Roycal

So I take it the participant did not select any effective date, and the program defaulted to "right now." Assuming that should have been clear to the participant, I agree it's his error and he has to live with it. Maybe he'll be more careful with his financial decisions in the future, and this doesn't sound like a major one in any case.

I've been out of the business a very long time, so I must say I am surprised that docusign is "legal" for the execution of plan documents. Shouldn't be, of course, but so be it if someone in authority has pronounced it so. I'd add some substance. Why does the "date" of this particular amendment matter? I'm not saying it doesn't, but the person it matters to does (an individual participant claiming a right? the IRS, the DOL?). For example, if it is important for IRS qualification purposes, then the question becomes exactly what documents does the IRS require to be signed and dated. What does the IRS regulation, or whatever, that sets forth the IRS rule say? Then, how does state law come into play here? By resolution I take it you mean a corporate resolution, and then a document signed pursuant to that resolution. Would IRS rules pre-empt state corporate law? I think not, but I haven't looked at it. Finally, if the effective date of the amendment is all that's important, as compared with a "signed" date, then what does the resolution say? For example, maybe the resolution is adopted, clearly and documented properly under state corporate law, and that it says something like "the X amendment submitted to and included with the minutes of this meeting as Exhibit B is hereby adopted and and shall be effective as of the date of this meeting. Then it should do it. I've had situations in which that satisfied the IRS for qualification purposes. Having said all that, I will say that in my long-ago experience in dealing with IRS agents who were reviewing my individually drawn plans for qualification purposes, their ideas about resolutions, signing and dating and other paper document issues were inconsistent and, I always felt, seat-of-the-pants.

Although all the details of your relationship(s) with the plan aren't provided, consider whether you may have responsibility/liability under the plan as a co-fiduciary that would require you to take action. See ERISA. Whether you think you may have such liability or not, others may. What a mess!

Start with the terms of the plan, as written, and go from there. I'd have to see the written plan document, for starters, to go further.

Ausrtin3515, you correct, but the entire US so-called "retirement system" is a complete mess, a s--- show, so this legislation fits right in.

Can't add much. As at least one other has said: (1) take a look at the TPA agreement; and (2) assuming that lots of money is involved, the participant should speak with an attorney who specializes in ERISA matters. More facts would help, too. Off hand, it sounds like this is more a participant failure than a TPA failure, but the TPA agreement may tell a different story. And, even if the result is pretty clearly a TPA failure, the participant may need an attorney to help resolve (again, assuming the money involved makes the attorney's fee worth it.

Given the kind of tax shelter plans the docs want, they should hire a retirement plan expert who specializes in shelter plans for high earning professionals. They should be able to afford it, and there are plenty around. (Regardless, if this would work, then the annual testing would be complicated and the docs should anticipate that annual bother and expense. Just an educated guess.)

I third the prior two suggestions (Bri and CuseFan). Follow the terms of the plan document. As an aside, my advice is to always start with the plan document. Read it. Do what is says. If not clear, go to the drafter for commentary and then have the proper plan administrator make a formal interpretative determination. All of this while keeping in mind the law and regulations. If the plan document appears to require something that you believe may be illegal, consult a lawyer. So many, many questions can be answered by reading the plan document. After all, that's one of the things it's there for . . . to tell you what to do.

If the brokerage firm screwed this up, why wouldn't they be happy, more than happy, to make it right? I'm assuming the account(s) are for a plan trust. If they are whining about paperwork, then employer needs to find a new broker, asap. There may be unintended consequences, or as Dick Rumsfeld would say, unknown unknowns.

One could write a small book about the significance of "Normal Retirement Date" in different types of deferred compensation plans. I know that this of no help to you, but inferentially I'm saying that this is a complicated subject, with lots of history. Be careful.

Probably adds nothing but my two cents. What does your contract provide? Comply with the terms of the contract. If the contract is fuzzy on the issue, which is your fault, then let your conscience be your guide. I would hope that your conscience opts in favor of the client. I would add that it disappoints me to see this question arise.

"Back in the day" you could not eliminate forms of benefit, such as annuities, with respect to accrued benefits. The so called anti-cutback rules prohibited that. I've been out of the business for over 10 years so I don't pretend to know the current rules and I'm not interested in looking them up. So, I would suggest to Tom, just be sure to make sure that this sort of change is now permitted. I will say this, as a policy matter I think it should be allowed, subject to adequate safe guards to protect what participants have earned. What I'd be concerned about, again from a policy standpoint, is getting rid of some arguably favorable annuity terms under the insurance contract that could not practically be replaced. Maybe the IRS has determined that the lump sum option is "good enough."

Broken record. Read the document. But more important, who should "read the document?" I'm assuming that Dragondon is a recordkeeper. If there's a plan interpretation question, then that question should be answered by the employer (or a designated fiduciary). If the latter needs help, then they should be going back to the person who drafted the plan document for them for help with the proper interpretation. The recordkeeper should keep hands off this question.

