Plan has a prototype document from a major brokerage firm. The brokerage firm is the "custodian." The plan sponsor missed the GUST deadline and has filed under VCP to get approval for the late-adopted document. Meanwhile, the brokerge firm has "frozen" all plan assets and will not make any distributions to the participants until the plan sponsor receives IRS approval of the document. What authority does the brokerage firm have in this matter? The letter of understanding betweenthe plan sponsor and the brokerage firm states that the brokerage firm has no administrative responsibilities.

I'll take a guess. May be the broker/custodian does the 1099R reporting. If the plan is disqualified, this would change the coding. Also, the account balance payable could be affected if the employer broke a fund rule by investing in a fund limited to qualified plans.

Did the plan administrator send out a Sarbanes Oxley notice?

No Sarbanes Oxley notice was issued. This Plan has only 10 paticipants.

I believe, without going back and checking, that the blackout notice is required for a 10 participant plan. I think only the "one participant plans" are exempted.

Hmmm. No other documentation of the relationship?

Is the custodian freezing investment switches as well, or just precluding distributions?

I've seen trustees preclude distributions where the plan has clearly violated some qualification requirements, but I've never seen one freeze investment choices.

Pax--just the usual verbage that the brokerage co has no administrative duties, will not prepare Forms 1099-R, etc. The agreement states "The Custodian shall have no duty to ascertain whether contribuitons, distributions or transfers comply with the Plan, the Internal Rev Code or ERISA." My personal opinion is that the broker just won't let go of the funds.

M: The custodian may be treating the plan as being terminated because it has lost its qualified status and will withhold payment until it receives a determination letter. Strange but true. Have you asked the custodian why payments are frozen?