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I hadn't thought about this before, but a bell just rang in the head and I guess if things are done properly, he gets 2 1099s one for the excess and the rest for the rollover. thus at tax time he pays the taxes on the excess. now, if he hasn't returned the excess then what happens when he eventually takes the $ out of the IRA? in other words, is the IRA keeping track of the basis? maybe telling them that will increase the pressure to get this done properly.

Honestly, I wouldn't even attempt to answer that question - to me, that's a question for ERISA counsel. Any opinion I might have I'll keep to myself, lest I expose my ignorance even more than is customary...

While I defer to the ERISA attorneys, I'd just observe that it is the participant who wants the distribution that is saying there will be a divorce - what ulterior motive would a participant have for making a statement that serves to delay or prohibit a distribution to himself? So I think it is pretty reasonable for the plan to put a hold on the account based on that, pending whatever additional written confirmation/statements whatever an attorney would tell the plan is appropriate. I think the "may" is fairly standard language, to allow some Plan Administrator flexibility. And, good luck getting a statement indicating marital bliss.

I would word it this way: The regulations are as follows 1.401(k)-2(a) (iii) Special rule for early participation. If a cash or deferred arrangement provides that employees are eligible to participate before they have completed the minimum age and service requirements of section 410(a)(1)(A), and if the plan applies section 410(b)(4)(B) in determining whether the cash or deferred arrangement meets the requirements of section 410(b)(1), then in determining whether the arrangement meets the requirements under paragraph (a)(1) of this section, either— (A) Pursuant to section 401(k)(3)(F), the ADP test is performed under the plan (determined without regard to disaggregation under § 1.410(b)-7©(3)), using the ADP for all eligible HCEs for the plan year and the ADP of eligible NHCEs for the applicable year, disregarding all NHCEs who have not met the minimum age and service requirements of section 410(a)(1)(A); or (B) Pursuant to§ 1.401(k)-1(b)(4), the plan is disaggregated into separate plans and the ADP test is performed separately for all eligible employees who have completed the minimum age and service requirements of section 410(a)(1)(A) and for all eligible employees who have not completed the minimum age and service requirements of section 410(a)(1)(A). In other words, you have a choice 1. All HCEs and only those NHCE who are not otherwise excludables (there is no reason to run an otherwise excludable test as their are no HCEs 2. Split the test into 2 - All who met 1 yr/age 21 and another test with all otherwise excludables (including OE HCEs) you have 2 tests, refunds in one test are not really related to refunds in another test. can't speak for other software, but Relius coding option 1 would be 'carve out' - you carve out all the HCEs and just those NHCEs who have met the 1 yr age 21 option 2 would be 'test separately' because you are indeed testing two groups separately ....................... by the way, there is no similar rule for purposes of Coverage

1) The procedure indicates that a verbal notification is sufficient. Telephone calls are "verbal." 2) I don't think any distribution is appropriate. No one know what percentage of the balance the DRO will ultimately award to the alternate payee. It may be more than half. Indeed, it could be all of the account (and he gets the house or other assets). Too many unknowns to make assumptions. 3) The procedure indicates a method for removing the hold. It needs to be written (and IMHO should be a "warranty" on the part of the participant that no DRO is forthcoming - so that there may be recourse if in fact a DRO is later issued.) I'm not enamored by "participant" statements as justification for a release of the hold. Participants lie - especially when trying to grab or hide assets from a soon to be ex. Not sure what the plan requires - but .... 4) I'd still get the "written" document required by the procedure - and if the spouse signs it - so much the better (and notarized is even better to prove that it was the spouse). Finally, ask counsel. The plan or it's fiduciaries - or the sponsor - don't want to end up paying "twice."

If you submit under VCP, just possible the IRS might run it over to audit as an "egregious" situation anyway... If a person has a failure (or multiple failures) but isn't willing to fix it, then there isn't really anything that can be done. Were the 5500 EZ forms filed correctly (under penalty of perjury, no less)? Relationships can be tough, but I don't really see any alternative other than saying something to the effect of, "your plan is out of compliance and can be disqualified upon audit, and you are potentially subject to all kinds of penalties for prohibited transactions, etc., etc., and you need to seek advice of counsel to determine your possible course(s) of action and the risks/rewards associated with each."

be there? ... well ... I'll be there! To recommend funds for free-ee-ee. You won't know What those funds are paying me-ee-ee. - The Four Fiduciary Tops