Gadgetfreak

I asked the same question to TAG a few months ago and got the following answer: Yes; the effective date of the plan can precede the establishment of the employer. From the 1997 Annual ASPPA Conference: ASPPA: A second question is if it is permissible to have a plan’s effective date precede the existence of the plan sponsor or a predecessor entity of the plan sponsor. Thus, if we have a brand new entity set up on 3/1/97 with a calendar year fiscal year, can we establish a PS plan with an effective date of 1/1/97, have a full 12 month plan year, and use all compensation paid during that 12 month period (which would be limited by the fact that there is no payroll prior to 3/1), and not need to pro-rate any of the regular limits? IRS: It seems reasonable that with proper attention to the details of the plan design (including effective dates and plan years as outlined above), the issues that are of concern in this question can be avoided. We know of nothing that prohibits provisions such as outlined above.

As a recordkeeper, our new client wants to use a specific custodian A - who offers a specific money manager portfolio but who cannot hold American Funds (which they want to offer). We are contemplating an arrangement where the American Funds would be held at Custodian B but still traded on our Platform (which would allow for our website to show complete balances). The issue we have is with fund transfers from A to B - they will take over a week and be very expensive (close to $100 for time and check writing fees). The issues would be similar if the second custodian was not on our RK platform with the added problem of participants having (possibly) two systems to monitor for their 401k balance. Assume transmittals are not a problem as the broker is willing to separate that out per custodian. Is there any prohibition from having an Administrative Policy that prevents transfers between these two custodians except for X times per year (if at all) and attaching those high fees and delayed timing? Thx.

So it seems that your interpretation (and this is what we do as well) is that any distribution requests that come in between 1/1/15 and 12/31/15 should be processed using 12/31/14 y/e. Which means we are holding the requests that come in during the first half of 2015 until the 2014 val is done and processing everything else based on the prior year. I am just hung up on the person that was a participant for anywhere from 1-11 months in 2015 and won't be sharing in the earnings (or losses). I suppose an extra val could be done but that is more work and the client may not want to pay for it.

My issue with using the latest valuation date is that it sometimes doesn't get done until June. If someone sends in a distribution request in April 2015, they were part of the Plan for 2014 and 4 months in 2015 but the latest val is 12/31/13. In addition, if someone sends in a distribution form in August 2015, they will get the balance based on 12/31/14 but they were in the Plan for 8 months of 2015. I also am not sure that a termination date has any bearing on this at all. The only reason I can see is whether they may be entitled to a year-end contribution (based on Plan design). But, as it relates to earnings, they are a Plan participant for as long as they have a balance and should share in earnings (or losses) just like anyone else. So I am just trying to gather ideas of how others implement the policies for these types of distributions. Thx,

The Plan Document specifies "as soon as administratively feasible". So if someone sends in their form on 3/15/15 (and he terminated on 2/20/15), would you give them their account value based on their 12/31/14 statement (which you may not get done until July 2015)? What about the fact that he was part of the Plan for the first two months of 2015. Though that would mean that he would need to wait until July 2016 for his money. See the problem ?

The Plan Document specifies "as soon as administratively feasible". It is not uncommon for the annual valuation and participant statements to be prepared well into the 2nd quarter of the following year. I am just curious in hearing what other people do with the timing of these distributions. Do you base it only on when you get the form or also on the date of termination? And do you have set deadlines to say that if you receive the form by _____, you will process based on the most recent valuation but after _____ they need to wait until the next val is done? Thanks.

Find a recordkeeper who values their relationship with the TPAs. I find the bigger the RK, the more difficult it is to deal with them. Smaller independent RKs often state very clearly what their role is. Even if they also sometimes serve as TPAs, when on their unbundled service platform, they will often say that they will comply with whatever the TPA requests. After all, that is really the job of a RK. For those RKs that are knowledgeable (maybe they also have a TPA business), having a second set of eyes can be helpful as they may (quietly) let you know if they think you made an error. But, at the end of the day, it is the TPAs responsibility to give direction to the RK and the RKs job to comply.

Good info. Here is another question: Is a loan removal or other change to loan provisions restricted from being changed mid-year if the Plan is a safe-harbor? Since whether loans are allowed or not is an actual selection on an adoption agreement, I would agree that you cannot add or remove loans during the year. On the other hand, individual loan provisions (maximum #, interest rate, etc,) or part of administrative loan policies and perhaps they CAN be changed in the middle of the year for SH plan. Anyone have thoughts on this? Thx.

But why can't you use this as an opportunity to change eligibility provisions or the Trustee for that matter (instead of doing separate amendments)?

As we are now in the DC restatement cycle, I use this as an opportunity to formally review Plan provisions with my clients to see what is working for them and what might want to be changed (I discuss things with them every year but this is more formal). Taking aside the issue with changing safe-harbor plans mid-year, I know there are certain provisions that cannot be changed if it makes it worse for participants. Retirement benefits is the first that comes to mind. Typically, I could use a logical rule that says if it is going to "take away" a benefit from existing participants, then it is not allowed to be removed. Is that a rule set in stone? What if a client is sick of handling loan repayments? Could they remove a loan provision going forward? I could argue that existing participants only deferred in the past because they knew they would have access to the money. But is that stretching it? Besides the above, is there any list of specific provisions that can NOT be removed or made more strict when doing these restatements? Thanks in advance.

I asked TAG this exact question recently and they agreed too.

I attach the policies (loan, deferral, QDRO, Hardship, as applicable) to the back of the SPD. I am not sure it is required but it makes the most sense (to me).

