This is a new one for me.

Short DRO incorporates the much longer Marital Settlement Agreement by reference.  The MSA awards 50% of the funds accrued from date of marriage to date of the divorce, adjusted for earnings (marital portion).  The MSA further states that Participant shall receive $20,000 from APs share of the marital portion of Participant's retirement account by virtue of the same DRO that divides the marital portion.

I may be grumpy due to the lazy DRO which made me go through the MSA to find the relevant language, but this doesn't sound right to me.  If AP has agreed to pay P $20,000 from APs share of the marital portion, P can use the MSA to enforce that agreement.  It shouldn't be the plans responsibility to pay P from P's retirement account using a DRO that assigns the benefit to the AP  but with part of the award payable to P.

Am I missing something here?

Company A and Company B are both corporations owned 100% by Fred so we obviously have a brother-sister controlled group.  Both Company A and Company B sponsor 401(k) plans - both have 12/31 PYE, same HCE definition, and current plan year testing for ADP/ACP.  Historically the Company B 401(k) plan has failed coverage testing so the plans have been aggregated to pass coverage and ADP/ACP.

Fred sells 100% of his stock in Company B to his best friend Barney on December 1, 2021, so there is no longer a controlled group.  Nothing else changes other than the stock ownership and there is no affiliated service group.

1. Are the employee populations of Company A and Company B required to be combined for coverage in 2021?

2. If they aren't required to be combined, can the plans be permissively aggregated for 2021 (and 2022 if desired)?

I assume 1 is no and 2 is yes since the 410(b)(6) transition rule allows the parties to a stock acquisition to test their plans for coverage and nondiscrimination purposes as though the transaction did not occur, but I'm just not 100% confident in my thinking... or there was too much holiday cheer last week and my brain still isn't functioning properly.

I am thinking about what procedures (and perhaps plan-document provisions) an individual-account retirement plan might want for situations in which the plan continues periodic payments to a participant for many months (or even a few years) after the participant’s death.

Imagine a situation like this. (This is based on a real situation, but I changed a few facts to protect the employer/administrator’s confidences, and to simplify the legal issues.) In 2017, Jack was 62, eligible to retire, and did retire. Although the plan precludes a life-contingent annuity, the plan allows other periodic payments (subject to minimum-distribution provisions no more restrictive than as needed to meet IRC § 401(a)(9)). Using the recordkeeper/trustee’s form (which the employer/administrator adopted), Jack instructed payment, by direct-deposit electronic funds transfer, of $3,000 every month, to be paid on the first banking day of each month. (Jack never had a spouse.) In 2017-2020, all goes well. On January 9, 2021, Jack dies. Then, no one told the employer/administrator, the recordkeeper/trustee, or Jack’s bank about Jack’s death, and none of them had any knowledge of Jack’s death. On January 4, 2022, Martha (Jack’s friend, but not a relative) informs the recordkeeper/trustee about Jack’s death, and furnishes the death certificate, Jack’s will, and a probate court’s letters testamentary that appoint Martha as Jack’s personal representative. The trustee promptly turns off Jack’s periodic-payment instruction. But before this, the plan made, and Jack’s bank accepted, twelve payments ($36,000) after Jack’s death. The employer/administrator checks Jack’s plan beneficiary designation; it names someone who is not a legatee or beneficiary under Jack’s will, and has no apparent relation to any of them.

Here are my questions for BenefitsLink neighbors, hoping some have experience with this problem:

1)        Must the plan try to get the $36,000 from the bank?

2)        If the plan tries and the bank refuses, how strong or weak would the bank’s defenses be in the plan’s lawsuit to recover the $36,000?

3)        If the plan does not get the money from the bank (and no one otherwise restores Jack’s account), how strong or weak is the designated beneficiary’s claim that the plan fiduciaries’ actions deprived the beneficiary of money the beneficiary otherwise would get?

Because the plan’s participants include a few thousand retirees, the employer/administrator presumes the problem of periodic payments continuing after a participant’s death (until the recordkeeper/trustee is notified) is recurring.

A)      What procedures might help manage this problem?

B)       Could a plan-document provision legitimate after-death payments to a participant (if no surviving spouse has any ERISA § 205 right)? (The employer uses no IRS-preapproved document. Also, the employer’s frequent mergers and acquisitions would set up an opportunity to get an IRS determination on whatever text the employer might add.)

C)       Would a plan-document provision be wise or unwise?

Any further suggestions?

Company A is 100% owned by a non-US company.

Company B is 100% owned by the same non-US company. 

Is there a control group for 401k purposes?

Question - does any of this actually affect what we do as TPA's? Will CPA's need anything new from us due to the following? (I'm thinking the answer is no)

I just received invitation to a Webinar that said the following.

On recent IRS Forms 1065, Schedules K-1 and in related instructions, IRS launches massive reporting requirements re: negative tax basis capital accounts, at-risk activities, passive activities, partner level built-in gains, disregarded entities and many more.  

