Feel free to describe any intriguing cases, distinctive problems, or other situations arising out of complying with or dealing with 401(a)(31). I have do a presentation regarding 401(a)(31).
From the TPA view of things, rollovers seem to go well, once everyone is thinking of the job in 2 parts.
1. There is the paperwork to get the money out of the current IRA or Qualified Plan.
2. There is the paperwork to set up the new account or prepare the current Plan to accept the money.
I have heard of the Plans not accepting the rollover until they see a determination letter on the distribution Plan. When I have received the request, I have always had a letter to give them. Does anyone know what they do if the Plan has never applied for a letter?
1. There is the paperwork to get the money out of the current IRA or Qualified Plan.
2. There is the paperwork to set up the new account or prepare the current Plan to accept the money.
I have heard of the Plans not accepting the rollover until they see a determination letter on the distribution Plan. When I have received the request, I have always had a letter to give them. Does anyone know what they do if the Plan has never applied for a letter?
1.401(a)(31)-4, Q&A 14 addresses what the receiving plan needs to do to verify that the rollover is coming from a qualified plan. It's too long to post here, but here is an example from the Q&A addressing a plan that does not have a determination letter.
One of my plans had a rollover recently where the receiving plan asked for a determination letter. The distributing plan uses a volume submitter document and did not submit for a determination letter. The receiving plan accepted a letter from the plan sponsor that the plan is intended to be a qualified plan.
Good luck with your presentation.
QUOTE
Example 2. (i) The facts are the same as Example 1, except that, instead of the letter provided in paragraph (ii) of Example 1, Employee A provides the plan administrator of Plan M with a letter from the plan administrator of Plan O representing that Plan O satisfies the requirements of section 401(a) (or representing that Plan O is intended to satisfy the requirements of section 401(a) and that the administrator of Plan O is not aware of any Plan O provision or operation that would result in the disqualification of Plan O).
(ii) Based upon such a letter, absent facts to the contrary, a plan administrator may reasonably conclude that Plan O is qualified and that the amount paid as a direct rollover is an eligible rollover distribution.
(ii) Based upon such a letter, absent facts to the contrary, a plan administrator may reasonably conclude that Plan O is qualified and that the amount paid as a direct rollover is an eligible rollover distribution.
One of my plans had a rollover recently where the receiving plan asked for a determination letter. The distributing plan uses a volume submitter document and did not submit for a determination letter. The receiving plan accepted a letter from the plan sponsor that the plan is intended to be a qualified plan.
Good luck with your presentation.
I am plan sponsor of 4 401k plans and 13 pension plans.
The trustee to trustee part can cause problems. Some trustees (fund companies) require a plan number and SSN on face of check or that forms be mailed with the check. If this is the case we can't process a trustee to trustee transfer. We do not allow the printing of the SSN on the check. Nor can our trustee who issues the checks include any forms.
The check is issued payable to trustee fbo participant and mailed to the participant to forward on to the trustee with additional information. We have had ERISA attorney opine that since the participant can't cash the check and it is made payable to new trustee it is still within the trustee to trustee guideline.
The trustee to trustee part can cause problems. Some trustees (fund companies) require a plan number and SSN on face of check or that forms be mailed with the check. If this is the case we can't process a trustee to trustee transfer. We do not allow the printing of the SSN on the check. Nor can our trustee who issues the checks include any forms.
The check is issued payable to trustee fbo participant and mailed to the participant to forward on to the trustee with additional information. We have had ERISA attorney opine that since the participant can't cash the check and it is made payable to new trustee it is still within the trustee to trustee guideline.
It's worth also noting that Reg Sec 1.401(a)(31)-1 Q&A-14 explicity says a determination letter is NOT required in order to reasonably conclude that it's a rollover eligible distribution (not that it stops other plans from asking). We liked when the distributor would print "direct rollover" on the check stub somewhere as why would they call it that if they weren't qualified to issue it as such.
We did the exact same, both because we couldn't include forms and because we wanted the participant to remain involved in the process.
As for experiences, etc...
1) Since IRAs are commonly moved via transfer instead of direct rollover, one regular problem is that financial advisors try to do back office paperwork to initiate a transfer. However those forms almost never meet the requirements of a qualified plan (especially receipt of the 402(f) special tax notice and proper spousal consent). The result is having to reject the paperwork and instruct the participant on the proper distribution procedure.
2) On the trustee to trustee part. Since the direct rollover must be payable to the TRUSTEE of the receiving plan, some trustees began rejecting rollovers that were not exactly worded to their requirements. In a large company (w/ 4 DC & 4 DB plans), this made having easily accessible rollover procedures very important.
3) MRDs are a common pitfall for those over 70.5 trying to do rollovers. Some plan administrators require that the annual MRD be taken before a rollover distribution can be made (whether that policy is right or wrong has been subject of other debate). This can result in a two step process (1st MRD, 2nd rollover).
QUOTE (JanetM @ Jun 4 2008, 09:07 AM) 
The check is issued payable to trustee fbo participant and mailed to the participant to forward on to the trustee with additional information. We have had ERISA attorney opine that since the participant can't cash the check and it is made payable to new trustee it is still within the trustee to trustee guideline.
We did the exact same, both because we couldn't include forms and because we wanted the participant to remain involved in the process.
As for experiences, etc...
1) Since IRAs are commonly moved via transfer instead of direct rollover, one regular problem is that financial advisors try to do back office paperwork to initiate a transfer. However those forms almost never meet the requirements of a qualified plan (especially receipt of the 402(f) special tax notice and proper spousal consent). The result is having to reject the paperwork and instruct the participant on the proper distribution procedure.
2) On the trustee to trustee part. Since the direct rollover must be payable to the TRUSTEE of the receiving plan, some trustees began rejecting rollovers that were not exactly worded to their requirements. In a large company (w/ 4 DC & 4 DB plans), this made having easily accessible rollover procedures very important.
3) MRDs are a common pitfall for those over 70.5 trying to do rollovers. Some plan administrators require that the annual MRD be taken before a rollover distribution can be made (whether that policy is right or wrong has been subject of other debate). This can result in a two step process (1st MRD, 2nd rollover).
I'm glad Jim Chad mentioned the paperwork to get the $ out of the paying plan as well as the paperwork on the receiving IRA/plan end, and that JanetM pointed out the concers she did about the payment checks.
The paying plan too has a verification issue, that the recipient of the direct rollover is or is intended to be a 408 IRA, 401a plan or some other tax-advantaged vehicle. Otherwise, there should be mandatory 20% tax withholding.
In advising the paying plan, there is sometimes resistance by the receiving vehicle's trustee/custodian to verify the nature of the receiving vehicle in a simple, reasonable format being requested by the paying plan.
There are truly legitimate concerns from both ends of the direct rollver.
The paying plan too has a verification issue, that the recipient of the direct rollover is or is intended to be a 408 IRA, 401a plan or some other tax-advantaged vehicle. Otherwise, there should be mandatory 20% tax withholding.
In advising the paying plan, there is sometimes resistance by the receiving vehicle's trustee/custodian to verify the nature of the receiving vehicle in a simple, reasonable format being requested by the paying plan.
There are truly legitimate concerns from both ends of the direct rollver.
Problems? What problems? Haven't you heard the Fidelity radio commercial where some guy goes to Fidelity and rolls over his 401(k) over his lunch break?
Yep, but the unspoken lines were that the guys 401k plan was at fidelity. He signed one set of forms and it served both to send and receive. LOL the beauty of advertising is most often omitted.
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