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The problem with that is that I don't think even the PBGC will allow anyone who is not a majority owner to opt to forego any of his or her benefits (given the fact that coercion could be involved). Plus, of course, there it is in broad daylight, evident to all. Further, spousal consent is probably mandatory for any benefits to be foregone, and the resolution does not address that.

The failure originated with the notion that the participant should be allowed any control of the policy. The participant is merely the insured. The plan is owner and beneficiary of the policy (I tend to use "plan" and "plan's trust" interchangeably). So, under what authority would the insurance company act per the instructions from someone who is not the owner. If the insurance company issued a check (from policy loan proceeds) to the participant, then that would be a taxable distribution from the plan to the participant. There is nothing (eg legally enforceable loan agreement, amortization schedule, etc.) that would invoke 72(p) to have that distribution treated as a loan. With that said, the failures appear evident. The approach used to correct is should be interesting:-) (I'm keying this from my smartphone, so please excuse the brevity) Good Luck!

My take is that this was not a plan loan at all, or I'll temper that a bit and say it may not be. Insurance, in my opinion, should be considered just another asset of the plan, with some unique characteristics. One of them is that if the plan is otherwise pooled, any insurance is effectively self-directed/segregated. That may or may not be relevant but the point is that premiums, loans or other transactions involving the insurance "account" should be considered transfers between accounts. So you have money coming out of the insurance policy and going to a participant. The "coming out" part is a transfer out of the policy, and (to my way of thinking) you first have an effective transfer to a "side fund" (old admin terminology for everything not insurance) and then...ah, here is the question. It's either a loan, or a distribution. Of course there was no paperwork either way, and the consequences (ultimately) are the same - taxable income. How to treat it might depend on whether loans were permitted, what shred of paperwork might exist, etc. What you do have is an unfortunate mess, probably created by the agent in setting up the policy ownership correctly, and the insurance company, for being sloppy and letting it happen and then allowing the loan. None of which is surprising. (I may be complicating the situation by creating a phantom step but I don't feel like re-typing. I guess you could boil it down to either a loan or a distribution, directly from the policy. But adding the intermediate step helps, I think, to prevent the line of thought that there could or should be direct dealings with the insurance company and participants.)

It is quite possible the prior employer kept the plan open until he determined if any final contributions were need for tax deduction reasons. As others have said, if no money was with held from your pay check then likely the only thing both employers are guilty of is poor communication. If this was an asset sale, and that seems likely in this case, the new employer would not even have authority to withhold 401(k) contributions without establishing a new plan and getting new deferral elections. As for the 2 days notice that is problematic as by law I believe they must give you 30 days before requiring a distribution.

You are welcome. P.S. - please note in #2, I mentioned if there is any "required" employer contribution. This is really the operative phrase - it is very possible that the plan provides for an employer DISCRETIONARY match, or profit sharing contribution, which under the terms of the plan would not be required. So if all deferrals were properly deposited, it is quite possible that no further contributions are required under the terms of the plan. Again, speaking in generalities here, as we don't have full information! Good luck.

I understand your concern, but first, take a step back and take a deep breath, and don't panic yet. There may not be anything whatsoever inappropriate or "shady" going on, but I know it is difficult for you to determine that when you are getting incomplete information and/or poor communication. We are all operating on fragmentary information here at best. 1. Assuming this was an asset sale, there is no requirement for the plan to be terminated when the assets were sold back in August. 2. Did you have any deferrals that were withheld prior to the sale that have not been deposited? If so, then yes, this is a violation (perhaps not intentional) and the former employer entity will be required to deposit them and pay interest. If there is any employer required contribution (safe harbor, match, etc.) that is due for the period prior to when you became employed by a new employer, then that amount will need to be contributed prior to the plan termination being completed. 3. Address your questions, IN WRITING, to the Plan Administrator (presumably your former employer.) See what you get. The fact that you are getting any communication at all tends to make me think there is nothing deliberately shady going on, but really no way to know that from this end. Hopefully you'll get appropriate answers and all will be cleared up to your satisfaction.