justanotheradmin

I hesitate to name the company because the last time I complained about a specific company there were some issues with my post. Nor do I want this to turn into a 'let's all bash XYZ custodian/ recordkeeper'. During the regular course of things I haven't encountered too many issues with this company. Just this particular misguided attempt to get uncashed checks off their books. As to how they are allowed to do this - I asked the same question, and asked them to provide citations. I have not heard back from my latest e-mail.

A financial company that shall remained unnamed has recently notified it's plan sponsors that it is changing how it handles uncashed distribution checks. Any checks uncashed after 365 days will have the money moved to an IRA. When we asked for clarification the response was that nothing from the tax reporting on the original distribution would be changed. Depending on the type of original distribution, the deposit into the IRA would either be considered a contribution, or a rollover. It would be up to the participant to make sure it was reflected correctly on their tax return, including amending prior returns if necessary. I can think of a whole host of ideas why this is a bad idea, and was wondering what other people think. The financial company is not making any distinction between under $5,000 force out distributions, affirmatively elected distributions, rollovers, cash outs to participants, Roth money, non Roth money etc. What if the amount exceeds the person's IRA contribution limit? I have not seen other companies handle uncashed checks this particular way before. But maybe there are others who do it the same way? Am I in the minority in thinking there are several other similar - but much better - ways to handle this?

Hi Peter, This is what I found. It is from the Estee Lauder case filed last month. Is the amount indexed? If not, it should still be $110. but I confess, I didn't actually read the CFR. "29 C.F.R. § 2575.502c-1 increases the penalty under ERISA § 502(c) to $110 per day"

I don't have many answers for you, but wanted to thank you for your thorough post. Often first time posters do not provide enough information and context for their question or concern. For anyone to actually be of help. I think you've provided enough information that someone who does work with SIMPLEs could help you, or at least ask some follow-up questions to try to help. I will say that offering a participant the ability to enroll, or make a change to their deferral is separate from the education meeting. Yes, usually one of the functions of the education meeting is to help with those, but there isn't any reason why you can't (you probably should) provide the enrollment and annual information earlier, as in November. And then if employees complete the forms and turn them into you, the updated elections can be implemented by 1/1. If the advisor's only role is to help the participant select their investment line up (and NOT help with enrollments) then a January meeting might be fine. Similarly with the notices - some advisors do take on the responsibility of passing out notices, but many don't. For small employers, usually the employer is in the best position to know how to reach employees, or have a last known address if hard copy notices are sent. I'm not aware of a fulltime requirement for SIMPLEs. If I recall, the requirement is $5,000 in the prior two years, and an expectation of at least $5,000 in the new year. So if you were hired in 2016, made over $5,000 in 2016 AND 2017, you'd be eligible to participate in the plan starting in 2018. That assumes your SIMPLE plan document ( do you have a copy? Maybe the IRS sample doc was used? Does the adviser have a copy?) doesn't provide for a more generous eligibility (such as immediate upon hire). Sounds like the advisor is in the investment only role, and not in the 'day to day administration' or 'ongoing annual operations' role. Either you / the employer will need to fill that role, or hire someone who will. Good luck.

You should check with your lawyer. Are the REITs part of a 401(k) plan? You should contact the plan administrator (whoever is listed in the summary plan description, might be the Ex's employer). and write out your request and ask these questions, including asking for an accounting by investment of the account segregation (where they split apart your portion and your ex's portion). I would also include the trustees on any written requests you sent to the plan as the trustees are required to keep track of the money. As for the financial advisor - well, unless they are a fiduciary, they may not have any legal say over the money or where to move investments. I would suggest working with someone who actually has the power to move money or make decisions for the plan, the plan administrator, or a trustee. Good luck!

I have never heard of one. We have filed amended returns years after the fact without issue.

Was the pre-existing money in Sponsor A's plan also sent to PEO plan? Or were only new contributions sent to the PEO plan, leaving the old money untouched? Has the Sponsor A plan been filing 5500s? Did they treat their plan terminated as of the payroll service change date? Forgive my skepticism I find it hard to believe there was no paperwork. Not even a blackout notice? I'm guessing there is some sort of paperwork (albeit probably incorrect or incomplete) somewhere. Either way both plans would have failures. Both the PEO plan fiduciaries and Sponsor A Plan fiduciaries should be aware they likely have fiduciary breaches. Especially if they accepted money that didn't belong to the PEO plan, or sent money from the sponsor A plan that shouldn't have been sent. The PEO Plan would need to disgorge the money and earnings tied to Sponsor A. Sponsor A's Plan needs to try to recover the erroneous contributions. Regardless of where the money was held (erroneously in the PEO plan) the money would be assets of Sponsor A's plan, and should probably be reported as such on the annual accounting, Form 5500s, etc. And to answer your question - Yes something like this would be a significant plan error and should go through VCP. I would not self correct this. No - the money shouldn't go to IRAs. I'm sure others can chime in with things I've missed and further suggestions.

