MoJo

Well, as pointed out in the ABC letter, there appears to be many "rogue" DOL auditors - and the biggest problem is the lack of consistency - due to the lack of guidance. If we had some indication from the DOL as to what the standards are for some issues, we could actually get our clients to avoid them.

Except the DOL has the power to compel compliance with their conclusions - as I indicated above, a client of ours is being told they MUST reimburse the accounts of the small balance termed participants for ALL of the expenses (including internal investment expenses charged by the mutual fund companies). They can ignore that - at their peril. The next step is litigation.

The language is (and this is not verbatim): At the direction of the Plan Administrator, the Trustee shall .... The Trustee has a mandate - but only triggered when the PA says so. Nothing says the PA has to say so. We ALWAYS caution plan sponsors to have a policy and stick with it. It's inconsistency in approach that we think is the bigger problem.

It is a dispute over the "rules" that is the problem. Our plan documents make cash-outs permissive (or so we believe). As far as the missing participants are concerned, the standard is "reasonable" search. I would argue it isn't reasonable to spend $1000 to find a participant with a $500 balance. Besides, plan interpretation and expenditure of plan assets is a FIDUCIARY matter - which is a judgment call based on what a "prudent expert" would do in like circumstances with similar information. The DOL should monitor the PROCESS (ensuring it is consistently applied, reasonable, etc.), but not the conclusion. Some may disagree, but....

That has been our argument with the DOL - and they (at least the auditors we've worked with) say "OK" - even if it depletes the account. Same for small balance cash-outs. In plan, there is no per participant fee and institutionally priced investments. IRA provider charges $50 per year and retail priced investments. According to the DOL, doesn't matter. Cash them out. We have one plan sponsor who is facing the expense of rebating ALL of the fees to terminated participants with under $5k balances (despite the fact that those participants actually benefited from the expenditure of those fees).

What he said. In other words - the plan sponsor designs the plan, the fiduciaries carry out that design (as a prudent expert would) and that includes finding appropriate service providers who will do quality work (as a prudent expert would demand) for a reasonable price (as a prudent expert AND the DOL demand). The "price" paid (as long as it's reasonable) is a plan expense, but the employer can usually cover those costs outside of the plan if they want to.

Thanks Peter. The list of "issues" in many ways parallels our experience for a book of business consisting of clients considerably smaller in size than the average ABC member company....

If your loan payments were deducted from you pay, those amounts became "plan assets" and if you employer did not forward them to Fidelity - then your employer has a big problem. Talk to them and make sure you have all the facts FIRST. Then, if they messed up, demand they fix it. As a last resort, call the DOL and they can intervene (but - as a last resort - make sure of the facts first).

Well, "it depends." I would argue that moving to a new service provider - being that that decision was a fiduciary one (or it better be) is an expense that could be borne by the plan - BUT it would depend on the costs your are talking about. In my experience there are no "hard dollar" costs that the plan or the sponsor would incur. There is labor involved, but would never (ever ever!) recommend that a plan sponsor try to recoup that expense from the plan - so it becomes a plan sponsor borne expenses. Investment related expenses (back end loads, market value adjustments, termination fees) are all complex subjects and would require an in-depth analysis to determine if it is, or could be a settlor expense (without it being a contribution to the plan). What kind of expenses are you talking about?

Gosh, I hate to agree AGAIN with Belgarath (just on principle) but he raises very good points. Keep in mind that a "partial plan termination" is a LEGAL conclusion based on facts and circumstances, and they must be taken as a whole, to reach the conclusion. I am always perturbed when one raises the so-called 20% threshold for a partial plan termination. It is not a "litmus" test. It is a "rule of thumb" and generally (but not always, as Belgarath points out) when one exceeds the 20% mark (as a result of one or a series of related corporate actions), a partial plan termination occurs. BUT, you can MOST CERTAINLY have a partial plan termination with less than 20%. Case in point, a company with 5000 employees in 10 separate divisions of 500 employees each, doing different work (separate lines completely) can have a partial plan termination when they shut down one division, resulting in a 10% reduction in their entire workforce, but 100% reduction in the workforce of the shut down division. Partial plan termination? The IRS would probably say yes - and in my experience, they do.....

Unicorns are far, far more common than "easy to read" fee disclosures....

I wouldn't suggest the participant has any more information than the alternate payee - it's what you ask that determines the "upper hand." DROs are complex. Plans are complex. Good attorneys get the right information before drafting or agreeing to a the terms of a DRO.

