MoJo

I'm confused.... First, is this an asset purchase, or a stock purchase? If the latter, the ESOP is a seller of the stock in the company it holds - which would require an "exchange' of cash (to the ESOP) for the stock (to the purchaser). Simple enough. If it is an asset purchase, then the ESOP will continue to hold the stock of the selling company, but now the selling company will essentially only hold cash (received from the sale of its assets) and then as part of the "liquidation" of the selling company, it will distribute cash to its shareholders (including the ESOP - which will then distribute the cash to the participants in due course). What is the "potential" PT you see?

Yea, well, maybe if they hadn't ALREADY adopted a procedure that specifies a verbal notice is sufficient, then they'd have the luxury of not accepting them - but I'd take the case of hte potentially soon to be ex-spouse/alternate payee on the facts given by the OP. Bad planning provides bad options and even worse outcomes.

1) The procedure indicates that a verbal notification is sufficient. Telephone calls are "verbal." 2) I don't think any distribution is appropriate. No one know what percentage of the balance the DRO will ultimately award to the alternate payee. It may be more than half. Indeed, it could be all of the account (and he gets the house or other assets). Too many unknowns to make assumptions. 3) The procedure indicates a method for removing the hold. It needs to be written (and IMHO should be a "warranty" on the part of the participant that no DRO is forthcoming - so that there may be recourse if in fact a DRO is later issued.) I'm not enamored by "participant" statements as justification for a release of the hold. Participants lie - especially when trying to grab or hide assets from a soon to be ex. Not sure what the plan requires - but .... 4) I'd still get the "written" document required by the procedure - and if the spouse signs it - so much the better (and notarized is even better to prove that it was the spouse). Finally, ask counsel. The plan or it's fiduciaries - or the sponsor - don't want to end up paying "twice."

Actually, Austin, I represent the small to mid-market clients, and my comment still stands. If a company can't or won't comply with the law, then it isn't a viable business. That's why they hire people like you and me - to let them know what the requirements are, and to help them to comply. Those that don't need to know that there are consequences - and frankly, shouldn't be doing things if they can't do them right. Saving the business by cutting corners is simply not a viable business model. Now, there are companies that have been ill-advised over the years, and if they are willing to make it right, I'm all in trying to help them - BUT NEVER WILL I WORK WITH A CLIENT THAT SEEMS TO THINK THAT THEY CAN JUST IGNORE THE ISSUES AND RUN THE RISK OF GETTING CAUGHT. Because they will get caught. At times, I've even turned them in (and no, I don't break "attorney client" privelege - I've only done it where there wasn't an attorney-client relationship). Do it right, or don't do it. That applies to service providers as well....

With all due respect Austin, if you are in business and you can't or won't comply with the LAW, then you don't deserve to be in business. That applies across the board.

First, the "forever" standard is part of ERISA - maintain records as long as necessary to determine benefits payable - and frankly, it isn't that burdensome. Buy another hard drive or rent some cloud space on another server. As far as Softie is concerned - I'm on a panel with their director of retirement benefits at an upcoming conference. They *have* every record from day one and employee one. I asked....

The problem here is that it is the PLAN'S responsibility to maintain the records - NOT the participants.... Every controversy requires a cost/benefit analysis to determine what is the most efficient outcome. I'm not saying just make an offer. I'm saying figure out what are the reasonable outcomes, what are the risks, and make a business decision.... Whether paying someone off sets a bad precedent or not is irrelevant (as is your snarky attitude). Plan has an OBLIGATION to maintain records. Plan did not. Plan may suffer consequences. The question is the best course of action to resolve it. There are three - find or recreate the records, settle the matter, or stick your head in the sand (or elsewhere) and wait for Schlicter {or another attorney) to come a calling....

Well, once a distribution has taken place, I can see it being reasonable, after an appropriate period of time (like the statute of limitation PLUS a buffer) to purge everything that exists prior to the distribution and not necessary to show the amount of the distribution. Actual evidence of the distribution I would advise be kept FOREVER - just because of this very situation.... As far as someone who hasn't kept the records - I'd suggest seeing what it would take to recreate them, or start talking "settlement."

ERISA requires the plan to maintain records for as long as necessary to determine benefits payable to participants. If this participant had a balance, the plan had an obligation to maintain records (breach number 1). A statute of limitations under ERISA usually only begins to run when the relationship ends. If this person had a balance in the plan, the relationship never ended and the statute hasn't even begun to run. I agree with Belgarath - keep plan records forever.... When I advise plan sponsors about contracts with service providers, I always advise them to include provisions that say 1) the records belong to the plan; 2) the service provider can NEVER purge them without plan sponsor consent; and 3) that in the event of the termination of the relationship, the service provider MUST transfer the records to the successor in their entirety or agree to preserve them FOREVER. Time for counsel to get involved....

