Distribution Made Prior to Document Payout Date

[Guest LCOLLINS]

I'm posting this again in hopes someone will answer:

A client authorized his retirement plan to payout a terminated participant who terminated in early 2005. The document calls for payout to occur as soon as administratively possible AFTER plan year end (12/31 for this client's doc). The payout was made in May 2005. Discovery was made by the TPA once the 12/31/2005 valuation was being completed. The plan had earnings for 2005 (not losses). The TPA feels 2005 earnings should not be paid as the distribution was already made. The participant is still due a small payment of the 2005 contribution.

What type of possible problems exist and what type of correction can be made, if any at this point. Should the participant be made "whole" receiving 2005 earnings on his 12/31/2004 balance?

[Bird]

I think the gain/loss allocation should reflect reality - the money wasn't there (for the most part) so no gains.

You have a problem of failing to follow the terms of the document. I'm not sure if this is covered under the new EPCRS procedure or not, but I'd just scold the client, document it and make notes to the file that you (they) have instituted procedures to make sure it doesn't happen again (the procedure being that they have to ask the TPA before they do anything).