Erik Read

John - since you haven't gotten a response let me see if I can help some. When prefunding you should always use as suspense account, even if the plan is daily valued. When allocating - paper is the only way to show the full contributions, then the losses are done, and cash moves. Be sure to keep a detail of the calcualtions, when a participants see's his annual or quarterly statement showing a "Contribution" of $1500, but has never seen that amount come into his/her account, they'll probably ask questions. Be prepared to defend your work with the sponsor even though the issue resides with they're wanting to prefund the contributions. Best situation is to invest the contributions conservativly, in Fixed Income vehicles, that are less likely to follow the ups and downs of the big market. Also - any contributions to the suspense account = the deductions, gain's and losses cannot be made up without it resulting in additional contributions that would count in all tests. Good Luck.

I'm posting to refresh this, and see if we can get some more feedback. My thoughts - I believe the fund family is the one to ask in this case. Most BP's are done on a single account basis, not on multiple accounts at least not for most groups that I'm aware of. I don't see any potential problem from the Plan side, it would just be considered another investment in the Letter of Intent.

Sorry that it has been so long - hope this isn't still an issue for you. However - I believe that this would be a PT. The B/D is more than likely the sponsor and would be considered a Party-in-interest or "Disqualified Person". If they are benefiting from the plan it's a PT - you'd want to get a writen opinion from either an ERISA attorney or apply for a PLR to be sure. The only other option is for the B/D to reimburse the plan, the payment would come in under "reversal of management fee" and would need to be split by the participants in each fund as of the end of each quarter when the 12b-1's are paid. Again - all my opinion on how I've seen things done in the past. Good Luck.

Just to clarify - Kirk - we're going to say the FMLA is the Family Medical Leave Act for those not familiar with all our accronyms. Okie dookie?

IMO - I don't think you'd have a violation of 1.411(a)-4(a) - the benefit hasn't "accrued" by the terms of the document, so it's not subject to "nonforfeit".

Don't know if I would specifically say there was a violation. I think there are more facts and circumstance to review. First - when are distribution made available to former participants? If the participant had distribution paperwork given at the time of separation, you have another set of issues. Second - when were all ee's notified of the change in funds, and was it a change in fund(s) or vendor? Third would be how the document states to handle "default" fund choices for participants, in this case, since the funds were moved, and the changes weren't "mapped" the default fund would have been selected by the recordkeeper. Fourth does/did the participant have access on a 24/7 basis to the account balance via either a VRU or web? Big can of worms. I think I'd have my fiduciary's for the plan review and brought up to speed ASAP.

I think it's time to make a contribution - say for the amount of the forfeitures?

I'm not sure that I want to answer your question directly, I think you ought to refer to Legal council for an expert opinion. I would however like to offer an alternative. If the employer would like to continue funding the contribution quarterly, put those funds in a seperate account, and amend the document that participants direct existing balances and/or deferrals (if you have a 401(k)). The issue stems with what your doing with the money you remove from the participant. If that money is leaving the plan - IMO - you have a problem. If all your doing is redirecting it among existing accounts you may not have an issue. Other opinions will vary, and your best bet is to get an expert opinion letter drafted in regard to the specific situation. Good luck.

In a lot of cases when your dealing with a bundled plan you have to remember that some fees come out prior to "ANYONE" seeing them - these are the fund fees, in several cases the fund families themselves are passing a portion of that fee directly back to the "investment advisor" or Recordkeeping Firm. I'm not saying that's good or bad, just that it needs to be taken into consideration when discussing total fees. During the most recent ASPA Summer Conference the representative from the DOL mentioned that you'd have a hard time selling him under audit that a fund with identical performance to another but with twice the expense ratio was the better fiduciary choice. Watch those fund expenses in line with performance, and remember - there is no such thing as FREE anywhere - someone's paying someone to do business, these companies aren't just being nice for a referral source.

I would say there is still an obligation to find the participant, and send them a new check. If the check was never cashed, the participant hasn't really recieved distribution, and is still due thier balance in the plan. I think you'd have to treat this like a missing participant.

If the employer/sponsor is supervising these employees and retaining hire/fire authority, the DOL says that they are employees regardless of who pays them. I think that you need to start with that, and work forward from there. If the leasing company maintains the supervisors at the sponsor, then you might be okay. Settle the employer question, then we can move on to same desk. Let us know a little more about the situation. Thanks. Great string for current environment with so many M&A's going on these days.

