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I may be the origin of the above response you received. The process to enable electronic filing of the Form 5330 has been difficult to say the least and at present there is only one vendor who is capable of doing so. This is a problem vexing our whole industry and industry groups from ASPPA to SPARK (and others) are all approaching the IRS for relief. At the ASPPA Spring Virtual Conference last month, Kelsey Mayo (ASPPA's Gov't Affairs counsel) mentioned that she raised the issue with the IRS and the IRS's response was that their website (link referenced above) includes language adequate to claim relief. Unfortunately, thus far, the IRS has been hesitant to provide a more formal statement of relief, IMO but that language does provide a path for relief. Paper file and retain documentation as to why it was necessary. I will also note that the electronic filing requirement is not entirely new. Prior to this year, the requirement applied to taxpayers filing at least 250 forms per year. In light of what counts as a form, this requirement has applied to many plan sponsors for years, but - to my knowledge - no one was filing the 5330 electronically, and the IRS has taken no action against paper filers. What I do strongly recommend is that plans pay any excise tax due on a timely basis - but, of course, I must note that I am not providing legal advice.

Just curious, has a draft DRO been sent to the plan(s) so the Plan Administrator can review it? (Hint: it's advisable.)

As support, here's a snippet from the 2004 ABA Q/A with the IRS: 19. §401(k) – Hardship Distributions A participant wants to know if the purchase of principal residence qualifies as a hardship if she is using the proceeds to 'buy out' the equity on her current home from her ex-spouse? Proposed response: Yes, because the dwelling is her principal residence and she is purchasing an interest in it that she didn’t own before. IRS response: The IRS agrees with the proposed answer. The participant is purchasing a part of her principal residence.

I would think there's one value per person for 414(s) compensation as used in the testing, as it sounds that these plans are being aggregated to pass their stuff. And as such, one value to use to determine the minimum gateway. (happy to be wrong) Participants always enter both plans at the same time, right? (With only the comp definition different?)

I would use the word blatant, but yeah, if that is not the perfect example of a PT, I don't know what is. I remember seeing this sort of stuff a lot back in the 80's when I first started and most/all PSPs were pooled balance forward trustee directed. Vacation homes/condos, timeshares, antique/collectible cars, etc.

Let’s assume that whatever survivor annuity or other death benefit the plan provides a surviving spouse to meet ERISA § 205 is inapplicable or exhausted. And let’s assume that, in the circumstances, the plan provides a benefit for which it might matter to identify a beneficiary. An ERISA-governed plan’s administrator must administer the plan “in accordance with the documents and instruments governing the plan[.]” ERISA § 404(a)(1)(D). That means the governing documents, not the summary plan description (unless the plan sponsor specified the SPD is a governing document). See CIGNA Corp. v. Amara, 563 U.S. 421, 50 Empl. Benefits Cas. (BL) 2569 (May 16, 2011). But let’s imagine the plan’s governing documents too might be ambiguous. (The ways plan sponsors make plan documents, especially when using IRS-preapproved documents, often result in provisions that do not make sense using only textual interpretation.) Plan documents typically grant the plan’s administrator broad discretion to interpret a governing document and the plan’s provisions. Many BenefitsLink mavens use the shorthand RTFD for Read The F . . . abulous Document (as RatherBeGolfing recently explained it). I propose a new shorthand: ITFD for Interpret The Fouled-up Document. If the plan’s documents grant discretion, courts defer to the administrator’s reasoned interpretation. See Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 10 Empl. Benefits Cas. (BL) 1873 (Feb. 21, 1989). Not seeing the whole set of documents you mention, I won’t speculate about the interpretation. This is not advice to anyone.

Avoiding unwelcome information about an employee’s living situation is among the reasons an employer/administrator might prefer that claims for a hardship distribution be processed from a self-certifying claim form.

pwitt, Peter Gulia's analysis of the issues is excellent. From a practical standpoint, I would want to know (a) whether the person who would take the money through the estate is different from the person who would be the contingent beneficiary and (2) whether the amount of money at stake is significant. If the takers are different and there's enough at stake for the one who would not get the money under the plan administrator's interpretation to hire a lawyer and sue, the plan might want to hire it's own lawyer to interplead the benefit into court.

Indeed. And if it wasn't under audit, it would be VCP. IRS Notice 2023-43

If it's discovered under audit, I think you are looking at Audit CAP and not VCP.

I agree that plans should pay the excise tax on a timely basis. File the 8868 (requesting 6-month extension) with the payment by paper and hope this is all worked out by January 2025!

A value of deciding claims using only a § 401(k)(14)(C) certification is that the plan’s administrator is removed—and its service provider too is removed—from discretionary decision-making about questions of the kind Ilene Ferenczy and Paul I describe. Instead, a plan’s administrator designs (or approves its service provider’s design of) the claim form to state each of the available deemed hardships, and not ask for any supporting information. Likewise, a service provider designs the participant website’s software to not receive any information beyond the online claim form. The claims procedure can be simplified (mostly) to approving a claim if the form is completed “in good order” and signed under penalties of perjury. Or NIGOing a form not filled-out or not signed. But shouldn’t an employer that serves as its plan’s administrator (and service providers too) welcome a procedure that gets rid of discretionary decisions?

