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When a plan is being terminated due to a sale, there is no requirement for a 30 day notice. I'm pretty sure it's covered in 1.401(k)-3(e)(4) but didn't have time to look and make sure that's the right cite. But it's for a 410(b)(6)(c) transaction.

it is a smaller of 50 participants or 40% of employees but no less than 2 people (unless 1 owner).

A QDRO distribution now (if the plan provides it without waiting for an earliest retirement age) might meet your client’s need for money. That might be so if “about 90%” of the QDRO distribution is allocable to Roth amounts and the conditions for a Roth-qualified distribution are met. About Federal income tax generally: Even if a court order commands or an alternate payee requests an immediate distribution, a plan’s administrator first divides a participant’s account into the participant’s and the alternate payee’s separate portions, and sets up a segregated account for the alternate payee. Unless the court order specifies otherwise (and calls for nothing contrary to the plan), a division should result in the alternate payee’s segregated account getting Roth and non-Roth amounts in proportion to the participant’s before-division account. See 26 C.F.R. § 1.402A-1/Q&A-9(b) (“When the separate account is established for an alternate payee . . . , each separate account [the participant’s and the alternate payee’s] must receive a proportionate amount attributable to investment in the contract.”). See also I.R.C. (26 U.S.C.) § 72(m)(10). If an alternate payee is or was the participant’s spouse, such an alternate payee is treated as the distributee of a distribution paid or delivered from the alternate payee’s segregated account. I.R.C. (26 U.S.C.) § 402(e)(1)(A). A distribution allocable to non-Roth amounts likely is ordinary income. A distribution allocable to Roth amounts might be a qualified distribution not counted in income. I.R.C. (26 U.S.C.) §§ 402(d), 408A(d)(2)(A). (Your description of the assumed facts does not say whether the participant completed a five-taxable-year period of participation in the designated Roth account, and does not say whether the participant is dead, disabled, or reached age 59½. See https://www.irs.gov/retirement-plans/retirement-plans-faqs-on-designated-roth-accounts.) About the too-early tax: “Any distribution to an alternate payee pursuant to a qualified domestic relations order (within the meaning of section 414(p)(1))” is an exception from the extra 10% too-early income tax that otherwise might apply to a distribution before a distributee’s age 59½. I.R.C. (26 U.S.C.) § 72(t)(2)(C). About a payer’s withholding toward Federal income tax: Whatever the withholding rate or instruction, a payer applies it to the portion of the distribution counted in income. “[A] designated distribution does not include any portion of a distribution which it is reasonable to believe is not includible in the gross income of the payee.” 26 C.F.R. § 35.3405-1T/Q&A-2(a) Hyperlinks to sources: Statute: I.R.C. (26 U.S.C.) § 72 http://uscode.house.gov/view.xhtml?req=(title:26%20section:72%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section72)&f=treesort&edition=prelim&num=0&jumpTo=true. I.R.C. (26 U.S.C.) § 402 http://uscode.house.gov/view.xhtml?req=(title:26%20section:402%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section402)&f=treesort&edition=prelim&num=0&jumpTo=true. I.R.C. (26 U.S.C.) § 402A http://uscode.house.gov/view.xhtml?req=(title:26%20section:402A%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section402A)&f=treesort&edition=prelim&num=0&jumpTo=true. I.R.C. (26 U.S.C.) § 408A http://uscode.house.gov/view.xhtml?req=(title:26%20section:408A%20edition:prelim)%20OR%20(granuleid:USC-prelim-title26-section408A)&f=treesort&edition=prelim&num=0&jumpTo=true. Executive agency rules: 26 C.F.R. § 1.402A-1/Q&A-9(b) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-A/part-1/section-1.402A-1. 26 C.F.R. § 35.3405-1T/Q&A-2(a) https://www.ecfr.gov/current/title-26/chapter-I/subchapter-C/part-35/section-35.3405-1T. Caution: Nothing here is advice to your client, or to you.

I don't know the exact context but I suspect his statement was more along the lines of "check the document carefully, because your document may say that if you fail the ratio test at 70%, you have to use the failsafe provisions to bring people in" -- that is, you have to follow the document, and if the document says to bring people in even if you could potentially have passed the ABT with the original population, that's what you have to do.

What am I missing here? Why is the participant making the contribution unless is the owner? Is the balance vested to be rolled over? As Corey stated, MASD may be a big issue especially if the participant is at 415 limit. Also, if at 415 limit then may not be getting any additional allocation, all facts and circumstances. Also, as Corey stated, you need to check the AFTAP certification - 436 rules and also do the 110% test, if the participant is HCE. The document has to allow it. Just my 2 cents

Even if the plan document allows a distribution, the distribution could be restricted by the plan's funded status under sec. 436, and if the participant taking the distribution is an HCE, 1.401(a)(4)-5(b). If the participant is at or near their 415 limit (or will be in the future), be aware of issues that can occur when there are multiple annuity starting dates. The distribution taken now still counts against the eventual 415 limit at retirement.

it is allowed if it is allowed by the Document. It is a benefit/right/feature so proceed accordingly if it is not owners-only plan.

