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The DOL and IRS are most interested in plans being operated in compliance. They do not want to destroy the plan or the plan sponsor. The penalties are the big stick. The client is going to have to provide an explanation of the what and why the filings were missed, and the tone and nature of that explanation will contribute to the negotiation of an agreed-upon penalty. Given the dates, it would not be surprising if somehow the pandemic contributed to the plan going off the rails. If the DOL says you can't use VFCP without permission, then expect any agree-upon penalty to be more than the cost of a VFCP filing. Hiring an attorney or consultant experienced in working with the DOL on delinquent filings and that has a reputation with the DOL of being helpful and reasonable can go a long way to reaching a viable resolution.

Love navigating the gray! The early termination for a business transaction such as selling the business should not be a concern unless the transaction was foreseen at the time the plan was established. That is, I would not start a plan effective 2023 if I had a contract to sell the business in a specific year in the not too distant future. Retirement is a trickier situation, as people plan to retire at a certain age all the time but then keep working for various reasons. Is having employees a positive or negative factor where the owner has plan for 2-3 years and then retires? Was it just a short-term tax deferral for the owner or did employees actually benefit? A lot of sides to the arguments and a lot of angles from which to approach accommodating the objective. If no employees to worry about, why not start the plan for 2023 and then freeze after 2024 or run it active another year or two at minimal earnings/compensation before ultimately terminating after 5 or more years? It doesn't get you to the presumptive 10 years but gets you closer - I intended longer but income dropped after 2 years so I froze and then after a few more years I decided to retire. BUT, your responsibility is to communicate the rules and various options and let client decide how to proceed given the risks.

It's a loan. What do you propose calling it that would not lead to discussions like this? I'm not exactly sure what is wrong with "this sort of discussion thread."

For practitioners who advise a plan’s administrator, here’s an important point: A plan is not tax-disqualified because the plan’s administrator relies on a participant’s written certification to the extent that the Internal Revenue Code permits that reliance. I’ve seen no suggestion that Baltimore’s § 457(b) plan suffers a tax consequence, or even an examination, because the plan’s administrator or its service provider relied on Marilyn Mosby’s self-certified claim.

It's still tax fraud, which is a serious matter. The participant accepted the tax benefits associated with a tax favored retirement plan and then lied to receive additional tax benefits. I suspect it was to receive a distribution she was not otherwise entitled to and a waiver of the pre-retirement distribution penalty. I could imagine an IRS agent during an income tax audit wanting to dig deeper into a large increase in income during a tax year and discovering such a fraud. It's one of those low probability high consequence things. Would someone go to jail over it, probably not, but I'll bet the IRS would make it painful.

Spouses are usually attributed each other's ownership for controlled group purposes, unless they meet the requirements to be exempt. The requirements to be exempt from attribution are described in IRC 1563(e)(5) - does it apply in your case? If they want to be in a controlled group, it should be pretty easy to make that happen. Personally I am of the opinion that collaborating on a retirement benefit program rises to the level of being involved in the management of each other's business, so just the fact they are both talking to you about adopting a plan together probably makes them lose the exemption. But if you wanted to be more formal about it, you could have one of them hire the other (and pay them a salary), or put each other on their company's board of directors.

The answer is yes, one DBP can cover them both, but the question is whether you have a single employer plan of a control group or affiliated service group (in which case you HAVE to have one plan covering both) or a multiple employer plan for which your reporting is a little different. If you don't have a CG under the new rules or an ASG, but want one, have one make the other an employee for a nominal salary.

One could argue that without a date certain for the plan term, there is no actual decision for the plan to be non-permanent. In that case its more along the lines of "it will be permanent until we decide to retire" which is an unknown future date. And if you sell the business at retirement, why assume that the plan would term? It could continue with a new owner.

To take it one step further, the plan cannot be required to pay benefits in a form other than, or an amount excess of, what the plan is designed to pay as a regular benefit. That allows the plan to interpret in a manner that allows consistency in administration, and making sure that, however it interprets its terms, it does not have to pay a lump sum amount, in the aggregate, greater than the plan was designed to pay if there were no QDRO. If the DRO asserts otherwise, it is not qualified.

