tpa firm distribution account

[R. Butler]

TPA firm has a seprate distribution account through which they will run non-rollover distributions for various plan sponsors and then handle the tax withholding and reporting. Are there any concerns with that setup?

Thanks in advance for any guidance.

[Belgarath]

Hard to say. The devil is in the details. I'd be concerned that if not handled VERY carefully, the TPA firm could be considered a Fiduciary. Does the PA/Trustee specifically direct the funds to be deposited to this account, and authorize all distributions? Is interest paid? If not, why not? Who gets the interest and how is it allocated? Does the TPA have any control over the funds at all? Etc., etc...

I'm not sure that there is automatically an issue, but it does seem to offer a lot of opportunities to confer Fiduciary status upon the TPA.

[david rigby]

Are there any concerns with that setup?

Might depend on who you are. Plan sponsor, auditor, employee of the TPA, etc.

[Bill Presson]

I don't have an issue with the tax withholding portion. We had some pretty good legal people look at that and we did it for years.

Not so sure about the other part of the money, even if its a cash distribution.

And now with the new EFTP process for withholding, we're shutting it down and moving all of our balance forward distributions to Penchecks.

[SMB]

R. Butler,

Are you submitting witholding for your clients via EFTPS as a "batch provider"?

SmB