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Yikes, I'd only roll those dice if I knew they were loaded and guaranteed to come up 7 or 11 as opposed to snake-eyes!

I have practiced family law for 55 years. The last 36 years I have spent trying to learn everything I could about competently transferring pension and retirement plans benefits between divorcing couples. It is not clear to me in your case if you are dealing with a defined contribution plan or a defined benefit plan or or a cash balance plan. It is not clear if the plan falls under one of the 163,000+ ERISA qualified plans, or under other Federal laws governing CSRS, FERS, FSPS and TSP, or under Military law, or whether it is one of the 10,000+ plus State, County or Municipal plans, or whether it's a Union Plan or a Church Plan or perhaps even an International plan. It seems that your client, who obviously performs his own surgery, is determined to be pennywise and pound foolish. You must NOT to offer him any advice lest he screw it up and blame you. You cannot save him but you can save yourself. They need a QDRO to make the transfer. The fact that you would even ask if they need a QDRO makes it clear that this is not your area expertise. One sure way of being sued for malpractice and charged with failing to adhere to the Rules of Professional Conduct is to involve yourself in an area of law you don't understand. Or worse, involve yourself in legal matters if you are not a lawyer. David Malpractive - Lawyer Liability in QDRO Cases - Willick.pdfTop-QDRO-Mistakes-Attorneys-Make-and-How-to-Avoid-Them (1).pdfShulman QDRO Handbook Table of Contents 2020.pdf

One of the aspects of the cautions against inexperienced assistance in these matters also applies to the "other distributable event" ideas: the different transactions have different implications, specifically including federal and state tax consequences. The tax consequences of dividing and account by QDRO vs some other avenue for extracting money from the plan for ultimate division of the account are quite different and would change the economics of the "equal" division between the parties. It is more complicated than dividing by two and filling in some forms.

Amend the plan before those people enter on 1/1, and those folks can be subject to the new schedule.

Vesting always starts from date of hire with a few exceptions as to the years you can disregard. Two somewhat common exceptions are the Plan may (but does not have to) disregard service prior to the effective date of the Plan and/or prior to the attainment of age 18 if so stated in the document. So assuming the participant is over the age of 18, his vesting in the plan will either begin on his hire date of 1/1/2020 or the Plan effective date of 1/1/2022 depending on the plan terms. Then vesting would either be under the 1000 hour rule or the elapsed time method depending on your document elections. So as Bill says - Read the Document.

It is insane 🤡 to attempt a reasonable cause filing when a denial means you get a CP-283 notice, and you are no ineligible for the IRS late filer relief program under Rev Proc 2015-32. Pay the $500 user fee and be done with it.

The plan has to have entry dates and they are written into the plan. Typically they are the first day of the plan year and six months following (ie 1/1 & 7/1) but can be more frequent. So assume your person was hired 10/10/21. They complete their 6 months eligibility 4/10/22. They would then enter the plan on 7/1/22 and be eligible to defer on 11/1/22. The 11/1/22 effective date for deferrals means that's when deferrals are first allowed in the plan. Not uncommon for a new plan to specify a date on or after the plan is signed in existence. As to vesting, I'm going to give you the most common example and one exception. Your plan defines exactly how it is determined. You just look at the plan year and ask "did the person work 1000 hours"? If the answer is yes, they get credit for 1 year of vesting service. Hire dates and termination dates don't matter for this measurement. The one exception is if the plan excludes service before the start date of the plan. But, in my example, the plan year, the hours, etc could all be different. Read the document.

I'm mildly curious as to who authorized the payment of the plan expense from the forfeiture account, acknowledging it may have already been built into the service contract for the recordkeeper.

PS, if you are a nonfiduciary service provider taking instructions from the plan’s administrator or trustee (which might be a qualified termination administrator, court-appointed fiduciary, or other successor fiduciary), you ask the fiduciary for its instructions. If you are the fiduciary, you face decisions about the plan’s accounting and final distributions.

However the employer’s paymaster and the plan’s administrator resolve challenges of these kinds, it might be stronger to put the solutions in written procedures, and in participant-facing communications, including a summary plan description and the form by which a participant instructs her elective deferral.

I'd be very leery of a procedure that would allow $100.00 to be withheld from a future check without a specific participant election. I'd say nothing "extra" is withheld froma future check unless the participant authorizes it.