We can’t wait to be a deer in the headlights preparing Form 1065 and Schedules K-1. In this action packed program, you’ll learn:  

Course Outline

• Negative tax basis capital account reporting – What must be computed and disclosed (and by when) – How IRS keeps moving the target
• How partnerships (and S Corps) face the at-risk (and passive) activity reporting blues (and what to do about them)
• Plethora of other new info required re: built-in gains lying in wait
• Consequence laden all new reporting re: disregarded entity partners
• New disguised sale reporting
• New disclosures re: liabilities of partner
• Stunning penalties for failure to wholly and accurately complete K-1

The CEO of one America Life insurance company said in 2021 deaths were up 40%. The most in history he said. It was surprising because I had heard death claims were up 1.5%. he said all life insurance companies experience the same increase. Does anyone have information that refutes or supports this 2021 statistic?

Thank you all.

https://www.efast.dol.gov/5500search/

The interface is much better and there is a new feature to allow filtering by all sorts of criteria.

Does anyone have any idea about the following change?

'' Defined Contribution Multiple-Employer Pension Plans: The instructions have been revised to implement an amendment to ERISA section 103(g) in the Setting Every Community Up for Retirement Enhancement Act of 2019 by requiring multiple-employer defined contribution pension plans to report aggregate account balance information by employer on the existing Form 5500/Form 5500-SF attachment for reporting participating employer information. ''

Date: December 29, 2021

https://www.dol.gov/newsroom/releases/ebsa/ebsa20211229

Thanks for your insights.

Our office is upgrading to Office 365. Since upgrading we're getting memory and runtime errors with Relius Admin when trying to access census or transactions, run reports and tests. We on version 2021.0.0. My computer still has Office 2013 and I don't have any issues. We've contacted Relius and they are not aware of any issues. Is anyone else using Office 365 and Relius Admin? Are you having any problems?

Good morning and Happy New Year to all!

I have a client that is a Private Equity Fund and it's a participant directed accounts.  One of the plan participants wanted to know if it was alright to invest in the firm's own hedge fund.  May question is if that would be allowed in general, or could it be viewed as prohibitive by the IRS since it's the firm's own fund.

Thanks in advance!

Two questions:  

I have always known that a QDRO can provide that the payment of benefits from an ERISA qualified defined benefit plan can provide for termination of benefits not only at the death of the Participant or at the death of the Alternate Payee, but also on the Alternate Payee's remarriage.  See page 105, paragraph “2" at the top of the page at -
https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/qdros.pdf.  

....where, in discussing QDRO language, it says that, "Payment to the Alternate Payee shall cease on the earlier of: [insert date or future event, such as the Alternate Payee’s remarriage], or the date that payments from the Plan with respect to the Participant cease."

I always assumed that this was authorized by IRC §414(p)(2)(C) requiring that a DRO state - “the number of payments or period to which such order applies”.

Question 1:  Upon the termination of benefits to the Alternate Payee, is it automatic that the benefits no longer being paid to the Alternate Payee will revert to and be paid to the Participant?  Is that a Plan by Plan issue?

Question 2:    Based on the provisions of IRC §414(p)(1)(B)(i) that provides:

        “The term “domestic relations order” means any judgment, decree, or order (including approval of a property settlement agreement) which—

            (i) relates to the provision of child support, alimony payments, or marital property rights to a spouse, former spouse, child, or other dependent of a participant,”

Does the termination of benefits on the remarriage of the Alternate Payee apply only when the QDRO has been entered for the purpose of facilitating payment of alimony to the Alternate Payee; or does it also apply where the QDRO is intended to allocate marital property? 

Thanks for you input. Citations of authority that I may have missed would be helpful. 

Happy New Year to all  

David Goldberg

With some holidays regularly on a Monday and others observed on a Friday or Monday, 2022’s calendar results in ten or eleven three-day weekends for many workers.

For most, our due date for 2021 personal income tax returns is April 18. For residents of Maine or Massachusetts, it’s April 19.

For retirement, health, and other employee-benefit plans, the due date for a plan’s Form 5500 report on 2021 is August 1. The typical extended due date is October 17.

For details, read my 2022 chart [attached] about how Federal and State governments and the New York Stock Exchange observe holidays.

2022 holidays recognized in public law in the United States of America.pdf

I am relatively new. But what is the better option for a TPA when they are overloading with work?

1.       Choose other TPA for their workload support.

2.       Setup a backroom team in other part of the world (like India, Philippine, etc).

There is many thing related I know but, I want to know in general.

Thanks!

I've a confusion regarding 402g excess deferral. If there are any excess deferral contribution amount then excess contributions must be refunded within April 15 (no tax required).

Do I need  forfeit any match contribution related to this excess deferral contribution?

I've attached an ASC generated report where it shows $14 attributable match need to be forfeited. Please share your thoughts.

Thanks for any insight.

From the Pension Rights Center:
 

Quote

 

A few days ago, we sent you the PRC statement mourning the loss of the Pension Rights Center’s founder and president Karen Ferguson.

