MoJo

We're in the same boat as Belgarath - the fiduciary rule hasn't changed anything as we already were pretty transparent. What is changing our approach, however, is recent experience with DOL audits of our clients. Fee disclosure has been a hot button for a while, but recently is two separate audits, they are doing an incredibly deep dive into our business and how we disclose certain aspects of our collected fees (and for our group annuity book - they are dissecting the underlying structure of the GA to determine EVERY aspect of revenue for the company), and THEN, they are seeing if the client understand all of the minutia. If not, they assess a penalty against the CLIENT for failing to be a good fiduciary who understands the concept of float on m&e expenses and VIP credits internal to a separate account held within a group annuity (which, of course, is not good for our business). That has triggered a reevaluation of our approach to simplify, and make more understandable that which even the DOL doesn't understand (they can't comprehend the concept of a GA, separate accounts, and even asked why participants couldn't just directly invest in the underlying mutual funds). National office has been involved as well, and our Groom has told us we are not alone.

...and there is the rest of the story. Always a problem when plans are changed to favor "execs." If they want to change back, I would recommend still, keep it simple....

No offense, but it's questions like this that make me want to go back into private practice specializing in correction of plan operational errors.... The short answer is "yes, but...." Potentials for errors in mis-characterizing an employee's classification, mis-calculation of required service for that class, problems when one changes job classification (say, a teller works 4 months and is in, but then moves to a job that requires 6 months to be eligible)., testing issues and the like. We have problems with just dual eligibility requirements (deferrals and match) or with "part-time" (one year, 1000 hours) and "full time"(something less than a YOS). Getting more specific just makes the plan that much more difficult to administer. Before getting into the weeds, what exactly is the plan sponsor attempting to accomplish with such a situation?

ABOSLUTELY! It's all facts and circumstances - and I would think that the better ROBS promoters have investigated the issue thoroughly and adjusted accordingly.

I think you have oversimplified what happens when a ROBS promoter is sought out. You assume that the IRA/plan participant has already made the decision to do this, and is shopping for a shop to do so. Most are looking for ways to finance a new business - and are looking at ALL options. ROBS promoters have to compete with other source of funding Heck, even the SBA has information on the pros and cons (and they ARE a competitor to ROBS promoters. https://www.sba.gov/blogs/can-your-retirement-plan-own-your-business Not so at all. I suggest you look at ROBS promoters websites. If they are smart - they've changed - but frankly, most I've seen aren't that smart. I looked at several (was contemplating this myself) and they are ADVOCATING for you do this type of transaction. They are trying to convince you that their way is the best way to finance a new venture. One I talked to actually would go so far as to procure the distribution paperwork to effectuate the transfer of my plan balance to the newly establish plan. That is far more than just offering "compliance" services for one who has already ddetermined they have the need. They are not just "Walmart" offering you a product - they are actively working to get you to do the transaction their way instead of another way - and THAT IS WHERE THERE IS A FIDUCIARY ISSUE UNDER THE NEW RULE. Not as simple as saying they are offering a ministerial service. Indeed, the new rule goes into some length about the differences between "salemanship" and advice. The line isn't easily drawn.

Don't know how many times I have to say it before you do it.... I even gave you the link....

In my experience, a TIN is always required for an estate - whether or not there is taxable income/returns that need to be filed. And yes - I agree whole heartedly that naming a beneficiary is a must - as the tax consequences to the beneficiaries of the estate can seriously diminish the value of the distributed assets (and in many cases, the estate is a "pass through" entity - leaving the taxes of hte distribution to the heirs).

Austin READ THE F'**** RULE. You are hung up on the fiction that a ROBS promoter isn't promoting the USE of IRA/plan assets for the purpose of funding a new venture - THAT MEANS that they are promoting the sale of assets in the IRA/plan in order to do so. The DOL has REDEFINED "fiduciary" to mean just that - advising one take money OUT OF an IRA/plan - regardless of where it goes - even if it goes into another plan. That necessitates "liquidating" those assets, and that is NOW considered fiduciary investment advice. As long as they INDIRECTLY get a benefit (money) from recommending that transaction, they are a FIDUCIARY - even if the moneyh they get isn't from the investment, but rather from ministerial services in handling the transaction/compliance. You are NOT a fiduciary unless you are advising people to move money (and I hope you aren't) from and IRA or plan to another one. Setting up a 401(k) plan doesn't involve you making any kind of guidance/recommendation/advice on taking money from another IRA/plan to "seed" the new plan. There is a difference! Read the material I cited above. This has been discussed ad nauseum for years.....