Could be a couple (married or unmarried) where only one partner is on the mortgage. In that scenario, there probably would not be an agreement for rent, just shared expenses. Without the distribution, they miss payments and are foreclosed on. I think that's enough for a bone fide hardship.

Turning on the business sale’s terms, there might be issues way beyond whether the ESOP’s documents are tax-qualified in form. But to consider your question, an ESOP that seeks § 401(a) tax treatment has no less need on discontinuance and termination for current (without a remedial-amendment delay) provisions than does a § 401(a) profit-sharing plan. Yet, consider too that an ESOP’s in-operation provisions implemented in reliance on a to-be-done-later remedial amendment might have used few or none of the optional provisions SECURE 2019, CARES, or SECURE 2022 permits. Just to pick one example, an ESOP might not have changed its applicable age for a § 401(a)(9) required beginning date.

If claims for a hardship distribution are processed under a § 401(k)(14)(C) certification, a claimant might believe, in her circumstances, that buying out the former spouse’s interest in the participant’s principal residence fits one (or more) of those deemed-hardship situations. And a plan’s administrator might not “ha[ve] actual knowledge to the contrary of the employee’s certification[.]”

Some court decisions describe a beneficiary designation as a part of “the documents and instruments governing the plan[.]” Others have described it as a record maintained under the plan. I don’t remember a case in which either description is a precedent or even a holding, rather than dicta. If “the” plan document is, after considering all textual interpretation methods, ambiguous, an interpreter might consider a summary plan description—a plan administrator’s attempt to explain the plan’s provisions—as possibly some secondary information about the plan administrator’s perception of the plan sponsor’s intent. (More so if the administrator is the same person as, or a committee or officer of, the sponsor.) Likewise, one might consider a beneficiary-designation form as information that might favor or disfavor one or more of the possible interpretations. If a plan’s sponsor/administrator uses documents, SPDs, and forms from a service provider without carefully reading and editing those writings, all interpretations might be weakened. But a plan’s administrator must do what’s loyal, obedient, and prudent in the circumstances. Sometimes, that’s a least-wrong interpretation. Two related points: For interpretations, a fiduciary’s duty of impartiality might call for maintaining over time logically consistent interpretations for similar situations. A plan amendment to change the default for an absence of a beneficiary designation might be an amendment one could apply with little worry about a prohibited cutback of a benefit. Why not clean up the whole set of writings so the provisions make sense, are internally logical, and are accurately described? Or if the plan sponsor isn’t ready (perhaps for expense or another reason) to do that, pursue carefully a least-wrong interpretation. This is not advice to anyone.

If you’re a law student (as your May 25 post mentions) and not an admitted attorney-at-law, you should seek the guidance and supervision of the faculty person responsible for your law school’s clinic or other program.

What Bill Presson said. Unless the trustee is ready to: resign or recuse, spend the time and lawyers’ fees to get an individual prohibited-transaction exemption, spend the fees for independent fiduciaries to make all decisions (which might include that the real property is not a prudent investment for the plan’s trust), spend the fees for independent appraisers—to estimate each fair-market value for the initial purchase price, each year’s valuation, and the price at which the plan may sell the property, pay the plan’s successor or separate trustee the fair-market rent the independent persons set, and meet other conditions the Labor department likely would require, isn’t this a nonstarter?

It’s a classic PT.

Not referring to any regs here, but my understanding is that a single employer who joins a MEP mid-year, their plan follows them into the MEP. It is the same as if they switched recordkeepers, you need to gather asset data from the prior recordkeeper, but the plan and compliance is run on the 12-month period. I get confused when a single employer plan joins a PEP mid-year, say on 7/1. The single employer's plan files a final 5500 and joins the PEP, which files one 5500. If the new plan is selected for audit in the PEP, the auditor wants the census data from the date they joined the PEP through year end. However, the plan has to be compliance tested for the 12-month period. The prior tpa would file the final 5500, but when the employer wants to calculate their true-up their match or make a profit-sharing contribution, which may have a last day requirement, the PEP tpa will need annual census data for those calculations. If the plan is ADP / ACP tested that has to be completed for the 12-month period, even though there are "half" plan years as a single employer plan and then a PEP adopter. I am not aware of any specific guidance that deals with annual compliance testing when a plan joins a PEP mid-year.

