Ask the Experts November 9, 2021

Small Balance Cashouts When Annuity Contracts Don’t Allow Them

Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.

Reported by

“We currently sponsor a single-recordkeeper ERISA 403(b) plan with both mutual funds and annuity contracts among the plan investments. We wish to add an automatic cashout feature for balances of $5,000 or less upon employment termination, but some (not all) of our annuity contracts do not allow for small balance cashouts. Could we just amend our plan to require cashouts for all of our mutual funds and the annuity contracts that allow them?”

Charles Filips, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

Depending on the type of plan document you use, you should indeed be able to do this, provided that your recordkeeper can properly administer this provision. If you have an individually designed plan document, you can simply amend that document to allow for such cashouts to the extent permitted by the annuity contract or custodial account (mutual fund) agreement.

However, if you have a recordkeeper’s pre-approved document, you will need to see if this option exists in your adoption agreement. Often it does (particularly when the recordkeeper and the annuity contract provider is the same entity), but sometimes there is no option for small balance cashouts in this circumstance (and you will generally be limited to the available options under the adoption agreement if you intend to maintain your reliance on the opinion letter). Also, you will want to make sure that the annuity contracts that do permit automatic cashouts provide for an exception to any withdrawal fees (such as a surrender charges) for cashouts of small account balances.

And, finally, of course, for plan changes such as this, you should always consult with your outside Employee Retirement Income Security Act (ERISA) attorney before proceeding.

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.

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Rebecca.Moore@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future Ask the Experts column.

Break from the Grind November 9, 2021

TUESDAY TRIVIA: From What Did Braille Originate?

Braille is the universally adopted system of reading and writing used for blind people.

Reported by

The Braille system of reading and writing for blind persons that we know today was invented by Louis Braille, who was blinded at the age of three, and refined over the years by experts. But, Louis Braille didn’t start from scratch.

While at the school for the blind in Paris, he learned of a system of tangible writing using dots that was developed several years earlier by Charles Barbier. Some sources say Barbier developed the system in response to Napoleon Bonaparte’s request for a means for soldiers to communicate silently at night.

Get more!  Sign up for PLANSPONSOR newsletters.

Barbier’s system used a set of 12 dots that represented sounds, but Braille encountered problems with reading the code. He revised it to a system using 6-dot cells that represented letters of the French alphabet.

According to Britannica, Braille’s system was immediately accepted and used by his fellow students, but wider acceptance was slower. The system was not officially adopted by the school in Paris until 1854, two years after Braille’s death.

A universal Braille code for the English-speaking world was adopted in 1932, when representatives from agencies for the blind in Great Britain and the United States met in London and agreed upon a system known as Standard English Braille, grade 2. In 1957 Anglo-American experts again met in London to further improve the system.

Reported by
Reprints
To place your order, please e-mail Reprints.

«