Below Ground

Tom, you are talking about the "Early Participation Rule", right? An HCE can be an OEE for ADP when using the "Disaggregated Plan Testing Option". (These are both discussed on page 4/25 of the ASPPA's 401(k) Plans and Intermediate Administration Topics.) "Carve Out Rule" is some verbiage that applies to Relius when talking about the Early Participation Rule? Did not know that you could NOT use for Coverage and Cross Testing. Luckily, I always passed with the Disaggregated Plan Testing Option. (Didn't need the extra kick from the EPR.) Thanks.

Perhaps avoid immediate payouts?

Can Otherwise Excludible Rule be applied?

I second that. As I understand this topic it is the earlier of the PYB following the date satisfied, or date satisfied + 6 months. By date satisfied I mean 1 year or 21.

Count one more for "plan expense". I have listed fees like this for about 24 years. Gone through many 5500 audits. Never a problem.

Thanks. This seems to be getting very interesting!

Thanks to both.

Discretionary applies to amount as a whole. The allocation is not. That is required for basic qualification, know as "definitely determinable benefit". You can choose what you are putting in but not how it is divided. That MUST be stated in the plan document.

Conceptually: You already remove the $5,000 Catch-Up when you went from $20,500 to $15,500. That person has no more Catch-Up available, so if you rank people by $$$ value and then cutback for excess from top down, that person should be at the top and should require a remedial distribution.

I did a search and found that I had asked basically the same question about 1 year ago. I totally forgot about that! Anyway, there was no "solution" then. As I went through other relevant posting I found out the most likely reason replies on this topic are hard to come by. It seems that I am not alone with my confusion toward ASG determination. It's a hard topic!

Thanks K2. Ultimately, I will tell this "client" that I am not the person to call for this determination. However, before I tell someone that they need to spend money to get a proper opinion I would like to at least be "in the ball park". Again, thanks.

Controlled Groups (CG) and especially Affiliated Service Groups (ASG), are not my forte. Any help with the following determination would be greatly appreciated. Mother and Adult Son are in real estate together. Their firms are (1) each has an individual propreitorship, under which they are respectively paid. They also own an agency that is an S-Corp which they have both have a 50% ownership. This agency is where they do selling, and it employs real estate brokers that work for Mom/Son. My first conclusion is that there is NO a CG. This is because neither Son or Mom have more than 50% ownership in the Agency, meaning no attribution of ownership. Without attribution, you don't have 80% common ownership, so no CG. My question is primarily directed toward the ASG. I think that the Agency could qualify as a First Service Organization (FSO) as it does appear to satisfy the definition of service organization. I also think that the proprietorships could each be deemed to be A-Organizations, especially since commisions earned under the Agency are paid through the proprietorships. Any help would be appreciated. Thanks!

Agreed!

I also think it is important to consider what controls processing. Is it the participant? The participant's broker? The participant's wife? Or perhaps the participant's uncle who was once in a 401 something plan that let him take money whenever he wanted some cash for drinking (Yes, I've heard that one!). The Plan is ultimately in control, which is not necessarily what the individual participant wants. Protecting the plan's qualification; thereby, preserving the benefit of all members should be the guiding force. To do this correctly, members must be properly advised via the SPD. Then, when a person requests money, there must be a written reply that includes a clear explaination of timing. What should never control is that the person simply submit papers for a distribution. As any good TPA knows, there is usually a "function" that involves all member accounts when processing a single person's account. Examples include true-up, discretionary year end allocation, certain compliance testing..... A distribution is "final". Is it really prudent to work with estimates? If you search this board you will find a number of posting related to paying to much to a person, how do we get it back. There is an old saying of do it right or don't do it at all. As I stated above, there are times when payment on demand should be processed. There are also times when a "partial payment" is prudent. Lastly, there are times when payment should simply not be made.

There are problems under some plans with just paying when the person submits forms. Consider the situation of an HCE that is paid his/her entire account, and then it is found that the payout included excess contribution from ADP/ACP Testing. You may have allowed monies that can not be rolled over to be rolled over. (There is a correct for this, but it is complicated.) Another situation is when each person has an individual account at an asset vendor, and monies are erroneously deposited to that person's account (Bob gets Sally's money). Yet another situation is when match is concurrently funded but is subject to annual true-up. I'm not saying you can never do "payouts on demand". I am saying that under some plans that would not be prudent. I have given a few situations above. There are others. I have actaully seen plans in very hot water given a policy of on-demand payout. I suggest that "administratively feasible" should be defined with respect to a given plan by the plan administrator. This should not simply be a "knee jerk decision". I would definitely agree that the SPD should be very clear on this topic.