But the match formula is discretionary. So couldn't the employer just use a lower formula?

Just remember, there still needs to be a "distributable event". Though, if there was theft, I would assume the employee would be terminated which is a distributable event.

Check the written "announcement" too. Does it say we WILL make or we INTEND to make? Sometimes EEs can read into the language because we all see what we want to see.

Thank you so much for the reply. You know, I was thinking that but then "over-thinked" it saying that that was just too easy. Maybe it is because it is Friday afternoon . I guess I agree that there is no reason why the employer can't do this. But am I testing coverage for this separate from deferrals (because there are HCEs who defer)? Does it even matter? Do you agree that an amendment to add new-comp with each person in their own group is the right plan? Thx.

This is similar to a situation I am facing now. Based on the Affordable Care Act, a client wants to give an employer contribution to just some of their NHCEs and none of their HCEs based on a dollar amount per hour worked. The plan does not have a profit sharing provision now so I will need to amend the plan to allow for profit sharing with each employee in their own group. At this point, I don't know how many of their employees will NOT be covered under this arrangement. But don't I still need to worry about coverage? And is it coverage for the whole plan or just this profit sharing source? Can I amend to only allow people covered by the ACA to participate and is that a statutory exclusion that won't require coverage testing? Thx.

Company A sponsors the Company A 401k Plan. Through common ownership (but not enough for a controlled group) Company B adopts the Plan and it is now a Multiple Employer Plan. There is an unsigned joinder agreement we inherited from a prior provider. Company A want to move to a PEO. They want to leave the Plan in place for Company B to take over as the Sponsor. So a new Sponsor Name, EIN and Plan Name must be done via amendment. If I really wanted to be clean, I could create a whole new set of plan documents. Company B doesn’t want to terminate the plan (and create a distributable event) as they want all assets to remain in the plan. They want this change effective 4/1/14. What amendments did you think should be done to facilitate this change? What changes should be done on the 2014 5500? If I do new documents, what nuances can you think of? Any other advice? Thanks.

A plan has a match formula in the Document for which they only make once a year after we do the calculation. At the same time we do the match calculation, we run the ACP test using our calculated numbers. In this case, the ACP test fails using the numbers we projected but were not yet made. Does this need to be done in chronological order (i.e. they make the match and then ACP returns/forfeitures)? Or can any steps be saved in the process and, if so, what? We know that to handle the ACP returns, unvested match amounts get forfeited and vested amounts are distributed. Thank you.

I checked the FTW Doc and I don't see any language that discusses either line of reasoning. TAG has stated to me that it is a violation on the Sponsor if they fail to withhold loan payment.

I agree with everyone here that the 50% rule only applies at the time of the loan but I have a related question which is how I ended up on this thread, An active employee/participant has a $47k outstanding loan balance. He is eligible for an in-service withdrawal of $100k. I don't see why that is not allowed. But here is where I am confused. He "wants" to default on his loan. I am not sure participant's (or the Employer for that matter) can choose to simply say "I want to default". My understanding is that there is a payroll agreement at the time of the loan to state that payments will continue as long as there is payroll. But what if he "wants" to? Whose responsibility is it to do the payroll deductions and what are the consequences for failure to do it? The participant is the owner. He is OK with a default (can't do an offset). I want to tell him that the Employer is obligated to continue repayments and it is a "violation" if the Employer doesn't. But what, exactly, is the violation? And, if the participant is willing to be taxed anyway, what "punishment" does he get for stopping payments?

In my experience, a non-producing TPA that also does in-house recordkeeping is probably one of the least likely to have an exclusive alliance with a vendor. Vendors won't send any business their way because they are in competition with them. And, for the cases where they are TPA/admin-only, they rarely control which vendor is used because they are non-producing as the adviser will usually dictate the platform. Yet, if the reputation is built on integrity and excellent service, the clients will come.

I urge you to due some extensive due diligence before deciding on this. I have been testing this on and off for several months and in-depth over the last two weeks. This is still a fairly new product and there are a lot of (in my opinion) obvious features that are missing. FTW is fantastic at listening to their users and getting enhancements done but this is still in its infancy. At the same time, the potential for this product is amazing which means that I continue to question whether to commit to a competitor until I see what FTW does with this in 2014. Perhaps the deficiencies I see are not important to you so you need to test yourself. As a brief example, there is no way to send a message to all the portal users of an existing single client at one time in an easy manner. When you are in the client screen, you can see a list of only those company contacts and select one. But to select the remaining company contacts requires you to look through a list of ALL contacts sorted by name and without even the company name next to it. So basically you need to know who you are looking for before you select. A glaring omission in my opinion and I hope the rectify that soon.

You can also look at Hightail (previously yousendit). You don't have to use a password (though you can) and I imagine that is the same as Dropbox - a complicated URL but it can be accessed by anyone who knows it. You can also recommend to your clients to use a password manager like Lastpass (free for desktop) which will help eliminate the forgotten password issues. Finally, look at your software providers for portal features. I know FTW and Relius have that capability. Also, there are vendors that offer CRM with portals. PensionPro does. Not sure about EBG.

I spoke to Relius yesterday and also, as a new member of RANDUG, posted my questions there too. It seems that, although no one will guarantee it, they are fairly confident posting multiple asset fee transactions and base fe transactions at the same time, should NOT cause negative holdings. I guess we will need to see if that is true.But good idea about the notes and Crystal. The problem is, if you want to use a Fee Schedule to automate the process, it won't put an individual note in each.