Well, the DRO is an order of the court directing the division of qualified retirement plan assets - and a separation agreement or other "agreed to" division of property is usually incorporated into another order of the court - granting the divorce or dissolution of marriage. Fundamentally, it is possible that a DRO contains "an agreement" between the parties that is not contemplate by the "divorce stip" (in your parlance), but I wouldn't think it to be a good idea. Consistency eliminates controversy, and if the DRO does something not in the stip, somebody may object, and then a hornet's nest get's kicked. IF retirement benefits were inadvertently left out of the stip, I would suggest amending it, and then draft the DRO consistent with the amended stip.

That's why we read all the assorted (if not sordid) details!

I agree with ETA - which is why in our shop, Roth is "lienable" but not "loanable." There is a task force in place to identify ways in which we can actually accommodate loans from the Roth source, but this (and every other shop I've worked for) doesn't treat loan repayments the same as a bank, and "tracking" the basis portion of each loan repayment has proven troublesome.

I am a lawyer, and My2Cents nails it, especially the part of the "fiduciary standards" being applicable....

The plan OWNS the policies. The plan get's the cash value if the policies are terminated. Now, if you want to get the policies out of the plan, there are two ways - 1) through an in-kind distribution ALLOWABLE under the plan (in-service, termination, or whatever is ALLOWED under the terms of the plan); or 2) the insured participants can BUY the policies from the plan - at basically the cash surrender value (which they would only do if they wanted to keep the insurance in force (as the cost of buying the policy would be exactly equal to the cash they would get upon terminating the insurance). The record-keeper is correct.

I would agree, Belgarath. The rule on "document interpretation" courts are supposed to use, absent something amiss within the four corners of the document, they don't look outside the document to determine intent. If the language is clear, all the parties agreed at the time, and attorneys were involved, courts ordinarily won't even consider one parties assertion that they misunderstood and didn't intend ... something. That's the theory, anyway. In the case the OP has, as I said, the norm would be to credit gains and losses, and most DROs we see provide for that (though not all).

That really is a question for your attorney. I will say, in my experience, the "norm" is that gains and losses are included - but people may agree to whatever terms they wish to.

Yea. You raise a good question - because in my experience, the actual "separation agreement" part of the divorce decree is not "readily" available. In my jurisdiction, they are not available on-line but I don't know if it is available if you show up at the court. I would think not - unless heavily redacted. If it isn't a "public" document, then I wold think it shouldn't be passed around to those who have no need to know, and that could/should be an ethical violation. That said, we get them all the time, and have to read them because it actually *might* qualify as a DRO. Most do not. As far as fascinating reading goes, our current favorite is one that "splits" the open bottle of Johnny Walker Blue Label ($150 a bottle), which was moot - because "he" hand wrote in the margin he had already finished it off - and in the same decree "she" wanted reimbursement for her half of the community property assets spent on ... um ... er ... his "other" friend (including hotel expenditures, travel, jewelry...).

We deal with this far too often.... Two ways: It's a missed opportunity and a contribution needs to be made (with earnings, match, etc.) under the EPCRS rules. It's a document "scrivner's error (something the IRS really doesn't recognize, but...) and you do a VCP seeking permission to retroactively amend the plan the way it should have been (no deferrals on bonues). It would help if there was paper trail to indicate that was their intent (and the fact that it goes back several restatements does NOT help), and if it only impacts HCE's it''s easier, but it's still a crap shoot.

All one needs do is show a list of company stock cases to the FIDUCIARY - and tell them that whether plaintiffs were successful or not 1) mounting a defense is incredibly expensive; and 2) they are PERSONALLY liable as a FIDUCIARY. The next question invariably is "how do I resign as a fiduciary?"....

...or... the things they didn't ask!

They do! I just hired one away from the DOL and since he had "10 years" in - he get's to keep it (albeit "framed" in a shadow box). He said he didn't have a gun though....

Yea. Well, we've had auditors "require" us as a service provider dealing with an abandoned plan to "certify" that we visited last known address. We've done "drive by's" but under no circumstances would I ever allow anyone on my team to get out of their car. We have actually had a DOL agent, though, make a personal visit to an elderly beneficiary of a deceased participant (abandoned plan) - who thought we were scamming her. She threatened him with her cane (true story!) - and thought his "badge" was dime store bought.