Ask the Experts June 4, 2019

(b)lines Ask the Experts – Rolling 403(b) Funds Back to a Prior 403(b)

Experts from Groom Law Group and Cammack Retirement Group answer questions concerning 403(b) plans and regulations.
Reported by

“An employee left our charitable foundation to work for another. When she left, she took a distribution and rolled it over to the plan of the other foundation. However, after a few months, she decided that the new position was not for her, and, since we had not filled her position yet, we made her an offer to return, which she accepted. Can she roll the funds that she rolled over to her new employer’s 403(b) plan right back to our 403(b) plan?”

 

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Stacey Bradford, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:

Yes she can roll the funds back to your plan via the same direct rollover transaction that she used to roll over funds to the other employer’s plan, assuming that your plan accepts rollovers. However, your returning employee will want to confirm that she will not be charged to move her funds back to your plan, since: a) some plans have surrender (withdrawal) charges depending on the type of investment used, though this fee is often waived at termination of employment, and b) some plans charge a flat dollar fee for each distribution, and such a fee is often NOT waived for termination of employment. In those situations the employee may wish to consider leaving her funds in the plan of the other employer (if permitted) rather than incurring a charge to roll the funds over.

In addition, you’ll want to thoroughly document the circumstances of her termination of employment and rehire so that, in the event that your plan is ever subject to an IRS audit, the IRS is assured that the termination and rehire was legitimate and not a “sham” termination/rehire designed to provide a participant with access to retirement funds (since the rollover funds in your plan will generally be available for withdrawal for any reason, subject to the specific terms of your plan).

 

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.

 

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Compliance June 3, 2019

EEOC Sues Dental Practice for Age Bias

The agency has been cracking down on age bias, as age discrimination can thwart employees’ plans to work longer and could affect retirement plan drawdown strategies.

Reported by

Capital City Dental Care, a dental practice headquartered in Harrisburg, Pennsylvania, violated federal law when it fired a group of dental hygienists because of their age, the U.S. Equal Employment Opportunity Commission (EEOC) charged in a lawsuit.

According to the suit, in August 2015, a new owner purchased the dental practice. From September 2015 through November 2015, Capital City Dental Care fired eight out of nine dental hygienists older than 40 at its Camp Hill, Pennsylvania, location. Capital City Dental Care did not give the dental hygienists, each of whom had years of experience and was qualified for the position, any prior notice or reason for the termination. From August 2015 through February 2018, the company then replaced them with 14 employees, 13 of whom were younger than 40.

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Such alleged conduct violates the Age Discrimination in Employment Act of 1967 (ADEA), which prohibits discrimination against people who are age 40 or older.

The EEOC filed suit (EEOC v. Michael A. Sisk, DDS, LLC, d/b/a/ Capital City Dental Care, Civil Action No. 1:19-cv-00804-UN1) in the U.S. District Court for the Middle District of Pennsylvania, after first attempting to reach a voluntary, pre-litigation settlement through its conciliation process.

The agency has been cracking down on age bias, and a House of Representatives committee recently considered such issues faced by older workers. A 2018 report by then acting chair of the EEOC, Victoria A. Lipnic, found age discrimination remains too common and too accepted as outdated assumptions about older workers and ability persist. It says age discrimination can thwart employees’ plans to work longer and could affect retirement plan drawdown strategies.

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