ESOP Guy

he plan was invested in funds only, no stocks/bonds. I believe I made some changes to the funds since 2009. Our point is the funds are made of stock and /or bond investments. So see what kind of funds they are stock funds of bond funds. You might want to hire your own CPA if you can't get the actual records.

Yeah I have seen plenty of balance forward plans that the only individually directed asset was the participant loans.

It would be in the section that describes earnings allocations. I used to do a good number of balance forward 4ks and PSP back in the day and most plan documents didn't say. So we pointed to the section of the plan that said if the document the Plan Administrator has the right to interpret the plan document in any reasonable way that is nondiscriminatory. So most put the interest back to the individual. I did have one plan that put the participant loans in the "bond fund". Almost 50% of the earnings were those loans and not actual bonds. I think this plan allowed people to choose to change their funds once a quarter but it was balance forward otherwise. Once again if the Plan Administrator interprets the plan and is consistent I don't ever recall a problem.

Here is what I tell clients all the time about my fees and the fees of other good TPAs. It is cheap insurance. By that it tends to save you money in the long run. I am not trying to rub salt into an open wound here but the little extra you would have paid a TPA would have saved you the cost of the TH contributions. You can either pay for good advice up front to avoid problems or pay for good advice on how to clean things up. In the end you will pay for good advice. This is field is too complex to use the cheapest provider in my mind but I could be seen as have a self-interest in my own advice so do what you want with it.

You might be able to debate the S&P 500. Do you have current statements? Are you invested in funds that are a mix of bonds and stocks? Do you typically invest in balanced funds or age dated funds? If so, counter the correct method is a blended rate of stock and bond returns. If you can show you don't switch fund ask the earnings be computed on the current fund mixes returns since 2009. Unless the court ruled the gains/loss has to use the S&P 500 it sounds like you ex-spouse is merely staking out a position for negotiations. Yes, since 2009 stocks have pretty much out performed every other kind of investment found in a 401(k) plan. So counter with your own rate of return.that is reasonable. The above is assuming actual records can't be found. The actual earnings is still the best. But after that this just sounds like a business deal treat it that way and negotiate. After actual earnings can't be determined there is no law or rule that says S&P 500 has to be the method so it is ok to push back if you desire.

I would ask your employer if they have the annual reports going back to 2009 which would include your account balance data for those years. The two companies you name would send an annual summary report of everyone's balances to your employer as the plan sponsor. If they are good at keeping records they might have the data

We need to back up here a bit. Was the QDRO approved by a court? When? Was the QDRO submitted to the plan back in 2009? Did the plan accept the QDRO? When? The account should have been split back in 2009 when the QDRO was submitted and approved a good by the plan administrator. Some thing sound off here. A splitting of 401(k) benefits in a divorce decree isn't enough. There had to be a QDRO approved by the courts.

Another thing a good TPA could help you with is if a Safe Harbor plan makes sense for you company. If you are having both ADP testing problems and Top Heavy problems it might be worth looking into a Safe Harbor plan that can be set up and ran such you get a "bye" on both of those tests. There are required contributions in a Safe Harbor plan but they can run a cost/benefit analysis for you to decide if it meets your goals at a cost you can accept. I agree with others. In any metro area of any size there are people who do nothing but help administer these kinds of plans. Also, some CPA firms have departments that do nothing but help administer these kinds of plans.

I am going to throw my voice behind the idea undoing the deferrals is not an approved correction method.

The plan administrator is supposed to keep these records. Do you represent the plan or the person getting the QDRO? If you are the person getting the QDRO talk to the plan and see if they have the records. By the way they are supposed to do the computation. If you represent the plan talk to the people who help you administrate the plan. See if you can get the records you need.

I guess from the IRS' view if the parent is in a much higher tax bracket then the kids there could be a net tax loss after the payroll taxes are taken into account. There could be estate tax consequences but that could get murky fast. It would be an all depends on the facts kind of situation. However, I have never heard of the IRS going after a TPA because someone else is playing the tax bracket game with family members. I agree with others at this point it is alleged problems not known problems.

The next obvious question is if they report a 1,000 hours how do you know the don't ever work for the company? Are they telling you the census data is false? They could be doing that but it seems odd. I say that because if they know they aren't working but reporting 1,000 hours that pretty much is admitting they know they are breaking the rules by sending false data because they know you need that data to make it all work. Then I guess the question really might be what is your obligation knowing the data is false?

Kind of related I would prefer if I only see one copy of each topic. For example currently if I go to All Activity I see this topic once where the original question was asked, then a second time where you replied and I assume after I add this I will see it a third time. I haven't found a filter to get it such I just see this topic once. If there is a way to just see it once it would be great and any insight how to set the filters to do that would be helpful. Thanks

To me the fact that you think there is a question is evidence enough to reject it for clarification. (Although if I received it I would read and if it is a DC plan I would read it as meaning your first interpretation.)

Is it possible what they did is legal? Maybe. It would depend on the facts. The facts would have to be rather narrow. I am thinking it might be possible if there is an ESOP loan to amend the plan to delay until the loan is paid off. But normally you would see that be prospective not retroactive. It would be nice if they were more transparent. I am one of the people on this board that tells people to go to the DOL only after all other attempts to get a resolution have been made. The DOL can be a rather blunt instrument and they can cause a struggling company more problems then it is worth. It can cost $10,000s in legal fees to defend yourself from the DOL and if this company is struggling that is just less money to fund your benefit payment. I would see if you can get an appointment with someone who is willing to tell you on what basis they think they can delay. Remember it is a lot of money and I am not trying to minimize your feeling that way but the goal is to get your money not punish the company. Every now and then people get on this board looking for advice and they have reached the mad point and they seem more interested in emotional satisfaction then getting their money. So try and talk to them and see if you can get an idea what conditions have to be true for the delay to be lifted.

