Below Ground

That was my point. A TPA needs to provide a good solid service. We can't be responsible for everything since the plan sponsor does need to do some things. Included would be execution of documents and maintaining necessary records. TPA's can only go so far, we can't be responsible for making a plan sponsor do the "right thing". We can only "guide" the client. I believe that current statutes recognizes that a TPA does not have total authority, so total responsibility is not possible.

We send out documents for signatures with "sign here flags", requesting copy of signed pages. We then make a follow up call to see if client will attend to actions needed while we are on phone. Another call will be made. An email or two. A quick reminder letter. Then, every year we will bring this up when we issue our annual report. Beyond that... ???? As a service provider we go to great length to help the Plan Sponsor "behave" as needed for compliance. However, beyond what we already do, what else is possible? Put a gun to the Sponsor's head and say sign or else? Sure. IMHO, the service provider is responsible to discharge reasonable efforts to get client to sign documents, maintain on and off-site copies, and return executed copies for our files. Having the service provider be "totally responsible" is not realistic, and is not fair. At some point the Plan Sponsor needs to be held to account for actions, or lack thereof. (Perhaps that is why the regulations hold the Plan Sponsor responsible.) I will take responsility for my actions, BUT I will not take responsibility for someone else who is not totally under my control. To think otherwise is arrogant (my powers are universal) and silly (my powers rival superman's). Nope, I will just do the best I can, with documentation to prove that.

I would round up.

Is there a way to easily tell if the hedge fund is one that would be deemed to be a mutual fund for Schedule H reporting. I have a plan that has monies in "AIPABSRT" and "HATTERAS" under a brokerage account of a "major house". I am unsure on where to list this investment on Schedule H. Help!

Each person is their own rate group?

GMK - I was not advocating any position. I was simply noting what an ASPPA Publication stated on this issue. I can also tell you that I have had plans that did this and then went go through an IRS Audit without problem. I should note that I did not advocate the method then. It was a takeover plan that was already using the practice. It seems that the key point is (as raised by Dougsbpc), don't have a benefit for the employer. Again, I am not advocating use of this practice. I am just saying it is done, ASPPA's Publication did discuss it, it was used as an example in cited regulations, the IRS says they don't like it, and in my personal experience it has been used without problem. Keep in mind that the paper trail would also show the money immediately leaving the account of the firm, as required for "agent status". I wholly agree that if the transaction is shown to be done for the benefit of the firm, you have a big problem. If you do have this need, the approach I would advocate would be use of a checking account that is owned by the trust fund, as posted by Belgarath. There are some minor operational problems with that approach, but clearly it does not involve the exposure potential under the "agent processing". Anyway, that's my 2 cents.

We have this specific "problem" with one investment provider that we work with. I recall that in the Defined Contribution Plan Series used for ASPPA Exams, this issues was actually covered. (When I have more time I will try to find exactly where (Volume 2 or 3, I think), but the issue was involving the processing of withholding taxes.) Anyway, it was deemed to NOT be a prohibited transaction if you used a company account as a "pass through" or "agent" for processing. In other words, if the money is deposited to a company account and immediately processed out (2 or so days), that would not be a problem. Found it. Page 9 - 23 of Volume 2. "The employer can act as agent of the payor in making distributions. ...may transfer funds to the employer, and the employer makes the distribution." "Although this arrangement is described in the cited regulations, IRS officials have informally expressed the opinion that such arrangement is not an appropriate method...." It goes on to say that this is fine for withholding according to the IRS. Grey? How often do we see that?

Sieve is 100% correct. The Safe Harbor Match Formula should be considered the lesser of dollar for dollar, or 4% of compensation. (Depending upon the document "compensation" can mean pay for the payroll period or the year.) You may wish to check again with your TPA. Perhaps you heard wrong? If they still say provide 4% of pay when the person did not defer 4%, get a new service. Match means related to the deferral. The 4% is a maximum limit. Good luck.

I send a client a report showing testing details. Those details include "contribution cutbacks" resolved by Catchup, and those resolved by remedial distribution. My summary to the client simply tells them whether distributions are needed. That way, the typical client can say "Oh, no action needed", or "Darn, I have to do...". The special client that wants analysis is also satisfied by looking at the detail. In summary, give them what they want, but make sure compliance is realized.

That is my understanding. Off hand, I don't know where to tell you to get confirmation. I seem to recall that this issue is resolved by the fact that monies belong to the trust, not the adopting employer, and are used exclusively for the benefit of all participants. You may consider reallocating the forfeitures to the employees of the terminating employer before the withdrawal, which of course, would resolve the issue "cleanly".

What I have always understood to be the case is that the sponsor of the prototype no longer sponsors the plan for that firm. Effect is the plan is viewed to be an individually designed plan, which will need amendments to keep up to date as time goes by. IMHO, when you are talking about a nationally recognized document, this should not be a big deal for the short term. What we do is (1) tell the client about potential concerns, and (2) offer to restate either now or at a future date when an amendment (that is not easily obtained) would be needed. In effect, advise of potential problems and offer an on-going solution. That's about all I can see doing. Typically, we end up restating the document for a number of reasons (usually to improve design), making the point moot. It is, of course, easier to work with the document that you are most familiar with; BUT we do service plans that don't use our document. We just keep those clients updated on concerns and let them decide. Anyway, hope my 2 cents helps.