I admit I am a DC guy not a DB guy so I normally read this out of curiosity and not say anything. However, I will at least suggest you think about how rehires will be addressed and get that in the amendment. What if a person was hired and left before the date 1/1/23 and only had 2 YOS so wasn't vested in the plan and gets rehired after 1/1/23? I would make it clear how they will be treated in everyone's mind. I work with a number of firms with very high turnover and to keep it simple everyone agreed it was original hire date and that was written in the amendment. Maybe it is obvious in this type of plan how this will work but I am throwing it out there as I have seen this turn into a debate after the fact in DC plans. You can nip this up front if you think it through.

I know they're trying to save some money. But don't let their problem become your problem. Unless you're an attorney, don't try to create a DRO.

I agree with SSRRS. The 2022 RMD is based on the 12/31/2021 balance, and doesn't change for events occurring after 12/31/2021.

Even if one were to believe it is 100% certain the Service would grant the requested relief, a practitioner’s fee for writing up her client’s explanation of its reasonable cause might be more than $500.

Agreed, a tax exempt employer or government employer is not subject to the excise tax [IRC Section 4972(d)(1)(B)]. Because of this a tax exempt employer could exceed the IRC Section 404(a)(3) deductible limit for Profit Sharing Plans without having the excise tax imposed. However, the applicable dollar limits under IRC Section 415(c) must not be exceeded.

Oh, I agree wholeheartedly! IMHO, a remarkably foolish risk given the potential penalties. If the building burned down, or was washed away in a flood, or in the hospital, etc., then it might be different, but changing jobs, or whatever, doesn't build a strong case as far as I'm concerned.

This is a great point and should not be overlooked. If you had owner or HCEs only and gave immediate vesting but now there are NHCEs coming into the Plan and you want to add a vesting schedule, that might be an issue.

I don't think so. Years ago, back when the PS deduction limit was 15%, I did RK for the large/audited PS 401k of a very generous NFP that easily exceeded that threshold every year without issue. Total compensation and benefits still need to be reasonable but there's no hard coded limit of which I'm aware.

No Penalty letters yet but a lot of letters denying extensions this week. We mailed 12/31/2021 extensions in bulk via certified mail that show with usps tracking that they were delivered prior to the 7/31 deadline. The stamp on the certified mailer back however shows a receipt date of 8/8. The IRS appears to be rejecting them all one by one as attempted to file late. They were postmarked and delivered on time. This appears to be a logging error with IRS where we now have to dispute timing. 12/126 have forwarded letters so far this week. Just waiting on the second wave for the late filer penalties. What a waste of time.

This is one reason we only allow percentages and not $ amounts. And limit the % in the plan to be less than gross - taxes (FICA and others that tax off gross). I seem to remember my last employer had it limited to 90%.

5500-EZ filers are not eligible for DFVCP. DFVCP is a DOL program and non-Title I plans, i.e. 5500-EZ filers, are not under the DOL's jurisdiction. Instead the IRS offers a penalty relief program for plans that failed to file 5500-EZ. You can read more about it here: https://www.irs.gov/retirement-plans/penalty-relief-program-for-form-5500-ez-late-filers I suspect you were already aware of this since you referenced the $500 fee for this program instead of the $750 fee for DFVCP. Regardless, this program is the relief offered by the IRS for plans that forgot to file their 5500-EZ. Without it, the penalty is $250/day with a cap of $150,000. If the 5500-EZ was originally due July 31, 2022 then we are already at $27,000. Compared to that, I would say that a $500 fee is very reasonable.

I have seen separate documents for this done by consultants or law firms . I would start with one of the large volume document providers or a good ERISA law firm.

