MoJo

Uh, yea, well we've seen people "try" to do this, and "advise" the plan sponsor against granting the loan in the first place. I hate to say it, often it's an owner seeking a loan to make payroll or some other business expense, and that in and of itself raises issues about the ability of the borrower to make payments. In other circumstances, we've seen participant take a principle residence loan, followed by 8 other people in the same location, all buying the same property. Same with hardships. Participants talk. In one case, they shared the same "eviction notice" complete with the same typos. It happens. Hardships are evil too, but loans are "eviler." ?

Absolutely! But it is also self-correcting. Our loan policy (consistent with DOL guidance) says one defaulted loan on the books, and no more loans - until it's paid in full. PERIOD. Plus those pesky tax consequences.....

What you describe is a ruling that indicates that a condition to initiate a loan - being a requirement that payroll deduct be the only way to repay the loan, cannot be prohibited by a non-federal law. IT DOES NOT say that state based wage and hour laws can't give a participant the right to then remove consent to continuing withholding from their paycheck. There is a difference....

I don't agree that the plan has a problem. The plan has to offer loans consistent with the regs (non-discriminatory, compliant with 72(p), etc.) and be on "commercially reasonable" terms. ALL of those criteria apply at the time the loan is intiated/taken. Subsequent events have no bearing on the plan's compliance with it's loan policy and the regs. There may be a "fiduciary" issue in not attempting to collect a loan - but that is more of an academic conversation unrelated to plan "qualification" issues. Loans are (still) evil.

Speaking from a service provider's perspective (bundled recordkeeper) - it would *never* be implemented unless the employer themselves implements something - and even that would bungle up things. Even something like filing a "mortgage" for a loan for the purchase of a principle resident is impossible and cost prohibited to do (and would require compliance with 50 different state requirements, and probably even more local protocols to perfect an interest). Loans are evil. 'nuff said.

I disagree that state wage and hour laws are pre-empted by ERISA. ERISA's pre-emption only applies where state law is inconsistent with ERISA. I defy anyone to find ANYTHING in ERISA that says one can mandate a particular form of payment, and as you say, the "consent" is a "contract" and contracts are governed under state law, and many state laws provide that employees cannot be forced to have amounts withheld from pay absent (on-going) consent. Show me the inconsistency between state law and ERISA here. It simply doesn't exist.

I'm tired of "very...interesting." I'd like to go back to normal, dull and boring ERISA work!

While I agree in principle, there really is nothing that says the DRO has to be specific to "pay" for child support. It could simply be payment in settlement of a an obligation, which in this case, is child support. I would question why the custodial parent would want to roll over this payment - as it shifts the tax burden - as you say David, when they could simply take it in cash - and if they so choose, invest it otherwise (maybe even take a deduction for a contribution to an IRA). Money is fungible.... And BTW, once the money is in the name of the AP in the plan, they are, in fact, a "participant" and I can't see why a DRO couldn't be issued against those proceeds.

My initial thoughts - concepts that came to mind: "leased employees" and "affiliated service groups." Just sayin.... Facts matter.

1) The IRS issued guidance on this point - which provides a "safe-harbor" and indicates there are other "reasonable alternatives" (and then lays out ONE such reasonable alternative as an example. The safe harbor is to defer until 1/1/2021 and reamortize as of that point in time, with all payments due as scheduled. The ONE reasonable alternative is defer payment due in 2020 until 10/1/2021, but require regular payments due in 2021 to be paid as scheduled. In this alternative, you would reamortize as of 10/1/2021. Another alternative discussed (but not referenced by the IRS in the guidance - but of which they were aware) would be to stop payment from 10/1/2020 through 10/1/2021, and reamotize then. 2) The Act allows for an extension of the term of the term of the loan by the amount of the deferment period - up to 12 months. 3) Yes, prepare an amort schedule, and reamortize at the appropriate time. Keep in mind, the participant can restart payment if they choose prior to the end of the deferment period. Yes, but remember that the term of the loan is extended by the period of deferment - so reamortize over the remaining term, as extended.

Which can be done without the overhead of a PEP. That's part of what we are building (as noted above) to satisfy the ask of our advisor partners....

The PEP needs an audit - and to the extent that controls are tested involving employer activities, any or all of the participating employers may be tapped to "participate" in that audit. Because of hte number of employers expected in a PEP, the audit will likely be more extensive (and expensive) than a single plan audit, and every participating employer in the PEP will pay a share of that cost (directly or indirectly) even if, as a standalone plan, and audit would not be required. One of the (many) reasons we concluded that the economies just aren't there.... Good in theory, not always practical or efficient in practice.

I don't know if we qualify as a big player or not, but we found that the demand was NOT for a MEP/PEP, but rather to have a way ADVISORS can commonly service their clients, consistently and efficiently. A PEP actually doesn't make economic sense for the service provider unless they have unlimited IT resources to automate everything (I WISH!) - otherwise, there is a lot of manual "combine for this purpose, pull apart for that. We're working on what the advisors want, but it won't be a PEP.

