MSN

Great question, Peter! Most of the TPA agreements I've seen carve out responsibility for errant data so I wouldn't anticipate them drawing a hard line here. I think it gets more interesting if the TPA is an affiliate of the payroll company facilitating the on-demand pay arrangement and also in plans with outsourced 3(16) duties.

I had a discussion with a representative of a trade association on this topic today who pointed to the 2022 Greenbook which gives us some insight into how Treasury was thinking about this a year ago. You can access that at the following link (page 106): https://home.treasury.gov/system/files/131/General-Explanations-FY2023.pdf Their proposals included, in part: Section 7701 be amended to define on-demand pay arrangements Section 3401(b) be amended to provide that ODP arrangements be treated as weekly payrolls Sections 3102, 3111, and 3301 be amended to clarify that ODP arrangements are not loans It's not specific to plan issues, but it's better than nothing. It may also be a prudent practice for the client to document the position they take with regard to the treatment of on-demand pay, and rationale for same, to show that fiduciaries recognized the challenges this creates for their plan and made a reasonable decision that they can consistently apply, absent future regulatory guidance.

@CuseFanThanks for the response. I think there may be more to this than just the year end scenario. Let's say in your example above, the employee had a 5% deferral election in place at the beginning of the pay period. The day after the on-demand pay request is paid, the participant changes their deferral election to 0%. Would the employer still have to withhold deferrals on the amount paid mid-period? I think they might, but I'm not sure. Does the date that the on-demand pay is received start the clock for deposit timing or would that go off of the scheduled payroll date?

How are TPAs handling on-demand/early-access pay with regard to plan compensation? Is it treated like a traditional payday loan where the employer isn't involved and ignored for plan purposes? Or counted as compensation when the employee has constructive receipt? I want to think it's ignored, but when the program itself is an employer benefit, it feels a little different somehow.

How would the plan administrator demonstrate that a participant didn't provide proper investment instructions? I'm envisioning a claim several years down the road after the plan has changed recordkeepers. Would there be a record of the participant being notified of the deficiency and the consequences if left uncorrected? I kind of like the idea; it forces participant engagement. It seems like the risk of not administering this properly may be greater than any risk that could be associated with QDIA selection and I'd have to have a lot of confidence in the employer's ability to facilitate this to even begin to consider this sort of provision. I'd also wonder about whether the sponsor could unintentionally hinder a participant's ability to select investments. For example, maybe there is a single employee who speaks only Spanish - the deferral form is available in Spanish, but fund materials might only be available in English.

Is it the age of the minor or the competence of the minor or a combination of the two that would be determinative, in your opinion? Could state laws around the ability of a minor to consent to health care services be a proxy for ERISA application? I know it's apples and oranges, but there are similarities. I know there seem to be 2 camps here - an participant is a participant, regardless of age and a minor is a minor, regardless of employment status. With healthcare, a minor is a minor until there are circumstances that reasonably justify (in a practitioners opinion) the minors ability to give consent. It may be reasonable for ERISA deferral elections to track this? Just thinking out loud. I appreciate all the responses! This is an interesting discussion.

There is no age restriction for eligibility with this plan, nor is there a service requirement. The owner wants the child to be able to participate.

Allow me to add some context...Business owner employs his own child to perform certain minor services for the business. Think cleaning, filing, updating social media accounts, etc... They also may pay for modeling services posing for the company Christmas card or a highway billboard. I'm confident that the minor did not sign any of the normal working papers that would be required of a "normal" employee. If the working papers were required, but not attained before the child provided services, would that negate their status as an employee for plan purposes?

Assume that a plan participant is a minor with legitimate plan compensation. The minor’s parent makes the decision for the minor to make an elective deferral contribution to the plan without the minor’s consent (or even their awareness). Would this create an operational failure where the plan document requires the election be made by the participant and doesn’t provide for proxy? Or, would parental rights control here and allow for the parent to make this decision for their child? If the parent has the ability to cause the contribution, would the child have the ability to override the election their parent made?

Adding a wrinkle to an already messy situation - What if there are uncashed check assets in the MEP from a terminated employee of the entity that spun off had who taken a distribution prior to the spin off date? Would the uncashed check assets be part of the spinoff? I haven't seen this detail in a spinoff agreement before.

Thanks all. Do you have the participant complete a new distribution request form or do you act on the former providers form? If you require a new form, do you invest the money in the interim period or leave it uninvested? Do you charge a distribution fee to cover the work associated with the redeposit and subsequent distribution in addition to the fee charged for the initial distribution?

EBSA is interested in reconnecting participants with their money. I don't see how transferring an amount from "known" provider to "unknown" provider could be reasonably expected to achieve that aim. It's most likely that a participant wouldn't even open mail from us. It's probably more efficient to send the funds to the sponsor and have them send to the participant. Is that an unreasonable position?

I've got a plan that transferred to us from another recordkeeper last year. The prior recordkeeper just came to us stating that they had a stale check attributable to this plan and asking us to confirm wire instructions to move the funds to us. This is the first time I've seen a recordkeeper attempt to transfer stale check assets to a successor provider, but maybe it's more common than I think. Are other providers accepting stale checks in situations like this and how are you handling this? Are there any issues rejecting the stale check being transferred?

Make sure you pay attention to the recordkeeping requirements too. I had the IRS reject a lot of my credits because I didn't adhere to the robust recordkeeping requirements.

Would the independent agents want to participate in the MEP when they could easily find a low cost Solo(k) offering on their own, without any of the constraints of the agency? Might be a lot of work for no utilization.