Below Ground

No. The multiple-employer nature does not cause the timing problem. Given that some small firms process withholding tax on a monthly basis, having to tell that small firm that deferrals need to be processed within 3 - 5 days of issuance of paychecks is "problematic". It is not the processing of the "central site" that causes delays, it is the small firm getting information and transferring funds for processing by the central site. Regardless, thanks for your comment. It suggests that participating employers need to be better screened before being accepted. I do think the solution posted by Locust has great merit. Thanks!

Locust, you are correct. Just needed to vent on the issue. It is a shame that having a plan is not easier for the small firm than it actually is. The real loss is the lack of benefit coverage for the employees of those small firms.

I really appreciate all of the above posts. In many ways I don't think the 3 - 5 day period is reasonable for the type of plan I am discusssing. Please note that I am NOT arguing with the position that this is what the DOL would want or say. I am just saying that real world facts of this case, and cases like this, make this time frame impossible. How can I say this? Shouldn't all firms that want a plan be able to meet this standard? Well, look at payroll tax withholding requirements for very small firms. You do not have a 3-5 day time frame for that, which I would think would be more pressing for the government. (Collection of tax dollars.) Now, look at a collection of small unrelated firms (that are subject to those withholding tax rules) which band together to save money and gain "purchaing power" made possible by the multiple employer approach; thereby allowing a quality plan to be possible for these small firms. Don't we want employees of these firms to have some form of retirement benefit beyond social security? The strict position of the DOL seems to be counterproductive. Oh, I know that we need to safeguard against abuse by the evil business owner, but do we really want to make all aspects of 401(k) plans so difficult for the small firm. Of course, didn't a similiar course of events impact defined benefit plans? The holding account approach might prove to be a good solution. I can see where this could be applied with minimal increased effort. However, isn't this similiar to the fiduciary breach scenerio in the McKay Hochman Alert (Hot Topic) of June 8th (or thereabout)? Again, thanks for the posts.

Plan is a large multiple-employer 401(k) plan which has adopting employers all across the country. Typical adopting employer is a small firm which is on the very "low side" of sophistication. Processing is further complicated as adopting firms have varied payroll cycles (no standard). Deferral data is required to be sent to a "central site", which processes actual deposits for all adopting entities. Given that the 15th of the following month is no safe harbor, how should (or can) one determine when deferrals should be deposited to satisfy the "timely standard" of the DOL?

Thanks!

I currently own a small TPA Shop that specializes in defined contribution plans. A very good friend of mine owns a TPA Shop that specializes in defined benefit plans. During the normal course of events it came up that we should know what the value of our firms are, and what values should be applied to other "books of business" we might like to buy. Is there a standard formula that is used for this purpose, allowing for a reasonable estimate? I have heard values like 1-3 times annual revenue plus receivables. While I know that this type of transaction should only be done after consultation with some expert (who???), it would be nice to be able to have such an estimate going in. Anyone have any comments?

I did not describe that correctly. Sorry. Let me try again. Client gave us a formula that seemed to reconcile to the rate that they were funding during the year, with an amount still receiveable at year end (annual true-up). Computations were then done, including testing, using this rate. Representative of client "signed off" on allocation, saying this was correct rate, so corrective distributions were processed. Several weeks later, the client representative called back saying match formula provided was wrong, and a "lower rate" actually applied (actually, maximum match amount lower). In effect, the rate was not changed in actual practice, just the formula used for year end review and reconciliation. Hope this is clear.

401(k) Plan has a discretionary match that is determined after close of the year. Data is provided for testing after March 15th deadline, so test failure results in both corrective distributions and Form 5330 Penalty Tax. Distributions are made and Form 5330 is filed. Following that time, Employer then decides to change match to a lower rate. Testing on new rate has smaller corrective distributions, and smaller penalty tax. Anybody have thoughts on this scenerio?

Does anyone have an opinion on whether a code value is used to denote use of a Volume Submitter Document under Line 8a of Form 5500?

What areas are you looking to have flexibility with? There is a certain amount of flexibilty permitted, but there are also design aspects that must be constant. I suggest that you call AccuDraft. I have found their document to be a good choice for most circumstances. They can also guide you through the "cans" and "can nots" of this specific concern.