Pooled Profit Sharing

[Nic]

Is the Plan Sponsor required to provide to a participant the specific funds or stocks they are investing in for a pooled Profit Sharing Plan?

[justanotheradmin]

They are required to furnish the Summary Annual Report - which for trustee directed pooled plans is required to contain some investment information.

 

[Nic]

Thank you!

 

[Bird]

It's more than just the SAR.  PPA '06 requires a list of assets.  Widely ignored, and the DOL did not provide samples as they were required to do under the act, but it's there (Section 508).

[RatherBeGolfing]

8 minutes ago, Bird said:

It's more than just the SAR.  PPA '06 requires a list of assets.  Widely ignored, and the DOL did not provide samples as they were required to do under the act, but it's there (Section 508).

We have a lot of pooled plans and we provide a list of Assets & Liabilities with the SAR & benefit statements.  From what I have seen, most practitioners provide a similar A&L.  Its either a list of assets and liabilities with amounts at the end of the year, or a list with amounts at the beginning and end of the year.  Not that complicated.

[Bird]

3 hours ago, RatherBeGolfing said:

Not that complicated.

It is if you're not fully reconciling assets (we are, generally).  I'm not arguing with you, it's not complicated if your systems are set up right.  Maybe I don't get out much but I get the sense that there is widespread noncompliance.

[ESOP Guy]

4 minutes ago, Bird said:

  Maybe I don't get out much but I get the sense that there is widespread noncompliance.

The reason there is widespread noncompliance is because there is so little guidance.  So anyone's guess is good as another person's regarding what you need to do.  

Many years ago I worked for a place where I still did some 4k work.  For some of the plans with a large brokerage account with lots of investments we were sending a quarter inch of paper to every participant as we were photocopying the 12/31 statement showing each stock, bond... investment the plan had. 

The firm I work for now we make a simple statement that tells what percentage is in various asset classes. 

As far as I can tell no one call tell me which is correct.  So I think a number of people simply gave up on the whole thing.  I have never seen anyone get called out on this issue. 

[Bri]

Is it the full list of assets?  Or just a note that they have the right to examine a copy of the statements issued by the regulated financial institution?  (Presuming there's no audit report.)

[jpod]

7 hours ago, Bird said:

It's more than just the SAR.  PPA '06 requires a list of assets.  Widely ignored, and the DOL did not provide samples as they were required to do under the act, but it's there (Section 508). 

I thought this annual disclosure was required only if SPECIFIC assets are allocated to employees' accounts, but not if the investments are truly pooled and no employee has any rights to any specific assets.  I could be wrong.

[ESOP Guy]

Here is an article from 2007 about it.

https://benefitslink.com/articles/guests/participant_statements_erisa_law_group_200707.pdf

It says:

The value of each investment to which assets in the participant’s account have been allocated,

 

Most people I know have taken this to mean even a pooled account has some kind of requirement.  The question was always how much detail.  

[RatherBeGolfing]

2 hours ago, jpod said:

I thought this annual disclosure was required only if SPECIFIC assets are allocated to employees' accounts, but not if the investments are truly pooled and no employee has any rights to any specific assets.  I could be wrong.

The pertinent language from Section 508 is:

Quote

‘‘(i) the value of each investment to which assets in the individual account have been allocated, determined as of the most recent valuation date under the plan...

So its not whether a participant has any rights to a specific asset, it is whether the assets of the individual account has been allocated to an investment.  Since the investments are pooled, a pro rata share of each account has been allocated to each investment, and the value of each investment must be disclosed.  At least this is the most common interpretation.

[RatherBeGolfing]

5 hours ago, Bird said:

It is if you're not fully reconciling assets (we are, generally).  I'm not arguing with you, it's not complicated if your systems are set up right.  Maybe I don't get out much but I get the sense that there is widespread noncompliance.

I agree, and we also fully reconcile the assets.  I guess my issue is more that I don't think you can properly administer a pooled plan without asset reconciliation so noncompliance of the schedule of assets requirement is part of a bigger problem. 

[Mike Preston]

We fully reconcile but do  not disclose individual investments. 

[Bird]

In case anyone is wondering, the idea/theory behind the law was to allow participants to coordinate/adjust their personal risk tolerance with the knowledge of how plan assets were invested, presumably by changing other assets.  Add it to the list of well-intentioned but silly requirements we deal with.

[Gilmore]

To implement the requirements of PPA, particularly as it related to participant statements, we consulted with an ERISA attorney for guidance.

Until further specific guidance was given by the DOL, we were instructed to include a line in the participant statement that says the participant's account value reflects a proportionate share of each of the individual investments held by the Trust, as of the last day of the plan year, and that the participant is able to contact the Plan Administrator (contact info included) if they want to request a copy of the Trust's investment holdings.

Ten plus years later I do not believe we have ever heard of a participant requesting the asset statement.

[Bird]

18 hours ago, Gilmore said:

Ten plus years later I do not believe we have ever heard of a participant requesting the asset statement.

No a surprise at all, but that doesn't validate the approach, IMO.  I don't see it as much more compliant that doing nothing.  It probably doesn't matter because I think we are all getting a free pass since the DOL has not done their job.  For some reason it irks me that someone got paid for what amounts to mumbling and not saying anything.

[Gilmore]

Mike, or Bird, or Golf, when you say you "fully reconcile" the assets, can you elaborate. 

Let's say for example that all of the assets are in one pooled brokerage account.

Are you providing a breakdown of each investment on the participant statement, or a breakdown by asset class...?

Appreciate the information.

[RatherBeGolfing]

2 hours ago, Gilmore said:

Mike, or Bird, or Golf, when you say you "fully reconcile" the assets, can you elaborate. 

Let's say for example that all of the assets are in one pooled brokerage account.

Are you providing a breakdown of each investment on the participant statement, or a breakdown by asset class...?

Appreciate the information.

Ours is attached/enclosed with the benefit statement but not on the benefit statement itself.  We provide a breakdown of each investment, so individual stocks, mutual funds, etc.  Participant loans are shown as a total rather than each individual loan.

[Bird]

My definition of "fully reconcile" is to record all activity - contributions, distributions, dividends, sales, purchases - and compare that to the cash account.  So, e.g., the cash account is $1,000 at the beginning of the month, and transactions noted above net to +$500, the cash account should be $1,500.  If not, then we missed something.

We're tracking this in a spreadsheet with individual investments, so at the end of the year, the info is there to condense into a list of assets, which we provide with the participant statements.

Depending on activity, it is borderline insane*, and we are increasingly bailing out and just looking at year-end info and saying "it's possible something was missed but if you want that certainty you have to pay for it" or words to that effect.  

*But just for the record, we once found a $30,000 transfer to another brokerage account - unrelated to any of the parties to the plan - in one of those godawful "managed" accounts where literally no one could pay attention.  And many, many times where someone forgot they made or didn't make a contribution.  

[RatherBeGolfing]

We do reconciliation similar to what Bird described above, recording all the activity in the account and balancing month by month.  Its not too bad for pooled accounts, but it can be a real PITA for SDBA plans when the participant count starts creeping up.  We use spreadsheets now but before that we used an actual trust accounting software that recorded everything on the transaction level rather than totals (each purchase in January vs. one entry for January purchases).  

[Gilmore]

Thanks for the replies.  We only have a handful of these types of plans.  Sounds like we lost track of what was probably meant to be a short-term solution.  For starters we will start breaking down the asset classes by % on the statements and re-evaluate going forward.