When you say that the 401(k) was mistakenly moved to the PEO, what do you mean? The money was moved? Were there plan meger or termination resolutions or amendments done? Does the PEO have an signed adopting employer agreement from Sponsor A?

A closed MEP is forming and has asked about the 20% Top Paid Group Election. Does anyone have any insight as to the mechanics of how that would work? The plan document is sparse on this topic. Some well paid folks may occasionally switch between entities. Does their compensation from all participating employers count when ranking by compensation? I would think not. The document does say Total Compensation is used, and Total Compensation is that of the Employer. In this case each Employer is separate (as opposed to a related CG or ASG where there are multiple entities treated as a single employer). So only compensation from the entity doing the analysis would count? I believe each entity would do it's own 20% analysis, since each entity's annual testing is mostly done separately, but I don't deal with MEPs often. The top paid group election is a choice the businesses plan on making as a group, as the current game plan is to have all entities ( 5 or 6 small employers) have identical provisions.

You should contact the Department of Labor. If you complete the online form: https://www.askebsa.dol.gov/WebIntake/Home.aspx Someone will usually call you within a business day to try to help you. Additionally, you can try to find the Form 5500 (annual reporting form) for the plan by doing a search on https://www.efast.dol.gov/welcome.html I find searching by EIN to be the most effective. You may be able to find your employer's EIN on your W-2 or paystub. If you do find one listed, I would save the most recent one and have the information handy or send it to the DOL with your request as it will have good information that they can start with, such as the legal name of the plan.

I would like to point out that there is a point of confusion for some employers about Entry Dates =/ Deferral Change Dates. They are not the same. The plan can absolutely still only have plan entry dates twice a year, but also allow deferral changes each pay period. The semi-annual plan entry date would be in the legal plan document / adoption agreement. As others have pointed out, the deferral change frequency may or may not be in the plan document, as many treat it as an administrative election. Sometimes folks equate the plan entry date with an open enrollment period, similar to health insurance. Retirement plan entry dates don't work that way. It is much more common to allow starts, stops, changes, as needed, without waiting for a specific date such as 1/1 or 7/1.

Perhaps. But if they aren't even turning over a copy of the plan documents its hard to know what is going on. The plan would likely have to make the request to the ERISA bond company. If the plan says there was no breach, I can't see it making a claim on the bond to the surety company. But sounds like the plan isn't saying much of anything right now. If the bond covers the theft, then the surety company probably would be going after the fiduciaries for the loss. And hopefully someone has good fiduciary liability insurance.

Did folks see this? I just found it so interesting and timely. What do people think? Anyone else intrigued? Hopefully more details will become available as the suit moves forward. Who approved the distributions? what was the process? was an online requests? How come they haven't provided a copy of the plan documents? How did the money go into accounts that weren't in her name? Wouldn't someone catch that? Why haven't they settled? So many interesting things. Distribution fraud is booming and a very real problem. https://www.napa-net.org/news-info/daily-news/recordkeeper-plan-sponsor-charged-401k-account-theft https://www.napa-net.org/sites/napa-net.org/files/BermanvEsteeLauderComplaint[1].pdf

Glad you got your answer. I think what I, and some of the other folks are questioning is why there was a need for a new plan? An imperfect analogy: If I own three trucks, and I want to own one, usually just selling two and holding on to one is simplest. The more cumbersome approach would be to sell all three and then buy a new one. If the plans are the trucks - why were all three shut down and a new one started instead of just keeping one open and merging the other two into it? There are a number of great reasons to keep an existing plan going. There are fewer reasons to shutter everything completely and open a brand new one. I, (and I think some others) were curious as to what the reasons were to open the new plan. Was there a specific reason? A specific business need that was trying to be met? Was is just that someone didn't understand keeping a plan open and continuing it was an option? One plan could have absorbed the other two, and all of the money can be held at Empower. A new plan doesn't need to be set up to move the money to Empower or use Empower as a service provider, so the plans would have realized the cost savings your describe regardless. I realize this wasn't your original post question, but if there was a good reason to structure the merger / new plan the way it was done, we'd be curious to know that reason.

Some clarification is needed. If you really did have three plans - and started a completely NEW plan, then I don't believe the new plan can't rely on the audit waiver rules that require lookback. It's a new plan. If you had three plans, and one of them was updated and absorbed the other two plans the plan left standing would be able to rely in the audit waiver rules that require lookback, because there is a prior year to look back to. With a new plan, there is no prior year to look back into. the 80-120 look back allows the audit to be waived completely if requirements are met. The short plan year simply combines the audit with the longer regular length plan year, but the plan is still audited for the short period along with the regular length plan year. I'm not which which rule you are trying to use.

