loss on balance prior to final distribution

[Guest GS1100]

A participant terminated in 2001, was paid his balance in 2001. He was eligible for a contribution for the PYE 12/31/01 which he received in 2002. His contribution was deposited into his last investment election on file. Approximately 3 months after the 2001 contribution was made, his final distribution was processed and he was paid out his final balance. In the 3 months time, his account lost value do to the decline in the market. His initial distribution was deposited in a fixed income rollover account. The participant is now claiming for the loss on his final contribution from the time of the deposit to the distribution plus earnings based on a fixed income account. The participant is claiming that his election in the plan was no longer valid.

Does anyone think he has a case?

[Guest b2kates]

is this a daily valuation plan or a balance forward with valuation dates?

[Guest GS1100]

It's a daily plan.

[QDROphile]

Is the claim based on failure to comply with section 402(f)?

[Guest GS1100]

No.

[Guest LKHartnett]

So he's comparing the rate of return at his rollover institution with the rate of return on the investments he had elected himself in the plan? And his assets were invested accordingly prior to his distribution? Was he aware when he terminated that an additional contribution was going to be deposited in his account?

Did he request the distribution, or did you automatically process it once the contribution was made?

[Guest GS1100]

He claims he was told that he would not receive any more distributions when he received his initial distribution.

His distribution was done automatically (but not very quickly).

You are correct that his money was invested in his old election.

I guess his claim could be valid if he was told he would not receive any more money and therefore, did not make a change of investment elections at the time of his initial distribution.

Yes?

[Guest LKHartnett]

Quite honestly, it's probably not worth the trouble to argue with this participant. I am guessing that you're talking about restoring a minimal amount?

We had a similar circumstance a few years back, and put into place the following procedures:

1. If we know an additional contribution will be in the works following a participant's termination, we strongly advise them to postpone distribution until after the deposit is made.

2. If the participant insists on taking an immediate distribution, we indicate that we will be charging them a processing fee for each individual distribution.

3. If this does not discourage them, we let them know that unless they advise us otherwise, their money will be deposited in a money market account, and it will be distributed as soon as administratively feasible following the deposit.

All of this information is contained in a customized distribution packet that is sent to participants who have terminated and will be receiving an additional contribution. (It really wasn't that big a deal to put together - just made modifications to a standard packet).

If a participant terminates, and no additional deposits will be made, we send a "standard" information packet.

[Guest JCatt]

I always have to ask this - would the participant be complaining if the market had gone the other way?

[Guest LKHartnett]

Please, please take the money back! I didn't earn it!