Visual aid

Box D - didn't paste in well, but see below Form 5500-SF Department of the Treasury Internal Revenue Service Department of Labor Employee Benefits Security Administration Pension Benefit Guaranty Corporation Short Form Annual Return/Report of Small Employee Benefit Plan This form is required to be filed under sections 104 and 4065 of the Employee Retirement Income Security Act of 1974 (ERISA), and sections 6057(b) and 6058(a) of the Internal Revenue Code (the Code).  Complete all entries in accordance with the instructions to the Form 5500-SF. OMB Nos. 1210-0110 1210-0089 2021 This Form is Open to Public Inspection Part I Annual Report Identification Information 0BFor calendar plan year 2021 or fiscal plan year beginning and ending A This return/report is for: X a single-employer plan X a multiple-employer plan (not multiemployer) (Filers checking this box must attach a list of participating employer information in accordance with the form instructions.) B This return/report is X the first return/report X the final return/report X an amended return/report X a short plan year return/report (less than 12 months) C Check box if filing under: X Form 5558 X automatic extension X DFVC program X special extension (enter description) D If this is a retroactively adopted plan permitted by SECURE Act section 201, check here. . . . . . . . . . . . . . . X

I think I may have found something: Form 5500 Filing Requirement In August of 2021, the IRS issued an Employee Plan News bulletin that states that retirement plans that are retroactively adopted can skip the first year’s Form 5500 filing. Plans that are retroactively adopted become effective as of the last day of the first plan year, creating a one-day plan year that would normally require a Form 5500 filing. However, the IRS is allowing plan sponsors to file their first Form 5500 for the 2022 plan year, indicating on the filing by checking a box, that the plan was retroactively adopted.

Why and how did they "forfeited the checks"? Your question isn't very clear. Why are you working with the DOL? Is this an audit? I would think the employer would have to make the forfeiture account whole and repay the amounts through the plan to those 5-6 participants. why do you think that you don't have to reissue the whole original amount?

This doesn't make any sense.

They want to avoid employees jumping in and out of the 401(k) plan. The HCEs are allowed to participate in the NQDC, so they prefer some stability there.

Is there also a DC plan? Not mandatory, but it might be useful to make sure the plan design considers the existence of another plan.

Generally no. You might want to look at timing to see if it favors HCEs. As long as you follow the rules on changing a vesting schedule and don't cut back those who already accrued the 100% vesting I personally haven't seen it be an issue but perhaps someone else might have a different experience.

I concur - please note the new vesting schedule will apply to all those who have not entered the plan yet - and not to only post 1/1/2023 hires. If the objective is different, tweak the amendment language to accommodate.

This was one spot we got caught in audit at my former employer a few years ago. There can be very specific timeframes on how long forfeitures can sit. The plan administrator should be making very sure they are following plan provisions on this. And use them as early as possible.

Also, the IRS' view (not codified in regulations) is that the nature of a defined contribution plan is that there shouldn't be unauthorized accounts (i.e. pots of money) not allocated to participants. Therefore, if there is a separate forfeiture account (rather than nonvested money recordkept in participants' accounts), it needs to be depleted as of the end of each plan year.

Send them a copy of the Plan's QDRO procedures and let them know a QDRO is required but that is not something your office prepares. If you do know some low cost QDRO providers in the area you might point them in their direction or tell them to ask the court who is handling the divorce.

IRC 401(a)(13) contains the "anti-assignment rule" which says that no part of the benefit in a qualified plan can be reassigned to a 3rd party. QDROs are one of the exceptions to this rule. That's why you have to have the QDRO if you want part of the participant's benefit to be assigned to the ex-spouse. If there is independently a distributable event, for example if the participant is over 59½, or if it's non-deferral source and has been in the plan for a few years, then they could just withdraw whatever amount they choose and pay it over to the ex-spouse. Plan provisions permitting, of course. Could you find a blank QDRO template somewhere? Probably. Could you get a judge to sign off on it? Maybe. Just be careful, especially if your local jurisdiction has rules relating to the unauthorized practice of law. It's probably going to be easier and/or safer to try to find a local lawyer who can do one for you, even if you do have to pay them a few bucks for their time.

Without a QDRO, is there any other sort of distributable event allowing the participant's distribution to be paid from the plan (and now we're talking PAID rather than TRANSFERRED to the alternate payee) ?

Nuclear war is a concern that never use forfeiture account. Huh? 🤪 Seriously though, if your concern is a plan never using its forfeiture account, then I bet it's failing to follow the terms of its written document. The document should say when/how to use them. (Including an emphasis on when.) So yes, there should be concerns - if the plan was supposed to allocate its forfeitures, then numerous participants don't have the full amount in their accounts as they should. Or perhaps the company took a deduction for a contribution which was supposed to be offset by the forfeitures. Anything they didn't do right is something the IRS certainly would scrutinize upon examination.