Are you talking about the current forfeitures or prior years? If the allocation of the forfeiture has occured, yes, it should be included. If it hasn't occured, and your projecting the allocation, no, I wouldn't include that amount this year, until it $ certain. Any other oppinions or citations for inclusion or exclusion?

On the flip side of that, when plans change TPA firms, the buying firm usually adds a clause to indemnify themselves from any errors or ommission made prior to the takeover. I would assume (bad word) that in your case, both firms would be asked to responde, maybe not together, but if something happened in years past, I'm sure the current owner would name the prior as the responsible party. Might check and see if there is any case law or PLR's for reference.

Not sure that I understand 100% what your asking to do. My first suggestion would be to check with the financial institution your account is with currently. Second, find the new firm you want to move to, and have them help you with the paperwork. If all your looking to do is change the account that the deposits are made to, your current institution should be able to help you. Good luck - if I've missinterprited what your asking, please explain some more.

GREAT QUESTION. I was going to ask this at the ASPA Summer accademy, but we ran out of time. I'm also wondering about electronic documents, 5500's, on-line loan - basically how long until the Qualified arena can go paperless!

Doesn't the code cover both buy-back and eligibility? I've always understood that 5 BIS and you treat them as a new hire not a prior term. Anyone else?

Very good string! However, Justin, I must disagree with your statement that Defined Benefit Plans are aging Dinosaurs. They are coming back in force. Our firm is selling DB's to professional's like hotcakes! I agree that having six annuity options as well as a lump sum provision could confuse participants, however I also think it's a viable option for participants to use in their planning. Estate planners would love to have several options to look at rather than only an annuity to work around. Provided we're talking about significant balances, I would hope the participants are using some type of an advisor for their financial needs in retirement.

Without knowing all the details, my best suggestion is to put all the facts in front of an ERISA. When in doubt bring in the attorney's! My understanding is that MPP Plans haven't been able to have a CODA provision since "Thrift" plans were done away with. I would also question the "keeping" of the interest earned on deferred compensation - that should be placed in the plan as interest. You've definitely got one for the books here!

So - who wants to move to Vermont, marry someone of the same sex, then get divorced and run it through for a test case? Any volunteer? Just kidding!

I believe open enrollment can be accomplished at any point via an amendment or restatement. Anyone disagree? Not sure on a code site for this. Issue is that everyone then become eligible if the were employed on or before x date. Be careful - if your intention is just to have certain ee's come in, you may be surprised. The amendment/restatement is usually used in M&A transactions. Easy way to make all the new ee's come into an existing plan.

I would have to agree that it isn't allowed - one item for contention would also be if the plan allowed "Property" as a contribution, most plans don't allow that type of a contribution. The other point would be that the employer would then be taking a deduction for income from a prior period of time... I think he's out of luck, and will have to make what ever required contributions there are for the year in cash. If you find something to the contrary though - please be sure to post it so as to enlighten the rest of us. Thanks -

Couldn't you also argue that the use of the ERISA assets in conjuction with the non-ERISA assets also lowers the fees on the ERISA assets? I'm not aware of any sections that give guidance on this issue. You might try looking to the DOL web site, or searching the 401(k) Message board. Good luck - keep us posted.

I think you're on the right track. However - I'm not sure I like the verbiage you've choosen to use in the document. I'd stick to the addage that the formula has to be definetly determinable. ie - the QNEC will be allocated first to ..... in an amount not to exceed or at least _%, then to..... in an amount not to exceed or at least _%, thirdly to ...... In my opinion that may be more acceptable to the IRS then, "to be determined". Again - just my opinion.

I would have to concure with Wessex. If the checks were cut in December the participants have obvisously been given RMD's in a prior plan year. First year isn't required until 4/1 of the following year. I'd say these participants should have been on the phone asking for the distributions, or at least their CPA's should have mentioned it if they're worth their money!

If you do postpone the payments - do you not still have to have the same amortized period of time for payoff? In other words - lets say we postpone payment and the participant does not return to his/her duties until 9 months have passed, are you not required to re-amortize the remaining loan/interest accrued at the point of return so the principle pay back period does not exceed the originals terms of the note (3 to 5 years)?