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SPOT ON.

It is a testament to the level-headedness of the thread's participants. Either that or we just enjoy watching an internet version of Don Quixote play out.

For some reason, when I see a comment like "The reason to do [this] is that some employees' spouses' retirement plans have high administrative fees, so we considered setting up a new "clone" of our existing DC plan specifically for those spouses.", the first thing that I would assume is that the spouses are spouses of HCE decision makers. Decision makers otherwise tend to completely ignore issues concerning the plans covering the non-employee spouses of rank and file employees. After all, if those high administrative fees can be categorized as unreasonable and due to fiduciary violations, it is not the sponsor of THIS plan who may be named a defendant in a fiduciary violation lawsuit!

Our concern first came up when the plan sponsor went into emergency manager status and bankruptcy was a possibility. I wanted to make sure that should bankruptcy happen there would be no question as to where the assets belonged.

This was my intended answer. I was shaking my head (not nodding, but shaking) so hard that I missed the first two questions. Good Luck!

The most simple answer I can come up with is that a plan has to be maintained for the exclusive benefit of employees and former employees (the exclusive benefit rule), and what you are proposing would violate that very basic premise.

We don't know for sure, as IRS has not issued any guidance yet on this issue. However, IRS Notice 2005-92 covered this stuff for Hurricane Katrina. Can use either Code 2 or Code 1 if under age 59 1/2 - depends on whether you accept the individual's representation that the hurricane distribution rule applies. Hurricane distribution recipients used Form 8915 to report the distribution and any subsequent repayments.