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The end of December marked the end (at least for now) of my 41+ years in this business, starting as a part time DC system programmer (before I knew what a "forfeiture" was) and ending as an Enrolled Actuary with all the ASPPA exams completed as well. I have also been a Benefitslink Board participant for more than 23 years. Here, as well as through the exams, is where I learned my stuff. I am grateful for the learning, teaching and helping opportunities (and more than a little fun) created by Dave and Lois Baker through this awesome system. Their efforts aren't appreciated enough. Thanks also to the countless Board participants that have educated and helped me over the years; and I hope I've been able able to help others as well. I still plan to linger now and then but goodbye and Happy New Year for now! Thanks again Dave and Lois.

This always cracks me up. Along with the "Paperwork Reduction Act" analyses by the DOL.😁

Amen!

A few things: 1) Doesn't really matter what the divorce decree says, it matters what the QDRO says. 2) Both participant and AP would have signed the QDRO to accept it (or at least their attorney did). Doesn't mean they understood it, but they should have. 3) Often, but not always, the APs share is based on the # years married / total years working * final benefit. Sometimes it is 50% of the benefit at the time of divorce. Depends on the wording in the QDRO. 4) She has a right to see a copy of their QDRO procedures. 5) The QDRO should have a specific section that address what happens if one of the parties die before benefits commencement. If it was a true "separate interest" QDRO, the APs share would just be forfeit if they died before commencement. If it was a pure "shared interest", the benefit reverts to the participant. Many are a blend of the two where they are shared until commencement, then they become separate. In those cases, if the AP dies before commencement, the benefit typically reverts to the participant. 6) Seems like the only way the AP's portion could be paid to someone other than the participant would be if it was a separate interest QDRO (since they are treated as 2 separate plan participants) and the plan had a death benefit for non-married participants. So, maybe a lump sum or a period certain annuity? Not logical that it would be a life annuity. 7) Easiest/cheapest thing is to read the QDRO. If she doesn't have it, request a copy from the Plan Administrator. She probably only needs to hire a lawyer if the PA isn't following the QDRO.

Internal Revenue Code of 1986 § 401(k)(14)(C) now reads: Special rules relating to hardship withdrawals For purposes of paragraph [401(k)](2)(B)(i)(IV)— (C) Employee certification In determining whether a distribution is upon the hardship of an employee, the administrator of the plan may rely on a written certification by the employee that the distribution is— (i) on account of a financial need of a type which is deemed in regulations prescribed by the Secretary to be an immediate and heavy financial need, and (ii) not in excess of the amount required to satisfy such financial need, and that the employee has no alternative means reasonably available to satisfy such financial need. The Secretary may provide by regulations for exceptions to the rule of the preceding sentence in cases where the plan administrator has actual knowledge to the contrary of the employee’s certification, and for procedures for addressing cases of employee misrepresentation. Congress has not enacted anything to repeal or amend that statute. This self-certification change applies to plan years that began or begin after December 29, 2022.

If those contributions from the 12/29/23 payroll are attached to the 2024 plan year (i.e., available only for expenses incurred on or after 1/1/24), I think you could reasonably take the position that the contributions were not attributable to the 2023 plan year and therefore did not exceed the 2023 limit. Otherwise, the more conservative route would be to treat this as an excess contribution that's taxable in 2024 when refunded. IRS Notice 2012-40: https://www.irs.gov/pub/irs-drop/n-12-40.pdf If a cafeteria plan timely complies with the written plan requirement limiting health FSA salary reduction contributions as set forth in section IV, below, but one or more employees are erroneously allowed to elect a salary reduction of more than $2,500 (as indexed for inflation) for a plan year, the cafeteria plan will continue to be a § 125 cafeteria plan for that plan year if (1) the terms of the plan apply uniformly to all participants (consistent with Prop. Treas. Reg. § 1.125-1(c)(1)); (2) the error results from a reasonable mistake by the employer (or the employer’s agent) and is not due to willful neglect by the employer (or the employer’s agent); and (3) salary reduction contributions in excess of $2,500 (as indexed for inflation) are paid to the employee and reported as wages for income tax withholding and employment tax purposes on the employee’s Form W-2, Wage and Tax Statement (or Form W-2c, Corrected Wage and Tax Statement) for the employee’s taxable year in which, or with which, ends the cafeteria plan year in which the correction is made.

