What to do with ADP/ACP Refunds - Personal Finance

Has anyone ever seen a document for people getting ADP/ACP refunds that addresses the following critical point: What you do with the refunds dictates the ultimate impact.  So others can probably write more eloquently (and with more expertise) than me on:

-Availability of deductible pre-tax IRA's

-Availability of current year 401k contributions for you or your spouse to offset

-Availaiblity of Roth IRA contrbiutions (if not over limits)

-Availability of back door Roth IRA contributions

-Simply ivnesting in an after-tax account (capital gains, municpal bonds,etc).

It seems to me that if there were such a document it would go a very very long way...  I could probably write such a thing with all appropriate disclaimers.  I could even do a bit of a choose your own adventure (whats your AGI? Are you married? etc).

Personally, I would never want to go down this rabbit hole. We do qualified plan administration, not investment counseling. Could you do something like this? I'm certain you could. I just wouldn't want to - at least up front, I can't see that it would add enough "value" to our services (by the time you have disclosed and CYA to the nth degree) to ever make it worth it. If you do, have fun!

I suspect a written explanation of the kind austin3515 describes might help some participants make an informed choice, and so might lessen a highly-compensated employee’s displeasure about receiving a corrective distribution.

But I suspect also that many recordkeepers and third-party administrators don’t do this communication (even if one would put in the work to write a careful explanation) because it might “step on the toes” of an investment adviser’s or a broker-dealer’s representative, who prefers to be the source for that financial-planning guidance.

A communication of this kind might work if the recordkeeper’s or TPA’s computer system is automated to know and use information about the identity and contact points of each participant’s advisor.

20 hours ago, Peter Gulia said:

I suspect a written explanation of the kind austin3515 describes might help some participants make an informed choice, and so might lessen a highly-compensated employee’s displeasure about receiving a corrective distribution.

But I suspect also that many recordkeepers and third-party administrators don’t do this communication (even if one would put in the work to write a careful explanation) because it might “step on the toes” of an investment adviser’s or a broker-dealer’s representative, who prefers to be the source for that financial-planning guidance.

A communication of this kind might work if the recordkeeper’s or TPA’s computer system is automated to know and use information about the identity and contact points of each participant’s advisor.

Peter, I think it is more likely that most TPAs (and probably RKs) do not do this because they do not offer investment or financial planning services, and they emphatically stay on the other side of that line for good reason.  If you are not a tax advisor, you should not provide tax advice. If you are not an investment advisor or financial planner, you should not provide investment advice.  There are so many variables that going beyond "speak to your tax and investment advisors" is getting into territory where you should not provide such advice unless you are qualified (and licensed/insured) to do so.

I would be hesitant to craft such correspondence.  For a couple of reasons:

1) Once it's out there, you have to maintain it with the current rules and regs.

2) What if you forget or omit something?  What's worse: giving bad info or incomplete info?  Well, the former is worse, but the latter isn't much better.