See my comments in all bold type. I have a Client who was divorced by Judgement of Absolute Divorce. In the JAD the wife (Plaintiff) was to receive Rehabilitative Alimony for 30 months. The Defendant never provided those payments to the Plaintiff. Did she remarry within that 30 months - an event that would have terminated alimony under Maryland law? Do you have a judgment for the 30 alimony payments - a prerequisite to any collection efforts? In seeking a judgment, did you ask for pre- and post-judgment interest at the 10% judgment rate in Maryland? The amount due for alimony would have like tripled in 20 years. See the "Rule of 72s". What sort of Plan are you trying to serve with a QDRO for alimony arrears? A defined benefit plan or a defined contribution plan. Does the statute of limitation apply to alimony, normally viewed as a "duty" and not a "debt" in Maryland? Does the doctrine of laches apply to preclude your client from collecting alimony arrears? Now we are 20 years later and the Plaintiff is working on a Qualified Domestic Relations Order to receive the Pension benefits awarded to her in the JAD. Why wasn't the QDRO submitted to the trial court 20 years ago at the time of the divorce hearing? Tell your client to immediately file suit against the attorney who represented her at the time of divorce for malpractice; and report the attorney to the Grievance Commission for violation of the Rules of Professional Responsibility - Competence. Now she is also trying to file a petition to receive the Alimony payments never received, but I notified her that the statue of limitation has passed. However, she can use a QDRO to receive the Alimony payments that she is entitled to receive, as the state that she resides has no statute of limitation on QDROs. In Maryland the statute of limitation on the collection of alimony is 12 years from the date each payments becomes due. So at 14-/2 years (12 years plus 30 months) after the Order to pay alimony the right to collect it ended. The fact that you are trying to collect it via a QDRO rather that a wage garnishment or an attachment of his bank account is not likely to make a difference. Nice try though. Now to get to my question: I am drafting a QDRO for Alimony in a 401k Account, should I include only the exact dollar amounts awarded to her or should the QDRO apply the interest of the investment accounts on the wife's Alimony share, as any account would? Do you know anything about the laws in Maryland. I know QDROs have no statue of limitations in MD, as held in Potts v. Potts. You are misreading the intent of Potts and ignoring Rohrbeck where it is made clear that a QDRO is simply a method of enforcing another court order. The QDRO does not create the underlying obligation or define how the S/L will apply to the collection of that underlying obligation. My main question is how how should the interest be applied if the Alimony will be garnished under a QDRO for a Deferred Compensation Plan. You are full of surprises. Most deferred compensation plans (other than those that are under IRC 457) are not "qualified" under ERISA and cannot enforced by a QDRO. Another issue is that most are non-funded. Should the Wife share of Alimony be credit with the investment experiences under the plan pursuant to the rules of the Plan because the Alternate Payee will be treated as a Participant with her out retirement account created? No. The Alternate Payee will not be treated as a Participant. She will be treated as an Alternate Payee. And if you don't have a court order awarding gains, losses and investment experience, or you don't have a court order incorporating an Agreement awarding gains, losses and investment experience, you are got going to get such an adjustment assuming that the Plan can go back 20 years and make such a computation. If the Plan uses a TPA, the date that the most recent TPA took over is as far back at computations of gains, losses and investment experience can go. But see my comments above. about about prejudgment interest .

Honestly knowing that the IRS has to approve the providers filings, I feel a lot better making the connection to "If the IRS's systems do not support electronic filing." I.e., if the IRS has not approved the vendors files, then the IRS systems do not support electronic filing. I wish the line was a little bit straighter but it does seem straight enough...

This is not official, but for the purpose of this conversation: Industry groups have reached out to IRS regarding the e-filing issue looking for a a resolution like "you can file on paper until...". It has been pointed out that website already has language to accommodate exceptions. The IRS is well aware of the issue and the number of providers who can provide e-filing services. If you rely on this and file on paper, save everything just in case. Someone recently told me that there is probably little risk here even if they reject your paper filing since you paid the penalty on time. You can also extend the due date of the filing. Several of the big software providers have said that they are very unlikely to be able to get IRS approval by 7/31/24.

You need to talk to your H.R. deparment again, and also get a copy of the Summary Plan Description for the plan if they have not already given one to you.

You can ask in the state court for whatever state law allows. I would start from the idea that the spouse is collecting an alimony debt, and that interest, perhaps at some statutory rate, is an appropriate addition to come up with the fixed number that will be submitted to the plan to cover the award. The plan does not care. The plan will pay whatever the domestic relations order specifies is awarded. Interesting question about which state law will apply with respect to recovering the unpaid alimony (if there are substantial differences) and whether equitable concerns, such as latches, will be at play.

set up a DB/CB Plan if the Owner is older than his Ee.

Make a profit sharing contribution that passes the a4 tests.

Many of the plan administrators we have worked with also required proof of the threat of eviction. This usually was in the form of a written notice from the landlord or bank explaining that they would act to have the tenant evicted unless the issues (typically delinquent payments) were resolved. Fast forward to today's ability to rely on the participant's self-certification, and plan administrators' reluctance to press for information to corroborate the participant's request.

It would be up to the Plan Administrator but if they had sufficient evidence and believe that this is his primary residence (where his W-2 issued, his drivers licenses, a power company bill in his name, etc.) , I don't see why it would not be approved.

Thank you both for responding. YES, that is what happened... in a way. She was give the deferral form but never turned it in. And of course the EE feels jipped. The plan sponsor is such a good guy and want's to make it up to her to keep her happy... doesn't want a thorn in his side. It sounds like the plan doesn't need to do any corrective measures. It sounds like the best course of action is to make her whole outside the plan with a bonus and she can turn around and defer it into the plan. Case closed. Sound like a plan?