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I agree your mother needs to file a written claim for benefits. It would be best to include a copy of their marriage license or other proof of marriage with the claim. If you can't find the SPD, the plan's Form 5500 filing lists the Plan Administrator (and their address) and is available on the DOL website.

Almost definitely this plan does not provide a normal form of payout as an annuity but as a lump sum; therefore, it is REQUIRED BY LAW that your mother be the beneficiary for 100% of the account and it doesn't matter if a prior beneficiary designation was signed. I have written articles about this problem (which is disinheriting children of a prior marriage, which might be wanted he wanted), but nonetheless, that is almost definitely the case here. And even if the plan did provide the annuity as a normal form, than your mom is entitled to at least 1/2 of the account BY LAW. Now, that assumes that she did not sign any forms after they were married that waived her rights; but if she did, they would have to provide a copy of this form. Call the employer; ask to speak to whoever administers the plan. Whoever called your mom was talking out of their proverbial ass! You probably don't need a lawyer (yet); you need to talk to someone in charge of the plan and see what they say.

If you have the information contact the plan administrator and ask them how your mother files a formal claim of benefits as the beneficiary. It will start a process where they will have to tell her they are going to pay you or why they are rejecting the claim. If either of you have a copy of the Summary Plan Description it would have this information. The other thing this does is put the plan on notice there is a spouse at the time of death. There are rules regarding when someone besides a spouse can be the beneficiary. If they think there is a spouse they are going to make sure those rules are followed.

Was this notification/call from the Plan Administrator, or some flunky at the investment house? You need the Plan Administrator to make the decision. Assuming that this beneficiary wasn't required under the terms of a prior QDRO or something like that, then your mother should be the default beneficiary under the plan. My guess is that in most situations, she will receive the funds, and may not necessarily need to hire an attorney. However, I'll let some of the attorneys chime in - they have seen the strange and unusual...

What does the plan say? Our current VS 401(k) document has a box to check in the adoption agreement to indicate that the plan will not accept rollover contributions from "former Employees". If the box isn't checked, they can roll in. Our prior documents only allowed Employees to roll in. The plan document will tell you if she can roll the cash balance distribution into the 401(k). If the plan provisions are not clear, the document should give the Plan Administrator the authority to interpret the plan document. If she can roll it in, does the 401(k) document include or exclude rollover balances when determining if someone is under the cashout limit? The terms of the plan will determine whether or not her balance(s) can stay in the plan(s). I can't think of any problem with combining both distributions in the same IRA.

ESOP guy (and mctoe), It is fairly common to restrict loans to certain sources and perhaps even allow the participant to select which source...for loan recordkeeping purposes. Nevertheless, I think that if the loan were to default, it would be proper to treat it as a pro-rata taxable event from all sources, therefore, very little, presumably, would be from basis. At least that's how I see it, and how I would prepare the 1099. And there would be a 1099, as others have noted. I suspect the driver of this idea is trying to get away with something without committing tax fraud, or otherwise gaming someone's system, with the incorrect thought that somehow these circumstances don't require a 1099-R.

I agree with ETA. How do you cancel a loan without paying it back, refinancing, or a 1099R? I am just thinking out loud here and spotting issues. I have not researched this. But it seems to me that paying off a loan from after-tax funds with pre-tax contributions could be deemed a distribution of the pre-tax amounts and then a repayment by the participant. Conceivably that could disqualify the plan if it does not permit in-service distributions, and could result in the additional 10% penalty if the participant is under 59 1/2.

Several flaws in the 'process'. Participant takes a loan and fails to repay it, then the loan will become taxable as if it were a distribution. This will likely include a return of after-tax basis and earnings; and a Form 1099R will definitely be issued. If your goal is to take a distribution of all the after-tax basis from the plan without receiving any of the pre-tax amounts, then this could likely be done with a distribution and rollover. You'd need to provide details on the participants actual value in the plan. What are the money types? What money type contains the after-tax basis? What are the withdrawal restrictions for that money type? Good Luck!

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No, its more along the lines of an unnecessary expense to the plan. They either have to have certain balance in the account that could be invested elsewhere, or they have to pay monthly fees for an account that might not be used for several years.

You're thinking logically; don't do that Pickup contributions are the result of an anomaly where the "employer" funds the contribution and merely "designates" it as being funded by the employee. That would normally imply a non-elective contribution since it was not being made pursuant to any employee election, but made totally by the employer. That is not the case. This contribution is a pre-tax contribution, but is not counted against the employee's 402(g) limit. The question, then, becomes: If it is an "employee contribution", then shouldn't it be subject to FICA? It's not if the employee can find an governmental agency to pick up the contribution in their plan and record is as a non-elective. I am still a little shaky on these rules and am going from memory; but do know it defies logic in many instances. Good Luck!