or or roll to another institution not being treated the same way. Pamela L. (Bobersky) Shoup CEBS, RPA, QKA AMI Benefit Plan Administrators, Inc. 100 Terra Bella Drive Youngstown, Ohio 44505 800-451-2865 www.amibenefit.com Link to comment Share on other sites More sharing options...
PS Posted June 22, 2022 Author Share Posted June 22, 2022 16 hours ago, Pam Shoup said: Is this a Stable Value Fund within an insurance product where the MVA is actually an option? Mechanically, the insurance company should be able to give you an estimate of the MVA and that amount could be deposited and pro-rated to the affected participants prior to their distributions as an earnings amount. All affected partcipants should be credited with the MVA amount. If it has a true stable value fund, have you applied for the waiver of the PUT? It will most likely not be granted, but it will start your 12 month clock. If it is a true stable value fund, there will not be an option for a MVA. With regard to your question above, on a plan conversion, we have seen Stable Value Funds accept assets from one recordkeeper to another, as long as it was either a transfer in kind for the SV fund, or some sort of transfer where they could put the money into the stable value fund, but maybe another share class. Maybe this is what they are referring to for those that transfer to their auto IRA or to an IRA provider that leaves the money in the stable value fund. In this case though, you still have the issue of those who choose to cash out or or roll to another institution not being treated the same way. It's a PIMCO stable value fund and its a plan termination and the client has already informed them about the plan termination and there is a 12 months PUT. since we are dealing with unresponsive participants the fund swill be liquidated and rolled over to an IRA account. Link to comment Share on other sites More sharing options...
Pam Shoup Posted June 22, 2022 Share Posted June 22, 2022 Check with PIMCO and see if they will permit you to liquidate the fund before the PUT has expired. Pamela L. (Bobersky) Shoup CEBS, RPA, QKA AMI Benefit Plan Administrators, Inc. 100 Terra Bella Drive Youngstown, Ohio 44505 800-451-2865 www.amibenefit.com Link to comment Share on other sites More sharing options...
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