Peter: First, keep in mind that a "weekend conversion" is a rarity - and the ultimate determinant of whether it is possible isn't the size of the client - but the willingness of the "current" provider to do so. True, the larger the client, perhaps the more "leverage" they *may* have in getting the incumbent to cooperate, but for the vast majority of plans, the current is losing the business, and is not inclined to do the work necessary in the time frame required for a weekend conversion to be possible. Second, holding unallocated assets in an "account" can itself be problematic. Where is it held? Is it interest bearing (if not, that could be a different problem). The problem is that in many cases, the recordkeeper doesn't have any type account to hold the money. We are a "pure" recordkeeper with no "accounts" to even open. It would be up to the trustee to do so (Matrix) and they don't just have a "banking" type account available. It would have to be a custodial account and that itself adds complications. Our other "business model" is group annuity based - and the same applies for "holding accounts." Having an "outside" account is often the only option, and that requires the plan sponsor to open it....

In my case, no.

In my case, yes.

Well, we bring in dozens of large filers a year and have never had an auditor question this before - and so far, this year, I've only seen the one. The real problem is the determination of what is "late." The DOL has no safe harbor for large filers, and the regs say "as soon as practicable." The auditor's refusal to back down doesn't make them right. That said, I'm not sure it's a battle worth fighting.....

We literally this month had an auditor of one of our plans raise this issue and "demand" it be corrected (and the box on the 5500 checked) before issuing their opinion. Theoretically, I agree - late is late, but 1) the rule is as soon as practicable (and that is open to debate as to what constitutes practicable) and 2) the rule requires segregation from corporate assets - as Peter says, and not "investment" - so the temporary account seems to be the best approach (although, IMHO, that is really rather stupid - as the change in recordkeeper or other reason for the blackout is pursuant to a "fiduciary" decision where their are benefits that should outweigh a slight delay - in other words, "practicable" is, and should be a FIDUCIARY decision....)

I'm probably on the short side of this one - but to answer the OP's question, it is *NOT* a problem for the employer to have all of those terminated participant's accounts in the plan. Indeed, the employer might not have a choice in the matter. Second, these are *NOT* "orphaned" accounts. Most people are fully aware of their balances in the plan (at least if it's substantial) and choose to leave it there. I for one have money in my current employer's plan, and three previous employer plans. I do it for several reasons - including 1) I like the investment options offered; 2) I like that those investments are "institutional class shares" priced at a level that I can't match in a retail IRA account (and one of my former employer's, who shall remain nameless, but the Chairman use to advertise that you can "talk" to him) makes about 5 times as much on an IRA as they do on money in a plan (and they, as a financial services company that provides services to retirement plan is in the business SOLEY to attempt to capture rollovers); and 3) for competitive intelligence purposes (I get to see the new bells and whistles others roll out!). J/K on the last one (but I do compare). In my experience, some (many?) employers actually take a paternalistic view on this and try to keep money in the plan. It might benefit the plan (more purchasing power), and provided they are well above the audit threshold number, it isn't too problematic. Fees can be past through to terminate participants (only) if they so choose, and you may have a problem with missing participants - but otherwise, not a problem.

The plan is only responsible from the point it receives the QDRO. Anything paid to your ex prior to that is now receivable from your ex. So, basically, you'd have to get the court to enforce the divorce decree and have him cough up what should have been your share. Just an FYI - the QDRO could have been delivered to the plan at the time it was issued (you don't have to wait until retirement to send it to them). That then secures the benefit no matter when is starts.

I think once "disqualified" it remains as such unless corrected via an IRS approved method (CAP program), so if the act that disqualified the plan took place 15 years ago and remains uncorrected (in the IRS' eyes), it is still not qualified, and the IRS can take "current" action against the plan/sponsor.

Just adding that vesting goes with the participant - not the money. So, as Larry indicated, once the "participant" is fully vested, that applies to all current and future contributions.

I'm not so sure. We've explored the possibility of being a PPP, developing a PEP - and looked at it using all possible combinations (outsourcing the 3(16), PPP, etc.) and just don't see the economies in it. What we are seeing as the demand is mostly from advisors who want to simplify their book of business - but not combine it with others. In other words, they want a platform where they can scale their services as a 3(38) with a 3(16) somewhere in the mix. We can do that without a PEP - and have been doing so for some time. We're enhancing those capabilities (adding the 3(16) piece) and handling the demand that way. The system (we use Omni) just doesn't allow for combinations very well, and the development of the infrastructure around the rk platform is extensive - destroying the economies. Besides, if you are an 80 person plan filing the 5500-SF, why would you combine and now have to pay for an annual audit - that probably would be more expensive because of the multiple employers where data will have to be collected and controls evaluated? There will be a few that "specialize" in this area, but I don't think it will go mainstream....

Noise.

Not really. I work for a recordkeeper (offering both bundled, and unbundled - with distribution through hundreds of "TPA's") and the economics of a PEP just make no sense. I know others are promoting them - but in reality there are ways to aggregate plans either at the sponsor level or at the advisor level (mostly what is driving the market, from what we see) without the overhead of a PEP, and being a PPP. We've seen the demand from the advisor community to be more of an aggregated approach to how they provide investment services - mostly 3(38) services, and if we add a suite of 3(16) services (which we already do in a non-fiduciary capacity), then we achieve what the advisors want, without having to develop (again!) a MEP/PEP product. How about "Retirement Plan Coordinator?" Retirement Plan Consultant would step on the toes of advisors that brand themselves as that....