Leaderboard

I once worked for a company that allowed brokerage window in the 4k plan. The one restriction was you couldn't buy the employer's stock. They didn't want the brokerage window to be a way around the restrictions on company stock in the plan. You example might be harder to get a broker to keep a list of stocks that can't be bought and having to update it regularly but that might get to the same place it seems like.

To further expound on Truphao's comments - yes, the plan can pay the PBGC premiums, HOWEVER, they just get added back into the next year's Target Normal Cost, so there really isn't any advantage - other than sliding cash due from one year to the next. In other words, if you are in a cash crunch, you can use plan assets, but its "pay me now or pay me later". Many plans doing lump sum windows and annuity purchase as a way to reduce PBGC premiums - especially if you are at the cap. Cost to process lump sums is far less than the cost of the premium, so ignoring the impact to funded status - it is an effective way to reduce premiums.

BG5150: In my experience dealing with the DOL, they would look at this through the following lens: The ERISA fiduciary (Plan Administrator) "messed up" in this case--late contributions, etc... Plan participants should not have to "pay" for the fiduciary's mistake. In their view, this would not be a reasonable expense of plan administration. Others may have a different view, but this is mine. The answer is no.

Pretty much every brokerage house provides online access to the account holder. There is a minority of brokerage houses that provide trustee or PA access to a group of accounts even though each account is titled in the name of the trustees FBO a participant. Exceptionally frustrating to work with. We work with some plans where the brokerage house is of the opinion that the participant must authorize online access to the account and must authorize mailing a hard copy of the account statement to the trustee, PA or TPA. There is a minority of brokerage houses that enforce investment restrictions in a participant's brokerage account. These accounts most commonly are restricted to securities tradable on major stock exchanges. Trustees and PAs do need to monitor investments held brokerage accounts because without the brokerage house enforcing restrictions, the plan winds up with assets like limited partnership, private placements, naked put and call options, real estate, gold bullion and other nontraditional or high-risk investments. We have seen all of these turn up in accounts. Larger plans tend to require all participants who wish to use a SDBA to use the brokerage house chosen by the Plan Sponsor or PA. Small plans are more likely to allow individual participants to pick their own brokerage house and broker. (Enter into the picture here the owner's recently-graduated children, or Uncle Bob, or Joe at work who knows all about investing...) Unfortunately, working with a plan that uses a brokerage house that does not provide to the trustee or PA at a transaction and asset level can be a very labor-intensive effort, particularly when a plan is subject to an audit. Further, the plan fiduciaries are not aware when a broker who knows all about IRAs and squat about 401(k)s advises the participant about RMDs or suggests taking a payment and rolling it back into the account within 60 days. SDBAs definitely can add value to a plan's investment menu. It is important to work with a brokerage house that knows about and provides information needed by plan fiduciaries for the fiduciaries to fulfill their responsibilities.

yes, PBGC premiums are payable from the Trust, and it is a prevailing practice for many "larger" corporate DB plans

I would think the Trustee has access to participant statements even though it would be on an ad hoc basis (if they aren't online somewhere). In fact, I would think the Trustee MUST have access to that information. Those accounts don't belong to the participant (yet), they belong tot he trust FBO the participant. Same with the plan administrator. I would think they must have access tot he current assets and transactions within the plan.

In the OP, and then the discussion has been all about match formulas. A match is an enticement to encourage employees to contribute to the plan. If the goal truly is to entice people to work for him, then a juiced up match is not likely going to achieve that result. Consider having a conversation to confirm the objective, and if it truly is to provide a work incentive then explore a profit-sharing contribution. If the work force is generally lower paid, giving everyone who is eligible a small, flat-dollar amount initial contribution and an allocation of a percentage of profits gets them into the plan and focuses on the message that work pays off. The allocation period can be more frequently than annual if the company really wants to push the message. The profit sharing contribution can have a vesting schedule to hold down cost if there is high turnover. The company can still add a basic safe harbor match for those who wish to defer.