Belgarath

I couldn't settle for 28 million per year. Too big a cut from what I make now. Everyone knows that the best way to get rich is to work in a TPA office. 😁

Thanks Luke.

Here's one of many similar discussions from a quick Google search. I just get squeamish when I hear that the compensation is being paid DIRECTLY to the plan sponsor, rather than to the plan. I think it is ok to have it reduce the amount otherwise billed to the sponsor, since it is not a "settlor" expense. Any thoughts are appreciated! https://www.napa-net.org/news-info/daily-news/can-plan-charge-fees-terminated-participants-not-active-ones P.S. here's an excerpt from DOL 2003-3. Accounts of Separated Vested Participants. Some plans, with respect to which the plan sponsor generally pays the administrative expenses of the plan, provide for the assessment of administrative expenses against participants who have separated from employment. In general, it is permissible to charge the reasonable expenses of administering a plan to the individual accounts of the plans participants and beneficiaries. Nothing in Title I of ERISA limits the ability of a plan sponsor to pay only certain plan expenses or only expenses on behalf of certain plan participants. In the latter case, such payments by a plan sponsor on behalf of certain plan participants are equivalent to the plan sponsor providing an increased benefit to those employees on whose behalf the expenses are paid. Therefore, plans may charge vested separated participant accounts the account's share (e.g., pro rata or per capita) of reasonable plan expenses, without regard to whether the accounts of active participants are charged such expenses and without regard to whether the vested separated participant was afforded the option of withdrawing the funds from his or her account or the option to roll the funds over to another plan or individual retirement account. Ugh - this gets a little murkier all the time. It seems that under IRC Section 4975(d)(10), assets of a Plan can be used to reimburse a disqualified person for properly and actually incurred expenses related to services rendered for the Plan without being classified as a prohibited transaction that is subject to penalties.

CB - I seem to recall some DOL guidance that said it was ok to charge a different fee (has to be reasonable) to terminated participants, since there is extra expense in tracking them, communicating, etc., etc., but I'd have to look.

Thanks - I couldn't see it either. But perhaps they really mean it is paid to the trust, then the trust uses it to pay plan expenses - TPA fees, advisor fees, etc..., but doesn't pay it directly to the employer.

That's what I'm being told...

Just having a brain cramp - but if the accounts of terminated participants are charged an annual fee (50.00, 100.00, whatever) and this fee is paid to the employer, how is that not a prohibited transaction?

I would report it on the schedule A for 2020. That's when it was paid. To be completely honest, I don't get too worked up over Schedule A's - while others may have a different opinion, I have NEVER, in 36 years in this business, had anything on a Schedule A questioned or investigated.

In the 2020 version, it is on page 13A.83.

Thanks. Thjat was my thought. Could theoretically be PT issues, although hard to see what the penalty amount could be if it is "corrected" (i.e. distributed) same day.

So, here's the question - plan Trustee liquidates funds to pay a terminated participant. Doesn't open a trust checking account - deposits the funds to corporate account, and SAME day sends check to participant, or directly to the participant. Now, I know this is a no-no, but it happened. Question is if this in any way invalidates a rollover, since it technically didn't come from a "trust" account?

Austin - just a guess - perhaps due to the fact that some vendor like TIAA may allow loans on the contract that are not paid through payroll deduction, etc., and are really between the participant and the vendor?

I agree with the above, and I'm sure we've all seen many times where a participant who receives an RMD notice decides to take additional amounts. Then you have to provide a 402(f) notice. A PIA, but I don't see a good way around it, unless you mess with a special cover letter or notice that says, "Ignore this 402(f) Notice unless you decide to withdraw more than the RMD amount" or something like that. Seems to me that would be confusing to them. When they ask for more, we send out new forms, with the 402(f) Notice. Not saying this is necessarily the best way - others may have a better approach that works well.

Yup. At least, that's always been my understanding, and I've seen many sources confirm this over the years. (Sooo many years...)

Wow, thanks so much for the detailed response!

