MoJo

Do you have a cite for that DOL advisory?

I don't think I agree. State law is only preempted by ERISA to the extent that it is inconsistent with ERISA. I see nothing in federal law which mandates continued withholding for loan repayment (indeed, loans need not be repaid with payroll deduct at all...). Negative enrollment is another area where "forced" withholding (for deferral purposes) is an issue. I understand that litigation is on-going on that issue.

Interesting editorial. Problem is, the market sometimes goes SOUTH (and some of us are old enough to remember that...)! DB plans have a place in society (and don't create wealth for employers - merely provide a funding vehicle for an obligation). Wait and see. When boomers start retiring in record numbers, we'll find that most people haven't saved enough, haven't invested aggresively enough, and outlive their DC plan assets. Something that can't happen with a DB plan.

Well, the regs are really not very helpful - the rule for merging plans is that the benefits (or accounts) immeditately after the merger cannot be less than the benefits (or accounts)immediately prior to the merger. The question is one of whether the plans must merge, and what alternatives are available. That requires a consultative response beyond this message board.

If a financial service provider provides a break in fees as a result of aggregating ERISA and non-ERISA assets under management together, is that a prohibited transaction by virtue of the indirect use of ERISA plan assets to lower fees on non-ERISA assets managed? I can't seem to find any good authority here....

Not quite. What the IRS says about "plans" has nothing to do with what the DOL says about "trusts." Commingling of trust assets is per se a violation of basic trust law, unless there is a specific mechanism that allows it. A master trust is one...

I'm not sure I agree with the previous message. Despite the fact that the plans are sponsored by a "single" employer through the controlled group, the plans are distinct, and hence would require that the assets of each plan be used solely for purposes of that plans liabilities. Commingling the assets without the benefit of a master trust would be a problem. However, if this is a fully insured investment, I would question whether a trust were required in the first place....

There are many reasons a plan may not want to offer loans (yes, some people still consider these things "retirement" plans, and the money should actually be there for retirement). Same for a lower max deferral - 415 problems, ADP problems, corporate benefit philosophy (ie maybe they want to encourage other savings or investments through a stock purchase plan, or other vehicle). We are too quick to assume that this is "employee money" (legally it isn't - its the plan's money whose sole purpose is to provide benefits) and that if a feature is possible, it should be offered. Neither of these is a protected benefit, and I have (and will continue, where apprpriate) advise that loans be eliminated, and max deferrals be reduced.

Always a fun issue. A well crafted plan with an administrative policy regarding stock fund transactions should allow the trustee to suspend trading in the fund when liquidity (both fund, and market) conditions dictate. The employer really needs to take ownership of this - they want their stock in the plan - should should direct how to conduct transactions in it.

Thanks, Jim. From a sponsor's perspective, what is the benefit of this? The plan I'm thinking about (Marsh & McClennan's - the parent of Mercer (billed as the largest EB consulting firm)) has all monies invested in company stock. Hence, former participants, who are substantial shareholders, have no option to effectively leave funds in the plan....

Has anyone ever researched whether dividends received from a KSOP (through a pass-through provision) are rolloverable? A plan does not allow a participant to not accept passed through dividend once employment has terminated. Every quarter, a check comes, which of course, destroys the benefits of tax deferred compounding. Any insight would be appreciated.

Has anyone ever researched whether dividends received from a KSOP (through a pass-through provision) are rolloverable? A plan does not allow a participant to not accept passed through dividend once employment has terminated. Every quarter, a check comes, which of course, destroys the benefits of tax deferred compounding. Any insight would be appreciated.

I've been through one. No fun. Communication is the key here..... [This message has been edited by MoJo (edited 08-20-1999).]

Oh boy.... Well, apart from the inherent dangers of company stock, be careful that the purchases and sales of the stock are not prohibited transactions. Remember that even if a participant directs that a purchase be made, the actual purchaser is the plan, and seller, if a party in interest, the transaction would be a pt....

I disagree to some extent. Just having the mother appointed the guardian of the persons of the children does not, in all state, make her the guardian of the estate of the children (ie their property). In some states, an actual guardianship proceeding needs to be commenced, with annual accountings of all income and disbursements from the account. This would have to be established *prior* to distributions, as the distribution would be to the "guardian, as guardian of the minor children" and the court would then require accountings....

I'm a little concerned that say that you enjoy the protections of 404©.... ERISA section 404© protects on a transactional basis, and isn't design based. For you to believe that what you offer complies would be incorrect. Second, offering of nine funds (even if diverse) may not provide protection - the requirement is that the fund line up provide participants with the ability to create a portfolio with risk/return characteristics within the normal range of risk/return characteristic for participants of that type. i.e. the fund line up must be tailored to the participants.... I'd give lots of notice on any changes....

Tricky situation! What I've seen done in the past is that the formula is described as "taking into account certain factors, including compensation, tenure, age, position, etc...). Don't get into specifics about who gets what. If someone wants to see the plan, then they are entitled to it. Reinforce that plan contributions are part of compensation, and the company has a policy (if its true) against disclosing compensation to other employees (for obvious reasons). Good luck.

I've had the service take this position before. The requirement is that a p/s plan have substantial and recurring contributions. This is to demonstrate the permanence of the plan, and to avoid a termination (i.e. complete discontinuance of contributions). If a legitimate business reason exists to not make contributions in those years, and if that is a temprorary condition, then it can be argued no termination occured, until you actively terminated the plan. Give more facts....

Assuming the assets are transfered into trust timely (DOL requires that tehy be transfered as soon as practicable, but in no event later than the 15th business day of the month following the month they are zapped from employee paychecks), then the issue is one of prudence. The trust must invest the funds prudently (ie make the assets productive). Most providers do this within 48 hours upon receipt of *good* data. Good data is defined as allocation data that balances to the amount of the contribution. You'd be surprised as to how many times the two are not in balance. That requires manual intervention, manual balancing, and correction of the records. In the meantime, assets aren't allocated to anyone's accounts (although they may be invested in a money market or some other liquid stable value fund, if the time to correct is excessive).

GUST amendments shold do it; however, you should submit the plan for a determination letter - which will with certainty determine that the plan is up to date.

If the plan is subject to the spousal consent requirements, then yes....

The SEP is actually funded through an IRA. The SEP is nothing more than a "wrapper" that allows for greater contributions to the funding vehicle, which typically is just an IRA. The brokerage firm is half right - the money is immediately withdrawable from the SEP-IRA, and rollable into any other IRA. Why do they want to do this?

If the plan followed the employees to the acquiring company, then probably not - you need a distributable event to have distributions, and as long as the former employer doesn't retain control of the plan, one does not appear to exist. You should still; however, have the same rights and features in the dormant plan as you have had previously, and the assets clearly must be invested (whether by participant direction or by the trustee). It is possible to merge the plans, if the new employer wishes to do so.... There may be liability issues if the old plan had any problems in doing so.

Good luck. I know of no way to distribute small balances absent a distributable event (i.e. separation from service, etc...). As for charging fees, I know of some that are doing that, but I don't recommend it. Shades of discrimination here.... Generally the DOL doesn't like punishing people for exercising an ERISA right (like keeping a balance in a plan until termination of employment).