just in case sort of freeze amendments?!

A TPA firm seems to be proactively sending out freeze amendments for small DB plans. No mention of the notice requirement to participants, and the communication is very clear that it says not to return a copy of the signed amendment right now to the TPA, but that if there is a need to reduce the 2024 contribution they will ask the sponsor for a copy of the signed amendment then. Has anyone else seen this? Is anyone else doing this?!

If plans are in danger of funding issues, I  100% agree that freeze amendments should be considered, and if needed executed and notice given. With the ability to increase benefits after year end that now exists with SECURE 2.0, another amendment to unfreeze can be done after year end if circumstances change. I disagree with the "sign this now, but ignore it unless you need it" approach that TPA seems to be taking. 

I disagree with sending a resolution/amendment and telling a sponsor essentially if it's needed at the end of the year, they can provide the TPA with a copy then. 

I have been doing this a long time now, but still learn new things all the time. And admittedly don't spend as much time on DB as 401(k) so they are not my strong suit. However, this seems to be a document violation. Is there something I'm missing that doesn't make this at worst tax fraud and at best an ethical violation on the part of the TPA?

I'm really hoping one of you says "justanotheradmin - there is a special rule for small DB plans that you obviously aren't familiar with that allows just this kind of 'execute but don't have to use if you don't want to' amendment" . 

Sounds to me like you have a good handle on the situation.  Not sure there is anything "wrong" with it, depending on how it is presented.  If it is truly, "sign it now but don't tell anyone", that is clearly wrong, but it is, "here is an amendment in case you need it", that might be ok.  You are correct that 204(h) notices would be required, so if they weren't included, then they have a different problem.   There are fines for not issuing 204(h) notices.

Seems like a fairly large expense for the TPA to produce and send amendments when the sponsor didn't request it, but maybe it is all built into their pricing model.  

Is it better to back date an amendment, or to sign it timely without the intent to implement - both are unethical.  I might feel different if it was a 1 owner plan vs. a 2 person plan with one owner and 1 staff.    

The communication is clearly telling the sponsor the action they need to do is to sign and retain. It is also crystal clear that the TPA does NOT want the sponsor to send them a copy, unless they ask for a copy later in the year, which the TPA is very clear they will only do if there is a funding issue and the freeze amendment is needed to lower the required minimum contribution for 2024. 

It will be very convenient that only the plans that have funding issues are the ones that sign, and the ones that don't have funding issues are the ones that didn't sign. 

Doing two amendments - a freeze - and then if needed an unfreeze - is more work - but its the correct way to do it, and is allowed! Why would anyone put their personal reputation, licensing, etc at risk and do this? Its definitely a large enough company(the TPA) that they should know better. 

I can see for future years - some TPAs or document provides saying here is a freeze amendment for the upcoming year - and then as needed do another amendment after the year ends depending on funding goals. Which is a great way to do it to give employers, particularly smaller employers flexibility.  Sort of how some 401(k) providers really loved the Safe Harbor Maybe notices for awhile. Which again were allowed, when done correctly. 

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The communication is clearly telling the sponsor the action they need to do is to sign and retain.

Sign and retain?  If @Effen is skeptical (rightly so), this appears even more (agreeing with his word) unethical.  No, I think there are several stronger words that apply.

Additional question - if you were me - would you send an e-mail to that other TPA? It would be a very soft nice e-mail. I do have contacts there that might not know what is going on, and could possibly pass along the concern to the department or team sending out those e-mails. Or they could tell me to just mind my own business, which is possible. I have no interest in their small DB plans, I have enough work already, so I truly don't have a business interest in those plans. 

I think its more that if the front end admin staff or sales staff was implementing this kind of thing and the back end compliance or legal staff wasn't aware of how it was being communicated, I would hope some one would clue the back end in. Especially if I was the person who wasn't aware. I would want someone to tell me so I could try to put a stop to it, or convince the decision makers in that other department to reconsider. The TPA is doing a huge disservice to those plan sponsors with how the communication and instruction is given. 

I am hoping someone at that TPA, that is in a position of input, sees this thread and recognizes their company, and understands why it is unethical, but I don't think that will happen. 

The TPA is providing an amendment to plan sponsors with instructions (don't give this back to us NOW, wink wink) on how to circumvent the funding rules and in practice give them impermissible discretion on their funding, not to mention violating ERISA 204(h) if plans are not owner-only. How is this OK on any level? 

Amendment to freeze with proper notice as a "just in case" and then amend later to unfreeze, sure, I think that flies under certain business conditions as a one-off. However, I think doing those on a somewhat frequent basis in practice creates an impermissible profit sharing or cash or deferred arrangement. 

Just because some TPA's are big and popular, doesn't mean they know what they are doing.  Some of the worse work comes out of the biggest firms because they need to hire a lot of people and they don't have time to train them.  Many big TPAs are famous for low pricing and you generally get what you pay for.  

Maybe just remind them that there is a potential $100/day/person fine for ignoring the 204(h) Notice.  This is an old ASPA ASAP, but I think it is still valid.  https://www.asppa.org/sites/asppa.org/files/PDFs/GAC/ASAPs/03-07.pdf  "Substantial excise taxes under IRC Section 4980F may apply regardless of whether a failure to provide a timely Section 204(h) notice is egregious ($100 per day per applicable individual)."

If their "sign and retain" email doesn't even mention the 204(h) notice, seems like a big liability risk on their part.  

Should you work with them is up to you.  Your loyalty should be to the client, not the referral source. I always say, don't let their problems become your problems.  If you want to keep working with them, inform them of the issues (go to the leadership, not the person who sent the email) and make sure your clients do things correctly.