Belgarath

Heck, we usually can't even convince businesses with scads of money to spend $1,000 in legal fees...

Happy Tuesday! I guess I'll have to respectfully agree to disagree. Seems like comparing a current 401(k) to ancient 403(b) individual annuity contracts with TIAA or Horace Mann or whoever (which WERE often the "norm" back then, rightly or wrongly) isn't a valid comparison. I DON'T know what the fiduciary liability implications might be, and if proper fiduciary oversight (such as was required in those times of yore) was observed, and if there was reasonable "prudence" in the process, etc., etc. Do you feel comfortable that you know and can advise your clients of their fiduciary liability with regard to these ancient contracts? I certainly don't, and I'm not ashamed to admit it. How are our clients supposed to know? IMHO, it is a matter for legal counsel, particularly in these days of fiduciary prudence being litigated every which way you turn. Also, seems like advising them on what they can DO about protecting themselves against such liability (if anything) is a matter for legal counsel. Maybe I'm entirely misunderstanding what you are really saying. P.S. Nice that you think I have a capable head, but I believe your confidence is misplaced. I'm beginning to think that after all these years, I know less than I started with...

As a non-lawyer, I find it hard to imagine that a newly appointed Fiduciary could be held liable for any Fiduciary shortcomings from a prior Fiduciary, which the current Fiduciary has no legal power or authority to change. However, according to Mr. Bumble, "The law is a ass." I leave the fiduciary liability question to the legal cognoscenti. Way over my head.

An older discussion that touches upon some of this, FWIW.

Thanks Austin.

My memory is that you would have overlapping periods. So period 1 would be 10/1/16 to 9/30/17, and period 2 would be 1/1/2017 to 12/31/2017. I don't have a citation handy - just my memory. Then 2018. 2019, 2020. Depending upon the hours worked, sounds like your system may be right?

Yes, but 92-5 allows the plan to purchase insurance from the individual. I have blessedly put the details out of my mind, but you may wish to look at it as a starting point for your research. I venture no opinion as to whether it is a good or bad idea, other than to say having insurance in the plan usually complicates administration/compliance quite a lot.

Just curious as to what other folks have decided. I've decided that for most purposes, the "rigid" discretionary match is useless (or perhaps I should say overly restrictive), and we're using the flexible discretionary match for pretty much everything except where the client wants a fixed match in the document. You just have so many more options. I should hasten to add that we do NOT use the PPD document, so if you are using PPD, then your opinion re the "rigid' match might be very different. Curious as to other thoughts - pros, cons, which are you using? Only downside from my perspective on the flexible match is the notice requirement, and the notice is VERY easy. Edit - as I read the original post, I think I worded something poorly - when I said "useless" I didn't really mean that. I meant "useless" for most of our clients, as they usually want more flexibility than is permissible using the "rigid" discretionary match. But the rest of my question still stands - interested to see what others think. Thanks.

Hey Tom - heard things might have gotten a little rough down there in Jacksonville - everything ok with you?

Probably moot. The CPA will certainly take the recommendation of an International Man of Mystery!

If you look at the EOB, on page 7.696 of the 2020 version, there is a discussion of this issue. Somewhat less rigid than what you are describing. Worth looking at, but since this is a deduction issue, I'd present it to the CPA, and it is their choice!

I don't have such a resource, but this is from the IRS - although it doesn't specifically break out Schedule C filers. Is this sufficient? https://www.irs.gov/retirement-plans/simple-ira-plan-fix-it-guide-you-made-incorrect-employer-contributions-for-eligible-employees

I'm a huge fan of pre-approved plans, for many reasons, including those stated above. The reliance that QP Guy mentions helps me to sleep at night!! However, I will say that there are some plans out there that have very "unusual" provisions that won't "fit" into a pre-approved plan. Depending upon the importance of those provisions to the sponsoring company, it may be necessary to remain with an IDP. That said, I would always try to use a pre-approved document if at all possible and reasonable.

My furnace heats my hot water. That's an immediate crisis!!! 46 degree showers ain't all that much fun.

