MoJo

Our normal operating standards (and the standards of every other recordkeeper I've worked for) and 40 years as an ERISA attorney. What are you looking for for in terms of a "reference?" What do you need me to point to a "reference" about?

No I understand completely. A pooled plan is one where the participants do not control investments. But in a pooled plan - the money is ALLOCATED. You may or may not value the plan daily - which means you may not have a number of what earnings are allocatable to each participant's account until you do that valuation - but it can be done at any point in time with no other conditions or information. The lack of a current valuation does NOT mean the money is not allocated. It is. What the OP was asking about is "prefunding" into an UNALLOCATED account that cannot - I repeat CANNOT be attributable to participant accounts until the happening of a subsequent event (1000 hours, end of year, etc., or even the discretion of the plan sponsor (the WORST of all possible situations). That is the difference - and when others have said "prefundung" is "just like" a pooled account plan, I DISAGREE. They are vastly different in terms of whether it is allocated or unallocated. That is my point - and that is what you misunderstand.

This isn't semantics. It is a clear definitely determinable issue. I don't know how you handle trustee directed plans, but we ALLOCATE the money when it goes in - based on the formula of the plan (usually comp to comp) - and then VALUE the plan later to account for earnings. But - the money is NOT subject to subsequent allocation conditions. That would be a problem. We use the term "allocate" to account for earnings - but the principle has been allocated.

I'm sorry Mike, but that is just a ridiculous response. First, look above - and I talk about the balance forward account we handle. Second a balance forward account is ALLOCATED. When the money goes in, it is ALLOCATED to the participants. PERIOD. You may not update the earnings, but the money is ALLOCATED. What part of that is not understood? That is vastly different from a plan sponsor who "parks" money in a unallocated suspense account PENDING ALLOCATION. What we are seeing RIGHT NOW is some plan sponsors are getting PPP money, that must be "spent" within 8 weeks, parking the money into a plan and NOT ALLOCATING IT, until some subsequent allocation condition is met (1000 hours, end of year, etc.) THAT IS NOT PERMISSABLE as there is no certainty those allocations conditions will ever be met - and the money is truly UNALLOCATED. God help you if you allow a client to do that, and the IRS comes a callin'.

The difference here is that what some do, is irrelevant. It isn't technically allowed. Does it happen? Yep. It's still a violation of definitely determinable rules.

Yes - if it isn't "allocated" it is by definition a "suspense" account - or in other words, "unallocated."

Not instantaneously - but the process and formula is definite - and I can calculate it. PERIOD. It is "allocated" the moment it hits the trust - albeit fo rhte math. An "unallocated" fund is still subject to subsequent events for allocation (maybe allocation conditions, maybe other events). The key is legal allocations vs. unallocated. The former (while maybe not at my finger tips is CERTAIN in its allocation. The latter is simply parking money somewhere, and isn't permitted.

Then it's *not* a pooled account. If it's unallocated, it's not allowed. Definitely determinable is not a red herring - it's the "law." Sorry - but we're going to have to agree to disagree here. I deal with about 5500 plans these days, I have a little over 100 that are balance forward, about 250 with "pooled accounts" and NOT ONE has an "unallocated account where I can't tell from the plan records exactly where every dollar is allocated - but for the forfeiture account - at all times.

I think you misunderstand a "pooled" account. It's still "allocated" to participants even though they don't control the investments. What is being discussed here is a suspense account that is unallocated, much like a forfeiture account - which is unallocated (i.e. no participant knows what their interest is at any given time). Forfeitures are allowed because of vesting schedules - and the plan document. Other unallocated suspense accounts generally are NOT in the plan document. If the plan has a pooled account - you can still "definitely determine" the benefits of each and every participant from the moment it is contributed to the plan. With an :unallocated" account, you can't. BIG difference.

I respectfully disagree - *UNLESS* you consider it allocated at the time contributed. Then, well, it's "allocated" and not unallocated - in which case, you've got a fiduciary problem in it probably not being invested appropriately. Bad idea - and if the IRS catches it, real bad idea. I have never found a client who could give me a good reason for doing this - other than they can't budget (solvable with a savings account or they are attempting to hide money (something clients are trying to do right now with PPP money).

RTFD (I've *never* seen a document that allows an unallocated suspense account of this type - and the IRS doesn't likes these) , and google "definitely determinable benefit" formula.... At the time the "dollar goes in" it's allocation must be set. Earnings and allocation conditions violate this.

Plus the benefits of professional management!

