Distribution Notice Time Line

[Guest MEGK]

I have a client/friend who has a 401k for his employees and a former employee who left 850 days ago has $100,000 in the plan still just received all of the Distribution Notices and Rights from the Employer on what they can do with the money........a little late....the employee is throwing a fit and threatening to contact the DOL. Is there any penalties or laws for the failure to provide this information over 2 years later? I thought I read somewhere the employer has 90-180 days, and could be subject to $100 day fine.

[mbozek]

I have a client/friend who has a 401k for his employees and a former employee who left 850 days ago has $100,000 in the plan still just received all of the Distribution Notices and Rights from the Employer on what they can do with the money........a little late....the employee is throwing a fit and threatening to contact the DOL. Is there any penalties or laws for the failure to provide this information over 2 years later? I thought I read somewhere the employer has 90-180 days, and could be subject to $100 day fine.

what is his claim for?

Did he continue to receive quarterly statements stating his balance in the plan and have acces to an SPD?

[Bird]

Generally speaking, the employer doesn't have to do anything at all when someone is entitled to a distribution, unless and until they ask for it.

There's not a lot of info in your post so it's hard to say exactly what's going on.

[Guest MEGK]

Yes he did receive quarterly statements, but all the prospectus information had /has been sent to the employer’s address since they are the Trustee, so he did not receive any prospectus information.

Below is what I have found directly from the IRS website on the notices:

This notice describing participants’ benefits and the procedures to obtain them must be given to participants within 90 – 180 days of when they have retired or quit working. The information given to a participant will vary depending on the type of retirement plan, the reason the participant has stopped working, and the participant’s age but must explain a participant’s right to defer receiving his or her account balance and the consequences of taking money out of a retirement plan now rather than later.

Who Is Responsible For Sending It: The administrator of the plan

[mbozek]

it would be helpful if you could provide a link to the IRS notice that you cited.

[Guest MEGK]

http://www.irs.gov/retirement/article/0,,id=135676,00.html

[Guest MEGK]

http://www.irs.gov/retirement/participant/...=211621,00.html

This one is directly from the quote.

[401king]

http://www.irs.gov/retirement/participant/...=211621,00.html

This one is directly from the quote.

It would be news to me if the administrator was required to provide notice within a specified timeframe. It seems even the IRS contradicts itself when saying that "Timing: A participant may receive information describing retirement or termination benefits at any time" in your first link. I'm interested to know how this pans out and what people consider required WRT notices to terminated employees.

[QDROphile]

I think it would be very enlightening to learn why your friend is upset about the timing of receipt of distribution information. It would also be enlightening to learn what your friend learned from the distribution information that the friend should not have already known. So far it has all been about grasping at tidbits out of context. What is the story?

[mbozek]

http://www.irs.gov/retirement/participant/...=211621,00.html

This one is directly from the quote.

What the IRS is in own inscrutible and incomprehensible way is trying to describe (without explaining how the change applies) is Section 1102(b)(1) of the PPA which directs the IRS to modify the regs under IRC 411(a)(11) and ERISA 205 (should be 203) to provide that beginning 2007 the description of a participant's right to defer receipt of a distribution must also describe the consequences of failing to defer receipt of the distribution. Appearently a plan will not be treated as failing to meet the notice and consent requirements as to any description of the consequences that is issued up to 90 days after the regulations are modifed if the plan administrator makes a reasonable attempt to comply with the requirements of 1102(b)(1).

I have no idea of what the penalty is for failure to provide the notice.

[mbozek]

I think it would be very enlightening to learn why your friend is upset about the timing of receipt of distribution information. It would also be enlightening to learn what your friend learned from the distribution information that the friend should not have already known. So far it has all been about grasping at tidbits out of context. What is the story?

I dont know what actionable injury or loss could have result from the failure to provide a timely notice b/c 1) no distribution occured and 2) the only change in the notice is to make the participant aware of the consequences of not rolling over the distribution which is described in other materials that the particpant will recieve such as 402(f) notice.

[jeff77]

I would also add that distribution requirements would be subject to the Plan Provisions. Many of our Plans have that you can't even take a distribution until after the end of the Plan Year.

[Lou S.]

I would also add that distribution requirements would be subject to the Plan Provisions. Many of our Plans have that you can't even take a distribution until after the end of the Plan Year.

That wouldn't apply in this case as he's been gone for 850 days, more than 2 years. I suppose it could apply to plans that don't allow a distribution until NRA but those are quite uncommon in a 401(k) plan. That's much more likely in DB plan with no lump sum option.

