Below Ground

401(k) Plan uses the calendar year, and is notorious for providing data late. We just finally recieved 2012 data (after 4 written requests and numerous calls). In data submitted we find that ownership changed during the year so at year end, the three firms previously covered as a single employer are no longer a controlled group. Problem is when does this change apply to the Plan, and when does the Plan become a multiple employer plan. If we apply "multiple employer status" for 2012, one group under the Plan will fail ADP Testing and be considered Top Heavy. If status is applied in 2013, same problems for that year. During both years a key employee does contribute deferrals under the group that fails ADP and is Top Heavy, so where no employer contribution was used, a Top Heavy Minimum is required. Hoping there is a transition period under regs for this situation. Of course there has been no documentation on this topic processed. Any thoughts or insights? Thanks!

We know Mom can't cash that check. We tried that with a similar situtation a while back. We didn't know there was no estate so had check payable that way. Luckily, there were no other potential claims on the one. Mom was only relative. There was no spouse, no boyfriend or girlfriend. No one. That was easy. This one is not.

Uses succession rules for Texas. They have a nice chart that covers all possible scenrios BUT one. It does not address if you die with parents and siblings but no spouse or children! Oh Lord why me????

The POA did die with the person. You were right on that, I missed it. As too hiring an attorney, while good advice, is not likely to occur. Bird's points are right on the mark. I am not sure how you would pay to the executor. I guess we'd need to see if ING would write the check that way. The Plan document goes first to spouse, then children, then estate. Guess what we have? A Mom and a sister or two. No wife. No kids. No estate for that matter too. The interstate concern does apply. While it adds to the equation I do appreciate your raising that flag. Perhaps a LegalZoom.com issue? Regardless, thanks to all for your comments. They really do help a great deal!

We have a situation where a participant died without completing a beneficiary designation form. In this event, the plan document says pay proceeds to the person's estate. The problem is that the person does not have an estate since the person had pretty much nothing. The cost to setup an estate would eat up the $800 or so due as a death benefit. Without an estate, we can't make the payment to the estate as the check could not be cashed except by the estate (or representyative thereof). Basically, create an estate for nothing, or have a check issued that can't be cashed! What we do have is called the "Durable Power of Attorney" which names his mother to have Power of Attorney. Powers granted include "authorization to manage and conduct all of my affairs", which also allows for opening and closing of accounts, including "retirement accounts". While this seems to be the answer, does this not violate the "nonalienation clause" where a person can not assign his or her rights? I suspect I amy be making too big of an issue, but I do believe that caution is merited. Should we just make payment to the Mom, who paid for his funeral, as beneficiary in light of the Durable Power of Attorney? Any and all comments are appreciated! Thanks!

Thanks jpod! Totally forgot about this post! Anyway, Company A was/is an S-Corp in the State of NJ. I would agree with you conclusion, except that the owner of Company A is the Trustee, so there is a bit of liability. Not for the issues I listed, but with respect to the liquidation of the trust fund. It appears that the new owners don't care about the plan. They have made it clear that it is of no concern to them. They are allowing an employee (was adminstrative contact, but not the Plan Administrator) to recieve mail, emails and calls about the plan. Actions that would take more than 20 minutes or so are no permitted on their time. She does that on her own time! She does this because it is "the right thing to do" for her. We are allowing efforts to see that employees are properly paid out. They are all terminated except the owner, for whom we are not processing a payout (too many bills unpaid). We do the processing of the employee for signature by the Trustee. That's all until we see some of several years of unpaid admin service fees.

My position is to assume the worst case. We use a service contract that is automatically renewed each year. It could be interpreted that the annual renewal requires the mailing. While I assume that almost no one will read the mailing, it may have a value; especially if I male it an email that has almost no actual cost. Don't get me wrong, I would rather not have this as another issue to address. Unfortuantely, it is here so might as well make the best of it to solidify client relations. That is done with content -- provide something positive. Good luck.

UR welcome. Perhaps this annual mailing creates a good time to review the fees charges each client. Is an increase merited given the need to send 8 data requests to get the data for 2011? By the way, the fact that information was sent piecemeal and the census was provided as a hardcopy spreadsheet (would not send as Excel File for some unexplained reason) that was not sorted, and used 6 point font for 375 people... Well, there you have it! A bright side to everything! My Mom did tell me that you can find a postive feature if you look hard enough!