Nobody knows what that means. Are you a TPA, advisor...?

No Top Heavy in 403(b). No deferral testing in 403(b). LTPT applies to deferral rules. It is still possible to use a 20 hour (or another) exclusion category for an employer contribution. 403(b) plans are fortunate with regard to LTPT.

And to help discern the meaning of, or find support for an interpretation of, § 414(m)(5), consider the Conference Committee Report on the Tax Equity and Fiscal Responsibility Act of 1982. Many judges now disfavor legislative history as a way to interpret an enacted text. Yet, for older statutes, especially tax legislation, it can be a useful source of background information. A staff explanation about Congress’s reason for legislating (even if partly or wholly imagined) can suggest useful clues to interpret the enacted text.

Here is an excerpt from something by the CG/ASG Guru, Derrin Watson. I would recommend ERISA counsel if you have an actual situation: Code section 414(m)(5) also provides for management affiliated service groups. A "management affiliated service group" is a group consisting of [Code Section 414(m)(5)]: (A) an organization, the principal business of which is performing, on a regular and continuing basis, management functions for an organization or for an organization and other organizations related to the organization, and (B) the organization and related organizations for which such functions are so performed by the organization described in subparagraph (A). Note that unlike organizations affiliated under other provisions of section 414(m), 1) there is no requirement of common ownership of the managing and managed entities; and 2) is there is no requirement that any members of the group be a "Service Organization."

Sounds like question for an ERISA attorney since the then management regs were proposed in 1987 with no reliance and withdrawn in 1993 as though they had never been issued. I'm sure they'll get around to updating them "soon".

The 1/15 would be from 65-60. If she commenced retirement payments at age 62, they would be 80% of her benefit at 65.

You might want to look at the 5500 filing that is in public domain. The plan provisions are a required attachment to the Schedule SB. They won't be as detailed as the SPD, but they should define the early retirement provisions. https://www.efast.dol.gov/5500Search/

in addition to SPD it owuld be extremely beneficial to obtain a copy of the actual Plan Document in effect as of the termination date. It is not that uncommon (especially if we are going back) that the SPD and the Plan Doc language are not lined up perfectly.

Nobody on his blog can answer your questions without knowing more information than you have provided. You have referred to a "QDRO" but it is my experience that lay people (and Judges) use that acronym generically even it does not relate to an ERISA qualified benefit. They use it when discussing as IRA and plans sponsored by Federal, state county and municipal plans, none of which are covered by ERISA. The rules are not the same. Do you live in a state that deals with "marital property" or a state that deals with "community property" or in Louisiana. Did the agreement or the decree of divorce use the term "marital share", and if so did it define how that "marital share" was to be computed? You have not stated whether or not the plan is a defined contribution plan (like a 401(k)), or a defined benefit plan where you retire after a certain number of years of service with a certain income history and are eligible for a lifetime annuity and your former spouse may be entitled to a survivor annuity. I am guessing that your plan is a 401(k) plan (a defined contribution plan) but there is no way to advise you without seeing the exact terms of what was supposed to be in the QDRO. Does it state a "Valuation Date"? Does it adjust the amount payable to your former spouse for gains, losses and investment experience? If it does not reflect such an adjustment does the law of your state take the position that adjustment for gains, losses and investment experience are implicit even if not addressed? Will it even be possible for the Plan Administrators to may such an adjustment, or will records no longer be available or has the plan changed Third Party Administrators (TPA) who cannot or will not go back prior to the date that they became TPAs? If your plan is a 401(k) and you have retired, Federal law permits you to take out the full amount in your account without notice to, or consent by, your former spouse -- unless the plan provides otherwise -- or unless the plan has actual notice of your agreement or the judgment of divorce and have been told by their attorney will sit on the money until the parties reach an agreement or the court tells them what to do. If your plan is a 401(k), it may decide to wash its hands of people who take 14 years to protect their rights and file an interpleader and deposit the money in the Registry of the Court. In a defined contribution plan like the 401(k), it will be important to know how outstanding loans will be addressed and whether or not you have made hardship distributions and how much of your account is "vested" and whether you have a Traditional and/or a Roth component of your account. Does your 401(k) plan permit an immediate lump sum rollover or distribution to your former spouse, or is she required to wait until you retire? Do you live in a state where the 14-year delay has resulted in the court losing jurisdiction to enter a QDRO pursuant to a state statute of limitations, or the concept of laches, or because the period to ask for the QDRO expired per the Rules of Procedure, or some other reason? If your plan is a pension plan and you remarry and then retire (in that order), your former spouse will lose all rights to a survivor annuity benefit no matter what was the agreement of the parties or what was in the divorce decree or what is set forth in the QDRO. In some states if the agreement or the parties or the judgment of divorce does not explicitly mention survivor annuity benefits, the former spouse will not get them....period. Is your plan sponsored by a church or religious organization or a labor union? They tend to have strange rules. It is important to know the exact name of the plan? Don't tell me, for example, "Lockheed", since that company has 49 different pension and retirement plans. If you wife was represented by an attorney, the attorney should be sued for malpractice and report to the State Grievance Commission for incompetence. It may be too late for that (statute of limitations) but more and more states are adopting the "discovery rule." So DP66, you are not going to receive any useful information here, and you may some wrong information, even from me. If you want a correct answer you need to ask the right questions and you haven't done that. If you want to cross out all of the personal information in the agreement or in the divorce decree except for the name of the e Plan, and submit it to this message board, I will take a look at it and give you my thoughts. DSG