At any rate I'm curious why the OP's friend didn't request a distribution when he left?

I know it cracks me up when a participant who has been gone for years, ignored the original distribution package (apparently not the case here), calls up and says they need the money by Friday or something like that and want to know why that's a problem.

[chc93]

I know it cracks me up when a participant who has been gone for years, ignored the original distribution package (apparently not the case here), calls up and says they need the money by Friday or something like that and want to know why that's a problem.

This always bothers me. If the terminated participant continued to receive quarterly statements (at least 8 of them), he had to have known that he had money in the plan. Not only that, but the amount too. All he had to do was make a phone call to get the distribution package... and not wait 2+ years. Amazing.

[Guest MEGK]

My friend has filed a wrongful termination suit and they have improperly not paid other “benefits” due to him such as a medical reimbursement plan and so forth. Perhaps, the employer wanted to keep the employee in the dark for as long as possible and the employer has had all the prospectus information sent over the last 2 years to the employers address as well.

[mbozek]

My friend has filed a wrongful termination suit and they have improperly not paid other “benefits” due to him such as a medical reimbursement plan and so forth. Perhaps, the employer wanted to keep the employee in the dark for as long as possible and the employer has had all the prospectus information sent over the last 2 years to the employers address as well.

So what do those claims have to do with his retirement benefits which he could have transferred at any time after termination?

How has he been kept in the dark on his retirement benefits?

Was he getting statements on his retiremnt plan accounts?

[401king]

Going back to the original question - Does anyone know of firm deadlines to notify a former employee with a balance of the right to receive their benefits under a defined contribution plan? I've always assumed it is the participant's sole responsibility to request the distribution.

[mbozek]

Going back to the original question - Does anyone know of firm deadlines to notify a former employee with a balance of the right to receive their benefits under a defined contribution plan? I've always assumed it is the participant's sole responsibility to request the distribution.

Isnt the purpose of an SPD to provide such information?

It seems that the need for more disclosure is being pursued by advocates for employees to require the plan fiduciary to inform participants of the obvious features that are described in the SPD for which there is no further obligation to provide information.

[K2retire]

My friend has filed a wrongful termination suit and they have improperly not paid other “benefits” due to him such as a medical reimbursement plan and so forth. Perhaps, the employer wanted to keep the employee in the dark for as long as possible and the employer has had all the prospectus information sent over the last 2 years to the employers address as well.

If the plan is invested in publicly traded securities such as mutual funds, it is easy to obtain a prospectus by contacting the issuer. Since virtually no one reads them anyway, I doubt that is what the real problem is. Do you really mean some sort of description of the plan?

[Jim Chad]

Back to the original question: I have never heard of such a requirement.

[mbozek]

Going back to the original question - Does anyone know of firm deadlines to notify a former employee with a balance of the right to receive their benefits under a defined contribution plan? I've always assumed it is the participant's sole responsibility to request the distribution.

Only requirement that I am aware of is notification by SS to a retiree who has commenced SS benefits that benefits may be available under an ERISA retirement plan.

[Guest MEGK]

Here are some further details. The employee received the Participant Distribution Notice in April 2012, the completed Notice states distribution date is March 31, 2011 (1 Year Later) and the Plan Administrator signed and dated the form March 2011. The information a year later was than given by the Plan Administrator’s Broker who claimed it was their fault and no fault of the Plan Administrator. I’m not sure I buy this completely but anyhow. The Broker also requested my friend to sign a Notice that complies with Section 404© of Erisa….basically relieving the Plan Administrator of any legal liability. Of course he did not sign the document. It seems to be a little late (hasn’t been an active participant in over 2 years, and it gives the appearance of trying to prevent future issues due to the previous mishaps.

[Bird]

I don't mean to be rude but I can't follow your message at all. 2011 is one year earlier than 2012, not later. And do you mean the broker is taking the blame for the "late" notice?

Anyway, while it seems that there are numerous screw-ups, I can't figure out exactly what damage your friend has to gripe about.

[mbozek]

Here are some further details. The employee received the Participant Distribution Notice in April 2012, the completed Notice states distribution date is March 31, 2011 (1 Year Later) and the Plan Administrator signed and dated the form March 2011. The information a year later was than given by the Plan Administrator’s Broker who claimed it was their fault and no fault of the Plan Administrator. I’m not sure I buy this completely but anyhow. The Broker also requested my friend to sign a Notice that complies with Section 404© of Erisa….basically relieving the Plan Administrator of any legal liability. Of course he did not sign the document. It seems to be a little late (hasn’t been an active participant in over 2 years, and it gives the appearance of trying to prevent future issues due to the previous mishaps.

