ESOP Guy

There is a cost issue. I doubt you priced in running a "call center" for your clients in the billing. I would add I have found over the years if you work with the client on how to find the information in the SPD after a while they do learn to answer many of the basic questions themselves.

Although every price protection I have ever seen WAS IN the document. The parameters of the protection, how many years, how to compute the protection and so forth was added by an amendment when the transaction that caused the desire for the protection was done. So even if it is legit the fact it isn't in the document seems like a problem. I would strongly urge you to urge your client to find an ERISA attorney who has experience in ESOPs. Another reason they are controversial is could you be discriminating in favor of HCEs, are you operating the in a way that doesn't reflect the stock's FMV. On the other hand the reason they are mostly done is could the fiduciaries get hit if they allow a transaction to happen that causes their investment to drop. There is no good answer so one needs to be careful with this stuff.

I think his best case is he has both. And I suspect he needs to give people more for 2011-- namely those people who got a cont for 2010 but not for 2011 that met the requirements. More likely is he simply isn't following the terms of the document. I doubt an document just allows them to pick any day in the year and say that is the allocation day. Deep down I think he needs an ERISA attorney. I am not a big fan of recommending people to walk away from business, but unless the client is willing to get the needed legal help to fix this you might want to think about walking away from this one. It is quickly sounding like this client is going to be more trouble then you can recoup in billing. I think they need a VCP to fix this.

What compensation did he use for the allocation? Just 2010, 2010 plus a little 2011? Or did he give $500 per person without reference to comp?

Don't under estimate the practical problems. You have to be able to document the value you use for gain/loss every year. If you don't get it appraised you have to mark a box on the 5500 saying so. If you value it too high or too low when putting it in or when a distribution is made you have a problem. When it is time to terminate the plan you will have issues getting it out if one can't sell it. I am not an expert on small plans and the audit exception. But I seem to recall if you have too much of certain types of assets in the plan you can end up needing an increase bonding or an audit. What happens if the sponsor says it is worth X and the DOL say Y where X <Y and you don't have enough bond to cover the DOL value. You could be required to get an audit for that year. That would be expensive. In short I agree it is legal. The reason you don't see it happen is it is a pain in the rear to have in the plan.

I will admit I am getting more and more rusty on 401(k)s as I do just ESOPs any more. But I used to work on 401(k)s alot. My first thought is to have you check your prototype document under the definition of Compensation. It will tell you if you compensation is measure for the whole plan year or from date of entry into the plan in the year someone enters the plan. If it is from date of entry into the plan I think you will have a much stronger case. I won't say if it is full year comp your position is wrong, but I think this is an important plan provision. I think the really good 401(k) people on this board will want to know the answer to my question to feel comfortable answering you questions.

B(i) talks about the right of the person who MAY elect a diversification B(ii) refers to only those people who so elect-- you have to distribute or give 3 investment choices. In your case I would look into the idea of giving people the right to take a distribution if they elect to diversify. If they never elect to take a diversification that is their choice the plan has done its job by simply offering them the option to take a diversification distribution. And case it isn't obvious the person taking the distribution can either take it as a taxable distribution or put it into an IRA.

They can just do separate accounting. Although is the balance forward 401(k) portion investment trustee directed or participant directed? I ask because the rules say the person needs to be given three investment choices and with most 401(k) plans being daily and participant directed that isn't hard to do for them. On the other hand I am not sure I have ever seen a diversification put into a trustee directed 401(k) plan and am UNSURE that would meet the rules. I would have you note I am unsure, not saying it is wrong. EDIT: The longer I think about it the more I would say if the 401(k) portion of the plan is trustee directed investments you don't have a valid place to put the diversification amounts. They would have to either allow investment choice, or pay the amounts out of the plan. But at this point I don't have a hard cite other then the rules always talk about 3 investment choices.

I am not 100% sure I understand your question so I am going to ask a couple questions? 1) So this is a KSOP? ie it is one plan with both ESOP and 401(k) provisions not two different plans 2) Is the 401(k) portion daily valued or a balance forward? Most of your question points towards daily, but parts make it almost sound balance forward 3) By separate account do you mean at a whole new account name and number, or just listing another source within whatever account the 401(k) money is in? I hope I am not being dim witted in reading your question and asking silly questions, but I for one don't feel like I can answer your question until I know more.