I can assure you the vendor HATES this - as they aren't geared for taking in indivual checks. Requires manual processing. If the client is "influential" enough, they may accommodate that - but as you point out the problem is the records (recordkeeping and payroll) can get out of sync. The recordkeepers I've worked for prefer the employer to take the checks and remit the money as part of the normal payroll feed-contribution deposit.

I think the answer to this one is simple - is the individual considered a fiduciary, based on function (including the hiring and firing of other fiduciaries). If so, then yes, there is personal liability for "plan errors" that arise from a fiduciary failure. Equally as simply is that the individual is *not* a fiduciary and therefore personally liable simply by virtue of the the title "Controller." The only way to tell is to "inventory" the fiduciary functions and figure out who is performing them - which is why the DOL has for a decade or so been pushing the concept of fiduciary education on plan sponsors and their employees.

No audit. The requirement for an audit is to the LEGAL plan - not the administrative one. As far as "300 plans in one trust account" - NO! There were 300 plans each with their OWN trust, administratively held omnibus-ly by a bank. Each plan had it's OWN TRUST, but tat was defined by the RK who maintained "records" of what assets belonged to which trust.

Again, how you define "custodial" level is what distinguishes "plans" from each other. I worked for a large recordkeeping firm (someone you theoretically can "Talk" to) who never had "custody reports or "trust statements" relying ENTIRELY on the RK system to show what belonged to whom. They operated as if the RK system WAS the trust accounting system - and hence, had a SINGLE account at the captive bank that served as "trustee." Same thing as having multiple plans under ONE RK "ID" (and they did it often - using a location code to distinquish between the plans (of related companies, of course).

I disagree.... If you define the "trust" as being at the level of the recorderkeepers recordkeeping balances based on location code (or other identifier), then no, the assets are not available to fund the benefits of hte other plan. If you define "trust" as the reocrdkeeper's "plan" (or contract, or whatever) or at the mutual fund omnibus account level, then yes, they would be - but that is a ridiculous argument (especially at the "omnibus mutual fund account." I don't know how many "plans" fidelity recordkeeps, but I can assure you they have only ONE account at each mutual fund they do business with, and process "net trades" daily with them (that is, one trade each day FOR THEIR ENTIRE BOOK OF BUSINESS). Same for Schwab, Wells Fargo and pretty much most recordkeepers... That is NOT considered commingling, nor would it be considered commingling for a recordkeeper to have multiple plans under one "plan id" on their recordkeeping system, SO LONG AS they have a way to separate them for reporting purposes (and benefit payments, etc.).

EXACTLY, Austin. If every plan in the wold had to have their own account with every mutual fund they invested in, the entire industry would grind to a halt (EVERY recordkeeper uses "omnibus" accounts when trading with mutual funds -with the distinction of which plan has what being an "accounting" function). I don't think the "audit" issue is an issue - IF the RK can actually produce the required "reports" based on the location code (or whatever device they use to "segregate" plans....

Keep in mind that what is a "plan" is a "legal definition" while what the recordkeeper calls a "plan" is an accounting distinction. I've had multiple plans recordkept by the RK as a "single" plan - as long as the LEGAL requirements are met to make sure they are still separate plans. That means separate documents, separate "trusts" (again, a legal distinction, not an accounting one - which essentially means safeguarding assets so that one plan's assets can't satisfy the other's liabilities), separate Forms 5500, etc. How the RK keeps the records is irrelevant AS LONG AS they can separate them for purposes of the legal requirements.

I think the answer to the question depends on what you mean by "contract" and whether the "commingling" of the assets makes one plan's assets available to satisfy the other plan's liabilities. This boils down to whether the contract defines the pool of assets for the "plan" or whether the plan defines the pool of assets (i.e. as contained in a trust). Recordkeeping efficiencies do not change the definition of "trust" for legal purposes - so having assets commingled on a recordkeeping platform is irrelevant to what constitutes t assets of a single plan (as long as the recordkeeper can identify the assets belonging to each plan - which many do by using a "location" code or other identifier. If the contract is a "wrap" (insurance)contract, then the assets may actually be commingled within the separate account (invested possibly in MF's or clones) and that would be problematic (at least to me).