Read your plan document again. Some where the definition of allocation compensation is limited to that limit. It has to be written that way by law.

Once again if the plan administrator has reason to believe the loan isn't going to be paid back the loan can't be issued. The rules are clear the loan has to be issued on terms that are commercially available any commercial bank would only give a loan that is expected to be paid back. Strictly speaking is there a way to do what this person wants to do? Sure if you are willing to play in the grey areas and ignore things like is this a sham termination or a sham loan. But you could very easily get all the right paperwork. Even have a few loan payments be made from this person (The loan would have to not require payroll deduction payments.) and the chances are you won't get caught. But if the question is will I get caught don't bother asking here just do it. If the question is there a risk free way to do this then the answer is "no".

I will admit I had the rule wrong. At least where I work we don't send electronic if the person hasn't consented. Management around here can be a bit conservative when it comes to these kinds of issues and I mistook concern on their part for required in rules. . Edit: Or maybe management around here couldn't figure out what level of access was needed per this discussion and went for the more objective rule of consent or no consent as that is easily documented. Maybe I will ask some time.

Because you left off this part of the rules: (A) Except as provided in paragraph ©(2)(ii) (B) of this section, has affirmatively consented, in electronic or non-electronic form, to receiving documents through electronic media and has not withdrawn such consent; I have never seen any place that gets 100% of their people to consent. So you are either forced to send paper to everyone or make two groups. Now I have a client that has over 17k employees. For them the savings in postage is enough to go through the cost of making two groups of data and delivering one set electronically and one set by paper. I am not sure where that line is but most of my clients that has 2k or less in total employees seem to think just sending out paper to everyone is just as easy and cost effective. As for your various groups. Most of my clients that have employees who aren't "desk jobs" (think factory workers or your cleaning lady) feel uncomfortable with the idea those people have true access to e-mail and don't do it. For my clients that are like my engineering firms (where everyone has a desk job and pretty good with computers) the reason goes back to my first comment. Enough of them will not consent so they stick to paper.

I think you do have the serious answer along with the not serious answers. You need to make the person whole and document procedures that allow you to avoid such a mistake in the future is pretty much all a self correction requires. Where you expecting a more complex fix being needed?

I agree with all of the above. Since I didn't see it mentioned above but the correction to the 3 people will have to include some kind of lost earnings in addition to the contribution. Once again someone at your service provider ought to be telling you this. However, as you can tell from the earliest comments you have a bigger problem then the 3 people. There is a systematic problem that allowed this to happen and not go detected for years. That systematic problem could cause larger issues with the IRS or DOL.

David isn't referring to an IRS audit but the fact even a plan with fewer then 100 participants can need an audit any more if its assets are the wrong kind of assets. https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/faq_auditwaiver.pdf

Point the advisor to this IRS website https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-required-minimum-distributions#5 This FAQ I quote: Can an account owner just take a RMD from one account instead of separately from each account? An IRA owner must calculate the RMD separately for each IRA that he or she owns, but can withdraw the total amount from one or more of the IRAs. Similarly, a 403(b) contract owner must calculate the RMD separately for each 403(b) contract that he or she owns, but can take the total amount from one or more of the 403(b) contracts. However, RMDs required from other types of retirement plans, such as 401(k) and 457(b) plans have to be taken separately from each of those plan accounts. You are correct and the advisor is not.

There are plenty of DC plans that define disability something to the effect of: The person is permanently unable to perform their job performance. To determine that all it takes is a doctor's declaration that is true. There typically is something in the language about the doctor has to be acceptable to the Sponsor. Here is a quote from one of my client's documents Disability is a physical or mental condition you suffer while you are a Participant that, in the opinion of a doctor approved by the Administrator, totally and permanently prevents yon from performing your specified duties. You will not be considered disabled if the disability is caused by (I) chronic or excessive use ofintoxicunts or other substances, (2) an intentionally self-inflicted injury or illness and (3) an unlawful act you commit. (Not sure why my copy did such an odd margin thing.) One of the problems with using Social Security determination is they can be VERY slow. Just had this happen recently. Plan X has an employee terminate in the spring of 2014. Everyone agree it was for health reasons. He applied for SSA disability benefits. The SSA ruled in 2016 he was disabled as of the date he terminated back in 2014. It was everyone's opinion that means he terminated due to disability in 2014. Since we didn't know that back in 2014 and the plan has last day language we had to go back and compute his missed contribution. Being an ESOP we had to figure out how many shares he should have gotten. How much dividends he missed between 2014 and now....... This is NOT the first time we have had to do a correction due to a retroactive determination someone was disablity termination and not a regular termination. I have seen forfeiture restores be needed because of this along with lost contribution and earnings.

The VCPs I have gone through one of the earliest questions we got was have you made your proposed corrections? It was clear they were expecting a "yes" in my mind. I guess I could have been misreading it. In fact what is the real risk? In most cases if the IRS doesn't like it they want more put in not less. I don't think I have ever seen the IRS come back and say you are proposing too much of a correction. So really unless they say we simply reject the very idea of your correction putting it now makes sense to me. I will admit I am a TPA not a lawyer and I am not an expert on VCPs. I am merely telling you what I have been a part of in the past.