How do you define receipt of a DRO?

I have seen some interesting questions here and on other sites lately, which caused me to take a closer look at my firm’s QDRO procedures. One thing that I am a little stuck on and that I’m hoping for some good input from the benefitslink community on, is at what point do you consider the Plan Administrator being in receipt of a DRO for a QDRO determination? And more specifically, what triggers the Plan Administrator’s duty to segregate and separately account for the assets subject to the QDRO.

Our current QDRO procedures states:

“Upon receipt of a written notice of a domestic relations order, the Plan Administrator will…”

If I (the Plan Administrator) get a request from an alternate payee’s attorney asking for certain information to assist them in drafting a DRO, am I in receipt of a DRO that would require me to not process distribution requests from the participant? Technically, I would say no, I’m not yet in receipt of a DRO. However, processing a participant’s distribution request after you know that a DRO is in the process of being drafted seems to go against the spirit of the law.

I have not seen any advisory opinions or other guidance on what is considered receipt of a DRO. Would anyone here argue that there is such a thing as constructive receipt of a DRO?

Thanks in advance for any input and (hopefully) spirited discussion

J

Can a 5500 filing be taken back?

Company filed in 2014 for fully insured welfare plan but count was actually under 100, no filing actually necessary.

(for lack of knowing an answer to that question, filing is being amended with code 4R to reflect no 2015 filing)

of course these types of things are use at your own risk, but this appears to be working well for our office.

much of the data on the last page is from user defined fields so you won't get much there - or the data won't make sense if you are using the plan spec user defined fields since they won't be the same as fine (I am set for next year's compliance question in the office here!)

about the only thing you have to remember to do is make sure you check the box to pull all accounts including those with no activity or balances. but the report includes a warning reminder for that purpose.

but basically the report will pull the data to check info on participant count for the 5500 including a rough attempt at the 5500-SF

even a random message from the 'cow', because, well, the 'cow' insisted on it.

report will also count # of ees deferring, those who contributed more than the deferral limit (since the IRS apparently is going to start asking for that info anyway, so I wanted to see if I could pull that data as well.

Although I am a seasoned benefits practitioner, there is a personal question based on a personal situation that is about to be raised in the next couple of weeks.

I have a daughter who is no longer a tax dependent of mine and she has health insurance coverage through her employer. She is going to be starting a job with a new employer in a couple of weeks, and it occurred to me that she might have a gap in coverage, even if it is over a weekend. If her last day with employer 1 is a Friday (which coincides with the last day she has medical coverage with employer 1) and her first day with employer 2 is the following Monday, in which case she will become covered under employer 2's medical plan as of either that Monday or not until the first day of the following month, what happens if she gets injured during the period when she is uncovered?

A couple of possible responses might be COBRA, but she would likely not get the election until after she starts working for employer 2 and possibly after she has medical coverage with employer 2. Another possibility might be the exchange, but what if it is not an open enrollment period and what if she is not able to limit her medical coverage to the period when she needs it?

I would greatly appreciate any thoughts you might have.

Mailing updated SPD out in the next month. We know we have some bad addresses. We are going to mail via USPS with address correction requested. For the addresses we know are bad, should we be sending those via first class mail? I heard from our mail service that many plans do that, but they could not tell me why. I looked at the regulations, but could not find any guidance on point. any insight would be appreciated.

From the IRS website regarding the 10% excise tax due to premature distribution:

"The following additional exceptions apply only to distributions from a qualified retirement plan other than an IRA:

1. Distributions made to you after you separated from service with your employer if the separation occurred in or after the year you reached age 55, or distributions made from a qualified governmental defined benefit plan if you were a qualified public safety employee (State or local government) who separated from service on or after you reached age 50."

I deal only with qualified plans. Every now and again I'm asked by someone who is age 55 if the tax applies to them and I'm wondering why in the qualfied plan arena the powers that be didn't just make it 55 instead of 59 1/2?

anyone know?

Since July 31st is on a Sunday this year is the deadline Monday August 1?

Thanks,

Profit sharing pla with insurance is terminating.

The principals are the only participants with life insurance coverage.

The policies are in the process of being surrendered and the cash value will be rolled over to one of the plan annuities for distribution.

Would the cash value be allocated among all participants or just to the principals who were covered?

If a plan currently uses the employer's fiscal year (ex: year end of 2/28) instead of the calendar year as the plan year, what affect will this have on compliance testing, etc? Would there just be an administrative effect in terms of calculating deferrals and compensation for testing purposes, or is there something else I am missing? Will it negatively affect the employer in any way?

Company A sponsors a 401(k) Safe Harbor Plan - Company B is a participating employer - Not related to Company A. Company B wants to spinoff to another plan.

1. The plan Company B will spin off to is not Safe Harbor

Can Company B Spinoff Mid Year to a Non Safe Harbor Plan?