That's a somewhat tricky question. Many in the pension community don't agree with the apparent IRS interpretation, but the IRS appears to take the approach that even though you don't take into account voluntary terminations to determine IF there has been a partial plan termination, once you have made the PPT determination, then all the participants who terminated during the applicable period are 100% vested, whether or not the termination was voluntary or involuntary. I have some old scribbled notes here referring to Revenue Ruling 2007-43. But I haven't checked to see if there is additional, possibly newer guidance. Basically, who wants to fight the IRS over 1 employee? I'd just vest them and be done with it. (IMHO, my feeling is that their apparent stance is ridiculous, but somehow they don't seem to consult me on these things...)

Thanks! Very helpful. We've advised them to discuss with their ERISA counsel anyway, but this is great information!

A medical practice plan has apparently just hired a doctor who is a Canadian citizen. Everyone understands that since paid U.S. source income, is eligible for the 401k plan - all normal. Now, this plan allows each participant to have individual brokerage accounts. Doctor is from Canada, and his broker is in Canada. Is there any problem with a U.S. Trust allowing him to invest in funds in Canada? Further complication - Plan specifies each Doctor is Trustee for her/his account. So technically a foreign Trustee. Anyone run into this before? P.S. FWIW, the Trust is in fact organized in the United States, so even if this person invests in funds in Canada, it would appear that the Trust itself is under the jurisdiction of U.S. courts, and therefore it is ok? Is this "settled" law or does this require an opinion from an ERISA attorney?

As I am without a doubt one of the least tech savvy people in the country, I defer to you all! Whatever you think is best. I wonder if at some point, certain banking institutions might go back to "no internet transactions" banking, and deposits and withdrawals can only be done in person. Most likely not - probably not even possible any longer. Might not even be legal for all I know. Life is tough for us dinosaurs - the next dinosaur extinction looms large.

Gracias!

Thanks John. To make sure I properly understand what you are saying, say the amendment to take it out of safe harbor status is effective August 1, 2021. Are you saying the vesting of the 3% safe harbor becomes 100% as of that date? Or are you saying that the vesting schedule CONTINUES to apply to the safe harbor contributions that were made (or required to be made) through July 31? I believe you are saying the latter.

So, in this situation, where due to the QACA the 2-year vesting is being utilized, if you amend the plan mid-year to take it out of safe harbor stratus, does the 2-year vesting still apply to the safe harbor piece? It would seem reasonable top me that it would immediately become 100% vested, but I've not seen this issue. Thoughts?

Thanks Luke - very helpful!

Ok, thanks, but here's where I'm getting hung up, and I guess it hinges upon the interpretation of the language. Mine is probably wrong... back to 408(c)(2). Is it reasonable to look at it through the following lens: Since the fiduciary (the employer) has ALREADY incurred these administrative expenses, and they have been determined to be proper and reasonable expenses of the plan, why can't the employer be reimbursed? The employer/fiduciary has not contracted with itself to be paid for providing these services - the services have been provided by a third party, and the employer is being billed for them. If the employer pays the bill, then isn't reimbursement allowable under 408(c)(2) without having to rely on an exemption for the EMPLOYER providing the services? That's the interpretation I'd LIKE to take, but the regs on 2550.408c-2(b)(3) seem not to really support that interpretation. So perhaps one could rely on PTE 80-26? Appreciate your thoughts! P.S. - my own feeling on all of this is that it is, at best, the hard of way of doing something. Makes much more sense to simply have the plan pay the fees directly to the TPA, rather than messing around with trying to reimburse the employer. But the question was asked...

Hi Luke following up on this. I haven't yet done any exhaustive research - first, I don't even find an ERISA 406(b)(1)(C). Did you mean another section? Also, ERISA 406(a) starts with "Except as provided in Section 408." So, what about ERISA 408(c)(2)? The employer is a fiduciary, and has incurred the administrative expense charged by the (TPA, etc.) - does this do away with the bother of relying on a whole pile of other guidance? I haven't yet looked further than this, other than to note that PTE 80-26 might help...dunno yet. Thanks.

Here's one discussion of the issue. There others as well, if you do a search.