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It is permissible, it is not required, and there are pros and cons. Some companies fund the SHNEC with each payroll because the contribution is 100% vested and not subject to other allocation conditions (like a last day rule). They do this as a convenience and feel it helps them manage their finances. The TPA should know better than to say there is no "true-up". The SHNEC is not like a match. A plan can specify a time period for funding the match that is more frequent than annually. The SHNEC requires each participant receives must the the SHNEC percent of annual plan compensation. Payroll is notorious for having adjustments from pay period to pay period, and for having challenges reporting plan compensation should the definition of plan compensation be something other than 3401(a) W-2 compensation. The prudent plan administrator, payroll and TPA all would double check after year-end that everyone received the SHNEC they were due.

I would just like to thanks everyone for the advice and for those that can't give advice, "non-advice". There has been so much help and guidance this board provides. I'm not sure what I would have done without it!! Appreciative is not descriptive enough. It's time to switch professions. Again, thanks to all of you.

An October 19, 2017 Internal Revenue Service memo (later put in the Internal Revenue Manual) directs an Employee Plans examiner not to challenge a plan’s tax-qualified treatment for failing to meet the plan’s minimum-distribution provisions if a plan’s administrator took the search steps the memo states. missing participant minimum distribution memo-for-employee-plans 2017-10-19.pdf

All of the various ways the agencies have proposed procedures or made suggestions about finding a missing participant, no one explicitly tells us what to do when, for a plan that is not terminating, we try everything in good faith and cannot locate the missing participant - with some exceptions that are not considered acceptable by all of the agencies. The IRS says we can forfeit the benefits and pay it if the participant is found. The DOL doesn't like this. The IRS at least acknowledges in the 5500 instructions to the compliance question about benefit due but not paid that some participants will not be found by saying: "Note: In the absence of other guidance, filers do not need to report on this line unpaid required minimum distribution (RMD) amounts for participants who have retired or separated from service, or their beneficiaries, who cannot be located after reasonable efforts or where the plan is in the process of engaging in such reasonable efforts at the end of the plan year reporting period." There does seem to be some grudging, temporary acceptance by the DOL of the notion to write the check and let it escheat to the state. The IRS doesn't seem to mind as long as they get default withholding. The IRS and DOL want us to report to them people due benefits, but neither agency wants to let a plan cease to have the responsibility to find a missing participant (unless the plan can pass off that responsibility to a business that will take the participant's account where it slowly disappears into the abyss of administrative fees). The PBGC is willing to help, but not for DC plans unless the plan is terminated. Hopefully, sometime, we will have clarity across all agencies about what a plan can do with benefits due to participants who remain missing despite everyone's best efforts to locate them. This has about the same chance as there being universal peace, love and happiness.

409A is extremely complicated. There generally aren't requirements about when benefits accrue or are credited--409A is generally focused on hard and fast rules for the time and form of payment. That said, though, sometimes the two can be tied together by design... so the answer is going to be very fact intensive and can only be answered for a given plan by reviewing the document.

Are you the participant or the Alternate Payee? I assume you are the Alternate Payee? If so, the Plan Administrator will not pay you without a valid QDRO. If the QDRO was originally rejected and never corrected, then the plan has no authority to pay anything to you. The Plan Administrator is not bound by the divorce decree. There must be a QDRO in order for them to separate the participant's benefit. Generally a plan will have QDRO Procedures that determine what happens in this situation. My experience is they will give the AP a certain amount of time to produce a valid QDRO (like 180 days), if nothing is provided, they will just go ahead and pay the participant the entire benefit. That said, it sounds like the participant isn't requesting anything at this time, so likely nothing will happen until then. Short answer, you will need to retain a lawyer to draft a DRO, which you then submit to the Plan Administrator for approval, making it a QDRO. A life annuity of $140/month starting at 65 is worth about $20,000 based on standard life expectancy. Your call if that is worth the cost to hire a lawyer.

Beyond tax law: A deferred compensation plan is a contract between the employer or service recipient and the employee or nonemployee service provider. If that contract specifies when an amount is credited to an obligee’s account, the employer ought to follow the obligation the employer made. If the relevant document is not specific, the obligor ought to act in good faith, with fair dealing, and reasonably so as not to deprive the obligee of the benefit of the parties’ bargain. This is not advice to anyone.

In the correction I describe in my prior post, there would be no amending of returns.

If the plan sponsor’s goal is increasing nonhighly-compensated employees’ elective deferrals: Beyond increasing an arrangement’s initial default percentage for newly eligible employees, consider also: a “reenrollment” so a participant with a deferral percentage (whether affirmative or impliedly elected) less than the new initial default percentage is defaulted to that percentage, unless the participant opts out; an “auto-escalation” provision to increase a participant’s deferral percentage each successive year. (Everything depends on an appropriate notice and a participant’s opportunity to opt out from whatever default is presented.) I don’t advocate these plan designs, but merely mention them as provisions some plan sponsors adopt. Among many factors to consider for these and other plan-design questions, a plan sponsor might consider its guesses and perceptions about how employees might react to a presented default or escalation. Some employers worry that too much attention to an elective-deferral arrangement might awaken some employees, and might lead some to decrease or end one’s deferral election. A plan sponsor might consider doing only what’s feasible within the employer’s capabilities and the recordkeeper’s and third-party administrator’s services.