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John, you don't have ANY loans from the plan, you had distributions made that were taxable and subject to penalties if appropriate. Calling an elephant a horse doesn't make it so. You have no loan procedures followed and no loan payments made. That ain't a loan; it's a withdrawal. Depending on how much money is still in the plan could impact my analysis of how to handle this. If the amount left is small and he is planning on taking it all out and paying tax on it (not trying to roll it over), I would suggest that: 1) He failed to report taxable distributions when he took the money out; 1099Rs need to be prepared for those years and submitted. He needs to talk to his accountant about filing amended returns (there are substantive questions as to statute of limitation issues, but IRS could claim longer than the normal 3 year period would apply). 2) Take the balance out and report it as taxable income. Don't try to roll it over because there are questions as to the qualification of the plan.

Using elapsed time to determine service includes a service spanning rule that gives the employee credit for a period of severance not exceeding 12 months if they rehire within 12 months of their termination date. In your example, she was gone less than 12 months (5/31/19 - 8/19/19), so service is credited the same as if she was continuously employed from 3/11/19 - 9/6/19. 6 months of service would have been satisfied on 9/10/19, but she was not employed on that date. When she rehires less than 12 months after 9/6/19, the service spanning rules will give her credit for the time from 9/6/19 through the rehire date. She gets credit for that service when she rehires again, so I would say she will satisfy the 6 month of service requirement upon her pending rehire.

Unless I'm missing something in the facts as you outlined them, these periods of severance should be included in determining her eligibility service under the "service spanning" rules. The language you quoted from your plan doc just says that this person's eligibility computation period didn't restart each time they were hired after a period of severance, since they have not yet had a one year break in service.

Fidelity is used to strong-arming plans and participants to fit its system rather that create a system that is compliant with QDRO rules. I have had to protect clients with end-around policies and procedures even in DC plans. I never had a client willing to take on Fidelity or fire Fidelity over it. I agree with Larry Starr -- this does not even look like a system fault, only a form of order preference. You should at least force Fidelity's hand at round one.

Thank you both for your answers. As it happens, we gave her the benefit of the doubt and sent a letter explaining that due to a complete lack of response from all parties, we are assuming that she did not use the plan in any way for 2018, and that we look forward to helping her with 2019. We copied her CPA and her investment advisor on the letter. We will see if anyone bothers to respond to us. 2019 is almost over and census requests and annual questionnaires will be going out again at the end of December. If once again we get the same total silence from her and her advisors, we will take Larry's "goodbye and good luck" approach. If we had seen this yesterday we would probably have done it this year.

Easy one; you are right and Fidelity is wrong (sort of). If you present a well drafted QDRO that has that language, the plan HAS to accept it or give reasons for why it is deficient. Go ahead and submit your own QDRO (or use their sample but modify; you don't have to use their model you know). Fidelity is providing an automated method to produce a QDRO but it is not the only way to do it. Look at page 1, #2 on the attached form. You can plainly submit a manually drafted document if their "samples" don't work for you. Good luck; you will probably have to be persistent.

Excellent news about the ASPPA. I must be blind though, because none of the letters our clients received appeared to have an address to send the letter to. Only had the generic Ogden address at the top left.

ASPPA is in contact with the IRS ASPPA Seeks IRS Action on Form 5558 Acknowledgments BY KIZZY GAUL OCTOBER 2, 2019 34 GOVERNMENT AFFAIRS ASPPA has received several reports of incorrect Form 5558 acknowledgments or extension denials being received by plans that had timely filed to extend the filing deadline for their 2018 Form 5500. In some instances, the acknowledgments are reflecting the extension deadline of Oct. 15, 2019 for off-calendar plan years. In other cases, the extension is being denied as not being timely filed. ASPPA’s Government Affairs Committee has been in contact with the IRS to receive guidance on the most efficient resolution. It is important that plan sponsors read their Form 5558 acknowledgment letters (i.e., CP 216 or CP 232) closely to make sure they are correct. If an incorrect acknowledgment letter or extension denial is received, the plan sponsor should write a letter requesting reconsideration and providing an explanation regarding the incorrect acknowledgment letter. The letter should be sent to the IRS address listed on the acknowledgment letter, and a copy of the incorrect letter should be included with the correspondence. The IRS will review the request and provide a corrected acknowledgment letter. In no instance should Form 5558 be refiled after the filing deadline. ASPPA’s Government Affairs Committee will continue follow up with the IRS to determine the cause as well as continue to advocate for electronic filing for Form 5558 to assist in eliminating these issues. Kizzy Gaul, JD, CPC, QPA, QKA, TGPC, is Manager, Regulatory Supervision, at Prudential Retirement. She also is a member of the ASPPA Leadership Council.

While I agree with Bird's technical and practical answer generally, I would be more specific in this situation. The client hasn't responded at all to your requests for information; I would send a sign off letter saying: "Because she has not responded to our requests, we have no option but to sign her off and we have no more responsibility for her or the plan and she might have requirements that now won't be met. If she thinks this letter in error, contact us. Have a nice life!"

It's not a mistake of fact; it's just a plain mistake. The money doesn't belong to the plan, any more than if Vanguard deposited someone else's check into your client's account. They would fix it. That's what this client needs to do. That money doesn't belong to this plan; it doesn't matter if the other plan doesn't exist yet (that's a separate issue).

I vote no.

There's a technical answer to this, and a practical answer - the technical answer is that the plan exists and you have to do everything you would do for an ongoing plan. The practical answer is, if there is never going to be any activity (and you're not going to get paid), then you just ignore it as if it never happened. At least that's how I would approach it. It's a bit different if you have someone that thinks they are going to use the plan but just doesn't fund it in/for the first year. In that case we would (and have) filed a return for the first year with 0s. I think there is an argument that because it had no money a return isn't needed, but then you get into questions about the effective date to use when you start filing returns, and honestly, filing a return is such a small deal that it's easier to just do it than tie yourself in knots trying to figure out how to start reporting in the second year.

Glad it worked out for you, Nuggetjr.

If the plan is terminating, then just make sure all the distributions including deemed/offset loans are (or have previously been) reported and taxed properly. Repaying amounts to the plan, adopting retroactive amendments, etc. as described in EPCRS not worth it in that situation.