Pam Shoup

From a recordkeeper's point of view - check to see if whoever holds the plan assets can work with ACHs or wires and eliminate the paper check processing altogether. The recordkeeper may be able order the ACH directly, once the contribution data has been received.

This is not correct. Loan payments should show up as their own type of transaction. Depending upon the software, it may be listed actually as a loan payment or a transfer out of the loan source/transfer into the funds or some other way. When the loan payment is showing up in the contribution column, either the report provided by the payroll system was faulty, or the firm that processed the transaction(s) did not process them correctly. With that being said, it may be next to impossible to have the transaction re-processed. If the loan payment (contribution) was made to the originating source of the loan, it is not going to make any difference on your ending balances by source. You will need to back out the loan payment(s) from the total contribution to determine the actual contributions to the plan. If the contribution/loan payment is made to an incorrect source, then the transaction will need to be re-processed. For example, if the loan was originally withdrawn from the profit sharing source, but the loan payment (contribution) was made to the deferral source, this will cause a whole host of issues, including determining hardship available amounts and then there's that whole thing about not re-characterizing money . . .

Is there any reason why any left over money in the ERISA bucket account is not allocated to the plan participants as earnings at the end of the year?

Yes, the clients are made aware of our role. Most of our clients do not want any responsibility for running the plan, including pulling down payroll, census and wage data on a payroll, monthly or annual basis so we do that for them. We also explain to them that no matter what, they are a fiduciary by virtue of the fact that chose us to service their plan. We are usually paid from the plan assets and not from the employer so our client is the plan and our responsibility is to the plan participants. Where we have issues is those clients who don't want us to pull down the information and it is like pulling teeth to get data. Fortunately, most of our clients are very hands off when it comes to the plan and have all of their particpants contact us for everything. The independent financial advisor (3(21) or (3(38)) assists or chooses the funds and conducts the enrollment meetings, to the extent they are not auto enrolled. I suspect that we attract a very different set of clients. We just happen to work with a lot of employers that want a plan, as long as they don't have to do anything to take care of it. We are the recordkeeper for all of our plans and we perform compliance services for about half of them, with the other half serviced by outside firms for their TPA work and have various levels of 3(16) compliance services provided by the TPA, depending upon the firm. It's a lot of responsibility, but I have a lot of custom written software and educated staff to do the work. I can't imagine trying to use any of the industry off the shelf software to try to perform 3(16) services.

We actually engaged the advisor in the whole process and he found the employer to be equally non-responsive. We emailed, he emailed, we called, he called, we sent letters certified mail, he sent letters. We told the client that we would need to notify the DOL, they didn't care. We conferred with the rep (who was working as a 3(21) so he was a co-fiduciary also) and he agreed with us that we had to resign and notify the DOL and he also resigned from the plan. At this point in time, I can't worry about what the employer thinks. As a fiduciary, it is my job to act in the best interest of the plan participants.

You may also want to check with Penchecks as they are able to deduct the fee from the money that they receive. It is my understanding that the fee is less than $35 for lesser distribution amounts.

Because we are a fiduciary to the plan, we fired the client, and we notified the DOL. The plan was assigned to a DOL Investigator rather quickly.

There are a couple of threads on this issue so you may want to refer to them. There is not a certification per se to become a 3(16), but at a minimum, you should have most of your staff with industry credentials. Having CPAs, E.A.s or ERPAs will also make a difference if you want to actually file the 5500 forms. Some things to look into: 1. Education and knowledge of your staff to not only perform 3(16), but to also educate clients and to spot anything that could be an issue. 2. Fiduciary insurance coverage for your 3(16) services and thorough knowledge of what you will need to do in case of a possible breach of your 3(16) duties. 3. Very clear knowlege of what services you will and will not be performing as a 3(16). Your Administrative Services Agreement should reflect your exact services. You should also look to see if your current plan document provider will allow you to be named as Plan Administrator in the document/5500 so that the IRS will notify you if they are making an inquiry. 4. Very explicit policies and procedures for you and your staff to follow. Depending upon your service model, you may want to look into getting a SOC 1 - SSAE18 audit or a CEFEX certification.

Check your plan document. Many providers automatically paired an EACA provision with a QACA one. Still others kept them separate and you had to affirmaately elect both provisions.

I would also believe that an annual 404a-5 notice would be proper in this case disclosing the fees for the brokerage window and the other parts of the 404a-5 notice requirements when you have participant direction of at least part of the plan assets.

I agree with FGC above. Most firms pick and choose what services they offer as a 3(16) and there are some employers where a fiduciary lite is all that is needed. Make sure that your serivce agreement is very clear with what services you are providing as a 3(16) and what you are providing as a TPA.

As always, go back to your administrative service agreement with the clients. If you as the TPA did not agree to provide the service, then the reponsbility falls on the Plan Administrator.

Make sure that you contact the DOL yourself so that they can open a complaint on the situation. Don't assume that someone else has called. If this is truly a case of the employer collecting premiums and failing to pay claims, the DOL will take the complaint seriously.

