frozen target plan receives funds

[Guest shronesz]

I have a frozen target benefit plan that got several checks from the Nasdaq settlement. Can the company cash these checks and pay plan fees or must they be allocated as earnings?

Thanks

[Guest]

I think it comes down to the plan document. If the document allows the Plan to pay expenses from the Trust, then I don't see any problem, assuming the expenses are "reasonable". If you deposit it into the trust and allocate it as earnings, then deduct expenses and allocate them, don't you get to the same spot? You may want to run the settlement through the Trust just to have a better paper trail.

I just curious, but why would allocating it to the participants cause a problem? Do you have individually directed accounts?

[david rigby]

Might there be a question as to exactly which participants get any allocation? If this "gain" is a result of a settlement, would/should it be allocated to those who were participants at a particular time, such as the settlement date, or the date a lawsuit and/or complaint was filed? Exclude participants who may have entered the plan after some date?

[Guest shronesz]

The document does allow expenses to be paid from the trust to the trustee. I agree that the settlement should be run through the trust. The employer would just like to cash the checks and pay expenses.

The plan has been frozen since 3/1/1996, therefore, anyone eligible since that date has no account balance. Allocating to the participants would not be a problem. They are not individual accounts.

[AndyH]

It seems to me that the money should absolutely be deposited with general assets of the plan. Period.

Then decisions can be made as to whether it is appropriate to pay expenses from the Trust, but one should not be dependent upon the other. Clearly the sponsor should not base the expense payment decision on whether a class action lawsuit is won or lost (provided the sponsor did not directly pay legal fees).

I do agree that whether the accounts are pooled or self directed is a practical consideration, but in theory it should not affect the decision to deposit such receipts with other Trust assets.