The ASPPA Journal's Winter 2011 Edition included an article "Impact of 408(b)(2) Regulations on TPAs" that I found very helpful. One suggestion was to send a disclosure to all clients. Several reasons were cited, but one I found very compelling is what if a Plan that was expect to not have reportable income for a year actually does, you are looking at a prohibited transaction. Provided that you can develop a simple mailing that meets the disclosure rules, and generation of that mailing can be done economically, perhaps "better safe than sorry" makes sense. To Beltane, my research would conclude that no it does not. Sorry.

There was a pretty good article in the ASPPA Archives, but I can't exactly recall the name. Something like "How 408(b) Disclosure Rules Impacts a TPA". I have researched this topic to death and can't provide any recommendation over that article. There were other resources but I found that piece to be the best. Anyway, I can tell you what we are doing... We are sending out an annual mailing to ALL clients (suggested in article) to insure that our fees are covered. This allys the fear that you may send the client a bill, which historically they have always paid, and this year they pay with trust assets. Without the disclosure you have a prohibited transaction. Our mailing is comprised of a brief cover letter that lists the services we expect to provide to that exact client, and both how and what we expect for compensation. The mailing also includes a separate listing for definitions for concepts and terms. An explanation of how revenue sharing works is an example. The content and level of detail will depend upon the specifics of what services you provide the client. In addition, presenation style will factor in. Perhaps our approach won't work for you, but perhaps it may. Either way, better safe than sorry. Good luck. Hope this helps!

Annie, if you recieve any payment, like a benefit distribution fee, from the trust fund you are impacted.

Bad medicine is worse than no medicine.

My first job (1985) was TEFRA, DEFRA and REA restatements. At that time I don't recall self-directed accounts being a material part of the industry. To the contrary, they were a true novelty. It wasn't until sometime after the utter destrcution of the small business defined benefit plan market by "well intentioned regs" did interest in this type of program start. Bad policy is bad policy no matter how you try to dress it up. Seriously, what benefit is really expected of the participant notices? I see only more paper thrown at participants, and an increase in underlying cost. The only end result of this requirement that I see is the move from private plans to government mandated plans. Make the private plan so unattractive by virtue of government imposed costs so that we will have one "choice" left -- the plan provided by the government. Well, we all know that government always provided the best for the public, with no waste or fraud. Sort of like the GSA! This is not to say that many departments and workers of the government aren't worth their weight in gold. Many are! However, a monopoly is a monopoly. Unbridled power is never good. Oh yeah, telling someone not to worry doesn't sound like a nanny state. It sounds like fraud. To catch fraud, should not we get the attention of the entity that can make a difference. Since most participants will not even read the material does it make sense to involve this party? Perhaps if you want to have those uninform people run to the government for salvation. No, I suggest that the Plan Sponsors be used as the engine of change and enforcement. They unlike the average participant can no only make informed decisions, but have the power to fire the crook. PS: My role is not directly involved with participant notices. There is no solution for me to figure out. I just hate seeing an overreaching government once again overstep and destroy a valuable program.

Just a thought. Wouldn't it be better to have the Plan Sponsor be provided with such disclosures allowing for a review with professionals who could seek out the best deals? Even with notifications a participant can't simply move his or her funds to another platform. Perhaps these notices just say here's some infor that you shouldn't really care about since there is really nothing you can do if you want to use the plan. Just a thought.

Perhaps, but do the benefits justify the cost. History is full of examples of good intentions bring about horrible unintended costs. Do you really believe that the costs to comply with what so far appears to be ridiculously complex rules and requirements, are justified? That old saying of don't throw the baby out with the bath water comes to mind. Were the complexities brought about by TRA 1986 worth the destruction of defined benefit plans for small employers? Keep in mind, I ask these questions from the position of not being someone who must provide these notices.

For what it is worth (about nothing), I agree with Bird, BG, masteff and K2. Actually, I think K2's point is critical, and is where I would make my stand. The other points are good arguments, but I would say they don't account for intent. Sort of like precedent in case law? That of course is totaly subjective, so here's where opinions will never reach agreement.