MoJo is correct that the terms of the plan could cause a problem, but my guess is that the lawyers may have done the right thing here and made sure that Plan A's coverage was not extended to B's historical employees, given that Company A adopted Plan B and based on your OP, KJJ-TPA, there does not appear to be an immediate intent to merge Plan B into Plan A. Thinking back on this after I posted yesterday, I think the case that the 410(b)(6)(C) protection was not lost (assuming that MoJo's suspicion that Plan A's coverage was extended, intentionally or unintentionally through boilerplate tucked away in the Plan A plan document is incorrect) is even stronger than I stated yesterday. The 410(b)(6)(C) regs are very short and incomplete, but they do state clearly that 410(b)(6)(C) protection should not depend on the form of the transaction (i.e., stock sale, asset sale, or merger). Assuming that Plan B's coverage has remained the historical Company B employees, and same for Plan A, then the effect of A's adopting Plan B and putting the B employees on its payroll (but having them continue to defer and otherwise be covered by Plan B) is the same effect you would have if the transaction had been an asset acquisition or merger.

Dianna912, if other efforts (including some Effen suggests) don’t result in clarifying the participant’s benefit to her satisfaction, and you seek to help your friend evaluate her potential courses of action: Consider whether the circumstances you describe suggest enough potential for clarifying (and so improving) the participant’s benefit that it could be worthwhile to pay for at least an initial consultation with a knowledgeable employee-benefits lawyer. If the pension plan is ERISA-governed: One possible interpretation of ERISA § 206(d)(3) is that a qualified domestic relations order—to the extent (if any) that an order may provide for a successor-in-interest to an original alternate payee—may so provide only if the order restricts such an alternate payee to a spouse, former spouse, child, or other dependent of the participant. (I’m imagining that the deceased’s nephew is not the participant’s dependent.) See, for example, In re Marriage of Janet D. & Gene T. Shelstead, 66 Cal. App. 4th 893, 78 Cal. Rptr. 2d 365, 22 Empl. Benefits Cas. (BL) 1906 (Cal. Ct. App. Sept. 15, 1998) (interpreting ERISA § 206(d)(3), and applying ERISA § 206(d)(3)(K)). But recognize that this decision is no precedent. One might use it in an effort to persuade a decision-maker—whether the pension plan’s administrator or a reviewing court—that an order is not a QDRO. A further possible interpretation of ERISA § 206(d)(3) is that a qualified domestic relations order cannot designate an alternate payee’s successor-in-interest if, under the pension plan’s provisions, a participant cannot designate the participant’s successor-in-interest. That also might be so if there is no remaining interest to dispose of after the relevant person’s death. Recognize that the pension plan’s provisions might matter greatly. Consider that the participant might use the pension plan’s DRO and claims procedures to question the administrator’s interpretation, and to request the participant’s interpretation. (Some courts might say one must exhaust the plan’s procedures before asking a court to declare that a domestic-relations court’s order is not a QDRO.) Using the plan’s internal procedures might be less burdensome than litigation in a Federal court. None of this is legal advice to anyone.

Congratulations on your retirement! Best wishes for fair winds and following seas in the years ahead. And thank YOU for the kind words, as well as for all of your contributions to these Boards over the years -- we're honored to have been part of your journey.

Have had similar experiences with TIAA Annuity contracts. "Rev. Rule 2011-7 was issued to provide that a 403(b) plan meets the distribution requirements upon plan termination through the delivery to participants of a fully paid individual annuity contract..." (Groom Law Group "IRS Provides More Detail on Terminating 403(b) Plans" Nov. 19, 2020). Plan Sponsor "Ask the Experts" of January 16, 2024 indicates that a "fully paid individual annuity contract" means that the contract exists outside of the plan, in effect that the liability for the contract has been transferred to the annuity provider. The contract(s) still exist but the responsibility for the benefit and terms of the annuity contract now rest with the annuity provider and not with the plan. "Fully Paid" means that the Participants account balance has fully funded the contract; no future payments are required in order that the Participant receive benefits. In my experience with TIAA and 403(b) plans, it is clear that these requirements are met in the circumstance you describe. It is also true that TIAA will continue to carry the records for these contracts in the manner you describe. In other words, I think the requirement has been met. You can, of course, ask TIAA to list the contracts on a report without the plan sponsor's name but I have not had any luck with this and do not think it is actually required.

