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Managing the titling of SDBAs can be a major PITA where the plan allows each participant to set up the account and the financial institution plays hardball and insists that the names of individual trustees appear in the title. The greatest pain comes when one of the individual trustees leaves the company or worse, dies, and the financial institution insists that they will only accept an instruction if it is authorized by all of the trustees named on the account. The paperwork and time delays can drag on for months. When we work with a plan that wants to let participants choose their own brokerage (or even multiple brokerages), we explain this issue up front and strongly encourage them to not set up any accounts until they and we have an opportunity to review the account paperwork before that paperwork is signed. We look at things like the titling of the account, authorizations for the accounts to hold assets like limited partnerships, hedge funds, gold, annuities, real estate, and authorizations for the participant to participate in transactions like private placements or option trades. We also look at the financial institutions reporting to the plan administrator and to us as recordkeeper. We recommend keeping things simple and setting boundaries applicable to all participants. We don't always get our way and when we don't, we explain that the additional work for working with assets or accounts outside the boundaries will be billed (with a recommendation that the participant's account pays the fee). The biggest headache is when a trustee in senior management has a kid who just graduated from college and joined a financial firm. That trustee wants throw a little business to the kid get the kid's first sale and doesn't want to hear about how big a pain an uncontrolled SDBA can be. Bottom line, we like to see accounts titled as [Trustees of Name of Plan] FBO Participant so any change is trustee effectively happens upon the formal addition or removal of any individual, and we want to be copied on statements (electronic or paper) with the most frequent reporting (typically monthly).

Excuse me, I believe you have my stapler....

IRS announced they fixed the "glitch" (shades of Office Space) and will allow clients to ignore any late filing letter dated before 9/1. IRS Clarifies 8955 notices

From my experience it is too late unless the penalty is due to an error (i.e. the client filed under the wrong EIN). The client should have received CP403 and CP406 notices well in advance of the CP283 penalty. I believe the fact that the CP283 notice is associated with 5500EZ is just semantics as EZs are filed with the IRS and 5500 & 5500SF are filed with the EBSA. Both agencies can apply a penalty for a late filer of Form 5500 and 5500SF. Also see Q4 & Q9 here: https://www.irs.gov/retirement-plans/form-5500-ez-delinquent-filing-penalty-relief-frequently-asked-questions

Even though age 50 is potentially disqualifying, if you amend to 62 isn't that a benefit cutback, so VCP required? I guess if the fully subsidized ERA comes out to be the same benefit amount, arguably not.

EBECatty, the way I read both the DOL Fact Sheet and the FAQs, any correspondence or related action by IRS is not going to disqualify you from DFVCP. Only a DOL letter will do that. So let's assume you are successful under DFVCP. You should be. The IRS "guidance" on the topic, which is just what it says on its website, would seem to say that it will probably abate penalties once you demonstrate success under DFVCP. My guess is that you would be successful here as well, but I am not aware of anything in the IRM or anywhere else that discusses this situation, and of course dealing with IRS is often a demanding process on something like this.

The Bakers helpfully pointed us to Nevin Adams’ alliteratively titled article on a court’s decision that ForUsAll, Inc. can’t sue the U.S. Labor department about EBSA’s “Compliance Assistance Release” about “cryptocurrencies”. https://www.napa-net.org/news-info/daily-news/401k-crypto-case-crumbles-federal-court; https://www.napa-net.org/sites/napa-net.org/files/ForUsAll%20Inc.%20v.%20U.S.%20Department%20of%20Labor%20et%20al_082923.pdf; https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/compliance-assistance-releases/2022-01.pdf. Judge Christopher Reid Cooper finds that, even if the Employee Benefits Security Administration acted contrary to law by issuing its nonrule document, ordering the Release to be treated legally as a nothing would not relieve the harm ForUsAll asserts because prospective customers would still face the same risks about investigations and enforcement. Also, the opinion finds that courts do not review a Federal government agency’s nonrule document if it sets no legal right or duty, and no legal consequence flows from the document. The judge found EBSA’s Compliance Release was “informational” and does not compel anyone to do anything. Rather, it suggests fiduciaries “be prepared to explain how [their] actions comport with their duties of prudence and loyalty—whatever those duties are.” The opinion observes that the law is unsettled about what responsibility a plan’s fiduciary might have regarding an account that is not a designated investment alternative.

Q&A-4 is indeed limited to EZ filers. You can file DFVCP for 5500s filed for plans other than one participant plans and foreign plans after you receive a CP283 notice. You cannot use the IRS penalty relief program after CP283 (penalty was assessed after notice and follow ups), but you can still request penalty abatement (with no guarantee of approval). If you request abatement and get denied, you are no longer eligible for the penalty relief program. You cannot file DFVCP after the DOL has notified you in writing of a failure to file. I belive that DOL procedure says this has to be certified mail, but they also say they can change this at any time without notice. The DOL is now sending emails letting you know that they did not receive a 5500 they expected, and they have stated this does not prevent you from filing DFVCP.

