khn

We have a situation where a client's recordkeeper is offering to backdate a fee reduction for them as of march 1st; however, in that case they obviously wouldn't be able to get a fee disclosure out to participants 30 days prior. I'm thinking that because it's a reduction in fees that will benefit participants, they can send just send the disclosure asap without getting in trouble. Any thoughts?

They are currently paying the recordkeeper 15bps for all recordkeeping fees, which is paid from the erisa budget, but no separate $50 per participant fee. They want this $50 per participant fee to be used to go into their erisa budget and help pay the 15 bps.

They would like to do it as a way to offset costs. The original thought was they would add it to their Erisa Budget but that doesn't seem kosher to me.

We are working with a client who wants to begin charging an annual $50 administrative fee to terminated participant accounts. Their recordkeeper is trying to figure how they're going to handle this. Once they deduct the fees, where should they go? I don't think they could be added to the Erisa Budget account, as this should probably only hold funds from excess revenue. Any thoughts?

When our client has an employee separate from service, they process a separate check to payout their accrued vacation. Historically they have not taken a 403b deferral or match on this payout. Is there an issue with this? Their document seems to be silent on this subject. We have some confusion around whether or not deferrals MAY or MUST be made on the accrued vacation pay.

I know plan documents govern the beneficiary designation of a 401k, but is there any liability to an employer for not making sure all participants have a named beneficiary on file?

Do you forsee any issues because the forfeitures will be used in 2014 but may be left over funds from 2013 and 2012? it would literally be impossible to accurately reallocate forfeitures back to participants from those years because we don't have good records. I'm thinking this is the best way to self-correct and don't want them to have to file for VCP if this would be acceptable.

A plan converted to a us at the end of 2012. A large forfeiture balance ($200k+) was part of the conversion but we haven't been able to get any detail on what it consists of from the prior recordkeeper. The plan was using forfeiture funds throughout 2013 to offset their match as per the plan document but still has some funds left over. They have a large match coming up this quarter and would like to use the remainder of forfeitures to offset the match and zero out the account. Can that be done as a self correction method? they are hesitant to allocate to participants without good historical records, they'd like to use up the account and be clean going forward.

Is it mandatory to have a 6 month suspension of deferrals after a hardship withdrawal? A university plan has a custom document that is silent on the subject. To further complicate the question, some employees in the plan must make mandatory deferrals as a condition of employment. In that case, how can deferrals be suspended if they are deemed mandatory by the plan document?

What does everyone suggest to clients as a guideline for the appropriate amount of fiduciary liability insurance? I know there are many factors to consider, but for a fairly standard $8 million plan we would usually suggest a policy for about 10% of assets. Having a hard time finding any opinions on the 'right' amount of coverage. Seeking opinions!

One of our clients has a participant who's home was damaged in Superstorm Sandy. If he is rebuilding his primary residence, does that qualify him to take a residential loan in the plan? In other words, does rebuilding qualify as 'construction of a primary residence'?

We have a situation where 2 participants have investment elections on file, but due to an administrative error deferrals were not taken from their check for 3 months. My interpretation from EPCRS is that the actual returns should be calculated, and if those happen to be negative than go with the DOL calculation because you have to at minimum make the participant whole. In the event there's no investment election on file, then a weighted average method could be used. The Highest Performing Fund calculation can also be used if it's easier to calculate, but this could prove to be much more expensive. Am I correct?? I am getting confused between this and the missed opportunity deferrals.

My understanding is that this box should be checked if an employee is an active participant in a 401k plan, meaning if they have employee or employer contributions are allocated to their account for the plan year. If the only contribution is a year-end employer contribution, then employee would be considered an active participant for the year. In the case where a person is not contributing but receives a discretionary company contribution (i.e., QNEC), what if the company elects not to make a contribution after the year end earnings are calculated? If we have already checked the box and then the company ends up not contributing a match it would seem to create a problem. What to do in this situation?

Thank you much; i learn so much from this board.

If I am a 100% shareholder in an S Corp and a 50% shareholder in another S Corp and I offer a 401k plan in the company in which I am 50% shareholder, am I then required to offer it in the S Corp in which I am a 100% owner?

Thanks to both of you. I hadn't thought about the possibility of using the government shutdown as a plea for leniency, although it's probably grasping at straws. They have filed it as of this morning but I will definitely advise them to go after the auditor for any financial penalties.

One of our clients had issues with the auditor finishing their report and didn't file yesterday. What is the best option....can they file today and just cross their fingers? Or, will they have to file through the DFVC program?

Is the explanation that a plan is 404© and the fiduciaries may be relieved of liability for any investment losses that the participants may occur required to be in the SPD, or can it go out in another communication?

I would think the tests will need to be performed but we'll see what transpires. Even so, it's better than the alternative, i.e., having to do qnec and match which for this plan would probably be six figures.

An update if anyone is interested...the plan's erisa attorney is planning to file for VCP and file a retroactive amendment to exclude bonus from the definition of comp. Hopefully it will be accepted.

Our client's auditor noted a 'significant deficiency in internal controls' relating to how interest on participant loans was being recorded on their Control Letter in the Auditor Report. Besides identifying and fixing the problem and documenting what they will be doing for internal controls, what else should the client be doing? Is there anything they're required to do because of this being noted in the report?

I agree! This is only the third year this company has been doing their audit but I thought they should have caught it sooner. Thanks for the sanity check.

The plan's auditor has found that bonus is included in total comp and our client has failed to withhold on bonus for the past 10 years. I'm assuming they will have to file VCP. The issue is they don't have records of participant's actual deferrals going back that far. What would be an acceptable correction? And would they have to hire an Erisa attorney to help calculate and file?

Our client's auditor found the plan has been using the wrong definition of compensation going back 10 years, so they said they doubt they will be able to finish their report by Oct 15th because they need to know the financial implications. What does this mean... can they not file their 5500 on time now? Will they be penalized for this?

Understood, but if someone was to go in and lower their deferral percentage before they get paid a bonus, it would apply to all of their pay and not just their bonus payment. That's why i would think it's allowable, correct?