W4-P is for periodic payments. W4-R is for nonperiodic payments. And it's very difficult to not spell "periodic" as "idiotic" most of the time.

If it's eligible for rollover then mandatory 20% withholding applies. I'm assuming the participant has an in-service distributable event under the terms of the plan. If it's a hardship withdrawal, that's not eligible for rollover. I believe the presumption on those is 10% federal withholding but a participant can elect a different amount even 0% on form W4-R. As for timing and submission of withholding see ESOP's link. edited for Bill's correction.

I didn't see anything that explained how the plan document defined Early Retirement. "Missing plan documents" are not an excuse for bad pension administration. Also, I don't think PBGC protection has ended yet, as the PBGC can audit this plan termination. If the Group Annuity Contract provisions do not match the plan document provisions, the plan will have to correct this and amend the Group Annuity Contract.

There is a special catch-up available in 403(b) plans that is designed to allow participants to make up for some years in which they didn't maximize their contributions. I don't deal with 403(b) plans enough to feel comfortable explaining it here, but you can research it if you're interested. There is nothing along those lines for 401(k) plans however.

Unfortunately, they're going to have an uphill battle. If they go back to their former employer, the employer is going to say that the plan is terminated, and the benefits were transferred to the insurance company, so it's not their problem. The insurance company is going to say that the benefit isn't payable until age 65, and whatever information was provided previously is wrong, or not binding on them since it was provided by someone else, and again not their problem. Hopefully you have a copy of the Summary Plan Description. It will describe the early retirement benefit. That might be enough to convince the insurance company to take it seriously, but then again it might not. The insurance company should have an appeal process for denied claims, which you will probably have to use. And yes, you are correct that PBGC protection ended when the benefit was transferred to the insurance company. Good luck.

Plans get terminated all the time, for a variety of reasons, and it isn't necessarily an indication of financial difficulty. Sure, it COULD be, but very well may not be. If the plan is subject to PBGC, the participants should generally be ok anyway, up to the PBGC maximum. (Caveat - I'm not a DB person, so the actuarial wizards here may give you a different take on this. I stand in awe of folks who don't have to count on their fingers.)

What C.B. said. The document should address this question. I will say that in my experience, once you miss the initial 2-month eligibility, most of the time you would be looking at a Year of Service (usually, but not always 1,000 hours in the "eligibility computation period" of January 23, 2023 to January 22, 2024), and the entry date would be February 1, 2024.

The plan document should contain a definition of Year of Service for eligibility purposes. What does it say?

@Lou S. is correct, but don't overlook the possibility of a mistake in the original statement quoted in the first post above. It happens.

