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Just curious, is the advisor's name either McFly or Brown?

In situations like this, in a discussion with the investment adviser, I would try to mention the word "jail".

Yes, it is that time of year again – the annual tax lament, to the tune of “Yesterday” by the Beatles. Remember, it is only when the final line is truly sung from the heart that one can appreciate the scope of anguish and angst that the artist is attempting to convey… Yesterday... Income tax was due, I had to pay... All the funds I tried to hide away... I don't believe, I'll eat 'till May. Suddenly... I'm not sure that I am fiscally... Ready for responsibility... Oh yesterday, came suddenly. Why, I Owed so much, I don't know, I couldn't say May be Forms were wrong, how I long, for yesterday. Yesterday... Seemed like prison time was on its way... Now I need a place to hide away... While keeping IRS at bay. Why, I Owed so much, I don't know, I couldn't say May be Forms were wrong, how I long, for yesterday. Yesterday... Taxes due, I filed come what may... Losing all deductions that's my way... Of giving IRS my pay. mm - mm - mm - mm - mm - mm - mm.

Tell the advisor he had the option to contact you before the Plan Year ended if he wanted to change it.

The plan document should specify what sources are available for in-service distribution and when - for example rollovers may be withdrawn at any time but 401(k) only after age 59 1/2. So I think the individual source in-service distribution provisions are protected. Contribution sources usually have different distribution restrictions/availabilities as well as tax implications when dealing with pre-tax, after-tax and Roth accounts, so regardless of the protection issue I think it would be inadvisable to enact any such pro-rata procedures. That said, for sources with the same availability AND taxability, I think you can take in-service distributions pro-rata provided the document doesn't say otherwise.

You have covered a lot of rules but getting to the answer of each question seems to need some additional information. First, what are the plan provisions related to disability and disability distributions? Are they triggered by termination due to disability and/or by being determined disabled by the plan administrator (and the individual is not considered terminated)? Why are there concerns that the IRS may challenge his permanent and total disability diagnosis? If everything is done according to the plan provisions, what basis would the IRS have to make such a challenge? What does the plan say about the status of outstanding loans in the event of termination from employment? What does the plan say about the status of outstanding loans in the event of disability? Keep in mind that a loan offset and a deemed distribution are different things, and a withdrawal and a distribution also are different things each with different consequences.

Thanks for the replies. You have confirmed what I believed to be the case, but as you know, when someone acts like they know the answer, it gives one pause. Specifically, am I missing something? As to why the investment advisor thinks this would be a benefit, I have no idea. When I pressed on why the answer I got was that the client deserves to have the option. In fact, the response was delivered in a manner that suggested that I have no right to ask such a question! A real pleasure to work with I must say.

Thrift has also been used by many a governmental plan. Your filing requirements will depend on whether the employer is considered a governmental entity (none) or simply a tax-exempt company (5500 with plan audit).

History may not repeat itself exactly, but it can be analogous. The issues here are very similar to those faced by plans in the early 1980s when insurance companies offered 5-year or more GICs with guaranteed rates of return of 12% or more. Then the markets turned, new GIC rates dropped, some insurance companies failed, and MVAs were horrendous. This stable value fund likely is dealing with the impact of interest rate hikes on the value of the underlying fixed-rate investments. When addressing the issues, the starting point is the terms of the agreement with the stable value fund. As others have noted, is the fund benefit responsive as Lou asks above (can participants direct a transfer out of the stable value fund)? If so, typically there is no MVA applicable to the participant-directed transfer although some may have a trigger if transfers in the aggregate exceed a specified level such as the example truphao mentioned above. If the stable value is not benefit responsive and the plan is closing out the fund prematurely, then the MVA will apply. Sometimes this is a positive outcome for participants but this instance looks like it is a significant negative. In addressing the past GIC issue, some plan sponsors negotiated with the fund a buy-out of the MVA. Other plan sponsors, where participation in the GICs was very popular among participants, made a higher company contribution to help take the sting out of the MVA. Some plans that wanted to terminate but could not afford the MVA, froze the plan, allowed for distributions from the other investment options, and kept the GIC open to preserve the high guaranteed return (assuming the contract issuer did not go belly up). This had the overhead expense of running the plan for two or three years or until the markets shifted and the other strategies for addressing the MVA became affordable. Many plan sponsors' approach to the GIC issue was to acknowledge it was what it was, participants had a good ride on the upside, the choice of the investment at the time the choice was made followed the plan's investment policy, and everybody was happy until they were not happy. Good luck!

Unless you have a time machine, not allowed. PY changes must be executed before the before the new PYE date passes.

I suppose it sorts out in the end, if the loan is in fact paid off, and the sources get repaid in full. But in the interim, there are vesting issues, also possible issues with availability of funds at different times for different sources. I can't see how this is "ok" but I also doubt anyone (else) would pay enough attention to cause a scene; not that I wouldn't love to see a major payroll/benefits company learn a lesson in how things need to be done correctly. I seriously doubt this is covered in any SPD, BPD or other documentation. It should be implicit that money from a source goes back to that source.

https://www.irs.gov/retirement-plans/how-to-obtain-or-re-establish-an-ein-for-a-retirement-plan-or-an-ira-trust

In 1985, few employment-based retirement plans provided the convenience of paying a distribution as a rollover contribution directly to another retirement plan or an Individual Retirement Account. About what happened or what was reported, the individual might request from the IRS a copy of her 1985 tax return (and of later years’ returns). Form 4506 https://www.irs.gov/pub/irs-pdf/f4506.pdf. Consider whether the individual’s tax returns over many years might have been filed under an assumption that the account was an IRA. If so, consistency might require a taxpayer not to assert a different treatment now. See, for example, Estate of Hilda Ashman v. Commissioner, Tax Court Docket No. 15578-96, T.C. Memo. 1998-14575 T.C.M. (CCH) 2160, T.C.M. (RIA) 98,145, 22 Empl. Benefits Cas. (BL) 1283, Pension Plan Guide (CCH) ¶ 23943M, 1998 Tax Ct. Memo LEXIS 146, 1998 WL 188936 (U.S. Tax Court Apr. 22, 1998) (In 1990, a distributee received a distribution from a qualified pension plan, and her tax return treated it as rolled over to another plan. For 1993, the taxpayer was estopped from asserting that the 1990 distribution was taxable in 1990.). See generally R. H. Stearns Co. v. United States, 291 U.S. 54 (1934) (by Cardozo, J.).