I agree with Bill. If such an amendment is effective mid-year, it would take the plan out of safe harbor status, as it's not a permissible mid-year change to safe harbor.

This issue would exist even if you had two different plans, as they would need to be tested together for the most part. It's common for HCE to have/want brokerage options but not offer them to NHCE. Is the HCE a plan fiduciary? If so, how do they justify that the investments in their account are good for them, but all of the other participants have to stick to a recordkeeping platform? I'm not saying it can't be done, but it would be a difficult argument to make, and not one I would attempt. There are several recordkeeping products out there that include a brokerage option / window. Alternatively, I have seen plans give out annual notices to participants informing them that the default is XYZ at recordkeeper ABC, but that a brokerage option through DEF is also available, here are instructions on how to do that and the person to contact to set it up. But it makes the plan much more complicated, and I would hazard is rarely done correctly. It's not clear to me what your role is in relation to the plan. If you are in an advisor capacity (either as an FA or producing TPA), my first question is are there limitations to what kind of investment options you work with? There are some low cost recordkeeping options out there, particularly if there is a large transfer coming in. Can you research those and provide other options to the employer?

I have not - but wouldn't the third party handle the payment? Same as when it was paper? When checks were sent the sponsor couldn't send a check in with their information, so a third party (an attorney maybe) would have to facilitate payment to maintain anonymity. I suppose a cashier's check could have been used and it wouldn't have identifying information. So if the attorney has an escrow or trust account, that's what I would expect the payment to come from, not the plan sponsor's account or CC. What about a pre-paid visa card or something similar? they could load it with the amount of the fee for a one-time use?

Spot on Bird.

I agree with you Bird, I found fmsinc's comments antagonistic. It is hard to read tone into electronic communications, but the BOLD lettering, and demanding nature of the comments did not seem helpful to me. I was hoping my comments would provide some clarity, and the original poster could choose to clarify or not clarify as they felt appropriate. Hopefully i'm not coming across as annoying either. Edit : based on my earliest comments - I think I got the gist of his question fine enough too.

I should clarify - a regular plain old annuity, the private personal kind purchased through an insurance company, is not what any of us are talking about. That kind of annuity account /policy would not be subject to a QDRO . Since you mention the annuity being subject to the DRO 20+ years ago, the assumption is that the annuity is part of some sort of tax qualified retirement plan, and NOT just a personal annuity. If it was just a personal asset - the DRO wouldn't have been necessary (though it would probably still have been addressed by the property settlement agreement).

Mj1804 - Your initial post did create confusion because the as fmsinc points out - for many industry professionals the term "annuity" is used ONLY with pension plans. Pension plans, by their very nature, are required to be structured with an annuity. So if someone tells me they have both an annuity plan and a pension plan I would think they aren't familiar with retirement plan terminology. It is not common anymore for 401(k) plans to have an annuity provision, and even if they do, in the industry they aren't referred to as "Annuity" or "Annuity plans" because that makes it sound like a pension plan, and folks don't want to conflate the two. If your first QDRO covered a 401(k) plan that happened to have an annuity provision , for clarity's sake, it would be much more helpful to refer to it as a 401(k) plan, and NOT use the term annuity. Something like: Plan A: 401(k) Plan Plan B: Pension Plan The concern / question I think some of the commentators are getting at is - Do/.did you really have two retirement plans? Or is there only one plan? Many of us are used to participants, employers, even occasional advisors, CPAs, or attorneys, not understanding the technical terminology of retirement plans. If it isn't something they work with everyday it tends to all get jumbled up when they ask industry professionals questions. Then someone like fmsinc has to try to decipher what they really are asking about, and its hard to do without more information.

I agree, you need an attorney. If the original settlement does not mention the pension - there is your problem. And that is distinct from the DRO. If you are concerned about the plan paying a benefit to the ex-wife before you can get it resolved, well, an attorney can advise as to your options there. Good luck.

I'm confused. You have an employer sponsored Annuity, which is completely separate from the pension? Is the Annuity part of a retirement program? Is this correct: Annuity (part of something other than the pension) - a DRO was filed 20+ years ago, ex-wife was awarded part of it. Pension Plan benefit - a DRO is filed present day, it awards ex-wife part of the benefit. Original divorce property settlement agreement from 20+ years ago is clear that pension is 100% awarded to the husband - ZERO to ex-wife. So there are two DROs, for two different retirement programs / plans? In that case you don't have competing DROs on the same plan.

I agree with shERPA. If you think of it as the RMD accrues on 12/31 of the year prior. His 2019 RMD is based on his 12/31/2018 Balance, regardless of when during the year he actually turned 70 1/2. Similarly, you analyze his ownership status when the RMD accrues (well technically 1/1/2019, but you get the idea). If he divests himself on January 2nd, it doesn't matter.