Basically

I was going to make the post's headline "plan sponsor stealing participant deferrals". I mean that is what they are doing! I did suggest the participant top deferring immediately.... DUH I also told the CPA that the DOL is the watchdog when it comes to pensions and participant rights. i guess he needs to confront the company and get the ball rolling to recover his own money. I will suggest that he reach out to the DOL and even the TPA. I don't know who the TPA is but I hope they make it clear to the company that what is happening is illegal and they are risking more than they know. Thanks

Im horrible at searching and finding previous posts on a subject. Forgive me if this has been answered before... A CPA I work with asked me what should be done... here is the situation - His client works for a small company and has been deferring from his paycheck. He was on track to defer around $13K for 2017. After looking at his account he became concerned that the deferral deposits are not adding up. Significant discrepancy. Come to find out the deferrals have been withheld BUT they were not being deposited. In fact the company was using his (and maybe other participants) deferrals to cover some cash flow problems. Not good. I have never had this kind of problem. What do people suggest the proper steps he should take? Thanks

Thanks for your opinion and insight. I will impress upon the trustees that they need to take an interest in who is chosen, vet the potential advisor in an effort to protect the participant from being mishandled financially.

@RatherBeGolfing... That is correct. We just want to make sure that we are not forcing anyone to use XYZ since the owner has decided to use his own guy at ABC. My concern and goal is to present each participant (owner included) a form explaining that unless they have a better choice the default brokerage house will be XYZ and Joe Cool will be the financial advisor. As is stands now only one of the rank and file employees is considering a move... everyone else is thinks Joe is cool and will continue to use him. So to summarize your procedure... you just include a simple notice telling the participant that the option is available and if they want to check it out they should request more info. That is when you spring on them the procedures and more paperwork? Thanks

Each participant has a segregated brokerage account. Salary deferrals and the SH contributions are deposited into each participant's account monthly. The financial advisor appears on their doorstep twice a year to sit with each participant and discuss their account. He is also available in between visits as needed. Because the owner has personal funds also invested with the boutique advisor I am sure he meets at least semi-annually. Each account currently is registered to the plan FBO each participant. The trustees are listed on each account. Should any participant decide to move to a different investment firm the same setup would be put in place. I asked him if maybe the boutique would make an exception considering most of the rank and file accounts are valued anywhere from $50k ~ $150K. It's not like we are talking insignificant account balances. I am sure there are plans that are setup this way.... giving the participant's the option to choose where their account is invested.

I have searched the web and this site but can not find an example of a notice you would give to the participants of a plan informing them that they can establish an individual brokerage account away from the current financial advisor where their funds are being held. Here is why I am looking for examples..... A new plan to me... currently the plan has say 15 participants and all the participants have individual accounts at a legacy investment firm. The owner has a substantial balance ($700K) and his account is being managed by a money manager at a smaller boutique investment firm. The other participants do not have the minimums to open accounts at this boutique firm so their accounts are managed at the larger legacy investment firm. Doesn't seem fair to me... why does the owner get to choose a different investment firm while everyone else is stuck at the legacy firm? As you can guess, the owner doesn't want to give up his boutique firm so he wants to make it available to the other participants the option for them to choose where and who their account is invested. Does anyone have a boilerplate form that I can include as an addendum to the SPD as well as include at the end of the participant statement/SAR package given upon completion of the annual administration? Thanks!

So it has been discovered that payroll did not make the percentage change for 2 participants. Both participants increased their deferral contribution but the increase never happened. As a result we need to make the monetary correction on each participant's behalf. My question is... do we need to give these 2 participants a notice stating what we are doing to correct the issue? If so, does anyone have an example? Thanks

Perfect, thank you!

So.. to summarize and put it very simple... the correction is that the plan sponsor must calculate what the missed deferral amount was, determine what 50% will be and pay it into the plan for that specific participant. Earnings must also be added. In addition a notice must be made to explain what happened.

"My 2 Cents" - he is well established with this current firm. They have done a wonderful job. He wants to keep the money where it is. Finding a new IRA custodian one stop shop is not an option. This client is the only participant.. He is 100% vested and we do want to terminate the plan and roll the funds into an IRA. Time is my question. The sponsoring business has closed. Does the question of time come down to the plan document? or is there a blanket answer that is 'ASAP', 'within 90 days'.. is there a rule? Thanks

I have a client who closed his business. Single member business, only plan participant, substantial plan assets. We are trying to roll the assets into an IRA but unfortunately are running into some legal issues with the new IRA custodian accepting the money (a lot of document redlining between the new IRA custodian and the firm investing the IRA funds). I know a plan needs a sponsor. We have been working on this for a year (no joke). My questions are... 1- Can the plan continue sponsor-less until we iron out the IRA issue? If so how much time do we have? and what about.... 2- Can the plan continue indefinitely frozen or orphaned as long as the document is maintained and the plan operated properly? Thanks

Yes Austin... that is what I understood. Example: 100K account balance 20K RMD (4K taxes + 16K cash dist) 80K rollover to IRA Thanks, case closed

That is the explaination I was looking for and that was my concern. Uncle Sam wants an RMD and taxes to be paid. Upon her retirement her exemption is over and an RMD is required. AND... it must come from the plan... Correct? I will calculate the RMD, report ordinary income and withhold taxes. code that 1099R as normal dist I will then rollover the remaining amount, not withhold taxes, code that 1099R a rollover Thanks

So the plan is required to create the RMD.

