AlbanyConsultant

An ERISA 403b plan where we merrily have been excluding a few participants from the 5500 count for the past few years because they terminated in 2004 and 2005 and had their balances only in old annuity contracts is looking to terminate. All of the other participants with balances are active on the mutual fund platform so we were all excited to have an easy plan termination... and then someone remembered these stragglers. Is there any way to consider these few people already in possession of their accounts so that the plan can be terminated and paid out? Maybe with a notice to them to give them a heads-up that the plan is officially terminated?

Drat. Thank you, but drat. So if the ER still wants to start at a new platform, I could write a new document and have assets going forward for all participants at the new RK and the old accounts at TIAA, but I'd have to convince TIAA that their document no longer governs those accounts? Or, at least, is subject to any conditions in the new document (which, ha ha). Because with a few dozen participants, some terminated for 10+ years, there's no way that they will all agree to move to the new RK voluntarily.

A financial advisor has reached out to me about a 403b plan at TIAA. The plan has an employer contribution, and TIAA acknowledges that it is an ERISA plan... but they then say that because all the investments are in annuities that the plan sponsor does not control the investments, so the plan sponsor can't decide to move the plan in one fell swoop to another platform - it would have to be up to each participant because they control their own accounts. Is this just TIAA being TIAA, or do they have a leg to stand on here? Thanks.

In a plan where everyone is in self-directed brokerage accounts, two of the doctors (of course) have stumbled onto a non-publicly-traded stock that they want to buy. The financial advisor can't get them access to it through his platform, and the doctors aren't old enough for in-service distributions of any sizable amounts, so they are looking to change brokers to get access to this asset in the plan. The asset itself has a minimum - I've heard varying accounts of either $25K or $10K to buy in. Is that in and of itself discriminatory? If it's $25K, then no one else besides the doctors have that much in their accounts (at least as of 12/31/18). But what if it's $10K - pretty much everyone has that much.

I agree, but this is not the kind of client who is going to be on top of things enough to tell us when someone terminates or to initiate the forceout themselves. So I'm trying to save them from themselves by making the document reflect what will actually happen (i.e., we will swoop in after the end of the year, figure out what needs to happen, and do it then).

I'm taking over a plan that has immediate force-outs in the document for VAB <$5,000. I suspect that provision was not followed by the prior TPA, and based on how the assets are set up (individual brokerage accounts) and the fact that we won't be monitoring the plan on a daily basis, it doesn't seem like the right fit for this plan. Is it a cutback to change this to happening after the end of the year of termination in the document? Thanks.

Thank you!!

SIMPLE IRA.

Let me start by saying that I don't work on SIMPLEs - this was a call I took from a desperate advisor, and while I told the advisor that I don't know the answer (and he is now going to check with the company's accountant), now I am genuinely curious... A small business has a SIMPLE, and all participants have signed on to have their SIMPLE accounts through one financial firm (let's say Merrill Lynch). Now one participant brings in paperwork that says he wants to open his SIMPLE account somewhere else instead. Does the plan sponsor have the authority to limit where the accounts are? From what I can see, I don't think so, unless maybe the SIMPLE document is specifically a SIMPLE document from ML that specifies that all accounts will be held there... and even then, I'm not sure that would hold up. Am I even in the right ballpark?

I'm talking to a plan I'm looking to take over, and they are getting close to the audit threshold. Luckily, they have two separate businesses in their controlled group, so I'm thinking about splitting the plan into two identical plans to avoid the audit (yes, we'll charge them a little more, but nothing near what the audit costs). The assets are on a product platform. One of the issues of the plan is that very few of the participants have balances, so I can deal with manually separating the download, but is there a problem with all the participants staying in the same 'contract'? Is this a master trust? Thanks.

Seems like every few years, there's a thread about whether a plan sponsor can enforce the loan policy to have loan repayments only be deducted from payroll. Here's one good one from about two years ago: https://benefitslink.com/boards/index.php?/topic/61537-stopping-loan-payments-while-still-employed/ Let's go with the premise that if someone wants to cease their loan deductions while still employed, you cannot stop them. If the loan policy says that loan repayments are through payroll deductions only, do you then have to allow the participant to repay the loan through some other method? Or are they voluntarily dooming themselves to default? Thanks.

A client called because they were pressured by their platform to approve a distribution and agreed to it. Unfortunately, their document is written so that there is a one-year wait on distributions (because there are usually errors in deposits that we have to reconcile after the end of the plan year). But let's say that we are confident that this particular person has no deposit errors, so the distribution was 'correct' in the amount (vested amount, deposits, etc.), just about ten months too early. I know that they have violated the terms of their document. But what is the downside/correction? It's not really an "overpayment", is it? I'm not seeing anything remotely applicable in EPCRS 2018-52. Thanks.

Short version: we took over a pooled profit sharing plan a few years back... all pooled except for a few participants with life insurance. No one new has purchased policies (we've made the plan sponsor give each participant a form to sign off saying that they don't want to purchase a policy), and all those with policies have terminated and gotten paid out except the owner, so his is the only policy left. Can the plan be amended to no longer allow life insurance going forward without causing a nondiscrimination issue? Or are they doomed to be stuck in CYA-mode until the owner gives up his policy? Thanks.

F&C

Company has three owners, A (the father), and B & C (the sons). Um, had three owners, as A passed away in 2017 (while in RMD status, but I don't think that matters here). With advice from their financial adviser, B&C chose to keep their portion of their father's money in the plan, so we created beneficiary accounts for them in the plan alongside their regular accounts. How should we be treating these beneficiary accounts for the purposes of top heavy calculations? I'd think we count them in both numerator and denominator for 2018, but what about beyond?

