austin3515

I have around 100 and they are all over the place. Good luck to me.

So what are you advising your clients to do who invest in FBO accounts, where the provider has nothing to offer?

Are you suggesting that today there is a realistic means of complying? IF so, what is it, please tell me! Aside from a 404a5 blanket disclosure from the fund company, I just don't see how it is attainable. Has anyone seen anything??

Let's say sponsor does not comply with these rules, and they send out incomplete information, or they don't do anything. 1) Is this an explicit fiduciary breach subject to the 20% penalty?; or 2) Have they simply lost their safe harbor. I am looking through the brokerage window disclosure requirements, and I fear that "FBO, Inc." does not have these disclosures. Does anyone have a sense for whether or not participants will be receiving those disclosures from any of the FBO providers (i.e., fees, commissions, trading charges, account maintenance, etc), perhaps incorporated into the statements? Or perhaps a pdf document available for download?

To not ignore the FAB for "good faith compliance" would mean that Plans wherein the advisor is using the same funds for participants within FBO accounts would need to provide all the fund performance data. There simply does not exist an infrastructure set to accomplish that. It is impossible to comply with. So for example, let's say the advisor pushes a set of Target Date funds in the brokerage accounts. According to the FAB those funds would be DIA's and require all the disclosures. But there is no mechanism to generate these disclosures, as there is for John Hancock/American Funds. That's what I was referring to. What are your thoughts on that particular aspect of 404a5?

Let's ignore the DOL's last minute FAB for a moment. If there are no DIA's, what would go in the 404a5 disclosure besides fees related to participant initiated transactions and a general statement that certain other expenses might be paid from plan assets? I'm not answering a question with a question, I'm actually asking a question . Are you referring to any account maintenance fees? The RIA fees?

Sometimes I'm amazed when a question that should be very very simple ends up being very complicated. I think the most conservative approach would be to pay bonuses on a date other than pay-date if you don't want to include comp. Better make sure the participant signs an election though saying no 401k from bonus.

I disagree, because the documents usually refer to a "pay-period" as opposed to a particular "pay-check."

Unless the document excludes bonus, I would say that it is included in the calculation.

From EBIA's commentary on the case sited above (empahsis added by me): In any event, this case underscores the importance of adhering to prudent procedures—and documenting those procedures—when carrying out fiduciary functions. For more information, see EBIA’s 401(k) Plans manual at Section XXVI.J (“Protection for Default Investments”). Link to their article: http://www.ebia.com/WeeklyArchives/CourtCases/20952

Tom, you are outstanding... I knew I saw something!!

But then why would Sal's 2011 book still include that paragraph?

I have a new client where the prior "vendor" () never told the client they were top-heavy. I was reading the ERISA outline book and Sal suggests that one might make a legally definsible argument that the top-heavy minimum may not be due in the year that a plan terminates. The argument would almost certainly be rejected by the IRS (he says), but you could fit this into a literal interpretation of the regs. He strongly recommends against this approach (I want to make sure I make this clear!). I seem to recall though that there was a recent IRS Q&A where this approach was publicly shot down by the IRS, and I'm need of that reference for purposes of these ongoing discussions. If anyone has it, I would appreciate it. Thanks!

There are stable value funds that do pay interest. And I think at some point before I retire money markets will start paying interest again (I'm a bit younger though, admittedly).

But some should have already sued, because they have defaulted into MMKT since the 80's. So if they haven't sued yet, why would they ever sue?

OK, maybe not $100K, but a LOT of money. And with respect to the sited Kraft case, I'm not sure that's quite the same thing as defaulting someone into the money market. That particular fund was supposed to invest exclusively in Kraft stock and it didn't. I should clarify that I'm following the QDIA rules based on the flawed assumption that my clients are distributing the notice in all cases. Anyone has a case where defaulted participants sued over being put in a money market, I'd love to see it. This was of course the norm for decades, so by the DOL's rationale there should be dozens of them!!

I just goit the impression from the sited case that had the notice not been sent, the ruling might have gone the other way. In other words, you're not entitled to the safe harbor unless you send out the notice. Again, I come back to my original point - would anyone have sued? Everyone always talked about how perhaps it would not be prudent to invest in the money market, but were the lawsuits on that topic that were lost? Due to poeple really sue unless they lose principal? I don't know, but I'd like to know if anyone can site a case where a trustee was held liable for investing in the mmkt as opposed to a balanced fund. Most people would regard never getting into court as preferrable to prevailing in court because of the expense associated with the latter.

I note that the crux of the defense is that they were able to substantiate that the notice was sent. I doubt most plan administrators could produce such a critical piece of information. Of couirse, had they not been defaulted, there never would have been a law suit. So again I ask, considering the defendants spent $100,000 defending their claim (perhaps more), which was worse again?

We've concluded that with JH in particular, we need to do it. It will only come back to haunt those who don't help. Too much editing! Americna Funds on the other hand prepared a delievery ready notice, but we are still going to email it to our clients and tell them they need to distribute the notice.

But, if you have the percents hard-coded into the document, then clearly this would not be a CODA. Consistency alone would not necessarily be a safe harbor, but I do agree it would make it look a lot less like a CODA.

Deemd CODA's are not a plan document issue - they are an operational issue. Although it is obviously a gray area, the owners shouldn't be able to elect their own profit sharing. Everything needs to be documented as a corporate action. The point is that just writing your document as described does not preclude a deemed CODA.

I'm just waiting for the call from that irate participant who lost money. That day will come! I'm sure others have already gotten that call. Recall that in 2008, QDIA was pretty new so the amount of defaulted money was probably relatively low. If we have another "dip" people might have more invested in the qdia and therefore lose more money. The ones I am most concerned about are the plans that are defaulting transfer balances into a QDIA. You come out of the gate with a huge amount of money in the QDIA. So people now might have 10's of thousands invested in the QDIA. Maybe they were in the money market before. I'm sure they'll have some thoughts on the QDIA decision that was made. And has anyone been called upon to prove that they did provide a notice? Shall we mail them first class mail, return receipt? IF you get sued, how exactly would you prove this?? I'm still curious to know if using the money market as the default totally invalidates any claim of 404c for the rest of the plan. i.e., the people not being defaulted.

Right, because 404c now requires use of a QDIA. So if I use a money market, I shouldn't be checking the 2F box on the 5500, nor should I say so in the SPD. Now, is 404c all or none? So if I don't use a QDIA is 404c irrellevant? The DOL has really ruined 401k plans. If I owned my own business I swear I would never start a 401k plan.

A) Selecting a QDIA as the default investment, such as a Target Retirement Fund or a Balanced Fund, but NOT distributing the QDIA notice (as might be the scenario with a client not so diligent about passing out important notices). B) Defaulting to a money market in anticipation that the QDIA rules are more or less impossible for most small employers to comply with. I note that the QDIA rules are not mandatory rules. I also note that Great West does a fantastic job at addressing QDIA. My own personal answer is that A) is worse than B). My saying is "If you're going to put someone on a roller coaster you better tell them that they're going on the roller coaster." I'm reminded of a sign at Disney World posted at the entrance to it's scariest rides. The sign says, in the form of a headline to a longer notice, "This is a ver scary ride." I think that is Disney's version of a QDIA notice. I just feel like one day someone is going to lose a lot of money and suddnely realize that they didn't like the way they were defaulted. And if the sponsor didn't provide all those notices (each year, mind you) then I can't see how the sponsor avoids liability.

In other words, "I agree with Austin"