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While it is not customary to treat any of our clients as anonymous file numbers, we respect...

the importance in this setting.
 
Please allow me to start with some background. When a 401(k) plan terminates, it is very important to ensure a proper and full reconciliation of assets before any distribution of balances is done. 401(k) plans have two ways of holding assets for participants. One is in an account where each individual has their own account (99% of today’s plans are like this). Another is in a setting where they are all pooled and at the end of each year, the allocation is done as to who owns how much, based on deposits, withdrawals and account performance (earnings or losses). In a pooled account, which this was, in a normal year, it is not uncommon for such a process to take until May or June. We first must get the payroll data and tax information from the employer and then we reconcile the accounts and allocate the earnings. In a year of plan termination, it is not uncommon for final distributions to be done 6 – 18 months following the termination of the plan. This is because all deposits must be done and reconciled and all assets and earnings allocated. Well, each day that it does not get done, the figures change because the investments change. That is a little background on the pension world we love and live in. This particular plan pooled and was going through the termination process, so we expected a longer cycle time.
 
Now typically, when a participant separates from service,  they are to distribute 100% of their account in the year following the termination. The complainant terminated in early 2013 and requested their distribution. The plan requirements called for waiting for a full distribution (not partial) following the year end after termination, which was 12/31/2013. So, her entire distribution should have been done in 2014. However, to be flexible and to accommodate a very unhappy separated participant, in 2013, we relied on the “administratively feasible provision” and were able to suggest an operational exception and pay about 80% of her account balance in 2013, even though it all should have waited until after December 2013.
 
Subsequently, a decision was made between the first distribution and the plan year end to terminate the plan. So, from our view, we made an exception to process a partial early withdrawal for a participant. But when the plan terminated, it became very important to follow all proper procedures to ensure proper reconciliation as the plan was closing. While this second distribution was a very small remaining portion of her account, we still needed to ensure it was done properly.
 
Now, outside of the technical explanation, we did have one error. We did not communicate that there was going to be a delay. In an interest to serve the participant, she was told a check could be cut; because in 99% of our plans, which are not pooled accounts and not terminating, it could have easily been done. But once it was recognized that the plan was in termination status and additional reconciliations had to be done, a follow-up call was not placed to the complainant informing her of the very unique setting surrounding her request. So, did we not do what we said we would do? Sadly, yes, we did not send her a check, because in doing so, that would have put the Plan Trustee and all of the other participants in jeopardy of not having the appropriate closing balances and transfers to their accounts. So we took a little longer to do it right and get her the proper amount. However, we should have contacted her to explain the delay.
 
The complainant has received her funds. While we wish the proper process had been communicated by our office more clearly and better understood by her, we will stand behind taking our time to ensure this was done correctly and within the rules. After all, With Your Interest in Mind in a 401(k), we never put one participant’s interest ahead of another.
 
The Partner in our Rice Lake office will be contacting the complainant to deliver a genuine apology. He is currently travelling on business and will return on the 12th, and will reach out to her by phone or letter within one week of his return.  
 
Respectfully submitted by  B&E Pension Advisers, Inc.
 
 
[redacted]

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