I thought a safe harbor plan could not transfer to another plan mid year.

Thoughts

Teresa

A plan has 2 new owners as of 2015. Each owns 50%. They were not owners at any time previous to 2015. Do they go on the top heavy test run in 2015, which is for determination date 12/31/16?

Our office is having a heated discussion about this.

A 457(b) plan has an old vendor that no longer gets on-going contributions other than premiums for life insurance policies. When the plan left the old provider, investment in life insurance was no longer permitted, but participants who had invested in life insurance under the old provider could still keep this investment.

Does the plan document drafted by the new provider need to contain a life insurance provision? If no, should the prior plan document under the old provider have a life insurance provision or is the old provider's contract provisions acceptable.

Are there different rules for 457(b) governmental plans vs top hat plans?

This assumes that investment in life insurance under a 457(b) plan is permitted by state law.

Thank you.

An employer had a substantially overfunded DB plan that was terminated, with the excess transferred to a new DC QRP. Unfortunately it appears that the excess assets will not be used up over 7 years due to anticipated low ongoing compensation and application of the 415 limits.

However due to historical high-3 compensation averages, it does appear there is room under 415 to use up most or all of the excess assets over the next few years in a DB plan. So we are looking at recommending the employer establish a new DB plan and merge the DC plan into it, along with the QRP suspense account, and then provide maximum DB 415 accruals for a few years to use up the excess.

Does this work?

IRC 414(l)-1(l) clearly allows the merger of DB and DC plans, but doesn't provide a lot of detail, certainly nothing that addresses the treatment of the QRP suspense account. There are some small DC account balances in the QRP due to the first year allocation of the suspense account. Seems to me we could probably treat these as 414(k) accounts in the DB plan.

All participants are already 100% vested in everything so no issues there.

Yes, this should have been looked at before the first DB plan was terminated, but that's a different issue. Thanks.

I have a participant who had 4 years of service before he terminated.

He then had 4 1-year breaks in service before he was rehired. He had 1000 hours in the plan year he was rehired in.

The plan is immediate entry for 401k & a 1-year of service requirement for profit sharing.

Does the participant come in for profit sharing during the year he was rehired since the number of consecutive 1-Year Breaks in Service does not exceed the greater of five or the aggregate number (4) of pre-break Years of Service?

Is the correction procedure the same for rehires who were not allowed to defer upon rehire date as they are for employees who became participants and were not given the opportunity to defer?

I looked on the IRS website and did not see anything specific to rehires.

Hi. I have a situation where the company sponsoring a plan has purchased back 5% of the outstanding stock and is holding it (as "treasury stock"). Does that affect the percentage owned for the other owners?

Example: 100 shares in total, 5 purchased and held by the company. Does an individual who owns 5 shares count as 5/100 and therefore not a "5% owner", or is it 5 / 95 outstanding shares, which is > 5%? Or even 5 plus their share of the treasury stock (so 5 + (5/100), which still puts him in to "5% owner" territory)?

Thanks.

The owner of the company owns 70% of the stock and the ESOP owns 30%. He wants to buy a whole life policy on himself through the plan. He's thinking that when he dies, the death benefit would buy out his 70%. Would that be a prohibited transaction? And can death benefits be earmarked for a certain purpose? Would deductible contributions be used to pay the premiums? Or maybe there's excess cash in the ESOP. I would love to get some input from ESOP people on this idea because I certainly don't know if this would work.

We have a 401k plan that we had two incorrect deferral percentage changes that were not implemented. Employees changed deferral from 5% to 6% but the plan administrator did not make the change. These are within the two year window whereby the employer can contribute the 25% of the missed deferral, 100% matching contribution and missed earnings. Other than notifying the employees as required and making these corrective contributions is there anything else the employer needs to do? Or report this anywhere?

A plan utilizes the basic SH match (100% up to 3% and 50% of the next 2%).

I'm trying to find a formula for a discretionary match on top of the basic safe harbor above that would be equivalent to a formula of SH 100% up to 4% and additional discretionary of 50% of the next 2%.

Suppose you have corporation A, which sponsors a plan. Corporation B is formed, and is owned 70% by Corporation A, and 30% by an unrelated investor - no options, etc., so not a controlled group. (nor is it an ASG)

Corporation B is very small, and the owners of A want to just include B's employee's in A's plan.

Their pre-approved document contains multiple employer provisions, so they can sign on as a participating employer - no problem there. Question is, does a separate 5500 form need to be filed for each?

This doesn't appear to be an "open" MEP as discussed under AO 2012-04A, and given the 70% ownership, it seems like this should be sufficient to consider it as one plan for 5500 purposes?

Any thoughts? I realize this is a matter for legal counsel to determine, but I'd like to formulate some thoughts before it reaches that stage...

Thanks.