RCK

We rolled out automatic enrollment for our wholesale/retail population in 1999, and have been pretty happy with the results. Our experience has been pretty normal: opt-out rate has been consistently in the 5-7% range, but the percentage of people who actively override the defaults in the first year is also pretty small--probably less than 10%. If we did it over again, we'd spend less time agonizing over whether the employees would be upset (they weren't) and more time studying the default deferral rate and the default investment elections. RCK

We made a 'bottom-up" QNEC yesterday. I mean, I have a friend who made one yesterday. A generally reasonable guy, he only raised the contributions to 25% instead of 100% I have a hard enough time complying with proposed Regulations. I do not have a hard time ignoring phantom proposed regs. RCK

I agree with what I see as a concensus of the responders-- the distribution was valid as is. Was it sterling customer service? NO, but that's not the question. As a plan sponsor, when we receive a rollover form from a terminated participant's broker, brother-in-law, etc., we send it back with our plan's forms. Do we keep track of who has sent us the incorrect forms? Absolutely not. But then again, one of my personal pet peeves is investment advisors who expect the plan's administrators to make distributions based on the bank/fund/insurer's forms, thereby violating their fiduciary responsibility to provide the participant with a Special Tax Notice in a timely manner. RCK

Our loan policy says that the participant can ask for a suspension of payments, or a reduction of the interest rate to 6%, or both. But neither takes place without their request. Policy was blessed by ERISA counsel from prestiguous local law firm. RCK

kharris, You have stated the safe harbor approach--get the participant back to where they would have been, even if it is a windfall to them. Janet M has stated the most aggressive approach. That leaves a whole spectrum of choices in-between. I think that last time we encountered a situation like this (valid participant election not noticed for nearly two years), we made him whole up to the first statement date. Since it was a 401(k) with a pure profit sharing portion, he got a statement after a year or so showing a PS contribution and no 401(k) contributions. After that, we figured that it was his fault. RCK

Note however that the 5330 Excise Tax filing is based on the Tax Year of the filer, not the Plan Year.

Since I did not the concensus of response that I had been hoping for, had to break down and call plan's ERISA counsel. She agreed with mbozek--bankruptcy filing stops loan payments, but NOT employee conributions. RCK

A-1: Regular 401(k) contributions that the participant has been making in addition to the loan payments. A-2 The Notice says "Creditors May Not take Certain Actions. Prohibited actions are listed in Bankruptcy Code 362. Common Expmples of prohibited actions include contacting the debtor by telephone, mail or otherwise to demand repayment; taking actions to collect money or obtain property from the debtor; repossessing the debtor's property; starting or continuing lawsuits of foreclosures; and garnishing or deducting from debtor's wages." It is the last phrase that concerns me, because I think that it refers only to deductions in connection with the debt. RCK

I have reviewed other posts, and have not found any discussion on point for this issue, so I apologize if there has been one. 401(k) participant has a loan outstanding when plan is notified of Bankruptcy filing. We shut off the loan deduction, and (when the appropriate time comes) default the loan. QUESTION: should we also be shutting off the contribution? My feeling is that the participant himself can do that if he so desires, but that the plan and its recordkeepoer have neither the right nor the responsibility to do so. RCK

Tom, You are confused--this punchline actually belongs to a similar joke about a communist TV weatherman. Concept is the same, and that version is shorter but, alas, no funnier than yours. Happy New Year. RCK

Seems to me that the CPE author is confusing a hardship withdrawal and a bankruptcy filing. Bankruptcy would nearly always lead to an automatic suspension of loan payments and subsequent default of loan. RCK

If I can tweak Mike Preston's position: since you have a controlled group, you have at least a potential problem with Plan A, that covers 100% of the HCEs and 33% of the NHCEs. You will have to pass the nondiscriminitory classification test of 1.410(B)-4 and the average benefits test of 1.410(B)-5. From the design presented (and none of the actual data), I'm thinking that passing is not going to be easy. RCK

I just wanted to clarify (or dispute) mbozek's first response here. The plan sponsor does NOT have to apply for a determination letter on the termination. Is it a good idea to apply for one? Absolutely, especially if there is anything in the history that you're uncomfortable with. Do most sponsors do it automatically? Sure. Would it be a fiduciary breach not to apply for one? I'm sure that you could find someone to say that it would be. RCK

If you let it default, you pay income tax, 10% penalty, and lose the potential tax deferral on future earnings. If you repay it, you don't pay the income tax until later, you may be able to wait long enough to avoid the 10% and you have restored that tax deferral on earnings. But you do of course have to come up with the cash to do the repayment. If I had the money to repay the loan, I'd do it. In either case, I think that you have to change your username to "theworkerformerlyknownas401kworker".

