Leaderboard

Exactly what you pointed out - the basic plan document says that a participant can be forced out... but doesn't say anything about a beneficiary getting treated the same. However... this is the definition of "participant": Hmmm. Seems that I can treat the unpaid beneficiaries ass participants for this purpose... ?

I don't think that's possible. Under these circumstances, the plan Sponsor always signs the 5500, so their signature is the confirmation they have reviewed it. Was just curious about the separate authorization form.

If the service provider follows the procedures in the FAQ33a (see @C. B. Zeller's post above) and the service provider electronically signs the filing, the FAQ says "Under the e-signature option, the name of the service provider who affixed their own electronic signer credentials will not appear as the “plan administrator,” “plan sponsor,” or ”DFE” in the signature area on the image of the form that DOL posts online for public disclosure. The name will also not be disclosed as the electronic signer in publicly posted Form 5500 datasets or the public EFAST2 Filing Search application." Further, the FAQ says: "The IFILE application includes a statement for service providers that use this electronic signature option. The statement says that, by signing the electronic filing, the service provider is attesting that: • the plan administrator/sponsor/DFE has authorized the service provider in writing to electronically submit the return/report; • the service provider will keep a copy of the written authorization in their records; • in addition to any other required schedules or attachments, the electronic filing includes a true and correct PDF copy of the completed Form 5500 (without schedules or attachments), Form 5500-SF, or Form 5500-EZ return/report bearing the manual signature of the plan administrator, employer/plan sponsor, or DFE, under penalty of perjury; • the service provider advised the plan administrator, employer/plan sponsor, or DFE that, by selecting this electronic signature option, the image of the plan administrator’s, employer/plan sponsor’s, or DFE’s manual signature will be included with the rest of the return/report that the DOL posts online for public disclosure; and • the service provider will communicate to the plan administrator, plan sponsor/employer, or DFE signees any inquiries and information received from EFAST2, DOL, IRS, or PBGC regarding the return/report." The short version of all of this is the service provider should keep everything for each year. The written authorization does not say explicitly that it must be provided each year. Having a standing election runs the risk of it not being updated when the individuals involved change. The requirement to attach a "true and correct PDF copy" of the completed form "bearing the manual signature of the plan administrator" will be unique for each year. Getting the authorization concurrently with the manually signed form seems to be a best practice. To answer @Peter Gulia's question, this process is designed to require proof the plan administrator retains the responsibility to review and approve the filing, and that proof must be attached to the filing.

justanotheradmin, thank you for helping me think thoroughly. “Based on all of the relevant facts and circumstances, the group of employees to whom a benefit, right, or feature is effectively available must not substantially favor HCEs [highly-compensated employees].” 26 C.F.R. § 1.401(a)(4)-4(c)(1) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(4)-4#p-1.401(a)(4)-4(c)(1). But doesn’t that effective-availability concept refer to the right the plan provides? What the plan provides is a right to a distribution on having a severance-from-employment and having reached normal retirement age. That right is provided uniformly to highly- and nonhighly-compensated participants. Whatever expectation a participant had regarding before-amendment provisions is protected under the anti-cutback rule. I see that “the timing of a plan amendment . . . [could] ha[ve] the effect of discriminating significantly in favor of HCEs or former HCEs[.]” 26 C.F.R. § 1.401(a)(4)-5(a)(2) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(4)-5#p-1.401(a)(4)-5(a)(2). Whether it so discriminates “is determined at the time the plan amendment first becomes effective for purposes of section 401(a), based on all of the relevant facts and circumstances.” CuseFan, that some former employees neglect to update email, postal-mail, and telephone addresses might not be too big a problem if, as the employer believes, few low-wage workers will elect deferrals under the after-amendment provisions. Also, when an individual turns 65, she’ll get the Social Security Administration’s you-may-have-a-benefit letter, which directs its addressee to the employer/administrator. About the many subaccounts, I know the employer/administrator would need to negotiate its recordkeeper’s services, and that it might lack enough bargaining power. I concur with everyone that the employer’s plan design challenges the plan administrator’s responsibility and the recordkeeper’s services. As I mentioned, I don’t advocate the design. But BenefitsLink neighbors’ cautions help me volunteer cautions beyond the two questions I was asked.

of course they could roll the proceeds to an IRA, avoid the 20% withholding, and then turn around and raid the IRA without mandatory withholding.

Oh that's different. I don't recall if hardship is a protected benefit, you may or may not be able to amend that out, but if the Plan has in service at 59 1/2 and/or severance of employment already you'll need to preserve that for all current participants at least for funds currently in the plan and any earnings thereon or you'll have a prohibited 411 cutback. Accounting for pre and post amendment balances by source for all participants seems a nightmare and just asking for trouble. Oh and then telling folks that some of their is available when they terminate and the rest when they turn 65? That sounds like a fun conversation.

