We are often asked by our clients if they can distribute various required items electronically such as Summary Plan Descriptions, Summary of Material Modifications, Safe Harbor Notices, Qualified Default Investment Notice, 404a-5 Fee Disclosures, etc., etc., etc. Unless you are Rip Van Winkle and you started your nap in 1974 when ERISA was passed and you haven't awoken yet or you are one of our clients who has decided that all emails from us as your TPA should automatically go into the junk folder without being read, then you are aware that the wonderful regulatory arms of our Federal Government have spent the last 40 years (Post-ERISA) creating the need for you to pass out one retirement plan notice after another after another, ad nauseam. You know, those items you work so hard to pass out to everyone (because we browbeat you into doing so even though you might have some real work to do) that are actually looked at by 1/10th of 1% of your workforce (and they don't understand it because it is in required "government-speak"). "Ad Nauseam" above is the perfect adverb because it relates to "doing something that has been done or repeated so often that it has become annoying or tiresome".
Can you distribute some of these notices electronically (via email) rather than having to print and distribute hard copy? The answer is generally "yes." Well, okay, we will admit it - after reading the clearly worded guidance on this topic a hundred or more times even when fresh in the morning and even with our third cup of coffee and even after having borrowed a couple of our grandkids ADHD meds to help us concentrate, we are not totally sure we understand the rules. Below is our best effort at what we think the rules might be.
Basically, disclosures under Title I of ERISA (the Employee Retirement Income Security Act of 1974) must be furnished using "measures reasonably calculated to ensure actual receipt of the material." The Department of Labor issued a regulation defining a "safe harbor" for complying with electronic disclosure rules. The safe harbor is limited to individuals who meet the requirements of one of the following classifications:
"Integral Part of Duties. "Participants who have the ability to effectively access documents furnished in electronic form at any locations where the participant is reasonable expected to perform his or her duties as an employee and with respect to whom access to the employer's or plan sponsor's electronic information system in an integral part of those duties." That is government wording, not ours. Our interpretation of that is that if an employee's job is such that they regularly use a company email system as part of their duties, then they can be given electronic disclosures via email. Really, DOL? Would it be so hard to just say "If your employee uses business email regularly, then you can send them the notices they won't read via email!" You could also have employees who use a company electronic system such as an Intranet where you can be assured that they access the Intranet frequently in their duties who could given electronic notices. Yea, right - that expensive Intranet you maintain to communicate with employees that they have long since forgotten to log into and you have long since forgotten to update with anything fresh that would make they want to go there. Oh, wait, that is our Intranet I am referring to, not yours.
"Affirmative Consent. The safe harbor also applies to other participants (e.g., retirees, former employees and active employees who do not use a computer as an integral part of their duties), beneficiaries (e.g., surviving spouse, alternate payees), and other persons entitled to disclosures under Title I of ERISA who affirmatively consent to receiving disclosures through electronic media in a manner prescribed by the regulation." Our interpretation of this government double-speak is that if you give this group of people an annual Notice (yes, yet again another notice) properly written to have to necessary language and if they provide you with a personal email address to use for the purpose of receiving future notices, then you can distribute required notices to them through email. You might want to make the Notice and Consent Form that we can provide a part of your exit package or you could mail such a notice to their home address asking that the form be completed and returned. Unless they return the form, then you cannot send them notices via their personal email. Maybe the best course of action is to get them paid out or rolled over if they are an ex-employee - but of course to do that, you have to issue another whole set of disclosures!
If you would like to get our latest version of the Notice and Consent Form, just call our office at (650) 341-3322 and enter into our labyrinth of voicemail messages or just email your regular contact at our office. When they get back from their meeting with their kids school Principal, they will send you the form.
Here is a link to the actual Technical Release 2011-03 from the DOL with more detail on this subject - do us a favor, if you spend a few hours trying to digest the perverse language, please let us know if you reach any different conclusions.
