Legal & Compliance FAQs
NFW-3840AO, NFW-3847AO

Regulatory FAQs

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We are an SEC-registered RIA and, as such, will be a named fiduciary (3(21) only) on retirement plans. In light of the recent 404(c) changes, are we required to be bonded? With greater exposure I'm certain we will need additional coverage. Are there any codified minimum requirements for RIAs?

Is a plan sponsor required to provide any notice to a terminated participant? I understand the 402(f) notice requirements after a participant requests a distribution − but what about before the participant requests anything?

A participant contributed Thrift contributions back in the 1980s. The cost basis is available. The money now sits in the source "Post Tax Voluntary." Can the participant roll out the basis into a nonqualified account (he is over 59½) and keep the balance of the assets (growth from initial contribution) in the 401(k) without penalty and paying taxes?

An employer who has both non-union and union employees currently has a pension set up for the union employees and a salary-deferral-only 401(k) plan set up. The employer would like to convince the union employees to all "opt-out" of the pension and elect to participate in a new 401(k) set up by the employer. The employer would like the new 401(k) to have similar benefits as the pension (40 cents an hour) but only include the union employees and exclude the non-union employees. The employer would like to keep the existing 401(k) for the non-union employees so they would have two separate 401(k) plans. Is this lawful to do?

Does a fixed interest rate of zero (0) or below affect a plan's compliance with 404(c)?

Assuming a retirement plan holds an insurance policy inside of a plan and the employee terminates, what are the distribution options and what are the tax implications of each, specifically if the employee chooses to keep the policy and re-title it in his or her name?

Can an individual participate in a plan sponsored by a partnership if this individual does not receive compensation directly from the partnership? The partnership pays an LLC that the individual owns.

Regarding our fiduciary status on our 408b2 disclosure document, it says the broker-dealer provides investment-related services to the plan in its capacity as an investment advisor registered with the SEC under the Investment Advisers Act of 1940. Does this mean that our advisor is a "fiduciary" at the investment level and he or she can provide advice for a fee, but does not have discretion?

Which 5500 schedule does a plan, in which its sole assets are insurance contracts fully guaranteeing benefit payments, have to file?

Once the 408(b)(2) full disclosure requirement is operational how do you think the EBSA will test compliance? What entity would be the best target?

What are the main differences between Internal Revenue Service (IRS) and Department of Labor (DOL) audits?

What does the Department of Labor (DOL) look at when they audit plans?

How can a 401(k) plan design help with refunding pretax salary deferral contributions to highly compensated employees (“HCEs”) when the deferral percentage (“ADP”) test is failed?

I manage three profit sharing/401(k) plans and am always actively involved with the plan sponsors and the participants. Regarding 408b2 and 404a5, what are the responsibilities of sending and receiving these notices to plan providers, financial advisors, and plan sponsors? My plans are well established but I want to know and make sure I'm sending information to the plan sponsor on time and helping them understand what is required of them, and by whom.