@ MoJo. Yes, I agree that there are a number of people who get paid big bucks for very little. This is a problem that should be reviewed. Making service vendors fully disclose fees to plan sponsors has merit. I'm not sold on how 404(b) wants this done, but... Actually, my point was more directed at the participant disclosures. (Something that does not directly impact my business.) I believe that these notices will be a total waste of money because few, if any, participant will read them. Fewer still will understand. Despite the dubious value, they must be generated. This will cost the vendor (typically the place where assets are held) money. These notices will not be generated at no cost. Where will that cost go? To raise underlying fees? To reduce rates of return? It will paid somewhere, and like most things, payment will not simply be a reduction of profit. It will be passed on if not in entirety, then in majority. So then the impacted programs look less attractive. Less attractive means fewer firms will have. Fewer plan adoptions will ultimately kill the existence of these plans. Is that good? I suppose in the age of the "nanny state" the concept of private retirement plans is an anathema? I think that this question needs to be asked as we watch Europe ignite into riots over a failure of government benefit plans to meet obligations. Should we strangle private pensions, making all retirees dependent on the government? Perhaps I over reach in my conclusions. Perhaps as a national debt passes 17 trillion. Perhaps...

Just curious, but does anyone else find these disclosures as "regulations gone wild", especially, the 404(a) participant notices. Since this thread is directed at the "b" notices, let me first say something there. As stated earlier in the thread, clients do (or should) know what we as TPAs are being paid. Sending them a notice on this effect is not likely to inform a client on what I am being paid. Why? Do your clients carefully read everything you send them. I find that most clients have no desire to get anything else from me that they need to read. They just want me to take care of what needs to be done with the least amount of effort on their part. My sending this disclosure is not going to make clients think about whether my fees are competitive. Instead, this will be something they will simply "round file". As a TPA who rarely accepts revenue sharing (I often have my share given to the broker), my clients universally know what I am being paid. Why? They write the check, that's how. I also have every client sign a service agreement on "day one" which clear staes fees and services. The "a" notices are just nuts. Getting the typical participant to read an election form is a feat! Does anyone really think participants are going to read these detailed notices, reviewing the comparative charts, reaching informed choices? Who believes in the tooth fairy? Perhaps fees should be more transparent. I can see that, but these notices to participants will not have that effect. I see them as simply something that will intimidate the average participant, and most definitely raise the cost of servicing plans. Is that what is desired? By most observations, TRA 1986 hurt defined benefit plans. Those rules made sponsorship by a small firm to become too costly in many cases. Is that the intent of the 404(a) participant notices? Make plans with self directed accounts disappear? Well, that was my annual venting. Thanks for listening.

Like many I am sure, I have been reading and listening to a lot about the new fee disclosure rules. As we approach July 1st, I find myself looking for a good suumary of requirements as applicable to a TPA Firm like ours. Almost all of our revenue is from fees billed to the client, who directly pays these bills. We do, however, have some revenue which is paid directly from trust funds. First, services related to benefit distribution fees are paid from that person's account. Second, we do receive some "revenue sharing". Finally, we do have a few clients that have our service fees paid using monies of the trust fund. As always, any comments are greatly appreciated. Above that, does anyone recommend one of the many recorded seminars on this topic? Thanks!

Good luck to you with your new TPA firm. I must admit, there have been many days I ask why I do this. Well, it does pay the bills.

I just got my enrollment in March of 2012. Do I have to renew already?

I would guess no 1099 was filed. We shall see. Thanks!

Thanks Kevin. I will suggest calling to them. I think that is a great idea! We do know that there was no activity under the trust since the payment to the person.

Have a new takeover client with a profit sharing plan that uses a trustee directed fund, subject to annual valuation. Of course plan has several problems. One problem is that in 2009 a terminated participant was paid the 80% of the benefit due. The 20% for mandatory withholding was left in the trust. I do not know if any 1099R Form was done. (It appears that client kept almost no records.) We are now in 2012 and those monies remain in the trust fund. Any opinions on what actions should be taken to correct this problem? Thanks!

Option One is my understanding.