3(16) Signing 5500

[SSSCCH]

I was wondering if anyone had an opinion on an individual (i.e. Account Representative of a TPA) signing as plan administrator for a 3(16) defined contribution plan. I understand that under these circumstances that only the signature of the plan administrator is required. However, if the TPA is not a fiduciary for all aspects of the plan (i.e. payroll, personnel) but day to day functions (QDRO review, hardship approval) can the individual signing be open to personal liability should suit be brought against the plan sponsor and their fiduciaries? What does the IRS definition of being a 3(16) encompass? Should the employer still be required to sign as the plan sponsor?

[BG5150]

The 3(16) duties should be detailed in the service agreement and/or the plan document. I have seen documents define the PA as the employer and a designated 3(16) administrator with duties outlined in a separate service agreement.

If the signing of 5500 is not expressly mentioned in either document, then the 3(16) should NOT sign.

[SSSCCH]

Thank you! It is not expressly mentioned in the service agreement that we will be signing the 5500 but we are considered the plan administrator for certain functions, not all. I'm concerned that by me and my staff be asked to sign as plan administrator without the signature of the plan sponsor, we are taking on some liability for which we could be personally held accountable.

I would love to hear from others who are in this situation and how they are handling.

[My 2 cents]

Thank you! It is not expressly mentioned in the service agreement that we will be signing the 5500 but we are considered the plan administrator for certain functions, not all. I'm concerned that by me and my staff be asked to sign as plan administrator without the signature of the plan sponsor, we are taking on some liability for which we could be personally held accountable.

I would love to hear from others who are in this situation and how they are handling.

If you are "considered the plan administrator for certain functions", then you have probably already taken on some liability for which you could be personally held accountable.

[SSSCCH]

That's what I was afraid of

Even if the client is sued and the company indicates that we were signing on behalf of the organization, I don't think that will hold water.

[ESOP Guy]

This is why every TPA firm I have worked for the standing orders were to not approve QDROs and hardship requests and so forth.

The letters are very clear we were making a recommendation that the QDRO be approved as we believe it is a valid QDRO. We were recommending the hardship be approved as we believe the request meets the rules.

But the letter was clear the administrator was doing the approving.

I have no idea if that was enough to protect the firm I was working for or me as I have never been part of such a suit. On the other hand I doubt you are getting paid enough to take on the liability you are describing with no defense that you aren't a fiduciary.

[SSSCCH]

You are correct!

[BG5150]

That's what I was afraid of

Even if the client is sued and the company indicates that we were signing on behalf of the organization, I don't think that will hold water.

Thank you! It is not expressly mentioned in the service agreement that we will be signing the 5500 but we are considered the plan administrator for certain functions, not all. I'm concerned that by me and my staff be asked to sign as plan administrator without the signature of the plan sponsor, we are taking on some liability for which we could be personally held accountable.

I would love to hear from others who are in this situation and how they are handling.

If you are "considered the plan administrator for certain functions", then you have probably already taken on some liability for which you could be personally held accountable.

That's the POINT to being a 3(16) Plan administrator. You agree to take on the RESPONSIBILITY and the LIABILITY that comes with the various functions. It is more than just an administrative convenience for you to approve distributions and monitor payroll.

If you are truly concerned about the exposure, perhaps you should not have entered the 3(16) "space" to begin with. I would immediately seek ERISA counsel to determine what your liability is and assess your risk tolerance thereto.

[SSSCCH]

WOW! I personally did not enter the 3(16) market, the company I work for did. I am aware of the exposure the company has taken on...my question has to do with me and my staff and our PERSONAL liability. We are being asked to sign 5500s for which we are not the fiduciary for all aspects of the employers business. Yet we will be held to the fiduciary standards due to the fact that our names are on this form.

that is my question...what is the personal liability and how comfortable are others in the 3(16) arena with signing the 5500.

[BG5150]

Your personal liability should be covered by your employers E&O