A couple more options: 1. Track down the number for your local DOL/PWBA office www.dol.gov/pwba/welcome.html and give that to her. Let her call to get an answer. When she fianlly finds someone who understands the question, she will find out that it is not required. 2. Assuming that the point of all this is that she wants to request a hardship, tell her to submit a written request, treat it as a claim for benefits, carefully consider the merits of her request, and deny the claim. RCK

Sorry--we should have provided more detail. Go to www.askpwba.dol.gov. In the lower right corner of that page, click "contact us". Click on PWBA offices, and find the PWBA office in your state. Script the highlights of the situation, and then have your wife call (see my prior post). She should be able to get to someone who can understand the problem, and help her pursue a solution. As a plan sponsor, I inherited a plan through acquisition that had some administrative problems getting distributions processed in a timely manner (a problem similar but not identical to the one you are having). I dealt with several people in the Kansas City office who were technically sound, followed up when they said that they would, and who were reasonable in pursuit of a solution. It will take some time to get a fix this way, so maybe the fastest is still to go to the plan sponsor. Your wife should have a Summary Plan Description (SPD), which should include rules on how to apply for benefits, and how to appeal any decision or response that you get from the sponsor. If you don't go through the benefit appeal process, you can't sue, so it is always a wise choice to pursue. RCK

Actually, calm down, and then have your wife call the Department of Labor. And if she can find someone else in the same situation, who is also willing to call, that would help. As a spouse you have no standing. A plan sponsor has to be very careful to protect the rights of the participant, and I assume that the DOL would do the same.

In the interests of full disclosure, I am employed by a plan sponsor. Have you gotten any statements in the last 62 months? RCK

As a plan sponsor, who was on the other side in a former life, I would submit some observations: 1. If you're doing this as a service for existing clients, that makes some sense. If you're going to do it in the hope of attracting additional clients, the results might be disappointing. 2. b2kates is right on--it is a specialized skill set. 3. Don't underestimate the workflow issues. It seems to me that an inordinate number of qualified plans, and particularly 401k plans, are calendar year. That means that they all have the same filing deadlines, and that the window of time when they want the work done is going to be pretty narrow. RCK

I agree with Katherine. As I recall, the reason that there is not a date is because the IRS feels that you can't make contributions in excess of the 415 limit. So there's no deadline for returning them. RCK

I also think that you walk on water--maybe only shallow water, but nonetheless. . . . I stumbled across your suggestion while winding down from a tough week. The flickering has not given me headaches, but it has annoyed me. Thanks, RCK

No. According to 1.410(B)-3(a)(1): In general. Except as provided in paragraph (a)(2) of this section, an employee is treated as benefiting under a plan for a plan year if and only if for that plan year, in the case of a defined contribution plan, the employer receives an allocation taken into account under section 1.401(a)(4)-2©(2)(ii), or in the case of a defined benefit plan, the employee has an increase in a benefit accrued or treated as an accrued benefit under section 411(d)(6). Unless of course the FAP for all of the HCEs failed to increase in the given year. RCK

Pardon MY ignorance, but why does a SERP plan have assets? RCK

I think that this more complicated. I do not see a permanency issue, but: If you have just one plan, you have: -one document -one SPD -one 5500 -one audit (or maybe none) -one recordkeeping agreement -one data feed. If you have two plans, you have: -two documents -two SPD's -two 5500's -two audits (or one or none) -two recordkeeping agreements -two data feeds. In my experience as a plan sponsor with multiple orphaned plans, the cost/benefit analysis is frequently driven by the audit issue, espcecially if they are full scope rather than limited scope audits. As long as the BRF and investment options are compatible, I'd vote one plan, amended to say that employees covered by a CBA are excluded unless the CBA specifically includes them. I think that bigger question is whether you think that the union is going to give this benefit away after two years. RCK

For anyone following this thread, the other regulation that is a little older, but still on point is 1.402©-2, Q & A 8. Reg 1.401(a)(9)-5 is effective 1/1/2003. RCK