austin3515

Well if they moved, the package we are sending would most likely not reach them anyway.

We have the ability to pre-fill Fund Company distribution forms with names and addresses before sending to terminated participants using an in-house software program. We would NOT enter DOB's or SS#'s. Just names and addresses. What are others doing? We had been including Names/addresses at one point in time but decided to stop because we felt like once that information was on the form, it was that much closer to being susceptible to theft. Do others have any insight regarding security audits, etc., that have done studies/analysis on this stuff? I'm sure others are putting a lot of thought into this. Part of the discussion of course is that we are mailing them the form, so the envelope and cover-letter does already have their name and address.

Polite on message boards?? That's novel concept :) I think I like that!

I want to be very clear about something. I would NEVER say yes to that question if there was no bond in place for the plan year (unless the effective date was retro). The question is "Was there a bond in place during the Plan Year." In my example I am indicating Yes which is completely not controversial. As to the Amount the question has but one word and no explanation. Anyway, I think it was an interesting discussion...

Internal memo, just in the files. In the old public accounting days for me "Memo to file" was a thing. The language you referenced seems to be discussing how you determine whether the bond is adequate. i.e. the determination of the adequacy of the bond is based on the reporting year. Does it preclude reporting the value of the bond as of a different date?

I recently wrote this memo regarding reporting a fidelity bond increase that took place in 2019 as of 12/31/2018. I'm less concerned with whether it is what you would do, and more concerned with whether or not it fits within the gray zone of opinion. Before I started writing the memo I was unsure, but as I completed it, I became convinced that not only was it ok, it was likely a preferred approach as a matter of providing valuable information to the reader. Anyway let me know what you think, The 5500 asks "during the plan year" did the Plan have a fidelity bond. We answered yes to that question because during the plan year there is a bond. The instructions are not specific regarding what bond amount must be reported (i.e. as of which date). For example, they could have said "enter the bond amount as of the beginning of the year” or “… as of the end of the year", etc. but they make no reference. In fact they provide no guidance on how to report a bond that uses the ERISA Inflation protection (if anything required explanation as to applicable dates it would be this). Based on this lack of guidance we are in a position where reasonable alternatives must be considered. One other reasonable approach would be to allow the Employer to report the bond in effect as of the date of the filing of the 5500. If a reader of a 5500 has more recent information regarding the value of the fidelity bond he or she will better be able to determine the level of protection the Plan has acquired.

So RBG, would you approve the request in my situation?

Personally I think you are inserting a threshold that is not in the regs. If it "could be done" then by complying with their wishes you are "preventing foreclosure." I personally don't think you have to wait until the very brink of disaster - you only have to be on the path to disaster. But anyway, the regs are not crystal clear on what "prevention of foreclosure" really means. So when there is flexibility I tend to give the benefit of the doubt to the participants.

Apparnetly in the bylaws to the condo association it says non-payment can result in a foreclosure on your property. Has anyone approved a hardship based on a delinquent condo fee? They have the nasty collection letter from the condo associations attorneys threatening that foreclosure is one of the remedies they will pursue. This is a first for me...

The promise that was made was "If you stay with us for 4 or 5 years" THEN we will give something to you. There was nothing of any value provided on day 1. Only the mere possibility of value in 5 years time. And the IRS says that's not anything at all. That's the whole point of the language "substantial risk of forfeiture."

It's not "another deferral." If something is not vested (i.e., someone has absolutely no right to it) it's not a deferral at all. The only deferral is the delay between the date the benefit vests and the date it is paid.

To be clear, an ERISA attorney wrote me a fairly lengthy email explaining her position as described above. Because it is both more conservative and generally better for the participant, it seems like a good approach!

Yes - and as someone pointed out this is a good thing! You typically delay payment like this to defer payment into a year when there is no other income. And if you defer payment into a year with no other income for FICA then all of a sudden you owe SS taxes. If on the other hand you pay FICA taxes there is no longer a substantial risk of forfeiture, the exec will "almost certainly" be over the SSTWB. You get the best of both worlds!

[I re-worded because I didn;t like it before!] I worked on a DC Plan with a "big law firm" and their position is consistent with EBECatty. In other words, if you are deferring payment/taxation for a "short-term" that is ok. If it were taxable immediately even if paid a short time later, there would be no value (or really meaning) to the rule.

I sent that link to a large actuarial firm we work and said "hey this would be perfect for DB plan terminations." The response was "That's who we already use." So that's two substantial endorsements!

WEll a) I personally do not hink a 1099 code is what makes it an ACP refund; b) getting some of these recordkeepers to change the 1099-R code might be a challenge. But to your point, I cannot argue with you that if they are willing to change the code, that should be done. Only that if they are NOT willing to change the code, that doesn't mean this won;t work. That's the distinction. For example, imagien trying to get TIAA-CREF to do this. Ha!! That's the funniest thing I've said all week!

Right but the initial issue was I did not believe time would permit that. Here's another argument in support of my position. Let's in January the guy cashed out 100% of his account. No rollover, just taxable distribution. I'm sure we all agree the refund requirement would be satisfied. Or better yet, let's say he had a $100,000 account, and distributed it all 100% as a taxable distriubtion, and left just $1,000 in his account. Now here comes another ACP refund of $2,000. What do you do? Tell him he needs to take another $1,000? that just seems crazy, and if you agree with me, then you agree with my approach above!

ESOP Guy I went to their website and its like someone is paying attention to a huge problem in the industry and tailor-made a business around it. Great link.

The 1099-R does not make ineligible for rollover. The fact that it is an ACP refund makes it ineligible for rollover, and he will be notified accordingly that a portion of the ISD is ineligible. At this point the exercise is academic because you all inspired to be clean my slate for the morning to finalize the refund and discuss with the client. But it seems to me it ought to work as described with a nice neat letter advising that $X is not eligible for rollover treatment.

1) Tom P. He was over 59 1/2 so no 10% penalty tax. 2) Lou S. The reason I don't want to do that is the obvious one. It's a pain. Not a pain for me, but a pain for the executive of a big client. And where in the regs does it say a distriubtion to a participant only counts as an ACP refund if it's coded a certain way on the 1099?

Tom - Do you think it really matters in light of my last response? I'm thiking the RK would not be flexible regarding changing the 1099 coding.

What's a 1099-r code got to do with it (don;t get me wrong I do know what you mean)? For example, often times a participant will close their account, and even roll it over. That's treated as a timely ADP refund even if they rolled it over. It seems to me the most important thing is that the money came out.

Participant is taking an in-service distribution from their Match Account "today" (cash out/non-rollover). As it turns out we are just about to tell the client they failed ACP testing and a refund is required for this very participant. Can anyone give me a reason why I can't take the position that the in-service distribution covers my ACP refund? The excess match (and then some) is about to be be removed from the Plan. I just don't have time to get the ACP test finalized to process it as an ACP refund yet. The participant has an urgent need for the funds, so no delay availalbe. I will certainly send a letter saying the amount of the ACP refund was not eligible for rollover.

Well there are often times people out there who get quite upset at the suggestion of things like that. I'm not disagreeing with you, but it wouldn't be the strangest thing in the world for someone to be uncomfortable with that. I mean what would George Costanza do if it were him? It says don't share your pin with anyone, Jerry!

I can sympathize with someone who has to sign say even 25 forms. And by the way, I assume this person "makes a lot of money" per hour and concludes it's not the best use of an hour and a half of his or her time. Big time executives I could definitely see saying "find me a better way because this is a waste of my time."