The plan has to allow it, but DB plans were recently allowed to drop their ISW age to 59½. 401(a)(36), I think added by the Miners Act.

In many BenefitsLink discussions, we present observations grounded on a set of assumed or possible facts. And we might suggest something based on an inference about a hypothetically assumed or possible fact. In this discussion, some of us might have drawn different inferences about some ambiguous, inconsistent, or confusing facts described in Renee H’s originating post and follow-up. As the earlier of my posts said, there are many possibilities. That post expressly recognizes that Renee H’s client might not have accurately or completely described the facts. I imagined at least two possibilities, including that a person described as a nonemployee director might be an employee. My later post assumed the information and descriptions in Renee H’s follow-up, and suggests one of several possible ways to handle a situation if a person is a nonemployee director, if the person desires a retirement plan, and if it is feasible to design a separate plan. We recognize that records or other facts furnished to Renee H might include an inaccurate description the client made following its own decision-making without anyone’s advice, or perhaps with another professional’s advice. We know that a business organization, whether small or big, might misdescribe some facts—sometimes unknowingly, sometimes inadvertently, sometimes ill-advisedly, or even for one or more other reasons or causes. Among the challenges facing a lawyer, accountant, actuary, TPA, or other adviser is that a client might not furnish enough information to get the facts right. Many BenefitsLink discussions proceed from a commenter’s inferences and guesses about facts to be assumed. An originating post often doesn’t fully describe all relevant facts. Often, that’s because the person seeking information or suggestions doesn’t yet know enough to discern fully which facts might be relevant. Often, it’s because the originating poster doesn’t yet have the facts. Still, many of us find help in a neighbor’s analysis of, or observation about, even a hypothesized situation. Often, that helps a questioner consider which facts and other assumptions to ask for, or which modes of analysis or advice-giving to pursue.

Well, I'll take the other side of the argument. I feel like it is my professional responsibility to refer them to their tax counsel - "Although I can't give you specific tax or legal advice, you might want to discuss this with your tax counsel, as I believe that Revenue Ruling 58-505 covers this issue, and I don't believe true "corporate director's fees" are eligible compensation for plan purposes" or something along those lines. They can take it from there. As you say, they can come back and tell me they misspoke - it is actually W-2, and the census is incorrect, we had "X" hours, or whatever - as long as they are certifying it, not my problem. As to the health insurance, I'm not the one blowing up their health insurance coverage - if their tax counsel tells them it's ok, then it is between them and their tax counsel. It isn't my responsibility to concern myself with other employee benefit issues/problems (about which I'm not qualified to advise them anyway) - I'm hired as a TPA for their qualified plan only, and advise them accordingly. Maybe I'm just being a jerk, I dunno...

Isn't this simple? They are not employees. So why should they be eligible to participate?

I think you can honor the contemplated second QDRO, if a state court is willing to issue it. The QDRO regulations specifically provide that a QDRO does not fail to be a QDRO merely because it alters a prior QDRO to reduce the amount of the benefit that is payable. 29 CFR § 2530.206(b): (b) Subsequent domestic relations orders. (1) Subject to paragraph (d)(1) of this section, a domestic relations order shall not fail to be treated as a qualified domestic relations order solely because the order is issued after, or revises, another domestic relations order or qualified domestic relations order. (2) The rule described in paragraph (b)(1) of this section is illustrated by the following examples: Example (1). Subsequent domestic relations order between the same parties. Participant and Spouse divorce, and the administrator of Participant's 401(k) plan receives a domestic relations order. The administrator determines that the order is a QDRO. The QDRO allocates a portion of Participant's benefits to Spouse as the alternate payee. Subsequently, before benefit payments have commenced, Participant and Spouse seek and receive a second domestic relations order. The second order reduces the portion of Participant's benefits that Spouse was to receive under the QDRO. The second order does not fail to be treated as a QDRO solely because the second order is issued after, and reduces the prior assignment contained in, the first order. The result would be the same if the order were instead to increase the prior assignment contained in the first order. A prior commenter noted that the contemplated DRO may not qualify as a QDRO because it does not technically assign any benefits to the AP. However, even if that is a correct reading of the law, you could effectively get around it by assigning $0.01/m to the AP (and then if you really wanted to get it to zero--which is probably not necessary as a practical matter when you are only worried about a Medicaid income threshold--you could simply have her disclaim the $0.01/m benefit). Or, if benefit payments have already commenced, you could argue that the new QDRO does assign a benefit--it assigns the monthly benefits that are payable through a particular cutoff date. You could also argue that the requirement is satisfied because the second DRO "recognizes" the existence of the AP's rights to any benefits that were previously assigned and which have already been paid, even as it revokes the AP's right to future payments. There are also several arguments you could make for simply recognizing the subsequent DRO directly. Three possible options occur to me: (1) permit the ex-spouse to disclaim her benefits under the QDRO, and take the position that the result is that the benefits are payable to the participant, rather than simply ceasing to be payable altogether (which is not immediately clear to me), (2) treat the new order as a new QDRO and determine whether it satisfies the requirements to be a QDRO, or (3) treat the new order as a modification of the prior QDRO and determine that the modification can be taken into account. Disclaimers of retirement benefits are generally permissible if permitted under plan terms/procedures which are complied with. The result is that the benefit is payable as though the disclaimant died prior to the date the benefit became payable. The original QDRO likely specifies what happens when the AP dies. Take a look at those terms and see if they would provide the desired result if triggered early. As a practical matter, who is going to sue? The parties agree on what they want to happen. It doesn't result in increased benefits payable from the plan. The IRS or DOL could theoretically take an interest on audit, but that seems unlikely. The biggest risk, from my perspective, is that the AP will turn around several years from now and argue that the second DRO was invalid, and thus she is entitled to the benefit payments after all. Given that the plan stopped paying the benefits to her at her express request when they see the complaint, the judge is likely going to raise several eyebrows (however many eyebrows they possess).