The Plan uses the Safe Harbor Definition of Hardship. We know that Compensation while under the "Suspension Period" can be excluded from ADP/ACP Testing. Would you also excluded this pay when determining the Safe Harbor Match of 100% on the 1st 4% deferred, or the 3% Safe Harbor Nonelective Contribution? Going further, would this same exclusion apply to determination of a "normal" Match that has a "compensation cap", or for a Profit Sharing Contribution. I believe that this exclusion is solely for Testing Compensation, but can't find any reference in the Plan document beyond reference to 414(s) for Testing Compensation. Any insights would be greatly appreciated.

Ditto

This copied from DOL website: The 2008 Form 5500 annual returns/reports (including delinquent or amended 2008 returns/reports) can still be filed using the original EFAST system on paper through October 15, 2010, or electronically through June 30, 2010. The 2008 Form 5500 forms can be completed using EFAST-approved 2008 software or using the official government-produced 2008 forms. The official government-produced forms can be ordered online at the IRS Web site or by calling 1.800.TAX.FORM (1.800.829.3676) between 7:00am and 10:00pm Monday through Friday. Why Jay21's client had a rejection does not make sense, since the DOL says you can still do paper up through 10/15/2010!

No Top Heavy Minimum required when only Catch-Up Deferrals.

Thanks Larry! Always nice to get that "back-stop opinion"; or should I say that help of the goalie!

Is it possible to us a Safe Harbor Match where the match is stated to apply to NCE and HCE Owners? In otherwords, all NCE would get the Match, but if you are HCE you only get the Match if you have ownership in the firm. In effect, HCE who don't have ownership are excluded. Would that formula qualify as a Safe Harbor Match? In addition to other concerns I have about this, I suspect that Top Heaviness may be an issue. Any and all comments are appreciated.

Me too.

Since most plans allow for testing to be on a benefits or contribution basis, I suggest that you first look to see if the allocation must be tested using the benefits basis. If not, and coverage testing is passed, I don't see how a plan that gives everyone the same percent of pay could fail when etsting under a contribution basis. (Since testing on the current allocation basis is not using a projection, demographics have no impact.) Of course, if the document says you can only test on a benefits basis....

Many plan already have language that allows for the flexibility Jim notes. You may find it already there.

These types of plans are actually quite common. The document must include an option allowing for self-directed brokerage account to be an option available to all members. You can apply a opening account balance minimum, such as $1,000, provided that it would not be deemed discriminatory under "RBF Rules". We normally have 3 "points of notice" for members on this feature. First, include in the SPD. Second, provide a special notice when a person has his/her first contribution going to the plan. Finally, send an annual notice with an election that allows using this feature. We have found that most employees will not choose this option since it lacks the structure you would have with the "mutual funds account". You are now saying to the person that he/she can invest in almost anything that can be bought, with exception to include puts and calls. That can cause many people to be overwhelmed by the number of options. This may not be preferable to the broad menu of set funds typically offerred. With this type of plan I believe it is prudent to let the person know about the downsides, as well as the upsides. This, I believe, is common sense. You should always try to let people have as much information as possible about what that choice may mean. Having too many choices can be bad. Whether these types of plans are a good choice could be debated for hours. My position is that they exist, and do require extra effort. If the Sponsor is not prepared to handle the potential extra problems created, they should not use this trust structure. Conversely, if they Sponsor is ready to handle the special issues created, and this type of plan is desired, why not?

Thanks for the replies. I had gotten, in writing, a statement saying that I did not need either the plan document or data on accounts to do a valuation and 5500. I had that "confirmed", saying that we would complete the 5500 based upon data held, and that in accordance with service agreement we are not responsible for related errors or problems. I then terminated our service going forward, following completion of that 5500 and valuation requested. Making a long story short, we now have in writing that we are to not complete the 5500 and valuation! In short, problem solved, I guess! The idea about contacting E&O Carrier is a good one to remember. Thanks! I really found this to be an "Alice in Wonderland Scenerio". Expecting that we do a review and do a reconciliation of plan operations without data on accounts, or even the amended plan document! Just too weird. I can't determine why a firm would want that. Pehaps, something in the data or document they didn't want us to see? Anyway, it is gone so.... Having a good service agreement is oh so important.

I was wondering if anyone else has ever run across this situation. Client firm is sold to a big firm. During the year the big firm revised the plan documents and moved the money to a different investment platform, shortly before the close of the year. Big firm refuses to provide us with new plan documents, and information about accounts on new platform. Problem is they demand that we do an annual valuation and prepare 5500. Requests for missing data are outright denied in writing, with person actually saying that since plan moved to a new platform we have no need of that information! Anyway, we are intending to simply do work with data held. Of course, "product" will be heavily caveated, and our file includes the numerous written requests and denials. Our written service agreement does say work is based on data submitted and the client is responsible to provide us with all data. I find this situation too surreal. Is this something we should report to the feds? Anyone have any suggestions? Thanks!

To muddy the waters, what if you are doing the test for 2009 and a person had > 5% in 2007 but 0% in 2008 (lookback year) and 2009? Oh, I say 6, since data used and analysis is for the "determination period" which is 2008.

Thanks Jim. I got that today too!