Wednesday, June 11, 2014
Monday, March 31, 2014
IRS Form 5500 Signing Time - In Other Words, Time to Play Hide and Go Seek With Your Misplaced User ID, Password and PIN Again
Don't you just love it when you have to sign into an online application once a year and only once per year and some government bureaucrat expects you to remember your username, password and a special PIN. The Dept of Labor, through their registration website, assigns you a User ID and PIN. These are assigned to you and not something you get to pick. Heaven forbid that the government would do what every other website in existence does - let you pick your own User ID so you might remember it. Well, welcome to the annual filing of the IRS Form 5500 for your qualified retirement plan. Around our TPA firm this is affectionately referred to as our "Oh Boy, we get to talk to most of our clients again time" since so many clients call for help on forgotten credentials. Hey, being such a friendly TPA firm, we welcome touching base with our clients - we would just rather talk about your kids and grandkids and not recovering your electronic signing credentials.
Had a great conversation with a good client recently. He told me how he spent hours putting all of his passwords into a cloud-base electronic password safe, only to then forget the password to open the safe. Been there! Done that!
When we have finally browbeaten our clients into sending in their annual census and annual plan information questionnaire and then we have done our compliance work and participant accounting, we prepare the IRS Form 5500 (or 5500-SF) and then "invite" our clients via an email to go online and electronically sign the form, hopefully before the applicable deadlines (for a Calendar Year Plan, 7/31 is the deadline often extended to 10/15). "Browbeat" is one of our new favorite words because it has synonyms of "bully, intimidate, force, coerce, compel, hector, dragoon, bludgeon, pressure, tyrannize, terrorize, menace, harass, harry and hound." And that describes what our friendliest and nicest Client Account Managers will do to drag your annual data out of you.
For many, the electronic signing process is confusing but with the help of our great administrators we can help our clients get through the process. This will be the process for all future years, so the person at your firm who is going to electronically sign the form each year needs to make sure they have a record of their User ID, password and PIN. There is a process at the Department of Labor website to retrieve or reset your password if you do happen to forget it or misplace it. The DOL website as of this writing is www.efast.gov.dol. You go there to register for the first time and you go there if you have forgotten your signing credentials. For lost credentials, first you will probably want to recover your assigned User ID (hit Log-In and Forgot User-ID). You are in good shape if you can remember what email you used when you registered and if you can remember the answers to some security question that you picked at registration time. Once you have your User ID, you can then recover your Password by hitting that link on the Log-In Screen. Hey, having been through the recovery process this time, put everything where you can be sure to find it one year from now. You already spend enough time handling your retirement plan - don't punish yourself by spending more time than you have to on this funky little process each year.
If the person who signed or who was going to sign your firm's 5500 leaves your company then you will need to decide who will sign the form in the future and they will have to go through the process of getting their PIN, etc. and you will need to communicate with us so we can email our "signing invite" to the right person. You could ask your ex-employee to do this process for you, but that is probably not what we would call a "best practice" (he says 'tongue-in-cheek' - another interesting phrase - lots of fun to Google these phrases to see how they came about).
We want you to know we really appreciate our clients. Our firm is in its 40th year of existence and we could not have lasted that long without a lot of really wonderful clients. Thanks!
Had a great conversation with a good client recently. He told me how he spent hours putting all of his passwords into a cloud-base electronic password safe, only to then forget the password to open the safe. Been there! Done that!
When we have finally browbeaten our clients into sending in their annual census and annual plan information questionnaire and then we have done our compliance work and participant accounting, we prepare the IRS Form 5500 (or 5500-SF) and then "invite" our clients via an email to go online and electronically sign the form, hopefully before the applicable deadlines (for a Calendar Year Plan, 7/31 is the deadline often extended to 10/15). "Browbeat" is one of our new favorite words because it has synonyms of "bully, intimidate, force, coerce, compel, hector, dragoon, bludgeon, pressure, tyrannize, terrorize, menace, harass, harry and hound." And that describes what our friendliest and nicest Client Account Managers will do to drag your annual data out of you.
If the person who signed or who was going to sign your firm's 5500 leaves your company then you will need to decide who will sign the form in the future and they will have to go through the process of getting their PIN, etc. and you will need to communicate with us so we can email our "signing invite" to the right person. You could ask your ex-employee to do this process for you, but that is probably not what we would call a "best practice" (he says 'tongue-in-cheek' - another interesting phrase - lots of fun to Google these phrases to see how they came about).