Yes, to all that. Pay close attention to QDROphile's last sentence. Just a bit more clarification: First, you should ask for a copy of the plan's written QDRO procedures. If you don't have an attorney who is very familiar with QDRO rules, keep looking. Usually, the best procedure is to have a draft DRO (typically created by the parties and/or their legal counsel) sent to the Plan sponsor (or some person/organization they designate for administrative purposes). Review of that draft (perhaps more than one) frequently enables small (sometimes large) errors to be corrected, and then a final (court issued) DRO is produced and sent to the plan and/or administrator. It becomes a QDRO only when the plan and/or administrator approves and accepts it. If the plan is sponsored by a governmental agency, such as a state/local government, they will have different (but likely similar) rules. If "your retirement" includes other accounts, such as one or more IRAs, any division will be handled outside of the QDRO process.

Your divorce property settlement terms, specified in the divorce judgment/decree/settlement, determine what the domestic relations order - DRO - (to become a QDRO) will apply to. You stated that "your retirement" was to be the subject of the QDRO. That rules out anything else, but you provide no information about what your what your "retirement" is, as specified in the divorce judgment/decree/settlement. Assuming that your "retirement" is some kind of qualified plan, the divorce judgment/decree/settlement should also specify what part of the plan benefits were awarded to your former spouse. Usually the award is based on amounts and benefits accrued at the time of the divorce and a delayed QDRO will not change that. But the award might include additions and accruals under the plan(s) after the divorce date. That would be unusual. Your new spouse's assets should be safe, as well as your assets (after giving effect to the divorce judgment/decree/settlement) acquired after the divorce, except your "retirement". The former spouse would have to go back to the court that issued the divorce judgment/decree/settlement to get more. A QDRO is almost always derivative, but the plan will follow whatever is put in the QDRO that is issued by the court and should not look to the original divorce documents. It is your job to make sure nothing more is added to the terms of the proposed DRO that is submitted to the court.

File a claim for benefits and send the supporting documentation you have with the early retirement eligibility. Removal of an early retirement benefit the participant was entitled to would be a prohibited cutback.

Cohen & Buckmann, P.C. prepared a summary of the grab bag titled Mandatory Auto-Enrollment is Coming for Some Plans - What to Know Here is their description on the rules. I parsed it to make it a little easier to follow "Mergers, Spinoffs and MEPs. It was unclear how the new requirements apply to plans involved in mergers and spinoffs. Employers also asked if they could “buy in” to grandfathered status if they became a new adopting employer in a PEP or other multiple employer plan that was grandfathered. Notice 2024-02 sets out some basic rules. If part of a grandfathered single employer plan is spun off to create a new plan, the transferee plan is treated as grandfathered. This rule does not apply to multiple employer plans. If two grandfathered plans merge, the surviving plan will be treated as grandfathered. If a new plan and a grandfathered plan are merged, the continuing plan is generally not grandfathered, unless the merger occurs as part of an m&a transaction during the period the m&a transition rule in Code Section 410(b)(6) applies. This provides an option to remain grandfathered if the plan designated as the surviving plan is grandfathered. In addition, each employer in a multiple employer plan is evaluated separately. An employer adopting a grandfathered multiple employer plan after December 29, 2022 is treated as adopting a new plan for purposes of the requirements. However, the status of the other adopting employers who joined the plan pre-enactment is not affected. My take on this in different words is: If a grandfathered single employer plan spins of a new plan, the new plan is grandfathered. If a grandfathered multiple employer plan spins of a new plan, the new plan is not grandfathered. If 2 grandfathered plans merge, the resulting plan is grandfathered. If a new plan (not grandfathered) and a grandfathered plan merge during a 410(b)(6) transition period: If the grandfathered plan is the surviving plan, then the surviving plan has the option to remain grandfathered. If the new plan is the surviving plan, then it is not grandfathered. If the merger occurs after the transition period, then the surviving plan is not grandfathered. If any plan (either grandfathered or not grandfathered) adopts a grandfathered MEP, the adopting plan is not grandfathered. Any plan that adopted the grandfathered MEP on or before December 29, 2022 is grandfathered.

Nope.

There is a difference between a money market account and a money market fund. A money market account is a liquid bank account that earns interest and is covered by FDIC. A money market fund is a liquid short term bond fund, earnings are considered dividends, not covered by FDIC and has a ticker symbol. The issuer generally guarantees a $1 NAV, however in 2008 some funds went below $1.