16b indicator

[PS]

Hi, 

one of the client would like to know if the 16b indicator can be removed any idea how this can be done? 

[Lou S.]

I'll bite, what's a 16B indicator?

[BG5150]

Whew, I thought I was the only one...

[PS]

16b is an indicator for a participant who is an officer of the company that is subject to 16b reporting to the SEC

[BG5150]

What does it have to do with a qualified plan?

[Peter Gulia]

Recordkeeping software often uses an indicator to mark a fact or condition that might call for preventing or delaying a transaction that otherwise would be processed or handled routinely.  For example, an indicator might flag a participant’s account as one affected by a bankruptcy proceeding or a to-be-evaluated domestic-relations order.  Or an indicator might mark an account as one for which the participant’s investment direction requires a delay, special handling, or even an administrator’s pre-clearance approval.  Or an indicator might mark an account as one that is a subject of beyond-routine information reports.

16b refers to Securities Exchange Act of 1934 § 16(b) [15 U.S.C. § 78p(b)].  Among other provisions, section 16 requires a securities issuer’s director, officer, or 10%-owner to file (electronically) a Form 4 Statement of Changes of Beneficial Ownership of Securities with the Securities and Exchange Commission by the second business day after nearly any transaction (including under a retirement plan) involving a security of the issuer.  Although the reporting requirement applies to the insider, an issuer might facilitate its officers’ reports.

Some recordkeepers offer a service of convenience reporting on an individual’s directions or claims that involve employer securities if the employer/administrator marked the individual as the employer’s director, officer, 10%-owner, or other “16b” insider.

[PS]

4 hours ago, Peter Gulia said:

Recordkeeping software often uses an indicator to mark a fact or condition that might call for preventing or delaying a transaction that otherwise would be processed or handled routinely.  For example, an indicator might flag a participant’s account as one affected by a bankruptcy proceeding or a to-be-evaluated domestic-relations order.  Or an indicator might mark an account as one for which the participant’s investment direction requires a delay, special handling, or even an administrator’s pre-clearance approval.  Or an indicator might mark an account as one that is a subject of beyond-routine information reports.

16b refers to Securities Exchange Act of 1934 § 16(b) [15 U.S.C. § 78p(b)].  Among other provisions, section 16 requires a securities issuer’s director, officer, or 10%-owner to file (electronically) a Form 4 Statement of Changes of Beneficial Ownership of Securities with the Securities and Exchange Commission by the second business day after nearly any transaction (including under a retirement plan) involving a security of the issuer.  Although the reporting requirement applies to the insider, an issuer might facilitate its officers’ reports.

Some recordkeepers offer a service of convenience reporting on an individual’s directions or claims that involve employer securities if the employer/administrator marked the individual as the employer’s director, officer, 10%-owner, or other “16b” insider.

So in this case if they want to remove the 16b indicator they will require to file Form 4 statement? 

[Peter Gulia]

PS, if you are an employee of a recordkeeper, third-party administrator, or trust company, you would not alter a 16b indicator (if your company ever touches it all) except as directed under your company’s procedures, which I don’t know.

Some never touch a 16b indicator because the customer employer sets that indicator on or off in census uploads or through a plan-sponsor portal to the recordkeeping system.

Or if a service provider sets or unsets a 16b indicator, it typically would restrict this to implementing the employer’s written instruction.  Further, a service provider might restrict which of its employees may do this.

A service provider might use its procedures and controls not only to avoid discretion in the way many retirement-services providers do (even for points of law on which the service provider’s knowledge often is superior to the customer’s knowledge) but also to avoid responsibility for a legal conclusion, especially about a point under securities law (rather than ERISA or the Internal Revenue Code).

If you need guidance, you should get it from the right authority in your company.

[PS]

Thank you!