I am with BG5150 unless you think there is some major issue report on the next 8955-SSA.

Has anyone even come up with an estimate of the lost earnings? I mean the mutual funds were sold if I read it right. Was the money put into a money market account? If so, even on that much money and interest rates so low the amount could be immaterial. I mean there is legal and it needs to be thought of, but there is the practical also. Has anyone even figured out if there is enough money at stake to make possibly starting a fight with the broker is worth it or not?

I have a self directed brokerage account with an employer 401(k). I always get the proxy info. And anymore with electronic voting proxy I just go online and vote. As far as I can tell the trustee doesn't ever enter the picture.

I have also seen one example where the judge made it clear if the bank teller paid the stolen money back by tapping in this case their ESOP account he would take that into account when determining the amount of jail time the teller would get. The teller paid money back to the employer by depositing her ESOP distribution check into the account of the bank she stole from, signed it over to the bank. But once again strictly speaking they choose to give the money over. In this case the judge did reduce the sentence. One would think a good defense attorney would make that part of an agreement up front.

I THINK the rule is the rule. Besides bonds are cheap. Advise the client to suck it up and buy the bond.

Does the plan say the distributions are made in the form of shares and then the ESOP buys the shares back? That would be a rare set of provisions. More likely as Marcus says the shares never leave the trust so there is no share transaction to report. It is just a 1099-R.

A former employer of mine did this work and the price would vary a great deal depending on all the facts. Contact me if you want a name at my former employer that can get you to someone who can respond to a RFP.

I am not aware of that change. The one that I think one can technically be in violation of is the participant statement requirement. Strictly speaking if you send an annual statement on a trustee directed plan isn't that due to the people by the day you file the 5500? If so, if you prepare them all at once, something I used to do with very small 401(k) plans, and send the paper copies of the statements to the sponsor on the same day one e-files you have done a technical violation haven't you? Mostly asking not taking that position. In this case it seems like the rules failed to keep up with the new ability to e-file.

If there is enough money in the person's account and just a shortage in a source why can't you just move money between sources to correct? The point of correction is to get people back to the point where they would have been had the error not been done. So it seems like the correct amount was paid in the QDRO, but from the wrong sources. So why can't the first correction be get the amount in each source correct and the second correction fix the excess contribution? I am asking, not recommending, but that seems likes the quickest fix. And at first glance seem like it is a legit fix.

Financial Headhunters in WI

To be very specific the QDRO is going to be whatever you two negotiate it to be as GMK says. (When I say you two that doesn't imply that you shouldn't use good lawyers, but in the end lawyers just advise -- you make decisions) But for example if your husband values the annuity and you value current liquidity you could agree to to let him have the annuity and you get something of value outside either plan. I seen the following example. The husband had a PhD and could earn a good living. The wife had a small business and a high school diploma. The husband got 100% of his retirement funds and wife got the house with a very small mortgage and an agreement he would make the house payments for x number of years. He did this because he knew he could get a mortgage again with his earnings. She did this because she knew if she ever lost the house she would never live in the town she was living in again. In short she traded future retirement value for current home equity. My point is in a divorce everything including the terms of a QDRO are negotiable. That is where good legal advice from someone who knows your situation can really help you.

If it is a contribution I would put it on the contribution line. I understand you might worry it exceeds a limit, but I have not found that to be a problem. It has been a long time since I had this issue come up with a plan I was working on for someone.

Google EFAST2 In the upper left corner is a 5500 search. The DOL has published all 5500s on the web since 2009 filings. Before that Google Free ERISA they tended to put 5500s pre 2009. They have a free service and a cost service depending on what you want.

Besides my experience is that bond is one of the cheapest insurance. I would have the owner even ask his insurance agent. It is very common for an ERISA bond rider to be included with his general liability policy automatically. In short I have found that often times the person has a bond and doesn't even know it.

Margin loans MIGHT cause PT issues. It also creates taxable income in the plan. I forget what happens if you have an uncovered loss. Here is a very old thread on it, but I don't think the law has changed since this discussion. http://benefitslink.com/boards/lofiversion...php/t13275.html My understanding is these issues are large enough it is why no one uses margin in plans

Pension Pro are you Poo Pooing their use of the term P O O? edit: sorry just had to say it.