1) No, an estate can't do a rollover. 2) Correct, 20% withholding doesn't apply 3) Yes, we need a tax ID (estate's TIN) for 1099 purposes. Like I said, we use the same the paperwork - didn't say all of the notices are applicable.

"Direct or indirect...". The ROBS promoter INDIRECTLY benefits from the sale of investments in the IRA/plan and therefore INDIRECTLY benefits from that investment action. EXACTLY the same as my employer opening an IRA without giving investment advice - WE BENEFIT FROM THE OPENING OF THE ACCOUNT - not through investment advice. Read the rule....

We use the same paperwork we use for all other distributions, and simply require a death certificate and "certificate of appointment" of the executor/administrator to process.

Austin: Read the rule - it lays out the requirements to be a fiduciary. It can be complex, but it's been being discussed for about 7 years now - no lack of information out there about it. And it is possible that if you recommend to a friend that they sell investments and close an account, you could (if you meet the few other requirements) be a fiduciary. Seyfarth Shaw's summary is (emphasis mine): The general rule is that a person is a fiduciary if the person provides recommendations or advice for a fee (MoJo comment - whether direct or indirect!) regarding: the advisability of acquiring, holding, disposing or exchanging plan or IRA assets. This includes a recommendation as to taking a distribution from a plan or making a rollover to an IRA; the management of such assets, including assets rolled over or otherwise distributed from a plan or IRA to another plan or an IRA; or an appraisal, fairness or similar statement, verbal or written, with respect to the value of such assets in regard to a specific transaction(s) involving the acquisition, disposition or exchange of such assets by the plan or IRA; Another good summary is here: https://www.whitecase.com/publications/alert/dol-issues-final-fiduciary-rule-defining-investment-advice-under-erisa-and-code And another (attached as a pdf) And of course, the source: https://www.dol.gov/agencies/ebsa/laws-and-regulations/rules-and-regulations/completed-rulemaking/1210-AB32-2 As I said in a previous post, the ROBS promoters I've seen actually do "promote" the use of plan/IRA money - which is a recommendation to sell. My employer has spend 3 years and MILLIONS of dollars to ensure we are in the right place. In some instances, we have morphed to ensure we aren't a fiduciary (and to ensure the advisors who bring us business are paid a "fee" instead of a "commission" to meet certain exemptions for them and us), and in others, we have chosen specifically to be a fiduciary. Case in point - our outbound call center - where we deal with large balance vested terms and ask if we can help them establish an IRA for a rollover of plan balances. WE MAKE NO SPECIFIC INVESTMENT RECOMMENDATIONS. WE CHARGE NO FEE FOR THAT SERVICE (but indirectly will make money off of an IRA we open). Both internally, and Groom law have concluded that makes us a fiduciary - so we accepted that are are now a fiduciary with respect to that activity (and FINRA licensed all those reps to better be in compliance). Schwab (a former employer) took the other approach and disbanded their outbound efforts to capture rollovers (and rumor has it, shopped around to sell their retirement services business - because they are in the game for the rollovers). 'nuff said. Whos-a-Fiduciary-Now.pdf

The ROBS people are recommending taking a distribution from either a plan or an IRS - which under the new fiduciary rule IS an investment recommendation to SELL whatever it is invested in in the plan or IRA. Under the new rule, that makes them a fiduciary, IMHO.... It does not require a recommendation of a specific new investment.

First, "loan" and "headache" are redundant. No need to use them together. Second, I agree with Bird, let it ride - except be cautious as these participants will be habitually a few payments behind and have effectively already "consumed" a portion of their cure period that may make the next incident "fatal" to the loan. Third, to answer your original question, we believe it is a refi and needs to be consistent with the plan documents.

