Roycal

I'd also look at this from the employer/plan sponsor's nonfiduciary role. In simple terms, the employer presumably maintains the plan as an employee benefit. The end of that benefit is getting money to the former employee or his survivors. I'd think the employer would want to ensure that. So why not eliminate the fiduciary cost issue by having the employer absorb the cost as a business expense of maintaining the plan. If I were the employer, that's what I think I'd do. From a fiduciary standpoint, a consideration should be, "How likely is it that the DOL's Lost and Found Data Base is going to be effective"? That's going to be tough to evaluate. Based on my own experience dealing with the DOL, I'd say it's not likely to be effective. What we don't know is whether the DOL's database will be set up and managed well. It sounds good in theory, but remember that humans at the DOL will be in charge. On the other hand, maybe for those few cases it would work out it would be worth it.

As usual, Gulia makes sense. If you're talking about real money, then you need real legal advice. Otherwise, just go with the custodian, the easy route.

I back up Bill Presson. The recordkeeper is clearly at fault and should be held accountable. You may need an attorney to help, but that could be expensive. I'd press for the recordkeeper to pay your legal expenses. One thing for sure, the recordkeeper is incompetent and the plan's fiduciaries would be breaching their fiduciary responsibilities if they go ahead and use this recordkeeper after the mess is cleaned up.

I'd back up Mr. Feldt in suggesting that you decline the work and send them somewhere else (I believe that's what he's saying). However, that's based on the facts as you present them, and to give you my best take I'd need a lot more facts.

You need to go to an experienced ERISA attorney for advice.

We could write a whole book on this subject, could we not? Just a couple of points. From the ERISA definitions: Sec. 3(16)(A)(i) & (ii). First, 3(16)(A)(i) provides that the "administrator" (not plan administrator, although that's the obvious meaning): is "the person specifically so designated by the terms of the instrument under which the plan is operated." Second, 3(16)(A)(ii) provides that if no one is expressly designated as administrator, the "plan sponsor" is the administrator. When I was in the business of drafting plans I'd always specifically designate the plan sponsor (normally the employer) as the administrator of the plan. Although I say "always," I cannot swear that there no exceptions. I took this approach with employers small and very large because the statute pointed in that direction and because since it's the employer's plan, the employer is the logical person to saddle with the legal responsibilities and liabilities of the administrator. Note that ERISA includes the term "plan administrator" 149 times and the term "administrator" alone 102 times. The term "named fiduciary" also comes into play. The term is used 20 times in ERISA and is defined in Sec. 402(a)(2) as follows: ‘‘'named fiduciary'’’ means a fiduciary who is named in the plan instrument, or who, pursuant to a procedure specified in the plan, is identified as a fiduciary (A) by a person who is an employer or employee organization with respect to the plan or (B) by such an employer and such an employee organization acting jointly." Backing up a paragraph, Sec. 402(a)(1) says that the instrument establishing the plan must "provide for one or more named fiduciaries who jointly or severally shall have authority to control and manage the operation and administration of the plan." Again, I "always" designated the plan sponsor/employer as a named fiduciary because, in my opinion, the employer is the person whose plan it is and who therefore should "have authority to control and manage the operation and administration of the plan." Of course, there will always be real people who will be causing the employer (here I am speaking of a corporation as the employer) to act -- H.R. people, finance people, etc. If they believe that by acting as employees of the employer they are going to avoid personal fiduciary responsibility, good luck with that. To anyone, a natural person, who touches a plan's operations, inside the employer or outside (such as a TPA or "directed" trustee), caveat emptor.

What the estate(s) needs is a Florida lawyer to provide advice. Sounds like these estates are large and therefore set up with wills, trusts, and executors. The executor needs to be involved, and the executor needs to have a lawyer (if not a lawyer) If you, guestdelta, are an IRA administrator or the like, not an attorney (or maybe a CPA), you should not be messing with this yourself. Do not rely on what JP Morgan tells you.

Bri's answer is absolutely correct. That's always been a fundamental coverage exclusion rule. In the plan document exclude non-resident aliens with no US source income. Then make sure you document the excluded employees, which can be tricky if you are talking about a large group of potential exclusions. Regarding the comment on Fidelity. " . . . one would think they know what they're talking about when it comes to 401ks" One might think so, but one would be wrong. Same with Vanguard and the other biggies in the game. Their business is investing assets, not in providing legal advice. It may also be that Fidelity (and the others) don't want to get involved with plans that have other than "routine" situations -- they may conclude that the risk isn't worth it for the money they'd make. I speak from experience.