The problem is, is that advisors these days are using the same, or similar black boxes to do investment monitoring and searches. Not much is actually left to the "art" of the advisor. The advisor I work is an LPL advisor - and they all pretty much use the same platform for investment monitoring reports. In fact, once the tickers/cusips are entered into the system, it take about 30 seconds (NO EXAGGERATION) to produce the quarterly report, a few minutes to scan the report for trouble spots (color coded for ease of identification) and maybe 15 minutes or more to figure out why a particular fund or two are "yellow." If and ONLY IF a fund is "yellow" for four to six consecutive quarters (that's 18 months, folks) would there be any work involved in finding a replacement (and that requires "pushing a button" to produce a list and selecting maybe 3 from that list to present to the plan sponsor) Figure an hour to present (and that is generous) each quarter plus travel time and yes, $105,000 is excessive. In fact, the SIZE of the plan (either assets or participants) has NOTHING to do with the work involved in investment monitoring. Participant count MAY affect some educational services the advisor performs, but once you get north of 250 or so participants, no advisor is actually going to be involved in education presenting (although they may be the one setting the curriculum and beating up on the recordkeeper to provide targeted educational services). Bottom line, the advisor thinks almost ANY plan can have quality investment monitoring services for $15k or $20k annually, and to get $30k or $40k you have to show SIGNIFICANT value add over and above investment due diligence.

I think you totally misconstrue ERISA's preemption of state laws. ERISA ONLY preempts state law to the extent that ERISA is inconsistent with those state laws. Where does ERISA govern who can and cannot operate on behalf of an individual? A POA, just like a guardianship, grants the holder of the power the right AND power to operate as the individual/participant would (subject only to the terms of the POA, guardianship, and state law). Absent something INCONSISTENT in ERISA that addresses the issue, preemption does not exist - and state law would govern the exercise of the POA (or guardianship, or even a deceased's estate - or whatever).

I don't think this is an "ERISA" matter - it's one of state law. A POA grants the holder the right AND power to act on behalf of the grantor of the power (to the extent of the language in the POA). If it is a VALID POA - then the person who hold it, FOR ALL PURPOSES ALLOWED IN THE POA AND UNDER STATE LAW -- *IS* THE SAME PERSON AS THE ONE WHO GRANTED IT. The questions to ask are 1) is it a "valid" POA?; 2) Does the POA grant authority to manage the 401(k) assets (either specifically, or as part of a "general" grant; 3) Is there anything in "sate law" that limits the grant of authority (doubtful, but I haven't research all 50 "quirky" states); and finally 4) Is there anything in ERISA that preempts state laws on POAs with respect to a plan (not that I know of, and virtually all of the service providers I've worked for had "POAs" for some participants - usually a financial advisor).

Both the $800,000,000 plan and the $70,000,000 plan are typical 401(k) plans with a menu of mutual funds/collective trusts for participant selection. Both are on "large" well known recordkeeping platforms (one is Vanguard, the other Fidelity) and both are fees for RIA services (and related "consulting" services). Both pay advisor fees out of the plan's assets. The $800,000,000 million dollar plan thought $90,000 annually too expensive and selected an advisor who would do it for $70k, while the $70,000,000 plan thought the "comfort" of being with the same advisor for 13 or 14 years was "worth it" (although the advisor I work with said they'd do EVERYTHING the other advisor does and more for $45,000) and really doesn't want a benchmark..... Sometimes I wish I were mean enough to send an anonymous note to the DOL about some plan sponsors....

I believe there is a PTE for an investment manager investing in their own products. I don't have the cite - but should be easy to find. The question in my mind is whether the structure as a "partnership" is relevant....

Pay it back, pay the excise tax. I know of no other way to correct it.

You know, I think the emphasis on fees is really an emphasis on fiduciaries being asleep at the wheel - and fees are the easiest to prove with some "mathematical" certainty. The market is HIGHLY competitive and if you overcharge, you will get "slaughtered." Just last month, advisors I work with LOST a bid for investment advisory services WITH a full recordkeeper search - for an $800,000,000.00 (that's EIGHT HUNDRED MILLION DOLLARS) plan with 16,000 employees. Their bid: $90,000 annually and that was the HIGH among those responding to the RFP. Seems like $75,000 was in the ballpark for the winner, and $45,000 was the LOW. Those same advisors can't convince another company with a $70,000,000 and 1,000 employees that they are paying their current advisor too much, at $105,000.00. Sometimes I wish I could call the DOL myself and report some of the egregious situations I run across daily (just today: $15,000,000 plan with barely enough employees to be audited - advisor paid $68,000.00) Amazing....

Costs of maintaining two plans (documents, forms 5500, recordkeepers) vs. costs of dealing with the ugliness of a weird plan document.... Add in possible growth of the small plan to "audit" size, and add that cost in (someday). My "preference" is one plan where possible, but always "keep it as simple as possible" - so in this case, hard to tell....