Leaderboard

TPApril, when you say there is no QDIA, do you mean there is no default investment alternative at all, or that there is a default but it is not a qualified default?

And your firm might want your lawyer’s advice about when and how to end your services while managing risks of your exposures to, if not liabilities, at least defense and other expenses.

I think you are OK. Doesn't DC TH-min require employment on last day of the year? So you shouldn't have a 411 cutback issue.

ERISA provides (and, although I readily admit my lack of expertise in this area, I have to guess that so do most states' laws provide) civil penalties for a participant to recover against a fiduciary in the event of a breach of their fiduciary duty. However in a plan that covers only the owner of a company, the fiduciary and the participant are typically the same person. I struggle to imagine any scenario in which a person would be inclined to sue themselves. In the case of a plan which covers, for example, two or more partners in a partnership (and no employees) then I could see a potential issue, but even then you have one partner suing another which is likely to involve much more than just the retirement plan. I am curious about what sorts of situations you had in mind when you posed this question. As I said, my knowledge of states' fiduciary and trust law is very limited so it's entirely possible there is some subtlety I am missing. Regarding prohibited transactions, a 401(a)-qualified plan is still subject to Code section 4975. For what it's worth, I have never had the sponsor of a plan which covers only owners ask me about fiduciary issues (although I have had a number ask me if a particular action would be a prohibited transaction...in those cases, if they have to ask, the answer is usually yes).

All good points, Dorian. But I believe the question was about mandatory HSA contributions. That's different from automatic contributions, which always has an opt-out option as you noted. I believe the question was asking if the employer can actually mandate employees contribute to the HSA--not just use default elections to automatically initiate contributions absent an affirmative election to the contrary. I also have posted some info on automatic/passive elections here if that's the context for the question: https://www.newfront.com/blog/automatic-enrollment-medical-plan-2 https://www.newfront.com/blog/passive-enrollments-with-rolling-elections

Plans that intend to comply with 404(c) do not need a QDIA as far as I know. But it bolsters the reliance on 404(c) protection if there is one.

I agree wholeheartedly with you Bill, and while we have recommended seeking an attorney's advice on multiple issues, and we are continuing to do so, this Plan Sponsor simply won't spend the money.

And are you also dealing with securities law violations, just to make it more interesting?

You need to make sure the problem remains the client's and does not become yours. If I were in your situation, I would explain that there are lots of penalties associated with not doing the things you recommend and you're not an attorney (I'm assuming). If they want to terminate without doing what you recommend, they need legal counsel and you'll follow counsel's advice.

No, the wife should not attempt to return the monies to the Plan, it sounds like the Plan may have followed its processes with full disclosure of timing, and the Plan may be able to reject the return. Assuming she did a 100% rollover the ex-spouse's feet-dragging attorney could likely attempt to serve a QDRO to the IRA custodian, instead of further aggravating the situation with a b**ls**t c.y.a. move like a contempt charge.

I believe that position was a remark from an IRS representative at an ASPA conference (don't quote me but I believe it was the 2000 ASPA Annual Conference at the Grand Hyatt in DC). The remark was not an official position of the Service and is not supported by current rules. The issue of seasoned money constituting a distribution and the entire premium taxable is not supported due to the fact that no distribution has occurred. The funds, although currently accessible, are not removed, distributed, from the plan trust, simply reallocated to a pre-retirement survivor benefit, life insurance. Taxation does not occur until funds have actually been distributed from the plan trust. [IRC 402(a)] Totally agree with the limit of 49.99%, best practice is 35% to 40%, leaving room for the cumulative test. An important note in design when dealing with a Profit Sharing Plan is the fact that Profit Sharing contributions are discretionary while insurance premiums are not (in most cases). Also agree with the taxation of the economic benefit, also known as the PS58 cost, which is taxable but it does create basis which is recouped upon distribution. And yes, subject to Benefits, Rights and Features.

I'm having a great deal of trouble understanding the text of your question. Two letters were sent by the plan administrator -- to whom? Could you type (as a reply) the text of those letters (just put a blank line where names and addresses appear)? I am assuming that the wife is the participant here. Correct? The participant has been waiting 6 years, I see. Please explain when the 6-year period started. I'm not sure what the significance is. You say the attorney who did not file the QDRO; are you saying the attorney for the participant's husband did not provide a copy of the order, signed by a judge, to the plan until 5 days after the funds were distributed to the wife (via a rollover, I believe you said)? What do you mean by "funds to the plan that has been discharged per the letters" -- what does "discharged" mean here? And what do you mean by "per the letters"? I know the Department of Labor has published two documents for the general public about the 18-month rule -- https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/qdro-determining-qualified-status-and-paying-benefits.pdf https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/qdros.pdf

The participant keeps the extra $1,000 and the employer puts the $1,000 back in the plan. There is no credit for future use.