austin3515

5500-EZ, but I was wrong. You have to have one 100% owner of a corporation to be an owner only plan. If you were a partnerhsip, different answer - you can have any number of partners. But for a corp. you're only allowed one owner. See " Who Must File Form 5500-EZ" in here: http://www.irs.gov/pub/irs-pdf/i5500ez.pdf

I think it is an ERISA plan. Corporations are "owner only" plans if they cover only employees who own more than 50%. Anyway, check the fine print. Does it say "at least 50%" or "more than 50%." I don't remember, but I know you're right on the line.

Accoridng Fidelity's web-site (for small business Non-Prototype FBO product--NOT their real platform) they are still evaluating what their response to 404a-5 will be. I still think there is a big problem with these, since the Plan Sponsor needs to provide an explanation of how the arrangement works, and how the participant can provide investment directions, and a listing of the account maintenance charges, etc.. I just think that the brokerage houses need to come up with something, and it just seems to me that it would not be very difficult for thm to do so. The disclosures for the DIA's, of course that would have been out of the question. But telling participants the 800 number for investment trades and what the annual maintenance charges would be, there's just no excuse. It should fit on half a page what is required. [i'm sure there legal counsel will make it 10 pages, but it should be the same for every single plan, so let's go Fidelity! Get it done!!].

http://www.dol.gov/ebsa/regs/fab2012-2R.html From Today's Benefits Link. And just after I talked about this for half an hour in a training, and just after I finished my paragrpah in my cover-letters explaning how this was a big problem. From BL: The DOL has withdrawn Q&A-30 from Field Assistance Bulletin 2012-02, replacing the FAB with another bulletin that contains new Q&A-39, which does not include the former Q&A-30's requirement that the plan provide disclosure of costs for investments through brokerage windows that were not designated as "designated investment alternatives" but that were chosen in fact by specified minimum numbers of participants. Here is the text of new Q&A-39: "A plan offers an investment platform that includes a brokerage window, self-directed brokerage account, or similar plan arrangement. The fiduciary did not designate any of the funds on the platform or available through the brokerage window, self-directed brokerage account, or similar plan arrangement as 'designated investment alternatives' under the plan. Is the platform or the brokerage window, self-directed brokerage account, or similar plan arrangement a designated investment alternative for purposes of the regulation? "A39. No. Whether an investment alternative is a 'designated investment alternative' (DIA) for purposes of the regulation depends on whether it is specifically identified as available under the plan. The regulation does not require that a plan have a particular number of DIAs, and nothing in this Bulletin prohibits the use of a platform or a brokerage window, self-directed brokerage account, or similar plan arrangement in an individual account plan. The Bulletin also does not change the 404© regulation or the requirements for relief from fiduciary liability under section 404© of ERISA or address the application of ERISA's general fiduciary requirements to SEPs or SIMPLE IRA plans. Nonetheless, in the case of a 401(k) or other individual account plan covered under the regulation, a plan fiduciary's failure to designate investment alternatives, for example, to avoid investment disclosures under the regulation, raises questions under ERISA section 404(a)'s general statutory fiduciary duties of prudence and loyalty. Also, fiduciaries of such plans with platforms or brokerage windows, self-directed brokerage accounts, or similar plan arrangements that enable participants and beneficiaries to select investments beyond those designated by the plan are still bound by ERISA section 404(a)'s statutory duties of prudence and loyalty to participants and beneficiaries who use the platform or the brokerage window, self-directed brokerage account, or similar plan arrangement, including taking into account the nature and quality of services provided in connection with the platform or the brokerage window, self-directed brokerage account, or similar plan arrangement."

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.