A participant is 75 and retireing. She has not taken any RMDs to date as she has not been required to because she is a simple rank and file employee. When she leaves she wants to rollover her complete balance to an IRA. When we pay this employee out and roll her money into an IRA must we process an "RMD" , withhold taxes, and generate a 1099R for the RMD from the plan... then rollover her balance to her IRA? Or can we pay her out in full as a rollover and code the 1099R as such and be done? Dont go through the whole RMD exercize?

Not married to the FA at all... just want to make sure I use the correct form. I understand the FA doesn't touch the money. Money will be sent to the custodian and then allocated/deposited into each participant's account directly. Not passing through anything. The FA will guide each participant individually with investment advice... nothing more. The plan sponsor will require that each participant IRA must be opened through 1 specific custodian therefore a form 5305 will be used. The custodian accepts the IRS form which makes it all good.

Ok.. so... Participant defers $500 Employer sends the money to the FA FA deposits it into the participant's IRA. FA uses custodian XYZ to clear for the FA's firm. I guess I would put the XYZ custodian... right?

Are you saying that when a 5304 is used the plan sponsor says to each eligible participant that they are on their own to find a financial institution who will setup the SIMPLE IRA account for them self to receive their contributions? At the bottom of page 2 of the 5305 is where the financial institution is listed. The financial institution listed agrees to be responsible for accepting the contributions from the plan sponsor and depositing them into the appropriate participant account. I see that as the FA's firm. Agree?

My question has to do with the the fact that the 5304 states..."Not for Use With a Designated Financial Institution" Ahhh.. what is a "Financial Institution" ?? Is the Financial Institution a specific family of funds like American or Vanguard? Or is the Financial Institution the firm that the financial advisor works for? I take it to be the financial advisor's firm... but I want to be spot on correct!! How do others interpret that statement? Im leaning toward telling this FA to use 5305-SIMPLE Thanks

Gotcha! thanks.. that last post helped. As for paying me to do some annual busy work for the client, I simply told the financial adviser that there is no form 5500 to file or any real admin that needs to be performed which is why I have not sold my services in this area. I did say to him though that I will need to be compensated for my time if Im to be a check and balance for the SIMPLE. I got the feeling that he himself was either going to pay that expense or prepare an argument to present to the client why they should. Thanks for your help, I really appreciate it! Howe

John, How often does a SIMPLE need to complete a 5305-S? is once when the plan is established enough until a situation like this happens? I mean, every year a new notice is prepared and sent to all participants and besides that nothing changes. Also, Is there a specific rollover form for SIMPLE plans? or can I modify my pension plan form with the SIMPLE info? Thanks PS - Im curious what people charge to "administer" a SIMPLE plan (prepare the annual notice, determine elig and calculate the match ... that's about it huh). I know it is not good etiquette to ask on these boards that question. I mean, time is money.. and no one works for free...

We will prepare a new 5305. I am not sure how old the accounts are. What he wants to do is simply bring along the accounts to the new investment platform. Here is what he wants to do.... Establish new Simple accounts for each participant rollover the old simple accounts into the new accounts continue the deferrals in the new accounts Is that being too simple?

huh.. very interesting. But, "with instruction from the participant" can the SIMPLE IRA be moved/rolled over? and subsequent contributions be contributed to the newly established account or is it just something that is never done? As you can imagine, the advisor wants the money under their control! Thanks

SIMPLE plans are not my bailiwick, with that said here is my question... I have a financial advisor who has a few SIMPLE plans and he asked me what he needs to do to move the assets of the plan from one custodian to another. What he has been doing is placing his SIMPLE plans with a large mutual fund who prepares all the paperwork for the plan. These simple plans are not going to essentially change at all. He simply wants to move the assets from the mutual fund to individual investment accounts somewhere else to offer a wider range of investment choices. Thoughts... suggestions? Thanks

I dont have the EOB... I did find § 1.457-1 through § 1.457-12 online and saved them. Ill look them over and refine my post. Regarding a written document, § 1.457-3 says this: § 1.457-3 General introduction to eligible plans. (a) Compliance in form and operation. An eligible plan is a written plan established and maintained by an eligible employer that is maintained, in both form and operation, in accordance with the requirements of §§1.457–4 through 1.457–10. An eligible plan must contain all the material terms and conditions for benefits under the plan I have seen posts that say a 457(b) plan does not need a plan document. There must be different types? or are people just wrong? Im using the FT William doc now, dont currently subscribe to the 457 doc. I think they have a "prototype format" doc (dont quote me) similar to their VS "prototype format" doc. Ill ask. Thanks