Are you saying that the information required by PPA 1102 was included in the Distributon Notice sent by the broker to the participant in April 2012?

What is the Distribution date supposed to signify? Was it the first day the particpant could receive a distribution?

Has the participant requested a distribution from the plan?

[Guest MEGK]

Yes, it was included with the Distributioni Notice by the Broker on April 2012.

We are not sure what it is suppose to signfy other then the funds could have been removed over a year ago.

No, he has not requested a distribuiton at any time.

[mbozek]

Yes, it was included with the Distributioni Notice by the Broker on April 2012.

We are not sure what it is suppose to signfy other then the funds could have been removed over a year ago.

No, he has not requested a distribuiton at any time.

Assuming that the notice was delivered late (and I dont know if it was) what relief is the client seeking? It seems that no one has prevented him from receiving his distribution which he has not requested.

[Lou S.]

Yes, it was included with the Distributioni Notice by the Broker on April 2012.

We are not sure what it is suppose to signfy other then the funds could have been removed over a year ago.

No, he has not requested a distribuiton at any time.

Assuming that the notice was delivered late (and I dont know if it was) what relief is the client seeking? It seems that no one has prevented him from receiving his distribution which he has not requested.

Seems weird. Like the guy is just trying to get a wind fall.

Assuming he has an SPD, receieved his quarterly statements and had the ablity to direct his funds, I'm having a hard time seeing how he was damagaed in anyway.

He clealry has some form of toxic relationship with his past employer so I'm not sure why he doesn't request the withdrawal now and cut ties.

[Guest MEGK]

The annual SPD was requested to the Plan Administrator on 4/16/2012 via email and regular mail and a 2nd request has been made on 5/16/2012. Is there a time frame/limit as to when the employer must produce the document? The attorney handling the case is suggesting to just contact the DOL and let it run its due course.

[rcline46]

I cannot believe the incredible amount of mis-information and mis-use of terminology used by the broker and participant reported in this thread. Even the immediately prior message by MEGK - there just is no such thing as an annual SPD. Maybe an annual SAR, but not an SPD.

In any case, the sponsor MUST provide the documents in 30 days.

[david rigby]

Going back to the original question - Does anyone know of firm deadlines to notify a former employee with a balance of the right to receive their benefits under a defined contribution plan? I've always assumed it is the participant's sole responsibility to request the distribution.

There is a "firm deadline"; the Plan Administrator must include this person on the Form SSA filed for the plan year following the plan year of termination of employment, which is due 7 months after the close of that (second) plan year (75-day extension available), unless the participant has received a full distribution before the filing. The PA must also notify the participant ("you have a benefit under the plan...") on or before this filing date.

It's possible the regular statements received by the participant ARE the notification to the participant. Also likely, the participant is responsible for keeping the plan advised of any address change.

[ESOP Guy]

MEGK:

I still don't know what it is your client wants or expects. You have never answered the question what harm or what the client wants. You just keep going on and on about how this information or that notice/form wasn't timely delivered.

At this point if your client could wave a magic wand what would be the perfect end result for him?

Because like I said so far all I hear you saying and asking is how much trouble can you make sure the plan get into. Is the point to create trouble or get something constructive done?

[mbozek]

Or to put it in the venacular, what is the loss suffered by the participant that results from plan administrator action or inaction for which a cause of action can be filed under ERISA?

[masteff]

Okay, here it is...

It's part of the change from Form SSA to Form 8955-SSA (specifically question 8).

IRS on 8955-SSA question 8 http://www.irs.gov/retirement/article/0,,id=252298,00.html

IRS FAQ on 8955-SSA http://www.irs.gov/retirement/article/0,,id=238940,00.html

8955-SSA Penalties http://www.irs.gov/retirement/article/0,,id=252909,00.html

MEGK - no, your friend has zero room to complain because IRS explicitly extended the time for 2009 and 2010. The notice your client/friend received was received timely according to the IRS FAQ that I linked above.

Edit:

And I missed this the first time: "A plan administrator may answer “yes” to question 8 if the required information was timely furnished to participants in other documentation such as benefit statements or distribution forms. A separate statement designed specifically to satisfy this requirement is not required." (emphasis added)

Edit 2:

This article suggests it stems from IRC 6057(e) http://www.ftwilliam.com/articles/8955.html