Belgarath

Well, maybe I was wrong in my initial thought. Looks like it could be ok depending upon facts and circumstances.

I'm thinking the answer is no. I don't think this would satisfy the requirement that loans be available on a "reasonably equivalent" basis. But I need to go back and re-look at 2550.408(b)(1)...

Congratulations! Best wishes for long and happy retirement. I'm green with envy...

Ok, thanks! Doesn't make a lot of sense to me, but I believe you!!

I'm looking at a situation where I THINK incorrect information was given, but I want to see if y'all agree. Situation is this - Employer A sponsors a Section 125 plan, that offers various options, including contributing to an HSA. Participant "X" does not participate in A's HDHP, but is covered under the HDHP plan of her spouse, at Employer B. "X" is eligible for all options offered under A's 125 plan. "X" is being told that she cannot contribute to an HSA under her employer's (A's) 125 plan, as IRS regulations prohibit this - because her HDHP coverage is under her spouse's (Employer B's) Plan. I don't think this is correct. Agree/disagree? Am I missing something?

Situation where census provided by client showed incorrect DOB for an individual, from inception, and it was never caught by the client. Employee terminated, left funds in plan. Now turns out that former employee is in fact several years older than 70-1/2, so multiple years missed RMD's. So, you self-correct, but under SCP you can't get a waiver of the excise tax, so you file the 5329 with the "reasonable cause" statement. Any thoughts as to the relative merits (or risks) of submitting under VCP solely to try to get a formal waiver of the excise tax? The total tax involved would likely be "only" a couple of thousand dollars more than the VCP fees. I know the IRS has historically been pretty reasonable about waiving excise tax in missed RMD situations, but not sure about a multiple-year situation where VCP is otherwise available. Also, would you file multiple 5329's - one for each year RMD was missed, or just one 5329 using the total of missed RMD's plus interest as the RMD for, say, 2019? I'd say the latter, but others may disagree.

P.S. - I assume the responsibility for terminating the A portion plan is part of the sale and purchase negotiation between Winnie and Tigger?

Hmmm - I think your first question is unanswerable without knowledge of the specific state laws. Section 4.03 of Revenue Procedure 92-64 has the same language you reference in the model Rabbi trust: 03. "The trustee of the trust must be an independent third party that may be granted corporate trustee powers under state law, such as a bank trust department or other similar party." I'm dubious that this would permit an individual to have such powers, unless that individual is operating as a corporation? As to your second question, I'm inclined to disagree. Assuming for the moment that an individual can, under the relevant state law, operate as a Trustee, then it would seem to me that they wear two different "hats" and this would not be considered constructive receipt. But I think this may be moot, depending upon the answer to the above. Hopefully someone here will have actual experience with such a situation - I've never had to deal with this.

Yes. See 1.401(k)-3(d)(3)(ii).

Thanks!

Let's look forward to 2020. Suppose corporation X and Corporation Y are a controlled group, each owned 100% by Winnie the Pooh. Corporation A is the Plan sponsor, and Corporation B is signed on as a Participating Employer. Winnie decides to sell Corporation A to Tigger on 6/30/2020. Tigger has no interest in maintaining a plan, because he's bouncy and fun, and 401(k)'s are not. So Corporation A's plan will be terminated effective 6/30/2020. Winnie, however, wants to maintain the Corporation B plan (it invests primarily in honey pots, which Winnie deems Socially Responsible Investing), so will spinoff the Corporation B portion of the Plan. Because this is a 401(b)(6)(C) transaction, the Corporation A Plan should qualify as a Safe Harbor Plan through 6/30/2020, the termination date. Corporation B adopts a new plan document with identical provisions for the initial short Plan Year of 7/1/2020 to 12/31/2020, and the Spinoff assets are transferred to the new Plan - for the Corporation B employees, this is not a distributable event, and 100% vesting is not required. This Plan should also qualify as a Safe Harbor for the 2020 short Plan Year. Am I missing anything here? Whenever something seems relatively straightforward in these situations, it makes me nervous. Hope you all have a great Thanksgiving holiday - drive carefully, and hopefully the weather won't interfere with your travel plans!! P.S. - just for the heck of it, suppose this transaction takes place on, say, 11/30/2020 - can corporation B still have a Safe Harbor plan for the 1-month plan year? I'd argue that they can, since the spinoff plan, although a "new" plan document, is considered to be a continuation of the prior plan. Since the provisions will be identical, seems reasonable. But on this subject, what about the 5500 forms - do you show it as a "new" plan 001? I lean toward that, as otherwise, seems like it will confuse the DOL system if you don't show it as a new plan. Also, would you set up your new document as a "new" plan, or an amendment/restatement of the existing plan? I lean toward amendment/restatement, even though for 5500 forms, I lean toward "new" plan.

I checked the option in the checklist, and got nada. Either it doesn't really work, or it has to be "turned on" or something.

