Leaderboard

This is exactly why plans should follow the actual law rather than the shallow, ill-informed, Department of Labor suggestion for the plan not to follow the law (to take action only upon receipt of a domestic relations order) and instead follow some some wispy notion or information that maybe there will be a domestic relations order someday or maybe there won’t, and thus the plan should interfere with plan terms and legal provisions otherwise clearly applicable.

Consider also whether the plan’s administrator might have a duty to consider a claim fairly. That might mean the administrator should not deny a claim if the claimant is severed from employment, meets any further conditions for the distribution claimed, and no plan provision impedes or delays the distribution. This is not advice to anyone.

@Paul I is correct. However, it's worth noting that the original post said nothing about buyer or seller or multiple plan sponsors, only about a merger of one plan into another plan. Careful consulting practices will help plan sponsors understand the difference as well as how to anticipate (and properly execute) such transactions.

This is addressed in Rev Proc 2021-30 under the "missed deferral opportunity"/"failure to implement an employee election". The employer must fund the total match the employee would have received had the correct deferral election been applied timely. In other words, if the employee elected to defer 6%, the match is based on a 6% deferral election, not the QNEC amount for the missed deferral.

The plan document should specify the beneficiary if there is no designated beneficiary. The plan document must be followed. So, no to your question. If the plan provides that, in the absence of a designated beneficiary, the eldest child of the participant is the beneficiary, and said daughter is the only child of the participant, then the daughter is the beneficiary, but not a designated beneficiary. I doubt that the plan provides that the eldest child of the participant as the default beneficiary. The plan might provide that the children of the participant are beneficiaries, and equal shares. The plan might provide that the estate of the participant is the beneficiary. If the daughter is the administrator of the estate, then the daughter will manage the plan benefit.

I am with everyone else. They have covered the law so I have only one more question: Why are you putting yourself in the middle of two divorcing people? I try as hard as I can to stay out of that position with all my clients. Divorces can be high emotion situations were people get nasty. Leave me out of it as much as possible is my position 100% of the time.

Why? What is your relationship to the plan? To the parties? Do you know whether the divorcing parties expect to include any particular assets (in this case, the 401k accounts) in their asset division? Even if you do know, is it any of your concern? Is it possible the parties will find ways to simplify asset division by ignoring some? Is it possible both accounts are small enough so as to be trivial? (BTW, these questions might be inter-related.) I'm not really asking you for answers, just pointing out that the plan (and its administrators) should stay out of the legal proceeding. It seems likely the QDRO procedures direct you to act on a (draft) DRO only if you get one. Alternatively, if your QDRO procedures direct you (or someone) to speak up (or take any specific action) whenever you hear about a potential divorce of a plan participant, then you should quickly engage an ERISA attorney to help you correct that.

I think the location of the assets is 100% irrelevant.

If what the executive seeks to do is to release the charitable organization from all or some of the organization’s obligation to pay her deferred compensation, the charity should get advice from its lawyers and accountants and the individual should get advice from her lawyer and her accountant. They might consider: How to document the release? What accounting notes to put in the charity’s financial statements? How the release would affect the next IRS Form 990 information return? What tax information reporting is required or permitted? If tax reporting is by a service provider rather than by the employer directly, what notices and instructions must or should be given under the service agreement? How to value the release? (Consider whether the value of the release might be less than the amount of the obligation released because the value might be discounted by the probability that the organization would not pay the deferred compensation when and as due under the plan’s provisions.) This is not advice to anyone.