Leaderboard

I see 2 separate issues. One is determining the beneficiary and the other is whether that beneficiary can receive a QPSA. QPSA is in code section 417. My opinion is that the consensus is that when the QJSA and QPSA consent rules are involved, preexisting beneficiary designations naming alternate primary benes will become null and void at the moment of marriage. So now you have to go back to your plan and read for a certain nuance... a spouse beneficiary who does NOT get the QPSA. It might simply mean she's treated mostly like a nonspouse; she might have to wait until a later date to take distributions or she might not get certain forms of distribution; just have to read your plan to figure it out. The key is that the validity of the consent is not contingent on a year of marriage, rather it's the availability of the QPSA that requires the year. (But the fact it's a 403(b) makes me less than 100% certain on the whole thing. I did find that some 403s can be subject to QPSA, so then it seems those rules would follow thru in full.) Edit: is the plan definitely subject to ERISA? Then my answer stands http://benefitslink.com/boards/index.php?/topic/51441-spousal-consent/

This may be an oversimplification, but as I understand it partners have no income until December 31. Terminating the plan June 30 doesn't change that.

I wonder if they're drifting into a breach of fiduciary prudence. I guess the real question is just how illiquid is the investment? Is it truly unsellable or just devalued? Two entirely different things. I know of no land, short of a SuperFund site, that won't sell at some price. My one or two ideas are likely to cost more to setup and administer than the real estate is worth... such as putting it in an LP and distributing the LP shares in-kind. Or if the executive suite is so in love with the real estate, go in for a PLR to let the company buy it from the plan on the grounds of providing liquity to participants. They need to weigh the costs of 1) risk of being sued for fiduciary breach by maintaining an investment they know to be bad, 2) filing for a PLR and 3) cutting their losses and selling at the current market rate. And this thread needs to be tagged so when other people come asking about putting real estate in plans, we can point them to this as a case study in why it's a bad idea. I do believe that illiquidity is one of the potential problems about which people are commonly warned.

Peter, At best, the "warranty" would make the insurance company a fiduciary for a very limited scope of responsibility, usually due diligence selection of underlying funds (exclusive of wraps). In each that I've read, the role of the plans investment manager under ERISA 3(38) was held by a party outside the insurance company, usually the sponsor. I'd question whether it would be possible for a sponsor in this situation to make a claim under the fiduciary warranty without subjecting him/herself to the possibility of a fiduciary breach claim. I think this acts a a pretty significant barrier to making a claim. I share your curiosity about the experience though and hope that someone on here can share a story. The other important thing to consider is the warranty is only as good as the guarantor...even if well intentioned, they may not be able to pay depending on circumstances years from now. In my opinion, it's just a marketing gimmick. There are real 3(38) managers in the marketplace, but I'm confident they are generally averse to the insurance companies platforms. Mark