I don't know if there is a special service or module that you could pay extra for - as far as I know, in the basic format, you can get a notice in Spanish to go with the SPD that refers them to the Plan Administrator, who would then presumably give them a Spanish SPD? Now you've got me curious - I'm going to go into a checklist, check that option, and see what comes up.

Thanks - I will pass all of these comments along to the folks involved. This whole discussion has been very interesting, and I thank you all for your opinions.

Rather shocking. We were asked to clean up a non-compliant plan. Just submitted an uncomplicated VCP filing in mid-October for failure to timely adopt a PPA document. Received IRS Compliance Statement already! Since I'm always quick to bash the IRS for taking too long, I have to give them kudos for doing this one so fast! Never had one turn around in 4 weeks previously.

Not sure I would either. What about a plan termination situation? I'd be more inclined to believe such a decision might be valid in such a circumstance.

Makes sense. Thanks. (Never really paid much attention to this aspect, since as I stated previously, we just use one document, but good to know!)

Just to play Devil's Advocate, what if the fiduciary made the decision that for terminated participants who have indicated that they will be taking an immediate distribution, their funds are segregated into something like a money market to protect them from short-term loss, under the theory that existing participants can recover from a short-term market loss, whereas the person taking a distribution won't have that "recovery" option?

Although this is a related topic, it is not connected to a different discussion I initiated in another recent thread. When we do our 408b-2 disclosures, we specify the amount/formula for any Revenue Sharing all in the one disclosure document. However, I believe it is acceptable under the regulations to have this in more than one document, as long as the required information/format is used. Just curious if folks out there generally combine all in one document, or use two or more. For example, a basic 408b-2 disclosure that has everything except the Revenue Sharing formula, and then referring to an attachment prepared/published by the mutual fund company that describes the specific Revenue Sharing amounts/formula/calculation?

RBG's suggestion - "Don't just pick the "right" answer, eliminate the wrong answers. The qualifiers will almost always eliminate a few answers for you " may be the best suggestion here on a multiple choice test. You know more than you think you do, and if you can eliminate a couple of answers, even your "guesses" will get you a much higher percentage correct than you would get from random guessing on the same remaining options. I took those tests more years ago than I care to contemplate, but if they haven't changed, it is easy to get tripped up on the format even when you do, in fact, know the correct answer. Things like, All of the following are true (or false) EXCEPT - make SURE you are picking the false (or true) answer - if you do it in a hurry, you can pick the first true (or false) answer you see, rather than correctly looking for the opposite. I seem to recall some double negatives, but they may not do those any longer, or maybe my memory is just faulty. Good luck.

So I do have a question - answer is not immediately apparent to me - let's suppose, as Kevin mentioned, that the 408b-2 disclosure from the TPA to the Plan Fiduciary did not adequately describe the arrangement. Is the PT (or potential PT) on the TPA or the Plan Fiduciary, or both? Or to really get into the weeds, suppose it was discussed with the Plan Fiduciary, but not put in writing? (I'm inclined to think this is likely to be meaningless, except perhaps in assessing damages in litigation, since the disclosure is required to be in writing...) I think the TPA involved needs to talk to ERISA counsel...but this discussion has been very helpful to me as I haven't really thought about these issues much for several years. P.S. - assume it is on the TPA, but not certain if applies also to Plan Fiduciary because Plan Fiduciary didn't adequately investigate or request more information, if disclosure wasn't specific enough...

The situation we were discussing was even simpler than that. There was no formula-derived payment/contract with/from plan. TPA was contracted solely with the Plan Sponsor for administrative fees. The contract/service agreement/whatever you want to call it specified that any fees billed to the Plan Sponsor would be reduced by Revenue Sharing paid to the TPA, if there is any. TPA received Revenue Sharing from the investment provider - which the investment provider provided automatically - nothing the TPA asked for. Then, as discussed, at some point the Revenue Sharing exceeded the TPA's normal fees.

Thanks - and the situation discussed doesn't fit into this category. It is a payment made directly by the investment company to the TPA - it is not an ERISA fee account or recapture account. Instead, the TPA, in its contract with the EMPLOYER (not with the plan) agrees that it will reduce the administrative charges billed to the EMPLOYER by the amount of any Revenue Sharing amounts received. And while as Austin points out the engagement letter, as apparently written, is weak in that it doesn't address the issue of Revenue Sharing in excess of normal charges, it still, IMHO, clearly would not belong to the Plan.

No, I don't think they do. I don't see how this can possibly be considered a plan asset. Very different from a plan where there is an "ERISA account" - the 5bps is being paid directly to the TPA by Investment Company X. Austin, would you feel differently if the engagement letter had clearly specified that any Revenue Sharing in excess of TPA fees charged to the Plan Sponsor would be kept by the TPA? If the Plan Fiduciary has done due diligence, and determined (rightly or wrongly) that the overall investment portfolio, expense ratio for the investment company, etc. is acceptable, then why should extra TPA profit be a problem? Granted that this is a bizarre combination of circumstances. You can see why the initial discussion went round and round...not sure there is any perfect answer (other than to avoid this situation in the first place).