This isn't a direct cafeteria plan question, but tis question was asked, and I don't know the answer. As part of an employer's overall benefit program, is it allowable to allocate (X) dollars per employee of employer contributions, which the employee can then use to choose among various option. For example, if an employer allocates $5,000 per employee. The employee can then choose to have the employer direct portions of this to the HRA, the Section 127 plan, the Health Insurance, the Cafeteria plan, etc.? The employee would NOT be able to receive any of this in cash. So "use it or lose it" in the various benefit plans. IF this is allowable, are there any tax ramifications? Since an approach like this seems too easy, I'm guessing there are problems with it! I'm going to refer the client to their benefits counsel, but thought I'd see if anyone knows a "general answer" to this. Thanks.

Same here. Last year I submitted, never heard anything. Contacted them 3 months later. VERY nice people, said it was being mailed within the week. Wrong. 2 more months went by, nothing. I called again, VERY nice person, apologized and said she would make sure it got mailed immediately. That afternoon, the certificate that had supposedly been mailed nearly 2 months ago arrived in my mailbox! So I ended up with two renewal certificates. To bad I can't just change the date on one and be renewed for 6 years... To be fair, it is possible that Covid issues may have contributed to the problems.

I've said it before - passing the tests is much easier than dealing with the renewal foolishness. It never seems to be a smooth process.

Assuming you are looking for an experienced Administrator, and not "merely" someone smart who you can train: I have no good sources other than the one you are using right now (BenefitsLink) - which is excellent. Unless you hit someone who is looking to relocate ALREADY, the general feedback that I've seen is that normal Admin positions frequently don't pay enough to entice people to relocate. If you are offering relocation expenses, that might help a lot. (If you move your business to Maui, you might get a lot more applicants. 😎) I've also heard, anecdotally, that many of the larger companies, while they have some very good people, often compartmentalize - so someone may be very good at Nondiscrimination testing, but can't interpret a document or do a 5500 form or a VCP filing. So getting the trained person you want, at a price you want to pay, can be very challenging. Subject of course to local conditions/labor supply. It also seems to me that some of the younger generation has some unrealistic demands on salaries/benefits. (When I started, plans were pretty simple - we did them with a hammer and chisel on stone tablets, and benefit formulas were 1 goat per year of service up to 25...) If you are willing to train, then job fairs at local colleges can work. At my prior employer, (a much larger company) we picked up a couple of excellent people. Problem there is that if you are a small TPA, there isn't generally a lot of room for advancement, so the 20-somethings move on. Sorry I can't provide more helpful suggestions. Good luck!

I assume so, but can't say with certainty without seeing the document. Does it allow for each participant to be considered a separate classification? Also, the AA at that provision would typically refer you to the base document section(s) that would give you additional information. (X.07(b)(2)) or whatever...

If the loan was only for two years, you should be able to correct under SCP. See RP 2019-19, Section 6.(.07)(3)(d).

Pretty much the same as a 401(k). BUT, just check your document - this will tell you what options are available. Most docs would allow general testing, integrated, pro-rata, whatever - the usual suspects. If it governmental as opposed to an ERISA 403(b), the world is your oyster, subject to 415, etc., and your document restrictions. No top heavy or ADP in a 403(b) anyway.

Hi MoJo - no, that's not what I'm saying (or if that's what I said, it certainly isn't what I was trying to say). I'm merely saying that the Appendix ALLOWS the plan sponsor to include language to modify/override certain plan default language. It's a normal IRS pre-approved plan. As to WHY they chose to do this, and whether on the advice of counsel, etc., and whether it as smart, stupid, criminally stupid, or worse, I cannot say. Hence my questions to the legal eagles on this board. I would not presume to advise a client on this - that's a matter for counsel, which I ain't. I was just curious about it for my own background information. The discussion has been informative! Thanks.

The purpose of the Appendix is to allow a plan sponsor to select overrides of the default document language. Why they chose this particular language I cannot say.

IRC 3405(b)(1) and (2)