hand-written amendment

[WCC]

On November 30, 2016 plan sponsor decides they want to change the safe harbor match formula from plan year to pay period effective January 1, 2017. They call the vendor, vendor says no way it is too late as the safe harbor notice is due the next day. 

Plan sponsor decides to hand write on the document crossing out plan year and writing in pay period. Required signatures and dates are written in to the margin as well as the execution page making it clear their intent. Plan sponsor changes the safe harbor notice by typing the notice and just changing plan year to pay period.  Plan sponsor delivers the safe harbor notice timely with pay period wording. 

Plan sponsor sends the hand-written amendment and signatures to the vendor. Vendor refuses to honor the hand-written changes. 

Thoughts? Are hand written amendments acceptable? 

Thank you.

[ETA Consulting LLC]

On what grounds would the vendor not 'honor' an amendment by the Plan Sponsor?  Are they saying they are refusing to accept these changes merely because they are hand-written? 

I'm not aware of any rule that would invalidate a plan amendment merely because it was hand-written.

Good Luck!

[WCC]

The vendor is taking the stance that since it was not typed into the prototype doc and since the vendor did not produce it, it is now a retro active amendment request.

 

[ETA Consulting LLC]

I would disagree.  I've seen amendments through board resolutions that would effectively amend the plan's provisions immediately with the understanding that the plan document would be subsequently amended to reflect the change.  This may very well fall within those same guidelines. A major point of contention that occurs when doing this type of amendment is ensuring that you do not amend the plan out of prototype status.  I cannot see where merely selecting one provision over another effective a month from now would cross that line.

Honestly, I would wonder why that client is still with the vendor.  Even when I worked in an assembly line process when it would take 2 weeks to process a simple amendment, the amendment by resolution technique was an effective way to get the plan's provisions changed until the document could be formally amended.  The client is looking to get something done.  Instead of looking for ways to meet the client's needs while remaining within the framework of the rules, it appears as if the client is being presented with a 'too bad for you'.  I may sound a little too critical, but this has been something I've been working around for at least 15 years now.

Good Luck!

[ETA Consulting LLC]

Just another thought.  I hate to lecture, but consultants must typically identify ways to get things done instead of reasons why they can't be done.  In this case, your only deadline (November 30th) was the deemed reasonable notice deadline for issuing the safe harbor notice.  You really had up to December 31st to actually amend the plan.  Many practitioners would present a argument that it is possible to provide a 'reasonable notice' that is done after November 30th.  At any rate, distributing the notice reflecting the safe harbor contribution that 'WILL BE' in effect on January 1st is the goal.  So, you did have the option of distributing that notice and then taking the two-weeks need for preparing and actual amendment.

My contention is that there is more that could've been done for the client.  Apparently, the client spoke to an industry consultant that recommended preparing the amendment and notice to their liking and distribute the notice; which gives them time to get the plan formally amended.  I just cannot fathom that the only way a client can get their safe harbor formula for the upcoming year changed on November 30th is to work through a vendor that refuses to prepare the amendment.  I'm not arguing for the immediate turn around for amendments.  I'm just saying that there are typically several paths to getting the same goals accomplished.

Good Luck!

[RatherBeGolfing]

44 minutes ago, WCC said:

The vendor is taking the stance that since it was not typed into the prototype doc and since the vendor did not produce it, it is now a retro active amendment request.

 

The plan has to have an amendment procedure, look at your base plan docuement.  I doubt the amendment procedure says that the vendor has to produce it or that it has to be typed.

That said, I'm not 100% sure that crossing out an option and signing in the margins of the document is necessarily a valid amendment either.  We are even further removed from amendment by resolution that ETA mentions above.

I would also look for a new service provider as they are clearly not meeting the needs of the sponsor.

[CuseFan]

This illustrates the difference  between a vendor and a service provider. The former simply provides a product according to its delivery system while the latter delivers service that provides value to the customer. Much easier to fire a vendor than a service provider.

[Bird]

Of course it's ok.  I had pretty much the same situation where a vendor couldn't/wouldn't prepare an amendment in a timely manner, so we did it.  Sent it to the vendor which resulted in much wailing and gnashing of teeth.  Eventually someone there admitted that it was a legitimate amendment, but it could not/would not be entered into their "system."  Oh well, then, you sure showed us...

[Luke Bailey]

On the technical issue of whether the amendment is valid, RatherBeGolfing makes a good point that you should check the amendment procedure language in the document. Assuming that, as  RatherBeGolfing suggests will likely be the case, the verbiage in the plan doc does not preclude the employer's amending the plan by, essentially, any valid process, the language of both the plan provision regarding amendment and the amendment itself should be reviewed by an experienced corporate lawyer with knowledge of the state law goverining the employer entity. Depending on whether the employer is a corporation (and in many states, whether it qualifies as a small corporation entitled to relaxed corporate formalities) and if so its bylaws, or whether it is a partnership or LLC and, in those cases, the partnership or LLC agreement, a corporate lawyer should be able to tell you whether the amendment was effective under state law.

If the amendment is valid under state law, it's valid, and the employer and TPA are stuck with it, although the TPA might be able to resign without breaching its contract if it has the right to insist on its procedures, given pricing model, etc., as written into its service provider agreement.

[AKconsult]

it sounds like the vendor's issue is that they were not given enough time to amend the notice to state that the match would be calculated on a pay period basis, rather than annually.  However, in looking at the various Internal Revenue Notices that address the notice requirement, I don't see a requirement for the safe harbor notice to describe the timing of the contribution (pay period or annual), only the contribution formula.  At any rate, I am in agreement with everyone here that this vendor is being unreasonable.  If the vendor could not change the notice timely, and the client retyped it for the change, then the vendor should have subsequently amended the plan by 12/31 to make the change the client requested.  They had plenty of time to do that.  I would consider the handwritten amendment as valid.  Sometimes there is a need to tell a vendor "I am not asking your opinion.  I am TELLING you that this is what you will do ...".  :)

 

[ETA Consulting LLC]

9 hours ago, AKconsult said:

Sometimes there is a need to tell a vendor "I am not asking your opinion.  I am TELLING you that this is what you will do ...".  :)

 

AKconsult for President!!!  LOL 

[Earl]

“A person who says it cannot be done should not interrupt the man doing it.” Chinese Proverb