Nate X, was your experience with EZ-filers only? Q&A-4 seems inconsistent with the more general guidance regarding the IRS's willingness to waive penalties if the plan successfully completes DFVCP. My thought is perhaps Q&A-4 was intended to apply only to EZ-filers, for whom DFVCP is not an option. The Q&A's are specifically addressing EZ filers.

The solution Bill Presson describes—making a corporation the trustee that holds record title to several brokerage accounts—might be one available to employers in some States. While many States’ laws prohibit a corporation that’s not a bank or trust company from engaging in a business of serving as a trustee or other fiduciary, a State’s law might permit a corporation to serve, without compensation, as the trustee of a trust for an employee-benefit plan for the corporation’s employees. To pick just one example, Pennsylvania’s Banking Code expressly permits a nonbank corporation to act as trustee of a trust “for the benefit of [the corporation’s] own employe[e]s[.]” 7 Pa. Stat. § 106(a)(iii).

I was told I could listen to the radio at a reasonable volume.

The reason they ask for date of DL is that distributions are required to be completed by the later of 180 days after expiration of PBGC's 60 day review period or 120 days after date of IRS DL (if submitted to IRS before submitted to PBGC). The PBGC Form 500 shows the date of IRS submission, if I recall, so they already know if plan was or was not submitted to IRS before PBGC. They don't care one way or the other, just need to know for enforcing their requirements on timing - to which they are very stringent unless you ask in advance for and get extensions.

There was cutback relief from upping NRA to 62 for a couple of years after that was enacted, but that was quite a while ago now so I agree it would be a cutback and think a VCP would be needed in this situation. Accrued benefits and funding were never the issue for artificially low NRAs, it was a situation where NDT could be manipulated and/or participants could get in-service NRA distributions very early. A successful VCP application on this might be contingent upon neither of those IRS-perceived abuses occurring in that plan.

I just watched a recorded webcast where it was said the IRS could (would?) waive excise taxes if self corrected within 180 days. Given you're within that time period (and still the same tax year) I would do that. Worst case, I believe, is a 10% excise tax if corrected timely.

That responsibility is satisfied through these requirements being spelled out in the SPD, which we all know every participant thoroughly reads, understands and remembers - LOL! The legal responsibility is satisfied, but it would be a good employee relations practice to remind such participant of those provisions.

Do you think the participant understands this? (In my observation, an emphatic NO.) If you think the answer is NO, then there may be some administrative responsibility to inform the participant.

Check the plan document, and in particular, check its definition of spouse. Some documents say the couple has to be married for one year before the newly-wedded spouse is recognized by the plan. Some documents are explicit in saying the date of the marriage automatically considers the spouse as the default beneficiary overriding any other existing elections.

Had a similar situation with a client back when I was in Lexington, KY. They ended up seeking approval from the State Dept of Financial Institutions to have their medical practice operate as a trust company only for their retirement plan and got approval. So the PC became the trustee for all the accounts.

The DC probably didn't need the DB to pass 410(b) and (a)(4), however, so it's probably OK. The post-distribution certification does ask for date of IRS DL. Don't know what happens if you put "none." In theory, the PBGC, if it new all of the facts, could take the position that the plan had a liability equal to trust taxes if IRS found out disqualified.

A PBGC case officer isn't likely to know much about the nondiscrimination standards for floor-offset plans. As CuseFan says, the PBGC audit will concentrate on whether participants received the benefits to which they were entitled under the terms of the plan. On the other hand, distributions by a disqualified plan are ineligible for rollover, so that closing out the DB plan before the qualification problem is resolved could result in nasty tax surprises for participants. Note, too, that since the plans were aggregated for testing, both are at risk of disqualification.

The trustee is, or should be, the owner of the account(s), and the participant's role should be limited to directing investment transactions. Accordingly, the trustee should get, or be able to get, statements on the accounts and definitely should not have to rely on the participant(s). Since financial advisors and/or behemoths such as Fidelity have a strong presence in this end of the market, it is no surprise that the accounts are often set up incorrectly.

Hey now, the HCE isn't making that choice, the Employer is. But yes, if you look at the AA for a pre-approved plan you can often find the language right there in the SH section, the Employer "may" elect to provide a lesser allocation to HCEs. So it's an ongoing option each year.

Was the employee's vested account balance at the time they last performed services for the employer less than $5,000, and does the plan contain a provision requiring the involuntary distribution of vested account balances of less than $5,000 upon termination? Did the employee have 5 consecutive 1-year breaks in service after the time they last performed services for the employer and before they died? If the answer to both of these questions is no, then I think it's clear that the account should become 100% vested upon the employee's death. If the answer to either question is yes, then a forfeiture may have occurred upon the employee's separation from service, or after 5 consecutive 1-year breaks in service. However, if the dollar amounts involved are not large, and the employer is concerned that the issue may not be entirely clear and wishes to avoid a potential dispute with the employee's beneficiary, the employer might choose to explicitly grant the additional vesting and pay out the full account balance.