Holding Account

[Guest johnberube]

Hi: Great board. I have a 401k plan that wired money into their Holding Account back in 2008. They generally use this money for funding their non elective contribution. For plan year 2008 they have decided not to fund this discresionary non elective contribution. Furthermore, they want us to send the money back to them. Is this possible? I didn't think we could remove money from the Trust. Please advise -thank you.

[J Simmons]

Is the holding account titled in the name of the plan/plan trustees or is it simply titled in the name of the employer? If just the name of the employer, no indication of the plan or plan trust, then you should be okay (provided you've also not included any balances in that account when reporting financial information about the plan on Forms 5500).

If otherwise and the holding account is or had indicia of being a 'plan' account, you probably cannot withdraw. See http://benefitslink.com/boards/lofiversion...php/t14199.html and the three-part series, http://benefitslink.com/modperl/qa.cgi?db=...ects&id=142, http://benefitslink.com/modperl/qa.cgi?db=...ects&id=141 and http://benefitslink.com/modperl/qa.cgi?db=...ects&id=143

[Guest johnberube]

Thx. Does the plan sponsor have to use the entire account balance in the Holding Account for their 2008 contribution? Or can they spill some over until the next year? Again - they prefunded in Aug. 2008. Thx -

Is the holding account titled in the name of the plan/plan trustees or is it simply titled in the name of the employer? If just the name of the employer, no indication of the plan or plan trust, then you should be okay (provided you've also not included any balances in that account when reporting financial information about the plan on Forms 5500).

If otherwise and the holding account is or had indicia of being a 'plan' account, you probably cannot withdraw. See http://benefitslink.com/boards/lofiversion...php/t14199.html and the three-part series, http://benefitslink.com/modperl/qa.cgi?db=...ects&id=142, http://benefitslink.com/modperl/qa.cgi?db=...ects&id=141 and http://benefitslink.com/modperl/qa.cgi?db=...ects&id=143

[J Simmons]

Money an ER puts into a plan is considered a contribution for that plan year, unless there is a prior or contemporaneous designation that it is for a different, closed plan year. I don't think you could have it carry forward as you suggest. I think it is a contribution for the plan year of which August 2008 is a part.

[rcline46]

If this is a balance forward plan, the money was deposited into the trust account for the plan because there cannot be such a thing as a holding account. Allocate the money according to the document, the client does not have a choice.

If this is a participant directed plan, there has been an operational failure because the money was not allocated according to participant direction, and/or participants received contributions to which they were not entitled, and/or I am sure other failures. Again, there is no such thing as a holding account.

The only way I would think of permitting a withdrawal is an indemnification letter from an attorney experienced in ERISA law, where the attorney puts themself on the line. An expensive lessor for the client and you for maintaining an account which may have been used to circumvent the law.