If you go back and look at ERISA's history, particularly the original conference committee reports, you will see that the service-measuring rules adopted in ERISA are intended to be the only way you can exclude employees based on service. The intent was to eliminate temp and part-times (and subterfuges thereof) as classes you could per se exclude. People tend forget this, and that includes even the IRS on occasion. https://www.congress.gov/bill/93rd-congress/house-bill/2/all-info Also, though not technically history, the report of staff of the joint committee on taxation is useful, but I can't quickly find a link. Although there may have been subsequent statutory changes, I've been out of the business for about 14 years, and am not aware of them.

Sure, different contributions for different group members would be fine if permitted under plan document. Plan document -- always see what it say first. Test for discrimination within the group as you normally would. If only NHCEs in the group receive the contribution, obviously no problem. Otherwise NHCEs vs. HCEs.

Amend the plan to clear this up (if necessary or appropriate) and make sure participants have timely notice of the change and how it will be put into effect.

I have had the IRS challenge early terminations, but that was a very long time ago. Sale of company and new owners would seem like a legit reason for termination due to material change in circumstances. I'd have no problem arguing that. 5310 is not required, but certainly the best practice. I would not bless a termination without one.

Only more questions. Does not the plan document say what happens when there is no valid beneficiary designation? Surely it must, What does the plan administrator think? Has the plan administrator taken a look at the "form" and made a decision as it should as a fiduciary? What does the employer mean when it says the beneficiary form is incomplete? The question is, "Is it valid or not?" Who's in charge here? That's the big question. TRP is not, I assume, a responsible fiduciary and I would think had no authority to "freeze" the account. Is litigation actually pending, a suit filed? Time for the employer to get it's ERISA legal counsel involved. When all is said and done it may be wise for the employer to reevaluate it's relationship with TRP. I know they are a mutual fund company, but as to their ability to help run plans I have no idea. As to my experience, with major players like Vanguard and Fidelity, when they screw up they bit the bullet, fix it, and move on.

5.4k Posted yesterday at 01:59 P "It's too much. They need to give us a minute!" But remember that they don't care about you/us.

Absent an error, I don't see how you can "unallocate." Of course, this begs the question, what constitutes an allocation? From your facts there's not enough here to tell. I agree with others that the client should consult his ERISA legal counsel on this one. Moreover, it we're not talking about much money, just let it go.

All good advice. What does the employer want? I'd advise him to just adopt in an "interpretation" when he gets into the plan that everyone will be 100% vested per the new plan (and take care of unallocated forfeitures per Kac1214). In my opinion vesting is overrated and forfeitures are a pain to deal with. As an employer (old days, as I am now retired) I changed our plan to go to 100% vesting a way long time ago. It had no impact on retention that I could tell and resolved some related issues.

This is life. I'm all for beefing up the IRS with more funding for more people, better trained people, and better hardware and software. I'm currently involved, personally, with a screw up between the IRS and the Social Security Administration. It's so screwed up it's funny, except that I have to deal with it. Five figures are involved.

All good advice. Again, as said many times before, the plan document is key. What does it say? The heck with what the "provider" does. The provider must follow the plan document, so that's where you look. The law and regs are important, too, of course. The "provider" follows the terms of the plan and makes certain it all complies with applicable law and regulations. This assumes that the provider knows the plan document intimately, as it should, as well as the law and regs. One more thing. The way plans are drafted (by imperfect humans) they are not always 100 percent clear on all situations. To clarify going forward, simply amend the plan. Until that's done, the appropriate plan fiduciary should determine what should be done in light of what the plan does say, if imperfect, and of the law and regs, and document that decision with reasoning.

Isn't this simple? They are not employees. So why should they be eligible to participate?

From Paul I: "A final note. A recordkeeper's system limitation does not take precedence over the plan document, nor does it take precedence over the IRC or agency regulations." I wonder how many recordkeepers vet the limitations of their "recordkeeping system" against all the plan documents that might be implicated? I would add: "and against all applicable law and regulations." This sounds like it would be a difficult, time consuming job, yet it is one that should not be avoided.