I agree that this plan design is permissible. The safe harbor rules do not impact and are not impacted by the normal retirement date. If the State has a requirement that the employer must maintain a retirement or acceptable alternative, this plan design is a retirement plan. While we are at it, why not add auto-enrollment and auto-escalation and no EACA withdrawals? You also could add in rollover in and keep those to NRD. Over time, the plan proportion of terminated vested participants very likely will accumulate to be greater than the proportion of active participants. The plan will have the burden of providing all of the required disclosure to these terminated participants (SH notice, SPD, SAR, QDIA notice, 404(a)(5) notice...). The accumulation of participants with account balances very likely will push the count of participants with account balances beyond the threshold for requiring an audit (keeping in mind that the deferrals and safe harbor are both 100% vested). There likely will still be payments other than retirement benefits for QDROs and death benefits. Autoportability is off the table since it now pretty much relies on the benefits being distributable. If the plan is going to hold the account balances until NRD, then it should at least allow for the contributions to be made as Roth contributions. I expect that our BenefitsLink colleagues who have read this far are cringing at the thought of such a plan.

A plan can allow for no distribution prior to normal retirement age. Though I believe that's much more common in a DB plan with annuity only options. I don't see why you couldn't do it in a safe harbor 401(k) Plan, but I'm not sure you should do it.

Or, if the participant and the spouse might still be spouses when the plan’s final distribution is to be paid or delivered, the plan’s administrator might want its lawyer’s advice about whether to obtain a qualified-joint-and-survivor annuity contract (for the portion of the participant’s account that is subject to the QJSA protection), interplead all claims and rights and petition for equitable relief in the Federal court for the district in which the plan is administered (or the Federal court the plan provides as the exclusive forum, if the plan so provides), and deliver the money (if any) and the annuity contract to that Federal court. But, as I imagine Kansas401k suspects, it might be simpler to help the divorcing persons get to conclusion and a QDRO before the plan’s final distribution. This is not advice to anyone.

I often tell clients and others there are two rules to observe when working with an insurance company... Rule 1: Insurance commpany always wins. Rule 2: Refer to Rule 1. Insurance companies are not in the business of letting go of assets. My exprience is that the people working at most such companies don't care about ERISA fiduciary duties, although they should. I suggest your attorney draft a complaint alleging fiduciary breach by VOYA and your employer. Then send it to your employer and VOYA's manager with the message they need to fix this or you will file. Of course, that will cost you money which is not fair. It may cause your employer some heartburn, as well, but retaliatoiin is also a vciolation of ERISA. Sometrimes a written complaint is the only way to get the attention of plan fiduciaries and insurance companies. The QDRO procedures requiremenet has been on the books since the mmid-1980s. This is really fundaamental plan work.

Keep in mind that in-service withdrawals, including hardship withdrawals, are not required to be permitted in the plan document. You are going to have to look at the plan provisions to see what is or is not permissible for this employer's plan. Most likely, you will not find a restriction in the plan that in-service withdrawals are not available to participants with outstanding loans. Until recently, the hardship withdrawal rules required a participant to take a loan before taking a hardship withdrawal (assuming loans were available under the plan and the taking of the loan itself was not causing additional hardship). While no directly relevant to this situation, it does illustrate that taking an in-service type withdrawal while having a loan was and is permissible. The amount of a loan @Bill Presson notes is based on vested amount in the participant's accounts available at the time the loan is taken. There is a strategy with taking a loan first and then taking an in-service withdrawal. It maximizes the amount available when the loan is taken and the loan is a not distributable event, does not incur potential early withdrawal penalties, and does allow for the opportunity to repay the loan. The amount of the subsequent in-service withdrawal was less and hence the adverse consequences of an in-service withdrawal were less.

This pension plan document might help you: https://www.wgaplans.org/pension/plan_doc/pension_index.html. Also, with your client entering her password, she might allow you to see her participant website: https://myplans.wgaplans.org/.

I suggest that you try to pose this question to the plan's original document provider. They are the most knowledgeable about what they provided and how they addressed all of the LRMs for each year in question. For example (and not a suggested course of action), they may have provided a termination amendment for the PPA document that would have added all of the required provisions needed should the plan have terminated before the Cycle 3 document was needed. If the plan's original document provider is uncooperative, you may want to pose this question to you current document provider to get similar input. Some document providers will sort this out for a plan but they may charge a consulting fee.

Somebody might remind both the employer and the provider that there is a fiduciary duty to process domestic relations disorders and determine whether or not they are qualified. The statute suggests an outside time limit (often misinterpreted), but the law requires that things be done within a reasonable time. The threat of fiduciary liability sometimes gets things moving.