Does the plan have a discretionary allocation, or is it simply a fixed formula. If discretionary is available and the money was deposited during the year and it can be allocated under IRC 415 and it does not exceed maximum deductible limit; it MUST be allocated. I went through this recently and there is a thread somewhere that went through this. Even though this was contrary to what the client wanted to do, the allocation had to be made. I think it was under "Retirement Plans in General".

I have heard on many occassions that this can mean (1) shortly after the deposit of the last contribution due to the person's account, and also (2) within the 6 months that follows the close of the related plan year. (I can't give a reg cite as I don't think one exists.) Most plans allow for interpretation by the Plan Administrator, with all such decisions being "final". If the document does not clearly define what this means then I believe this type of provision would kick in. Then, the decision of the PA would apply if that position could be justified as "reasonable". Anyway, while this may not provide an "official answer", I hope it helps.

We have a couple clients that use individual Vangard Accounts, and yes, those statements are not the most user friendly. They will, however, provide what you need. It's just a lot of work.

But of course! We have quite the selection for you to consider! My oldest son has a "tricked" Blaster. My youngest son has a 250EX. My wife has a Breeze/Grizzly 125. Lastly, my daughter has a BTM 50. I suppose you could ride any but the 50. That has a weight limit of under 100 pounds, I think. It is really small and slow. I thank you for the award. I accept with all the grace I can muster at this time of year.

I find that people ONLY hear what they want to hear, unless the IRS or DOL is knocking at the door. We send plenty of warnings, proof, etc... BUT I find that it does little, if anything, beyond showing we did our job. It is either ignore, or serves to drive the "client" away. I sense there is no solution. Guess I'm back to that "time for the 400EX". Thanks.

Thanks for the comments. See Post #5. Confrontation almost always sees broker and client run for the hills.

I'm in the east, so dunes are not really available. However, a quick lap on the MX Track, or a ride down a GNCC Type Trail at the riding park sounds good. Oh, snow is fun for donuts but I don't like the cold so much anymore. Bottom line is that a day on the 400EX beats a day in the office. I like riding the mud, dirt or sand. Thanks for the thought, it was pleasant.

We are slowly weeding out the bad clients, and the bad advisors. It's just a shame since many came to us with problems that we worked hard to fixed, which they will soon have again. (They never learn.) We try very hard to educate both clients and advisors, but I guess you can't win them all. And don't forget, getting new clients is not "cheap", especially with the downturn in the economy. You hope to recoup the "new client costs", but... Of course, ending up in court won't be cheap either so I guess I will just try to keep doing the right thing by doing things right. I have been doing this for 24 years, and I have never seen it so bad. Liars and cheats have always been around, but it almost seems that clients are too easily duped by these "professionals". Well, enough whining from me. Thanks for the feedback.

QDROphile - I need to check the ASPPA Code of Conduct on that. In short, I'm not sure. Lets say I'm not "bound", who could you report this too? Of course, I really wish there was something more "constructive" to do. I don't think I will ever get use to it. I will try but so far, no joy on that. David Rigby - That's part of the problem. We show why you can't do it, the broker simply says we are wrong even in the face of proof, and the client goes with the broker. I guess because it is easier to let people do what they want. Oh, the proof we always hear about is that other TPA firms say it is okay. In writing? No chance on that. How dare we question the broker's veracity! WDIK - You are welcomed to the opportunity. Maybe someone will have solution that both you and I missed. Oh, and boy do I have stories upon stories like your broker story. Maybe some day we can trade war stories. Perhaps I should write a book... We TPAs are really bad people I guess. I have been told that on many occassions. Anyway, thanks for the feedback!

We are a small TPA firm. Lately, we are encountering a problem which use to be an easily fixed problem. Now this problem seems to be "exploding" given the state of the investment markets. It is becoming a major problem for us. Basically, a few financial brokers associated with several plans we service tell participants that they can do things like close their accounts under the plan at anytime. By plan I do mean 401(k) plans, and by participant I do mean people who are still in service and are below 59 1/2, whose accounts have deferrals monies which are not being paid out under a valid claim of hardship. Getting right to the crux of the problem, these "professionals" are telling participants that they can do whatever they want; regardless of plan terms or pension law! These participants then go to the plan administrator at the firm, who then come to us to have the payment processed. When we say that the requested distribution is not permitted, the financial broker is contacted who then says we are wrong! What makes this especially frustrating is that when you produce research materials and/or copies of regs showing why the distributions is wrong, we are still deemed to be in error. With a long term client this is not a problem as they know we are right; but a new client who trusts the financial broker will typically decide we are wrong. We are then stuck with watching a "wrong payout" and a soured relation with the client. I note that we are not the recordkeeper, so processing does not require our actual input. My intention is not to just simply whine about the problem. Instead, does anyone have any suggestions on how to address this?