Larry, we are cut from the same cloth. My standard response is the same as yours (why do you want to do that?). What my team does is work to fashion what the client "needs," rather than simply provide them what they "want." Others think the easier solution is to cave to client wants - and then it doesn't produce what the client expected (because it wasn't what they needed), my team has to swoop in and fix it (but by that time the relationship has suffered). My team often jokes about setting up our own shop. It's only a joke as we all like the paycheck, like the company, and love the work - despite some challenges, and most of the people we deal with (including senior management) have come to trust and rely on us.

This is EXACTLY the approach my team determined was the best course of action (a team of 10, seven of whom are ERISA attorneys and the other three being the bright ones, whose sole purpose is to function as subject matter experts to the business, our clients and their advisors). Unfortunately others (notably sales) always come to the table with "everyone of our competitors can do this, why can't we" and undermine the authority my team usually has. Despite the fact that we can show that not all (or even many) of our competitors are doing it, sales drives "product" and the mere hint of "product" causes RMs to promote it - even if it doesn't exist. Just griping - but I've been doing this for 35 years, and for larger organizations, control gets diffused. I'll put my team (part of the line of business - not part of "legal") against any other service provider, and most ERISA law firms any day of the week. Cooperation is still essential, and with too many voices in the client's ear, controlling the message is nearly impossible. If my team gets in front of the client, it's done. If not, its pandemonium.

The amount ALLOCATED is the 415 amount. The participant doesn't have it until then, so the $105k is what counts for 415 purpose. We (a large, well known recordkeeper) STRONGLY discourage this for that reason, and about 60 others, including 1) the plan probably doesn't contain a provision for it; 2) the IRS wouldn't qualify a plan that contains such a provision (according to them, there are limited uses for "unallocated suspense accounts" and the client's budget isn't one of them; and 3) what happens if you have allocation conditions not met.... BTW, this has become a big issue right now, as employers are trying to shelter PPP money to qualify for loan forgiveness. No opinion on if that works or it's "fraud," but not our call.

The question is what is the status of the money that comes out. I don't care if you call it an RMD or not - the law change makes it an "eligible rollover distribution" and that isn't option. It may have no practical effect - provide prior guidance applies (which dispenses with 20% withholding and the 402(f) notice), but 1) we don't know what the IRS will do this time; and 2) we are specialists in a highly technical area - and being "specific" is essential to continuing to be specialists.

We've tried that logic until we were blue in the face - and faced significant client backlash.... Just sayin - as a service provider, we're bound by client demand - regardless of how unreasonable.

I would agree -which was my point. But if the father was a dependent, I don't necessarily believe his subsequent death of the disease cancels the participant's status as a qualified individual.

Time to find another TPA. Discrimination basics 101. One can discriminate pretty much as much as they want, provided it isn't in favor of the HCEs.... They don't want to do it.

Agreed - but only gets them out of 20% withholding for the "first" $100k. Any distribution over that amount is a "regular" distribution" (nad causes us headaches - as we have to process two distributions to handle withholding).

While I agree with the end result that this is (probably) not a COVID loan situation, I disagree that you need a specific reason for the loan. It doesn't matter. If you are a "qualified individual" you can get the money (assuming - you otherwise are able to get a loan). If the father was a "dependent" - then I would say it qualifies. Period.

NO!!!!!!!!!!!! A plan can be discriminatory in design and practice, as long as it is not discriminatory in favor of Highly Compensated Employees... And we have plans that have otherwise restricted distributions based on a number of factors.

Another resource: https://www.dlapiper.com/en/us/insights/publications/2020/03/coronavirus-federal-and-state-governments-work-quickly-to-enable-remote-online-notarization/ There is still the "in the physical presence" issue...

Employed or not, the plan fiduciaries remain fiduciaries until the plan is completely shut down. That said, they may not be willing to continue to function in that capacity post termination - but if the DOL get's involved, they could change their mind. I believe the audit is still required - along with other responsibilities in administering the plan, and then shutting it down (properly). How are distributions being handled? Even in those cases where we handle distributions without employer intervention (non-fiduciary outsourcing), we consider that authority to cease when the employer does, and suspend distributions. That usually triggers DOL intervention - and after a sufficient time (if the fiduciaries can't be found) the Abandoned Plan Program becomes the option, depending on who holds the assets, and then the 5500 issues become easier to resolve.

Ditto - to the max - except the part about us "old-timers" retiring soon. No rest for the weary/wicked!