Today, we are grateful that we can send you two incredibly powerful profiles of Karen, which capture her essence and aptly describe her amazing work. The first article, “Karen Ferguson, Fighter for Pension Rights, Dies at 80,” was written by Katharine Q Seele and was published in the New York Times. The second article, “Karen Ferguson, Founder of Watchdog Groups, Dies at 80,” was written by Matt Schudel and was published in the Washington Post.

The Times’ article discusses how Karen started the Pension Rights Center and “became one of the country’s foremost experts on pension law and a champion of workers’ rights.”

The article says that “Virtually every piece of consumer-oriented pension reform legislation of the past 45 years, she had a hand in….” including “strengthening protections for widows and divorced spouses.”

It also says that “Ms. Ferguson’s long-range goal was for the United States to establish a universal secure and adequate retirement system on top of an expanded Social Security system, to provide for those many private-sector workers who have no pension or retirement savings plan to fall back on.”

We at PRC are so thankful that the New York Times captured Karen’s ambitious vision.

Similarly, the Washington Post article lauded Karen for being an authority on retirement income security and quoted her as saying “It’s one of the great scandals of our country that people don’t realize they can work a lifetime and still not have enough money for retirement.”

The article points out that, in “addition to counseling individual retirees…about their benefits, Ms. Ferguson often testified before Congress and advised legislators.” It also says that “while Ferguson wrote many articles on issues related to pensions and was often quoted in media reports, she also joked that she was the lowest-paid member of her Harvard Law School class.”

The article credits her for advocating for and helping draft provisions of the Retirement Equity Act, the Tax Reform Act of 1986 and the Butch Lewis Emergency Pension Plan Relief Act.

We are so honored to have known and worked with Karen and we will carry on her legacy in 2022 and beyond.

We have set up an online Guest Book where you can share your memories of Karen and tell the world what she meant to you.  

 

Happy holidays!

The situation I am posting about involves a professional practice that is composed of an LLC that employees the staff and separate S-corporations, one each for the professionals who also collectively own the staff LLC. The staff LLC has a safe harbor 401k; in addition to a 3%-of-pay safe harbor contribution, the LLC pops in another 2%, establishing a 5% gateway minimum for cross-testing.  Each of the professionals' S-corporations has an identically drawn up 401k plan that permissively aggreates with the staff LLC's 401k, to allow the S-corporation to make a cross-testing determined contribution to its plan for its only employee, the professional that owns the S-corporation. 

One of the new professionals did not coordinate into this situation, but was convinced by an investment adviser to have her S-corporation instead set up a SEP-IRA to which she then make contribution for 2020 and 2021.  We're hoping to get the 2021 contribution, and investment earnings, paid out to the S corporation (and hopefully the financial institution won't report either the 2021 contribution nor its return to her. If so, her S corporation will simply include that amount in its taxable income for 2021).

2020 might not be so easy.  Because of the affiliated service group rules, the staff LLC employees would be included as benefiting employees in that professional's S-corporation's SEP-IRA.  If the contribution for the professional was say, 8%, of her 2020 W-2 wages from her S Corporation.  There might be a contribution due from the staff LLC to that SEP-IRA of 8% of their pay.

I am hoping that we can simply undo the 2020 contribution, have the financial institution regurgitate the 2020 contribution, the S-corporation and professional amend the 2020 Forms 1120-S, W-2 and 1040 to reflect the additional income.  Is that possible?

If it is not, rather than 8% for all the staff LLC employees having to be contributed, can the dollars that make up that 8% be re-allocated among that professional and all staff in proportion to their considered compensations?

This cash balance plan (half of a combo) had 6 eligible employees during the year.

One of them terminated with fewer than 500 hours.  And the plan requires 1000 hours for an accrual.

Seems easy....but, the plan has separate classes for the contribution credits, and her class always gets zero.

Did she fail to accrue solely based on the lack of hours?  She does get 415 participation credit for prior years even without an actual benefit, since she had the hours before 2021.

So I'm back to at least thinking "maybe".

(The two principal employees benefiting, out of either 5 or 6 employees, obviously are different outcomes for the test.)

Does the answer change if the plan is amended to provide any nonzero amount for a new class just for her, even though she won't accrue it?

Thanks!

--bri

Plan currently allows for in-service withdrawals at ag 59.5 for all sources.

They would now like to limit it to only accounts that are 100% vested.

Is there a cutback issue?

Does the Otherwise excludable employee provision consist of two options:

1. Otherwise Excludable Employees - where any employee HCE or NHCE is removed from testing - thus two tests - one for everyone meeting max age & service and one for those who are otherwise excludable under max age and service.

2. Early Participation rule - where you only exclude the NHCE's who have not me max age and service but would keep any HCE who has not met max age and service in the testing with everyone who met max age and service.

I have a client with both a cash balance and 401(k) that would like to invest part of each plan's assets in I bonds. Is this a permitted investment for a qualified plan?