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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.

Interpleader action would be conclusive.

We seem to be running into more resistance from plan custodians as we're trying to assist our clients in transitioning from one platform to another. We're seeing refusals to issue checks to the successor custodian, outright refusal to wire funds to the successor custodian, required medallion guarantees, etc... It feels like simple trustee instruction isn't sufficiant anymore. Is anyone else seeing this? Maybe it's all just in my head...

If a person is going to be a fiduciary investment adviser to a plan under ERISA, could they do so and not be an investment adviser representative? This question stems from a 408(b)(2) notice I saw from a registered representative (who is not an IAR) that disclosed that the rep was providing fiduciary investment advice under ERISA, but that such advice was "solely incidental" to the brokerage services provided. Since incidental advice falls under an exemption from registration in the 40 Act, it seems possible for someone to provide fiduciary advice under ERISA without being overtly licensed to do so, which doesn't feel right to me. If a plan sponsor, or other named fiduciary, would select an individual who wasn't an IAR to give investment advice, would that alone constitute a breach of their fiduciary duty to participants in that it's not acting "with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims?" If it would be a breach, can the arrangement meet the suitability requirements under FINRA?

Is adding an option to buy term insurance prudent? Regardless of the availability issue raised, the fiduciary (I'll go out on a limb and assume the insurance rep is not a fiduciary) is responsible for ensuring that it is prudent to allow participants to "invest" in term life insurance in the plan. The payout figures on term policies are remarkable, with over 99% never paying a dime to owners/beneficiaries. It's more like a black hole than a legitimate investment. Term life policies have a place in many individuals financial plans, but not inside the 401(k). I don't care much for whole life policies in plans either, but at least you could make a case for them as investments.

Have you checked the plan document to see if forms provided to the Plan Administrator following the participants death are valid?

The obvious answer is to seek legal counsel experienced in both employee benefits and securities law who can guide you. There are numerous considerations dependent on the business model that you're speaking of. What specific concerns do you have regarding shared employees? If you can narrow the focus I may be able to point you in the right direction. As you probably expect, the devil's in the details...

It doesn't sound like you were forbidden from discussing this with the auditor. If you're worried, send an email from a personal email account providing an unsolicited tip and ask the auditor to keep the tip private. If the VP is part of the wealth management group, they could have policies and procedures for reporting this type of activity that you should look into as well. You should be able to report the behavior without fear of retaliation. As the head of compliance for a firm, I promise you I would want to know about this and would take steps to protect you if you provided the information to me against instructions. Good luck!

I get 45% of the page too, but would never think that just looking at a sheet.

Peter, At best, the "warranty" would make the insurance company a fiduciary for a very limited scope of responsibility, usually due diligence selection of underlying funds (exclusive of wraps). In each that I've read, the role of the plans investment manager under ERISA 3(38) was held by a party outside the insurance company, usually the sponsor. I'd question whether it would be possible for a sponsor in this situation to make a claim under the fiduciary warranty without subjecting him/herself to the possibility of a fiduciary breach claim. I think this acts a a pretty significant barrier to making a claim. I share your curiosity about the experience though and hope that someone on here can share a story. The other important thing to consider is the warranty is only as good as the guarantor...even if well intentioned, they may not be able to pay depending on circumstances years from now. In my opinion, it's just a marketing gimmick. There are real 3(38) managers in the marketplace, but I'm confident they are generally averse to the insurance companies platforms. Mark

I would go the other way on this. I'm going to go out on a limb and assume that X is compensated for being the fund manager of Group Trust. In light of this, this appears to be a form of self dealing prohibited under ERISA 406(b) Act Sec. 406. (b) A fiduciary with respect to a plan shall not-- (1) deal with the assets of the plan in his own interest or for his own account, (2) in his individual or in any other capacity act in any transaction involving the plan on behalf of a party (or represent a party) whose interests are adverse to the interests of the plan or the interests of its participants or beneficiaries, or (3) receive any consideration for his own personal account from any party dealing with such plan in connection with a transaction involving the assets of the plan. Bundled providers don't "get away" with this...they have carefully structured the agreements to where any fiduciary does not have the ability to engage in self dealing. There is (generally) nothing wrong with a plan sponsor hiring multiple affiliates.