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I agree with my immediate predecessor responder. I respectfully dissent a whole lot from at least one of the prior commentators. First, the QJSA/QPSA provisions must be used by every pension plan, i.e., both DB and money purchase DC plans. Second, the QJSA/QPSA provisions must be used for any other plan (i.e., profit sharing plans) unless the drafter takes advantage of the exception granted to such plans by drafting the plan to contain (or the AA option election that activates) the three conditions stated in the regulation for the profit sharing plan to be exempt from the QJSA/QPSA rules. The first condition is that 100% of the participant's account balance is the spousal death benefit. Both of my enumerated statements are right out of the first sentences of Regulation 1.401(a)-20 Q&A#3. You should try to find the "no-QJSA/QPSA" provisions in the plan. If you have a DC basic plan document with a QJSA/QPSA Section, and you do not see that non-QJSA/QPSA language in that Section, then there will be another Section with those provisions, and in that case, there should also be an AA option referring to the latter Section, and which would need to be selected if there was to be no QJSA/QPSA). For the basic plan document, a good search term is "412" because the plan most likely mimics the regulation, i.e., "for plans not subject to 412,..." The regulation is copied below. That means that for profit sharing rule that contains the three provisions in the cited regulation for the account balance to be free of the QJSA/QPSA rules, the new spouse is the beneficiary unless that spouses waives his or her right to 100% of the participant's account balance. I agree with the statement that 100% of all death benefits must go to the beneficiary, but the term "beneficiary" will be defined by the plan to first confer spousal benefits and then refer the employer to examine the designation form if the spouse has so consented to non-spouse beneficiaries. It sounds like the participant made the assumption that the old designation would survive. Not so. Just like participants should re-do designation forms immediately upon divorce (so as not to inadvertently leave their ex as still being the beneficiary they specifically designated), they should re-do them immediately upon marriage, at least if there are to be non-spouse beneficiaries. In the absence of a QDRO saying otherwise, the old designation form must yield to the language in the PS/K plan that likely states something along the regulatory lines of: (1) The plan provides that the participant's nonforfeitable accrued benefit is payable in full, upon the participant's death, to the participant's surviving spouse (unless the participant elects, with spousal consent that satisfies the requirements of section 417(a)(2), that such benefit be provided instead to a designated beneficiary); (2) The participant does not elect the payment of benefits in the form of a life annuity; and (3) With respect to the participant, the plan is not a transferee or an offset plan. (See Q&A 5 of this section.)

One thought, I would suggest asking an attorney if creates a CODA- type arrangement. An employee in theory is choosing between $1,200 going towards their student loans (which is taxable income to them), OR being eligible for a plan match (that may or may not be equal to the $1,200). It has been a long time since I reviewed those rules, but one factor was definitely the employees ability to choose how to receive the money. I don't know if the fact that actual cash is off the table changes the analysis. Maybe someone else (Luke?) can chime in.

Doesn't 401(a)(11)(B)(iii) make the spouse the default beneficiary in a PSP? So, I don't see how the current spouse doesn't have a right to the benefit unless there is a QDRO issue.

Wait until the "failure to implement the deferral elections" for 9/15 issue comes into play, too! This'll be fun....

I would think she has ALL the rights. Of course, a reading of the plan document is in order.

Double check your definition of compensation in the plan document. Most of mine are pretty clear on this point. It says something to the effect you exclude compensation if in an excluded class or group. If it is silent on this point it is going to get more difficult so I would start there.

The answer is all depends. One needs to know a number of facts. Did your last participant certificate say your account was in shares still or cash? Some ESOPs do what is called segregation to their terminated employees. Segregation is when the accounts shares are sold and your balance is put into a cash investment. If that happened you don't have any shares in the plan. If that didn't happen you do have shares. So go back and find your most recent certificate and see if it says your account balance is in shares or cash. I will say if your account was still invested in company shares at the time of the sale all shares have to be treated the same. It is just having a balance in an ESOP doesn't mean you always have shares in an ESOP If you can't find your most recent certificate from the plan you might want to make inquires to find out if the plan puts the account balances of terminated employees into cash investments shortly after people terminate or not.

This is indeed complicated stuff and your post does justice to the complexity. The only part I would tweak is above. The ABT is company wide not plan level. And the threshold is the midpoint not the unsafe harbor. Good job.

Is the K-1 earned income? I would confirm with the partner (or their CPA) that it is not passive (such as from real estate or an investment etc) If so, then check the document. Ours would say yes, earned income from all entities counts towards plan compensation. The self-employment tax calculation may need to be adjusted as a portion of the social security that would typically be accounted for when using the K-1, would have already been paid as part of the W-2 withholding. If you use software to help calculate the SE-Tax adjustment for self-employment earnings to plan compensation, it may do it for you if input correctly. You should check with your help file or provider. Many allow you to input both W-2 wages and SE income into the calculation.

Generally, yes. But if the children were required to remain the named beneficiaries under the terms of a QDRO or court order then the children may still be the beneficiaries of at least part of the benefit. Since you say H was married to W2 for 3 years, then the "one year marriage rule" wouldn't apply, if the plan even uses it.

Although as I think about it there is a possibility there is an IRS audit that happened around the time of the plan termination. If an IRS audit is happening they can be very long. You might want to see if it is an actual IRS audit or an IRS determination letter filing they are talking about. If they come back and say it is an actual IRS audit you might as well sit back and relax. There is no getting the IRS to move quickly on an audit.

They might have used the term IRS audit but what they most likely did was file with the IRS for what is known as a determination letter. The IRS will review the plan and give a letter saying they believe there are no issues with the plan at termination. It protects both the plan sponsor and you from the IRS raising issues on the plan and any payments you get years after the fact. Getting this letter is a good thing and standard practice. So most likely that part is basically true. The IRS is running VERY slow on the determination letter process and it is taking a long time to get those letter. I will admit 21 months is on the long end of things but not unheard of too happen. I am working on a few ESOPs that have been trying to terminate and get fully paid and we are in year 2. I am working on getting another one where the company was sold in April 2018 and it is just now we got the IRS letter and we are gong to pay in a few months. So the range of time can be long gap. I would try and go back and see if they can give you any better information. They are most likely not wanting to give you a date as they really don't know when the IRS will produce the letter. When you say you got the first half was it really 50% or more like 70-80%. If it was closer to 50% see if they are willing to pay another 10-20% but realize that will increase the plans expenses which will decrease the total amount you get. If you got closer to 70-80% you might want to wait longer. The money is in a trust so it ought to be safe and there when the time comes for you to get paid. I understand the frustration but it can be a slow process.

I defer to Luke's wisdom, but really? If the plan document says there is a 6 month deferral suspension, it would be ok to ignore that?