We were about to tell the plan sponsor that the hardship paperwork they had sent to us looked in good order when one of our admins stumbled upon a GoFundMe page set up for the specific purpose of paying the bill that the hardship was submitted for. A very well-supported GoFundMe page. If we tell the Plan Administrator, they're just going to ask us what this means, and should they approve it or not. On the one hand, one could argue that there is no longer a financial need. On the other, there's no real proof that this was set up by the participant in question and that the money will actually get to the participant (internet scams abound). The hardship form does have a certification that the participant has no other funds with which to pay this bill, and this was signed by the participant. Maybe it was signed before the GFM page was created, or maybe it wasn't fully-funded at the time so they were looking to make up the rest via the hardship; I don't know. Our consensus is that no auditor would look this far into the situation - they would review the distribution form and the payment in the light of the [proposed] regulations and everything would be fine. No IRS agent is going to do an Internet deep dive on this - at least, I don't think it will be in their training in the next three years. Anyone already think through this and come up with a policy? Thanks.

A Taft-Hartley plan we've been asked to give an opinion on has issues with late deposits - certainly of employee after-tax contributions, and also possibly the money purchase contributions. The union is working with the plan auditor to chase down the late amounts. Is there a potential situation where the union itself is on the hook for these amounts?

We have a small segment of our new comp plans that insist on making profit sharing deposits during the year even though they are cross-tested and even though we have told them repeatedly in writing that this is a Bad Idea and a Royal Pain. Mostly, they give a small percentage (~1.5%) to each staff employee with each payroll to approximate the gateway minimum and none to the owners, so we figure that even if questioned, it could be shown that the deposit is non discriminatory. Or they give the 3% safe harbor to each staff employee with each payroll but don't for the owners (though that's usually only for sole props and partnerships, which makes sense). Today, someone here had the idea to ask if the receivable deposit, if tested on it's own, would be discretionary in favor of the HCEs. Sure, if you look at all the information for the entire year it passes testing, but if you look at that one after-the-end-of-the-year deposit, it's almost all for the HCEs and would fail miserably. Looking at this on the "receivable" is something I had never considered before. Is this an even bigger issue than I realized?

Because it wasn't agreed to at the start of the loan? I suspected that might be the case.

We're taking over a plan with several loans outstanding, and the plan sponsor has never known that they could pass loan admin fees to participants (if properly disclosed), so they are now interested in doing so. If I tell the investment product to take loan maintenance fees from participants, they will do so from all participants with loans - they can't exclude certain loans. Is there any issue with starting to charge the annual fee to the existing loans once they've gotten a disclosure notice that this will start happening?

This seems to be a situation where the P and AP attorneys are working together to get this resolved smoothly, so I think this is something they have cooked up together. To Larry's point, I could have them re-word it to attach the 401(k) and safe harbor sources, and that would have the same result as taking the money only from the daily-valued accounts. Are we supposed to be reading "plan" in 414(p)(1)(A)(i) as a disaggregated portion of a plan - is that where the idea of them being allowed to instruct by money type comes from? Otherwise, I'm not seeing it in there. Couldn't they say that (2)(B) gives them that authority? The individual accounts are with MassMutual; I believe they have a two-step process where first the money is moved to an account for the AP and then the AP elects when to take the distribution (it's at AP's discretion at that point). So even if the QDRO says that it is for an immediate distribution from the P's account, that's not exactly how it goes. I expect that I can submit Form whatever to MM saying create an account for AP and segregate $130K as of today from P to AP (well, maybe it needs a separate enrollment form to create the account, but you get the idea). MM will do a pro rata transfer from all funds P holds. Thanks for the quick responses.

A plan has 401(k) & safe harbor on a mutual fund recordkeeping platform, and the profit sharing in a pooled account. Participant P has a current balance of $200K in his individual accounts and $50K as of the latest valuation in the pooled account, and the segregation amount is slated to be $130K. For the sake of ease, obviously, it would be awesome to pay out the QDRO from the platform. The attorneys are writing that into the QDRO. Do they have that right? Isn't that the Plan Administrator's authority to decide where to pay the QDRO from? As long as the dollar amount is satisfied, that should be all they care about, I'd think. Any thoughts?

The plan doesn't have QJ&S, but I suggested that he get the spouse to sign off because he was putting someone (the executor) between the account and his spouse, and if he wasn't trying to scheme his way out of something, he should have no problem doing that. Haven't heard anything since then.

I've got a lawyer (naturally) who wants to establish a trust for the sole benefit of his wife as his plan beneficiary. He's wondering if this requires her consent, since she is technically not directly the beneficiary... but she kind of is ("kind of" isn't his term, of course). No, I don't know why he's going through all this, or if he's trying on purpose to not have her sign something - I'm trying to get those details. Any initial thoughts? Thanks.

The RK isn't keen on the idea of forfeiting money from a source that is fully-vested by definition, so I think I'm going to have to go the fee route. It's almost chicken-and-egg: if there's no distribution, then how can there be a distribution fee? LOL I can't cash him out because I outsmarted myself. I restated this document at a time when I was having a lot of problems with uncashed checks, so I made the autorollover threshold $0 - any forceout has to be rolled over. Millennium Trust will take small amounts (and if their fees eat it up, so be it), but I'll be darned if they get the fees for it and I don't! And I would have the plan sponsor pay for the distribution fee, but this is one of about 25 participants where the balance is less than the combined fee of the RK + us. After years of no PS, they made a small one two years ago and then haven't made another since, resulting in a large number of people who had never deferred with relatively small profit sharing balances. So while the plan sponsor might be willing to pay for one distribution, they certainly don't want to pay for two dozen of them. Thanks for all the ideas, moral support, and sympathy...