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We don't know yet. IRS has not issued any instructions on this. My advice to anyone who wants to do this, is to do an in-plan Roth conversion instead. You will get the same tax result through a well-understood process.

Just to add my voice to this, we have strongly recommended to our clients that they do not do anything in relation to this until guidance comes.

I agree with CB, I wouldn't recommend this until we have guidance. No telling when that will be.

You need 2 1099s.

Times a wastin'! The potential "what if" problem of the IRS saying, "How come youse guys reportin' so many?" is much less than what you are currently experiencing. Take advice from Nike: Just do it.

This is where the correction procedure for a 401(a)(30) using EPCRS Appendix Section .04 which calls for a refund of the excess and double taxation can be helpful. Again, the viewpoint for 401(a)(30) is the excess is treated like an employer contribution so it is not subject to the restriction on withdrawals that apply to salary deferrals. You can distribute the correction now, trigger the taxation, and clean up mess. The longer the excess remains in the plan, the greater the likelihood it will be not be treated properly in the future.

For the period 4/15/2021 to 6/17/2021, the employee has a period of service of 64 days. The period of severance from 6/18/2021 to 12/9/2023 is 905 days which is more than one year, so the employee period of severance is does not count as service. It would take about 120 more days for the employee to have enough days to be considered as 6 months of service. This would put the employee's completion of eligibility service in early June of 2024 and the entry date would be 7/1/2024 - which is your answer.

Or give the soon to be ex a partial legal settlement now from other assets in exchange for spousal consent and agreement to not include such in future property division? This is where the lawyers earn their money.

I am with Effen. Adding a few points: 1)In-Service can be made available at 59.5 (rather than only at NRA) which requires the proper language in the document. 2)I also think of in-service as a distribution of a full accrued benefit rather than some random amount. Thus if a participant recived a full distribution at January 1, 2023 of his benefit accrued as of December 31, 2022, then there is nothing to be distributed until January 1, 2024 since he receives an additional accual only on December 31, 2023. Is it too simplistic? 3) Those distributions require some actuarial gymnastics if the design is at 415 level, got to be careful with proper capturing the offset for val purposes

If a plan’s governing document is ambiguous, one might remove an ambiguity by amending the document. Might the plan sponsor amend the plan to provide that, if the administrator has not received other instructions, the final distribution is delivered as a rollover to a default IRA?

mal: Assuming that the plan is an ERISA plan (and if a DC or DB plan makes a difference in various details), the plan might consider acknowledging that the plan has received a domestic relations order in accordance with its assumed appropriate QDRO procedures (because the divorce decree IS a DRO) and notify the parties that it has determined that the DRO does not meet the requirements for qualification. The notice should then explain what the plan will do next, based on its determination that the order is not qualified. Because I do not know what "your" plan does next after a negative determination, it is difficult to suggest what to do next within the plan's framework. However, as a matter of my interpretation of the law and preferred principles, the plan should explain that the benefit is "suspended" (I will leave what that means to the plan) for a reasonable time to allow the submission of a domestic relations order that purports to meet the requirements for qualification. That puts the former spouse (estate) in a position with reasonable time to capture whatever is actually available under 1) state law - and there may be nothing for the deceased former spouse, and 2) federal law - yes, posthumous QDROs are possible but the devil is in the details, especially under DB plans. And shame on the Department of Labor for its completely useless efforts to comply with the Congressional mandate to provide guidance concerning posthumous QDROs, especially for DB plans. When the new DRO is submitted, it will be evaluated, and then either qualified or not. Keep in mind at that point the qualification requirement that the plan cannot be required to provide an amount or benefit that the plan was not designed to provide. Honi soit qui mal y pense.

Also, add that there will be fees deducted from the IRA for maintaining it

What kind of Plan, defined contribution or defined benefit. Pursuant to what law, ERISA, US Military, CSRS, FERS and other Plans administered by OPM, State, County or Municipal Plan, Union Plan, Church Plan, International Plan. Did the Court specifically award survivor annuity benefits. Is this matter pending in a case where if the court does not specifically award survivor annuity benefits the former spouse will not receive them....period, full stop? Like Maryland per the 2002 Potts v. Potts case. If you are referring to an ERISA qualified defined benefit plan and if survivor annuity benefits are subsumed into whatever language is in the Judgment of Divorce, then you are in luck. See my attached Memo that gives you two avenues of attack, the Pension Protection Act of 2006 that permits the post-mortem/posthumous entry of a QDRO, and the concept of "nunc pro tunc". Some states have permitted posthumous EDROs with respect to State pension plans that are not ERISA qualified. Post Morten and Nunc Pro Tunc Memo.pdf David

Not relevant to the question, but I find this very interesting in that I always hear about posthumous QDROs being filed after the participant has died rather than the ex-spouse/potential alternate payee. Curious how often you all have seen this.

It sounds like the owner's goal is to make the maximum deductible contribution and then make additional contributions potentially up to the annual additions limit. You do have to stay within the constraints of the plan provisions, so the starting point is to confirm what types of contributions the plan allows. Most owner-only plan documents I see allow just about everything: non-elective employer contributions "NEC" (e.g., profit sharing), pre-tax deferrals, Roth deferrals, after-tax, ...) To attain this goal, typically you would maximize the NEC which will reduce the owner's Net Earnings from Self Employment "NESE". Be careful because this calculation must take into consideration FICA and Medicare withholding taxes based on the NESE after the reduction for the NEC (a circular calculation). This would be the first step. If the owner wants additional deductible contributions, the owner should maximize pre-tax deferrals including, if eligible, catch-up contributions. If the owner may decide to make Roth deferrals if the owner does not want to make additional deductible contributions. If the sum of the owner's contributions has not yet reached the annual additions limit (lesser of $66,000 or 100% NESE after the NEC), the owner can make after-tax contributions that will bring the total of all contributions up to the that limit. If you do not have experience with these calculations, I recommend using software that is designed to do this task. Tax prep software can do these calculations, and some calculators provided by financial institutions can accommodate the level of detail needed to be accurate. Good luck!

The after-tax contribution wouldn't reduce his Earned Income. Do the PS calculation first to see how much is left to be a potential after-tax amount.

Is there a separate document section for plan termination, compared to the regular rules for distribution of benefits?

https://www.irs.gov/retirement-plans/consequences-to-a-participant-who-makes-excess-annual-salary-deferrals

Creative action? Maybe send a letter suggesting (without really promising) that, absent a signed election form received by X date, the benefit will be distributed to you, with applicable withholding, and will be reported to the IRS as a taxable payment. IOW, see if they call your bluff.

Kind of a smart spouse there to know the ERISA protection available!

Purchase an annuity with a J&S benefit? I don't think the other options are acceptable for a DB plan unless you'd like to be on the hook for a claim from the spouse.

If they are no longer due a benefit, I don't think there is a time limit on reporting them as "D". Now how well that gets translated to removing them from the government data base so they don't get the "you may have a benefit" letter I can't say. I also don't know if reporting a large number of "D", possibly in excess of the current participant count(?) would be viewed by the programs that filter for potential additional attention.

Have you asked FIS/PPD? IMO, I think rolling over to default IRA is the "best" of the allowable options available in these situations and personally I would not have any problem with sending the funds to a rollover IRA if good faith effort to get these non-responsive participants out of the Plan to facilitate the final distribution of assets in conjunction with the Plan termination. What are your other options? Send to PBGC program? Send them a taxable check less federal withholding and tell them they have 60 days to rollover? I think it's clear you're not required to keep the trust open for non-responsive participants just like you're not required for missing ones.