The IRS’s Notice 2020-62 about safe-harbor explanations for eligible rollover distributions warns: “the updated safe harbor explanations will not satisfy § 402(f) to the extent the explanations are no longer accurate because of a change in the relevant law occurring after August 6, 2020.” https://www.irs.gov/irb/2020-35_IRB#NOT-2020-62. What changes do you make so a text furnished now explains current law, including SECURE 2022 changes? One imagines some service providers follow SPARK Institute’s suggestions (which SPARK warns is not tax or legal advice): https://www.sparkinstitute.org/wp-content/uploads/2023/03/Special-Tax-Notice-SECURE-2.0-Act-Updates-Final-3.24.23-00391206.pdf. Are there changes not mentioned in SPARK’s suggestions? Which law changes are included in (or omitted from) Relius’ suggested explanation?

A few additional thoughts: Merging plans is the best way to prevent leakage, and I understand why some advisors recommend it, but the reality is that it's often a major administrative hassle, particularly where the seller's plan has protected benefits that cannot be removed. Then the buyer is stuck with deciding whether to open up those protected benefits to all of its employees, or reserving them for a subset of legacy-seller employees, giving them rights beyond what the buyer's plan allows. In the best case, you're amending the buyer's plan document for most acquisitions. For acquisitive companies that do multiple transactions a year, this gets to be unmanageable over time, particularly on an individually designed plan where you are also chipping away at reliance on the last determination letter every time you amend. Short of merging plans, the only realistic option is terminating the seller's plan. There invariably is leakage. In my experience, acquisitive companies that have an established process for transitioning employees typically do a better job of getting assets rolled over. Several I work with present the rollover process as one package, asking participants only to sign and return the forms to roll over their balance, with the HR team handling the rest. A thoughtful and well-timed communication process can (again, in my experience) increase the rollover rate if it's the path of least resistance. Companies that terminate plans and leave it all up to the participant to request a distribution from the recordkeeper, I think, will lose many more assets in the transition. To Peter's question, I have not personally seen that, although I'm sure it happens. In my experience the final default distribution is almost always an IRA in the participant's name. Even if directly rolled over to the buyer's plan as a default, many (most?) plans allow a participant to take a full distribution of his or her rollover account at any time. This adds an extra step, but won't stop a person determined to get the money out. I do think there is a concern among some practitioners, whether warranted or not, that by merging a seller's plan into a buyer's plan the buyer's plan is more at risk for prior non-compliance in the seller's plan.

Luke is exactly right. It's not a logical stretch to think that "excess plan" should include the comp limits, but that is not the precise wording of the statute. The historical context is that the compensation limits in IRC 410(a)(17) did not exist at the time ERISA [and its section 3(36)] were written in 1974.

As Dave alluded to, you can't just offer lump sums to actives because "they would like to". There has to be a distributable event - attainment of normal retirement age, plan termination, death, disability, retirement, etc. I think you can slide down the in-service distribution age to 59.5, but not younger than that without terminating the plan. Regarding freezing accruals for those who take the lump sum prior to NRD, it seems like as long as the effect of the amendment is non-discriminatory, you could do it. I would make sure you accurately disclose everything to the participants, then it is their choice, but it feels pretty scummy. You would also be required to show the plan is non-discriminatory every year thereafter since they froze accruals for non-excludable participants.

The application of the shifting rules applicable to the eligibility computation periods for LTPTEs is the same as these rules have applied since the 1970s. (The original example and the comments below are for a calendar year plan year.) No new programming required. First example The first Eligibility Computation Period starts on the hire date and ends on the day before the anniversary of that hire date. In the first example above, an employee with a 12/31/2023 hire date has a first ECP from 12/31/2023 ending 12/30/2024. The shifting rule says the second ECP starts on the first day of the plan year that contains the first anniversary of the date of hire. Applying shifting rule to the first example, the first anniversary of the date of hire is 12/31/2024. The first day of the plan year that includes the first anniversary of the date of hire is 01/01/2024, so the second ECP is 01/01/2024 ending 12/31/2024. Second example Moving to the second example, the first ECP starts on the hire date and ends on the day before the anniversary of that hire date. An employee with a 01/01/2024 hire date has a first ECP from 01/01/2024 ending 12/31/2024. Applying shifting rule to the second example, the first anniversary of the date of hire is 01/01/2025. The first day of the plan year that includes the first anniversary of the date of hire is 01/01/2025, so the second ECP is 01/01/2025 ending 12/31/2025. The key to how this has worked all along is the consideration of the first anniversary of the date of hire to determine the start of the second ECP.