Plan Restatement when change of TPA/Custodian

[legort69]

Hopefully I don't sound stupid with this question, but I just want to be sure. Lets say a client moves their plan from one TPA/custodian to another. Assets are transferred etc. We also provide the client with a new plan document, and call it a restated plan of the original. Thus, I assume no change in plan number, plan effective date or change to the continuing 5500 etc.. Is this how it works?

Thanks

[WDIK]

An amendment and restatement does not necessitate a change in the plan number and plan effective date, nor does it disrupt the Form 5500 filing.

Also, a change in custodian and/or third-party administrator does not necessarily require a plan to be amended and restated.

[SoCalActuary]

However, if you are changing, the new TPA or custodian would prefer to use their own document, especially when snap-on amendments are needed. The administration of the plan language is best done by those watching the plan in operation.

[WDIK]

the new TPA or custodian would prefer to use their own document

...and of course charge a small fee.

[GBurns]

Does a TPA/Custodian that use their own documents in such a change of TPA/Custodian only, give any sort of guarantee or indemnification covering and possible defects etc of their documents?

It seems that unless that is so, requiring use of their documents seems just an excuse to sell something. This would make their integrity etc questionable, in my mind, absent an acceptable reason.

I am a cynic, But then again WDIK?

[SoCalActuary]

I have long experience working with lots of different doc's. So I don't sell on this practice.

However, I encounter TPAs trained only in their way of doing things. For example, Paychex could not do a cross-tested DC until recently. So they base their fees on the plans they know how to administer. What they charge for the doc is subject to market forces. If the salesman can make it important to the client, then they will buy. If not, then it gets negotiated or the sale isn't made. Sometimes they build it into their takeover fees.

[WDIK]

GBurns:

I'm not sure if your reference was meant to classify me as a a faultfinding captious critic who believes that human conduct is motivated wholly by self-interest or as someone without firm adherence to a code of moral values . I am occasionally guilty of being the former but wholeheartedly deny being the latter.

[GBurns]

No reference to you was intended, but I cannot truthfully say that it was a Freudian slip. I just love the moniker and wish that I had thought of it first. It very often is the phrase that is last in my mind at the end of many posts. This time I stuck it in just for the sheer release of the "tension" of it.

WDIK is the epitome of what the Boards really stand for. We get to test that which we think we know and hope that if wrong someone else know enough to correct us.

It is nice to know your value standards even though you stated 3 but only chose between 2, leaving me to wonder if the first is a given. It could be that we are birds of a feather since I like the extreme redundancy of that first phrase.

What is this Board coming to?

People agreeing with GBurns and people being of the same standards? Must be that stale left over eggnog that I gave an extra spike to so as to kill anything foreign that might have taken up permanent residence in it? Drinking enough of the "spike" keeps away sharks from my legs. And you should see what it does to lawyers. If only there was something for actuaries.

[WDIK]

1. a faultfinding captious critic who believes that human conduct is motivated wholly by self-interest

OR

2. someone without firm adherence to a code of moral values

[GBurns]

I told you it was the eggnog. I saw 2 choices wrote 3 then addressed 3. This makes me really wonder what do I really know?

[k man]

i have tried to required they use our document. it is my perogative if i only want my people to administer and interpret one plan document. furthermore, as amendments are required you cant support another document so it is inevitable that you retate the document in the future.

[GBurns]

k man

I agree that it is your perogative but by that same logic clients can choose not to use your services.

Be that as it may, I wonder why it is that you cannot support another document if amendmends are needed? Does that mean that you could support another document but only if no amendments would ever be allowed?

I seem to have a problem understanding whether it is the support of another document that is the problem or it is the making of an amendment that is the problem.

For the documents that you do support Who makes any needed amendments, your administration staff, your in house counsel, outsourced counsel or the client's counsel?

[Demosthenes]

Strictly from an Operations perspective, administering a single prototype or volume submitter document simplifies training and streamlines processing. The more "vanilla" the book of business, the lower your costs and the greater your margins or the more competitive your pricing.

On the flip side, no matter how vanilla the book, the vast majority of TPA's will never achieve the economies of scale of a large Fund Co, Wire house, Ins Co or Bank. For a small to moderate sized shop, competing on price is a loser from the get go. (JMHO) Better to compete on the basis of expertise, flexibility, and strength of relationship management.

Regardless of my opinion, many shops do just that; require a client to climb on to their document. Then, when amendments are needed, it's a one shot deal to draft and approve the language.

There's also no question of whether or not systems or policies and procedures can support the amended language. With an outside doc, the administrative burden of drafting/reviewing each amendment and making the determination of whether or not it can be supported can swamp an operation.

I don't have an answer here, just looking at the reasons behind the TPA's requirement

[Earl]

When I takeover a plan I tell people they don't have to restate, but we will charge extra to:

1. become familiar with the document

2. use the document and

3. will be slower to process data and respond to questions because we will have to research an unfamiliar document each time.

I couldn't rationalize a takeover process that did not contain a document review by me, document provision review with client and restatement to my document.

Even in the most vanilla of cases.

[austin3515]

If they were on a prototype document with the old TPA, wouldn't they have to adopt the current TPA's plan? I thought once the TPA whose prototype you adopt is no longer in the picture, you can't rely on the opinion letter?

[GBurns]

I do not remember seeing the TPA, the investment vehicles, the bank or trustee etc referenced in either a determination letter or an opinion letter.

[austin3515]

As a TPA, we apply to sponsor a prototype, and the opinion letter is addressed to us, as the TPA?

[GBurns]

I assume you mean determination letter. But addressing it to TPA is for delivery of the letter. Look at the content. It could just as well have been addressed to the client's lawyer if he was the one who had mailed in the request. It would not mean that if the client changed lawyers the letter would be violated etc.

[FJR]

Most prototypes clearly state that if you are no longer doing business with that firm, that you can no longer use the document and it becomes null and void as of the day you terminate services.

[Guest 401der]

Our prototype actually provides that in the event the custodian or trustee of the plan changes without the consent of the prototype sponsor, then the prototype status of the document is lost and the plan becomes an individually designed plan with no reliance on the prototype sponsor's opinion letter. The plan itself doesn't become null and void. When changing bundled service providers, the trustee/custodian will more than likely change, and if we have a client plan leaving us to go with some other provider and trustee/custodian, we won't consent to that plan continuing to enjoy the prototype status of our document, so it is usually much better for the plan sponsor to simply adopt the new provider's prototype.

[GBurns]

Who wrote this "prototype sponsor's opinion letter" ?

[austin3515]

The IRS...

[No Name]

Right. We use Datair as a prototype drafter. They then offer their approved documents to client TPA firms who can apply to IRS for a "Notification Letter" with the TPA firm's name on the letter. You become a regional sponsor.

[mbozek]

Under IRS procedure a prototype determination letter is issued to the prototype plan sponsor (e.g. a financial instutition) which allows the plan to be adopted by employers subject to the conditions of the adoption agreement. An employer who adopts a ptype plan can obtain its own determination letter from the IRS by filing an application, but is not required to do so in most cases. It is common to restrict the use of the Ptype to plans which have a financial relationship with the p type sponsor, e.g. use the sponsors financial products or services.

An Individually designed plan gets a determination letter addressed to the employer who sponsors the plan.