On the issue of a 404(c) failure. I'd argue that the money is not actually subject to participant direction until it's allocated to their accounts. In the meantime, the investment fiduciary would be responsible for investing it prudently, with no 404(c) protection, of course, for the contributed money pending allocation. Some sort of cash fund should be prudent for a short holding period until a formal allocation can be made to participant accounts. This sort of situation highlights the sloppiness of how plans are drafted and how they are actually run by the recordkeeper and how employers participate in the process, or not. I say this without, of course, seen this particular plan document or otherwise knowing all the actual facts of the case. I expect it is also somewhat of a consequence of the DOL's hands-off approach to participant directed plans. A good, final solution for the recordkeeper would be to fire the client.

If you're taking a vote, I agree with Larry B. The substantive question, of course, is are these so-called subs really employees (in the single employer plan context). Any clear law on the rules that apply the context of a qualified plan? I do not know. Ask an ERISA attorney. By the way, how does said contractor treat his so-called subs for income tax withholding and social security tax purposes, and this is just for starters?

"Perhaps she needs to sue her attorney for malpractice." Absolutely, if there is enough money involved to endure litigation or settlement negotiations with the attorney. This should never have happened (obviously).

One more thought -- ethical and practical issues. For example, did you ask about other companies that might be in the controlled group, but the client lied to you, which you only found out about later. I actually had that happen to me once and it was not a pleasant experience -- I'll leave it at that.

First you say multiple companies of which the client is 100% owner, and then you say just two, with the client owning 100% of one and 50% directly of the second. This is as I understand you. Facts actually matter, so gather all the facts. Then, if necessary, read the controlled group code and reg provisions, including the attribution rules. You may need to dig into other IRS "guidance" and the case law. This could be a very messy situation, but hopefully not.

Fire them and then do an automatic cash-out. Well, maybe that's not such a good idea. A better idea would be to give them more profit-sharing contributions and get their balances up to something worthwhile. By the way, I'm assuming the question was serious, but maybe not.

Just my personal opinion, but this is a stupid situation. I see no reason to require whole percentages. This 1/3 situation is a prime example of the stupidity. It shouldn't be required by the plan document or the administrator. If it's in the plan document, I say change it. If it's a TPA requirement (Fidelity or Joe-Bag-of-Donuts), get a new administrator if they can't handle fractions or decimals. The more I think of this, the more ridiculous it seems. As best I can recall I learned "fractions" in the fifth grade and decimals in the six. Give me a break.

Without knowing all the facts, I'd say this is simple, no mess at all, really. The individual never set up a plan. If the $20,500 you speak of was erroneously not included as taxable income on his 2021 income tax return, then he should file an amended return for 2021 and pay the appropriate taxes, etc. Fresh start and do it the right way for 2022 if he is still interested in having a solo(k) plan. Does he have the right to damages from the payroll company or an advisor? I'd have to know more facts. This is free advice is from a layman.

I'm retired, have not practiced ERISA for over ten years and have conveniently forgotten the details of the affiliated service group rules. However, if this doc can legally maintain his own "rich" standalone plan under these circumstances, the law is very clearly a bad one. This is a policy judgment, not a legal judgment.

This discussion makes me happy that I am no longer in the absurd ERISA business, although I do advise myself, and my wife, about all of our retirement assets, now ensconced in IRAs. But a couple of observations here. Investing for retirement (including choosing DC plan investment options for those plans that offer them) is not rocket science, brain surgery or anything even close to that. i see absolutely no reason why a retired person with expertise should not be able to provide free advice of the kind suggested without difficulty to her. However, as others have pointed out, the real question is whether those who do act as fiduciaries in choosing the investment options are competent to do so, and the answer to that is most likely "NO." But that's almost always the case, is it not?

Query: Pam@bbm. Are you, the TPA, covering all client costs of your error? In any case, I think you have a conflict with the client at this point and I would recommend that that VCP work or whatever be handled from hereon by the client's ERISA attorney with you footing his or her bill and all other costs your client incurs.

Communicate the fund changes asap (in detail -- the more detail, the better). Second, find out who failed to make the timely communication about the changes, and take him, her or them off any plan responsibility. To keep them in place for a plan responsibility would likely be a fiduciary breach in and of itself, since his, her or their failure was egregious in the extreme. Check the 404(c) regs and any case law (not likely to be anything significant directly on point, but who knows). Luke Bailey suggests that the guilty parties pray. I can't disagree with that, although if the substitution was done "prudently," performance should not matter (but still may in the eyes of some). Next, suggest the employer check with its ERISA legal counsel, if they have one they regularly use. Finally, I am not a lawyer and so none of this is legal advice.