They did. The primary case was in Florida where the Florida bar alleged that Mercer ((then known as Mercer Miedinger Hanson) was engaged in the unauthorized practice of law by drafting documents and consulting on plan design issues ("tax practice" as alleged by the Florida bar). My ex worked for Mercer at the time (not in Florida, but...). They picked the wrong defendant. Mercer had the resources to vigorously defend and won in court, and won rather broadly. Document drafting is "ministerial" in nature given the tight parameters imposed by law and regs, and plan design is more "consulting" rather than tax planning advice. Others questioned the ability of non-lawyers to do document/design work, but I'm not aware of any challenges after the Florida decision. Oh, and back to the OP topic - I'm sure ROBS promoters have been looking at the fiduciary implications of their business (if they are smart), but I have seen some of the promotional materials and other documentation from one such promoter (a former colleague did this to start a "junk hauling" business that they are attempting to franchise out) and it CLEARLY (in my mind) was over the line. The materials talked about the '"average" rates of returns on typical plan/IRA investments and the "potential" returns by "investing in yourself" and your business idea. They had all sort of disclaimers in footnotes, but I consider that investment advice - not simply promoting their "compliance" services for one who had decided to do it.

The standard remedies if and when a breach of fiduciary obligations occurs. I would think the "test case" would be when the business fails and the plan holding the failed company stock loses value, you'd have an argument of imprudence, and related issues. Which, by the way, is a long row to hoe before 1) any liability is found; 2) determining what, if any damages occurred; and 3) collecting anything from the fiduciary/promoter. Just my "opinion" here, but I've never liked the ROBS concept. Failure rates of startups are astronomical and as things stand now, retirement assets (in a plan and in some case in an IRA) are exempt from attachment by creditors. Why would one take a crap shoot using unattachable assets in bankruptcy by making those unattachable assets fully attachable as the vehicle in which business assets (attachable) are purchased?

Yes, but one who "promotes" a concept and "advises" the participant to "use" plan assets for an investment in the concept, then I think they are a fiduciary.

IMHO, absolutely....

The answer to your question is yes, the spouse *is* the beneficiary with a few exception (does the first wife have a QDRO giving her an interest in the plan balance?). Naming one other than the wife as beneficiary is going to require that she waive her rights to the plan. Authority can be had, but your best bet is to go to the plan administrator and ask for a beneficiary designation form and instructions - that will tell you what is required for the guy to name his kids.....

I would agree that counsel should opine on the issue, but in the jurisdictions in which I'm licensed, a "legal separation" only settles "property" and possibly "custody" issues of the parties. It does not affect their status of being "married." Think of it this way - if either party subject to a "legal separation" order attempts to marry another, they are guilty of the crime of bigamy. Only a "divorce" (or "dissolution of marriage" - depending on jurisdiction) can render them "unmarried."

I would look at this a little bit differently. The spouse is the spouse - the legal separation does NOT change that status, but the legal separation (court approved under the laws of the appropriate jurisdiction) *may* alter the rights of a spouse with respect to the property of the other. If the plan is "clear" that ONLY a spouse may take under the plan (and under no circumstance can the participant name a non-spousal beneficiary), then I don't see the legal separation as having any effect on the plan provision. If the plan provides that the participant may name non-spousal beneficiaries, then you have the issue of whether or not the legal separation has the effect of eliminating the spousal consent rules for naming a non-spousal beneficiary - and that is something counsel should be consulted on. I haven't looked into it in a while, but I think there is some guidance on point....

It is a classic. Many of Harry's songs have a similar theme. A Better Place to Be - about not missing love when right in front of you. Taxi about lost love and not being able to go back and have a do-over. WOLD about choices that have consequences. Circle, well, all about life. Greatest Stories Live is my "travellin' music."

Congratulations Belgarath - to you and that saint you married.... Obviously she has a lot of patience!

As an avid Harry Chapin fan, all I can say is "Wow. [groan] wow [groan]" (and ditto on 6/6)

Dog gone it. Now I've got a Captain and Tennille song rattling around my head (lot of empty space there) where the lyric hides Toni singing "Sedaka's baaaaccckkkk...."