We want you to know we really appreciate our clients. Our firm is in its 40th year of existence and we could not have lasted that long without a lot of really wonderful clients. Thanks!
Monday, March 3, 2014
What Do You Mean "Give Salary Deferrals Back to Our Top People" - Are You Crazy?
If you have a Safe Harbor 401(k) Plan or pretty much any 403(b) Plan, then you can skip this entire discussion. Wow, that is like being let out for recess early - always a great thing! However, if you have received a communication from us telling you that you must refund some of the salary deferrals of your top people, then you probably want to read on. Okay, you probably don't really want to read on having a million other things you need to do, but you should anyway.
Come with me on an adventure back in time....... It is the early 1980's and 401(k)'s have just been created. Plan Design Consultants, Inc. has only been around for a few years at this time having been founded in 1975 by the man now affectionately referred to by our staff as "the old gray hair". Well, okay, maybe "affectionately" is not the applicable word for some of our staff. Anyway, back to our exciting story of mystery and intrigue.
Somewhere in the dark depths our our Nation's Capital, picture a couple of young recent graduates of Georgeton Law School are slaving away deep into the night on drafting proposed legislation (yes, I know it is really spelled Georgetown Law School, but, hey, this is a fictional story). They are anxious to impress the Congressman that was crazy enough to hire them. Picture Kevin Spacey of the Netflix TV Series, House of Cards - a tough task master, as you know. They have been up for two days with the help of the best illegal stimulants money can buy and this point they approaching paranoia and hearing voices from somewhere in their head. New legislative analyst #1 says to #2 - "We have just this one night to come up with some rules for 401(k) plans that will drive Plan Sponsors crazy for many, many years to come. These rules need to be incomprehensible, stupid, and most of all designed to make sure that the most successful people have a hard time retiring in style. Give me your best thoughts!"
Analyst #2 says "How about this, let's start by creating two classifications of people. The bottom classification will be able to save pretty much as they want without any restrictions. We can call them the "Non-Highly Compensated Employees". Let's call the top classification of employees the Highly Compensated Employees and let's really stick it to them with the rules and let's not forget to stick it to their family members as well. You know.... their spouses, their kids, their parents and certainly anyone owning more than 5% of the company.
Analyst #1 says "Dude, you are on a roll - take another puff and keep going!" To which Analyst #2 says "Wouldn't it be really perverse to come up with some crazy mathematical rule, like the top group cannot do salary deferrals on the average that are more than two percentage points than the average of the bottom group. For example, if the bottom group averages 2% of pay, then the top group would be limited to an average of 4% of their pay. Consider how genius that would be because the bottom group cannot afford to do hardly anything and therefore the top group will really be hampered." The Congressman will be so impressed. With these kinds of rules we can make sure people have to pay current income taxes.
"Yes, yes, yes..... you are really onto something terrific here! I knew there was a reason you graduated at the top of our class. If those top people have done too much under your two percent rule, let's make them take the money back out and, check out this.... let's apply a 10% excise tax on the company if they can't get this money returned within 2 1/2 months of the end of the year. That will really drive them bonkers - we can upset the top people, we can upset the company and we can make them "want to shoot the messenger" who would be the TPA firm doing these calculations."
"Beautiful, awesome, outrageous, most excellent - our legislative careers will skyrocket when Congress sees the superb work we have done on this. Give me another drag on that magic cigarette, will you? My only fear is that those legislative analysts who joined the staff of that honest, hardworking, intelligent Congressman from Kansas will create some sort of a Safe Harbor exception to our testing. They are such bleeding hearts that they will probably come up with some rule that says you can ignore our testing if you are willing to do a certain size match or Profit Sharing contribution. If the employer will agree to do this, they might even specify that the top group can do whatever the salary deferral limit is for the year. I heard they might let people put away $17,500 or even $23,000 if they are old geezers (over 50 by the last day of the year).