There are many possibilities. Just a few of them are: The data furnished to the TPA did not include a record of hours of service for a worker who in fact had hours of service. For some directors, officers, or professionals, the measure of service might not be obvious. Or, an employer or service recipient might lack records. An amount reported as wages might have been nonemployee compensation. For example, if a nonemployee director’s fee is not an employee’s wages, it might be the individual’s self-employment income. A director might be in the business of being a corporation’s director. If so, that separate business might establish its separate retirement plan. As just one illustration, a 50-year-old director’s fee of $20,000 a month might support a year’s individual-account retirement plan contributions of $76,500 [2024]. But a businessperson considering such a plan needs a practitioner’s advice about many qualified-plan conditions, including coverage and nondiscrimination, especially if the self-employed business might be treated as a part of a § 414 employer that includes the corporation the director serves. Renee H might face some delicate choices about whether to do the TPA’s work on the data presented, or to invite a conversation about a client’s information and a client’s (and perhaps others’) choices and wishes.

If they are Directors and getting paid fees for that but aren't employees, they should be getting 1099 income and could do their own plans off of that.

I think this is a big deal and the first question to be answered. Regardless of how they income reported to them or why it's W2, the fact appears to be that they are not providing ANY services to the employer and so even if you can argue it's plan compensation the IRS would say it doesn't matter because they have 415 compensation of zero. If they can substantiate services of some sort that's a different story and maybe it's untracked hours (or salaried hours or some equivalence) instead of zero hours. Otherwise, they're just on the payroll getting a paycheck for nothing, which if I'm the IRS I'm also questioning whether that is a legitimate deductible business expense. Sorry, seem to be in pessimistic, devil's advocate, argumentative mood this afternoon.

Don't overlook the possible explanation that the W-2 was issued because someone did not know the correct process. That might be the first problem to solve.

You have to follow the plan document. If the allocation conditions say a participant must work 1000 hours to receive an allocation, and there is no other exception to this allocation condition (typically for terminations due to death, disability or retirement), then the participant does not get an allocation. There are other provisions that may be applicable and again, you have to follow the plan document. Are they employees? The definition of participant commonly requires an individual to be an employee to be able to participate. This likely will impact your cross-testing results. (This also opens up questions about why the amounts were reported on a W-2 instead of a 1099, and the company's accountant should have an explanation.) Is this pay included in the definition of plan compensation? The amounts 2 out of 3 of the owners may not be considered plan compensation for purposes of calculating the contributions, and you have to follow the plan document and exclude it from the contribution calculation. No plan compensation would result in no contribution. You may expect that the 2 owners will not be happy if they feel they are not getting a PS contribution and therefore are not benefiting from their inheritance. There are other strategies to address the situation without involving the PS plan (and possibly triggering compliance issues with the PS plan).

The plan will respond to the receipt of a domestic relations order and implement the terms of a domestic relations order that the plan determines to be a qualified domestic relations order (QDRO). Can a domestic relations order that modifies an existing QDRO to reverse essentially reverse the QDRO out of existence? It seems like one should be able to do this if the state court will issue the modifying order. I do not know if this has ever been adjudicated, but a negative answer would be based on the text of the statute: The term "qualified domestic relations order" means a domestic relations order— (i) which creates or recognizes the existence of an alternate payee's right to, or assigns to an alternate payee the right to, receive all or a portion of the benefits payable with respect to a participant under a plan, *** The modifying order does not do any of that. The modifying order would either (1) strip the alternate payee of an interest in the benefits that the alternate payee has under QDRO #1, or (2) recognize the participant's right to or assign to the participant an interest in the plan that the alternate payee has/owns under the plan pursuant to the QDRO #1. But to paraphrase a lyric from Fiddler on the Roof, "Would it spoil some vast eternal plan to implement such an order?" Who is going to complain? If the plan keeps appropriate boundaries on how it engages, it won't be part of the conspiracy to defraud Medicaid. 🤐