Pam Shoup

In the current environment of online enrollment/automatic enrollment and estatement delivery, getting employee addresses for mailing purposes can be like pulling teeth. Years ago, we requested W-2s for plan testing purposes and could get addresses from those. Today, everything is done electronically, and address information is not necessarily provided. I know that this question is specifically with regard to participant distributions. However, with the upcoming regulations about once a year paper statements coming into effect, that is going to add an additional burden on someone (PA or outsourced to the RK) to keep track of missing participants. If statements get returned by the post office with no forwarding address, what is the regulation going to specify about lost participants and their paper statement delivery? If the participant is active, a request is going to need to go to the employer for an address update and there should not be a fee for that. RKs should be asking employers to update addresses to prepare for the paper statement rules. If the participant is terminated and the employer does not have a good address, an address search will need to be conducted and $30 to cover that cost is probably reasonable, considering all the possible steps that need to be followed, including any locator search fee.

The first question that I would ask is the type of services you are providing for the client. If you are providing recordkeeping services, I recommend that you have a SOC Audit (aka SSAE-18) of your firm and your processes. The large plan auditor will be able to have some reliance on your recordkeeping processes when performing the audit. It will also help you to identify any deficiencies in your recordkeeping processes and address them. If you are providing compliance services only, the auditor is going to be looking at what you do in the course of your normal services, and essentially re-perform the plan tests and review the financial statements. The data listed by Marjorie above is a common ask for audits. You should have a draft 5500 for them to review when they start their audit. If this is the first year audit, expect them to be asking for data for the previous year. The auditor is then going to review the employer and/or Plan Administrator's policies and procedures regarding remitting contributions, their role in distributions and loans and the eligibility/enrollment process, etc. If the employer/PA is maintaining paper forms, they are going to either sample audit or fully audit that paperwork. If your firm is responsible for maintaining forms, they may ask you for copies. If the records are kept electronically, the auditor is going to sample or fully audit the electronic records. They will most likely ask to see participant statements. If your role is compliance only, most of these asks will need to be fulfilled by the recordkeeper. Most likely, the employer will need to obtain these records from the provider's website. The auditor is also going to want to review the SOC/SSAE-18 for the recordkeeping firm, review the (certified) custodial trust reports, compare trust reports from the recordkeeper to the custodian and possibly review SOC/SSAE-18 reports for software providers/other vendors (if applicable). You should ask for the SOC reports for the recordkeeper and custodian ahead of time. Many recordkeepers automatically post the SOC to the website for the sponsor to access. Read them over to see if there are any deficiencies. If there are any deficiencies on the SOC report, the auditor may ask what is being done to mitigate those by the employer (if possible). I would look up ERISA Section 103(a)(3)(c) and review to determine if your employer qualifies for this type of audit. If you know a CPA firm that audits a significant number of benefit plans, you may want to contact them and ask for a sample request list and see if they are available to take on new clients. Lastly, the DOL has published a lot of information concerning the selection of auditors and what is necessary for quality audits. I would google those articles, as well as those published by the AICPA concerning benefit plan audits.

As someone who's primary job is to process conversions (money only, not addressing plan provisions or payroll), I can tell you that an in-kind transfer is much more difficult than a liquidation and wire. To speak to the comments above, if the money is insurance company separate accounts or omnibus accounts, an in-kind transfer is not possible. You would really only be able to move from one custodian to another where the funds are invested at the plan level. Arranging for an in-kind transfer as of a specific date takes a lot of coordination and agreement between the custodians, recordkeepers and the funds themselves and all must agree to the same schedule, and there will be lots of paperwork involved. Do you have a copy of the conversion records that Guideline originally sent over? You may want to look at those records to see for yourself if they had the information necessary. For example, did the records include the full name, Social Security Number and amount by source and fund by participant that was transferred? Also, did Guideline provide a report by participant with a beginning balance for the year, contributions, distributions, earnings, fees, loan data, and transfer out, etc.? Did they provide any census data? Did you map over the funds, or did they invest as per new enrollment allocations (or QDIA)? Mapping adds another layer of complexity, especially if fund data was not provided at the participant level. There are some recordkeepers who use their own identifiers and don't provide Social Security Numbers, which can make the conversion process difficult. Also, receiving the data for the current year doesn't always happen. I often have to make several requests to get current year data or end up getting several files with pieces of data and have to try to rebuild the year with what data I did receive (which I prefer NOT to do). If you ever do a conversion again, I would ask for sample copies of the records that are going to be sent over and ask to be cc:d in any communications between the recordkeepers so you can see what information is and is not being provided and when. Ultimately, if you are the Plan Fiduciary, all responsibility lands on you, so being very involved it the conversion process would be advisable.