And with their work done for the night, the young grads headed of to Foggy Bottom to seek more wisdom in the realm of Budweiser (no wait, it would have to be some IPA Craft Beer that cost $2 a bottle more than domestic beer - can't be saving that money for retirement you know) - and in the morning they can go for a Caramel Creme Crunch Frappuccino with Expresso Infused Whipped Creme and Italian Roast Coffee Drizzle. Hey, what's $6.75 for a coffee when you are not saving for the future anyway.
Come with me on an adventure back in time....... It is the early 1980's and 401(k)'s have just been created. Plan Design Consultants, Inc. has only been around for a few years at this time having been founded in 1975 by the man now affectionately referred to by our staff as "the old gray hair". Well, okay, maybe "affectionately" is not the applicable word for some of our staff. Anyway, back to our exciting story of mystery and intrigue.
Somewhere in the dark depths our our Nation's Capital, picture a couple of young recent graduates of Georgeton Law School are slaving away deep into the night on drafting proposed legislation (yes, I know it is really spelled Georgetown Law School, but, hey, this is a fictional story). They are anxious to impress the Congressman that was crazy enough to hire them. Picture Kevin Spacey of the Netflix TV Series, House of Cards - a tough task master, as you know. They have been up for two days with the help of the best illegal stimulants money can buy and this point they approaching paranoia and hearing voices from somewhere in their head. New legislative analyst #1 says to #2 - "We have just this one night to come up with some rules for 401(k) plans that will drive Plan Sponsors crazy for many, many years to come. These rules need to be incomprehensible, stupid, and most of all designed to make sure that the most successful people have a hard time retiring in style. Give me your best thoughts!"
Analyst #2 says "How about this, let's start by creating two classifications of people. The bottom classification will be able to save pretty much as they want without any restrictions. We can call them the "Non-Highly Compensated Employees". Let's call the top classification of employees the Highly Compensated Employees and let's really stick it to them with the rules and let's not forget to stick it to their family members as well. You know.... their spouses, their kids, their parents and certainly anyone owning more than 5% of the company.
Analyst #1 says "Dude, you are on a roll - take another puff and keep going!" To which Analyst #2 says "Wouldn't it be really perverse to come up with some crazy mathematical rule, like the top group cannot do salary deferrals on the average that are more than two percentage points than the average of the bottom group. For example, if the bottom group averages 2% of pay, then the top group would be limited to an average of 4% of their pay. Consider how genius that would be because the bottom group cannot afford to do hardly anything and therefore the top group will really be hampered." The Congressman will be so impressed. With these kinds of rules we can make sure people have to pay current income taxes.
"Yes, yes, yes..... you are really onto something terrific here! I knew there was a reason you graduated at the top of our class. If those top people have done too much under your two percent rule, let's make them take the money back out and, check out this.... let's apply a 10% excise tax on the company if they can't get this money returned within 2 1/2 months of the end of the year. That will really drive them bonkers - we can upset the top people, we can upset the company and we can make them "want to shoot the messenger" who would be the TPA firm doing these calculations."
"Beautiful, awesome, outrageous, most excellent - our legislative careers will skyrocket when Congress sees the superb work we have done on this. Give me another drag on that magic cigarette, will you? My only fear is that those legislative analysts who joined the staff of that honest, hardworking, intelligent Congressman from Kansas will create some sort of a Safe Harbor exception to our testing. They are such bleeding hearts that they will probably come up with some rule that says you can ignore our testing if you are willing to do a certain size match or Profit Sharing contribution. If the employer will agree to do this, they might even specify that the top group can do whatever the salary deferral limit is for the year. I heard they might let people put away $17,500 or even $23,000 if they are old geezers (over 50 by the last day of the year).
And with their work done for the night, the young grads headed of to Foggy Bottom to seek more wisdom in the realm of Budweiser (no wait, it would have to be some IPA Craft Beer that cost $2 a bottle more than domestic beer - can't be saving that money for retirement you know) - and in the morning they can go for a Caramel Creme Crunch Frappuccino with Expresso Infused Whipped Creme and Italian Roast Coffee Drizzle. Hey, what's $6.75 for a coffee when you are not saving for the future anyway.
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