If all it shows is the fees an expenses, then no it does not. When you open the regs, there is a model notice provided. Among other things is a a requirement that the plan states if it intends to be an ERISA 404(c) plan, contact information, how often the participants can give investment direction, information on any sources or funds that have restricted trades, the types of expenses that could potententially be charged to their account, a comparative chart listing fees and expenses versus a benchmark, as well as performance information versus a benchmark. Website addresses are included to find up to date information, and other information such as if the plan contains fund models (fund of funds) or a self-directed brokerage account as well as a statement regarding the cumulative effect of fees and a glossary, or a link to a glossary of terms. That's from memory and I am sure that I missed a few points.

We have been doing this for several years. The first thing that I would recommend is to review whether you are a 3(16) for some services and not others and whether you will be named as a 3(16) by service agreement or go the full monty and be named as the Plan Administrator in the Plan Document, as well as signing the 5500 form as the Plan Administrator. Make sure that your administrative service agreement is explicit on what services you are providing as a 3(16) and what services you are providing as a TPA. (I highly recommend the Ferenczy Law Group for a service agreement review). Educate your staff on the importance of every single transaction that they touch. Make sure that you have well documented procedures and that they are followed every single time. If you are a recordkeeper, make sure that you are doing your annual SOC 1 audit. Purchase fiduciary liability insurance and review with your carrier what to do in the case of a breach. Document, document document and educate everyone (your staff and your clients) what it means to be a 3(16) and that you have the responsibility and the liability for whatever level of services you have agreed to provide as a 3(16). With all of this being said, it is a lot easier (and less expensive) to make sure that each transaction is done correctly as they occur, instead of fixing a mistake later that was done by someone who is not educated in the world of retirement plans.

Check to see if the plan allows for involuntary cash-outs and then read on from there and determine if the participant qualifies and your plan's procedures.

We are the recordkeeper and we pre-fill in most of our paperwork but have an area for changes. With that being said, the address that we have is the one supplied by the employer or the payroll company. If a participant sends back an address change, their distribution is frozen for 18 days, which allows us time to send a notice out to the old address and to the new address and for them to respond to us if they did not authorize the address change. (The participant is informed on the paperwork that they should contact their employer to update their address, which would remove the freeze when the employer verifies the new address with us.) We also have procedures in place for when a person is requesting a cash distribution of more than $10,000. If it is an in-service, we call the particpant at their place of employment and verify. For a terminee, we start with a phone number provided by the employer and then dig deeper if we need to. We also don't permit distribution requests online. They must be done via a request form (loans, in-service, hardship, etc.) or initiated by the employer (terminations). As one of my IT guys says, "The more secure you want the system, the more inconvenient it is going to be."

There are two issues here. First, does the plan's loan policy allow for it? Second, can the recordkeeper handle it? Most recordkeeping software is built to basically use an amort checkoff. It does not matter when the loan payment comes in. The payment is just checked off of a loan amort and the full interest is still applied, even though the payment comes in early. Keep in mind though, the participant is still just making a lump sum payment on the loan, the normal loan payments will still be due.

If you are talking about a true TPA (Third Party Administrator who peforms ministerial functions), then they have no fiduciary authority . Therefore, the Plan Administrator/Plan Trustee/Plan Sponsor would be required to provide the information.

Just say NO . . . . unless they want to be subject to an EBSA press release . . . https://www.dol.gov/newsroom/releases/ebsa/ebsa20130507-0

Is the TPA a fiduciary to the plan in any way? Does their service agreement basically say that the TPA performs ministerial functions and acts only on information provided by the employer? If this is the case, then the TPA has no liability. However, in the future, the TPA want want to change their practices to request actual copies of W-2 forms or payroll reports directly from the [outside] payroll company and not accept reports run internally from the employer for annual wage and deferral reporting. A W-2 is a quick way to tell if the deductions were made pre-tax, etc.

Before anyone judges the TPA, is it a "TPA" (Third Party Administrator) or an FPA (Fiduciary Plan Administrator)? If they are an FPA, they are a Fiduciary to the plan and would need the documentation to be able to prove the request. In my experience, most employees request the "MAX Available"and don't really even know exactly how much they need to satisfy the immediate and heavy financial need so there is a lot of guessing. The TPA should be able to give a ball park number and let them know that they will calculate the exact amount when proof is provided. A simple solution would be to allow hardship withdrawals on earnings from deferrals. You can also take a look at your Substantiantion Guidelines to determine how much you would be willing to allow the participants to self certify their hardship withdrawals and to be responsible for holding onto their own documentation, etc., effectively removing a lot of liability of going through the documentation process. I expect that the way we all do hardships is going to change in the next 18 months or so as the proposed regs go into practice, any final regs get published and we are all able to perfect amendents to plans regarding hardship withdrawals.

To MSN: Do new distribution paperwork with the updated 402(f) notice, invest the money in the interim, charge normal disribution fee as you would to a regular terminee. Any other fees charged would most likely not be previously disclosed in a 404a-5 notice so I would stay away from charging other fees than your normal distribution fee and/or locator fee (if applicable).

I agree with JackS. Have the money sent to the plan with all of the demographic data possible. The amount that you receive will most likely be the amount after tax withholding so this amount will be your basis for this participant's future payout. Verify this with the previous RK. Follow your normal distribution procedures.

Have you tried asking the insurance agent?