I actually hired someone with a criminology degree to work for me, and it turned out to be a good fit. The ability to pay attention to detail and to document everything translated very well into this field. Also, the ability to speak directly to people and to know the right questions to ask translates well. However, I would not recommend that anyone work remotely in their first few years in this field. There is too much to learn and too many questions to ask, and the risk is too high if something is done incorrectly. I can't imagine trying to do it all remotely without a lot of experience.

As a Pooled Plan Provider, we have our recordkeeping reports available on the web for the AE to pull down at any time. The AE also receives trust reports from the trust company for their part of the plan on a monthly basis (and can login at any time to see all their transaction data at the investment level). I am not sure why they should have an issue with getting a trust report, unless the PPP only has the plan in an omni account and does not receive the trust reporting at the AE level. In that case, they should at least be able to pull the report from the recordkeeper's website to use to bring to a new recordkeeper. Not sure if the type of arrangement here but if the plan is transferring out of the MEP/PEP to another MEP/PEP or stand alone plan, I recommend that they have a Merger and Transfer Agreement executed in the process to formally document who is responsible for doing what.

Congratulations on the retirement. Enjoy the next stage of your life!

WCC - thank you for the clarification. Of course, the people that make these rules don't have to communicate all the nuances to plan sponsors/participants!

Jayasar, you are correct. 1. Highly Paid Individuals for 2026 are those that earned more than $150,000 (indexed) in 2025, based on FICA wages (Box 3 of W-2). It is a lookback provision. 2. Those without W-2 wages (i.e. sole props, partners) are currently exempt from having to make catch-up as Roth. 3. Roth provisions must be in place before the first Roth contribution. The timing of the Roth catchup contribution is irrelevant. The first Roth dollar deposited can be counted as Roth catchup. The participant does not need to exceed the 402(g) limit for the contribution to be counted as catch-up. 4. One note of caution if you have HPIs that solely earn W-2 and are not HCEs: if the plan does not permit Roth and the HCEs get to make catchups (pre tax) because they don't earn W-2, but the HPIs are prevented from catchups, then you have a benefits, rights and feature issue. In your example, since owner makes $50k in W-3 income, they are not subject to the Roth Catchup requirement.

I agree with David that you should ask for it. But in my experience, we rarely receive it from other providers. I recommend that you require all participants to re-enter their beneficiary data and remind them several times a year to update their beneficiaries. In the case we do receive beneficiary information from a provider, we keep the data on file. In the rare instance that someone passes away without a beneficiary, we look to the old file to see if anything is listed there.

I would add that reporting the correct participant counts is important. I have had some takeover plans where the counts on the 5500 were just under 120 to avoid the audit requirements when our review shows that the number of participants at EOY should definitely have been higher than what was reported.

Let me add one more thing, does the plan's 404a-5 notice disclose to the participants that the forfeitures will be used to pay plan expenses?

You should be able to do this via a Merger and Transfer Agreement whereby you merge and transfer the assets from the PEP to the stand alone plan. The PEP will report on its 5500 the transfer out, listing the name of the stand alone plan, the EIN and the Plan Number. You will need to review for anti-cutback issues, etc. Your plan document provider should have a model M&T available. The current PEP may also have a model you may be able to use. The stand alone plan will list the transfer in from the PEP on its 5500. The same would apply if you are going from PEP to PEP. A M&T will need to be prepared. I am not sure why this would be a mid year plan issue and why the PEP/RK would not permit the transfer out from a plan document or recordkeeping perspective, unless there was some agreement that it could only be done at PYE.

With the new Roth Catchup Rules for Highly Paid Individuals starting next year, I am trying to make sure that I understand the Rules for recharacterization. I understand that one of the methods for recharacterization is In Plan Roth Rollovers (if completed timely and the plan permits). My question is this: If a participant is under age 59.5, would this be done as an In Plan Roth Transfer and the 5-year recapture rule apply?

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