ERISA-Bubs: I haven't looked in detail at ERISA 404(c) issues in a good while, but I'll try to give you a framework. Last I knew, there were no penalties as such for failing to comply with the 404(c) regulations. Keep in mind that the purpose of 404(c) is to relieve the plan's investment fiduciary of responsibility for the participant's own investment decisions. If a plan offering participants investment options or choices (which is not required of 401(k) plans or any other types of IRC 401(a) qualified plans) wishes to have that option be legally binding, in the sense that the responsibility is passed from the investment fiduciary to the participant, then all of the ERISA 404(c) requirements, as set forth in the regs, must be satisfied. What happens if the plan gives investment options to participants but doesn't satisfy the 404(c) regs in some respect? Then there's no 404(c) protection. What does that mean? It could mean that there is a per se fiduciary failure on the part of the plan's investment fiduciary because the fiduciary is not managing the participant's investments as he should, the responsibility not having been legally passed on to the participant. Or it could mean that the participant's investment choices will be analyzed to see if they are prudent, and if so, no harm, no foul. There are other ways one could look at it, but to my knowledge this is a question that hasn't been expressly put to the DOL or answered in litigation. Years ago I put that question to the DOL and they punted -- saying they'd leave it up to the courts to work out what the investment fiduciary's liability might be in such a situation (including deciding how to approach or analyze the situation). In the meantime, why not do the common sense (and prudent) thing, which would be to correct the disclosure and get on with it. Not to take comfort, but I'd say you are not alone. My guess is that it is a very rare participant-directed plan that complies with the letter of the 404(c) regs because the administrative systems for such plans aren't set up that way. You might want to go back and re-read the congressional committee reports from 1974, particularly the conference committee report, for back ground on "why 404(c) in the first place." Finally, and to make clear, I not a lawyer and am not intending to give you advice as such, but rather I'm trying to reframe the question for you. Also, keep in mind that there may be some changes to the law or regs or new case law that I'm not aware of, since I've been out of the business for a while.

Not exactly on topic, but I went back and took a look at ERISA § 205(f), referred to by PG. Click on PG's link. You take a look at the language of this section, the references to amendments, notes and so on. Does it make you want to cry? I think it should. Or laugh? Maybe that would be better.

I second PG. The idea of setting a plan loan rate as a "reasonable" rate by comparison with what a commercial lender would charge makes no sense because plan loans are unique. That having been said, keep in mind that the plan is making an investment on behalf of the borrowing employee, not conferring a benefit to the employee via a low interest rate. Thinking about it this way, would not a relatively higher rate be more reasonable? I'd also ask this of the treehouse. What do you see, if anything, about how the IRS looks a loan rates in plan audits? I have zero experience in that respect. Finally, no matter what your decision is, the relevant lending fiduciary should carefully document their decision with reasoning on what's reasonable. Fiduciary decision making is a process, and it's the process that should count the most.

Refer the hospital to its expert ERISA attorney, who may also need to bring other lawyers with different expertise into play. As EBECatty says, this sounds like a complex question with many, many issues.

I'll throw this in. First, generally you may pay employees current taxable compensation of whatever amount, subject to wage and hour law and contracts you may have with them. Second. Prior to the enactment of sec. 401(k) we gave all our participants a 10% (3% mandatory and 7% discretionary) qualified profit-sharing plan contribution each year. The first year 401(k) became effective (and for some years thereafter), we amended the plan to allow employees to take 30% of the profit-sharing contribution in cash, or some fraction thereof, or let it stay in the plan as a 401(k) deferral. Cash-or-deferred arrangement option (1). Cash-or-deferred arrangement option (2) was for the employee to reduce pay to put even more in the plan as a 401(k) deferral (the more common approach to 401(k) today). All subject to applicable testing, $ limits, blah, blah, but not cross-tested ever. This was all completely legal and still would be. Eventually we discontinued option (1), so that the entire 10% profit-sharing contribution had to stay in the plan (always 100% vested). We did this because too many NHCEs and some HCEs (prior versions) were taking the 30% cash, which presented testing problems and because we thought the employees were better off, in any case, with the deferral (being somewhat paternalistic in the matter). As to your situation number 52626, I'll admit that I don't understand the question enough to try to give you my thoughts.