MoJo

Is it possible that one or more (disgruntled) participants have filed complaints with the DOL over this, or some other issue? The only problems I've ever had with the DOL are when participant complaints are in the "file."

"Partner buys all or a portion of a not liquid asset from the plan. Files via voluntary compliance with the DOL to "correct" the prohibited transaction. Pays the 5330 excise tax. Partner bears all extraordinary costs." Not a practical solution. Amazing how asset rich and cash poor many high earners are. "BTW, I still don't think your example makes much sense because can't the promissory note be distributed, in full if necessary, and the participant can come up with cash to roll over to an IRA within 60 days all that is rollable?" Not a practical solution. Amazing how asset rich and cash poor many high earners are. We have an entire book of business that we bought that contain a large number of such law firms - and some of the largest in the country. The only practical solution is to not allow such investments in the plan - but the practicality of it is a decision for the client - not us. We actually bid on, and then withdrew from ("there is a "God!") the hunt on a law firm that had 300 employees and over 1200 limited partnership interests in the plan - including limited partnership interests owning the building the law firm occupies - and they have a large and very well respected ERISA practice....

You now have to define "extraordinarily rare" because I see it several times a year. Usually, it's a lack of planning on the part of the participant who has an SDBA that invests in things that may be illiquid (limited partnerships being a favorite, real estate crops up often) and the "law firm" they work for doesn't actually place any restrictions on what can be held in the plan.... Beside, rare or not, it stretches the mind to have these discussions. Mental atrophy does, in fact, set in in our dynamic profession....

I'm not sure the numbers change the analysis. The thread is about an "illiquid" investment and RMDs. Consider an account that has $20,000 in marketable securities plus $20,000 in a promissory note for a total account balance of $40,000 - on 12/31/anyyear. Now consider on the first business day of the following year, the marketable securities drop significantly in value (below the RMD amount), not to recover throughout the year. I don't care how much the payments may contribute to the equation if they don't contribute enough to process the RMD based on the $40,000 account value. Think it won't happen? Go back and check out what happened in the early parts of the Great Recession. I know personally of some RMD issues as a result of this. I also know Congress suspended RMDs for a year because the RMD amount was a substantial portion of their remaining account balances - as a result of the market crash(es). Besides, the OP already said the payments were sufficient to cover the RMD - he was asking a hypothetical.

Most of the ones I've seen start off as 1 person plans (or husband and wife) but ultimately may add employees. Then things can get interesting....

I can't say for sure if there is any "authority" specifically on point, but the analysis is simply that while "cash" left the account, it was replaced with an (enforceable) promissory note of equal value. Hence, the balance doesn't actually go down as a result of the loan having been issued. I can comprehend of no other result with respect to the balance of the account.

From my perspective, the loan is nothing more than an investment held in the participant's account, and hence, the "value" of the participant's account is $46,000. I'm not sure of any exemption from the RMD requirements for excluding the loan from the calculation. Now, distributing a "part" of the loan may be problematic.....

Well, OK. We disagree. I find and fix them virtually all the time - and not just in M&A business, but with respect to ALL new business that comes in the door. Last year, we on-boarded about 450 new plans - and every one of them was reviewed through the process....

I work for a bundled service provider. From the client's perspective, I'm free. The issues you raise are easily discovered, and fixed. Its a small investment of time up front to cement a longer lasting relationship where we are perceived of as a "trusted advisor" and not simply as a vendor. It works even better the other way around - when a current client is acquired. Our success rate at keeping and expanding that business is extremely good.

That's why there is such a thing as "due diligence" and why including pro's in the process is essential. We all know only a fraction of distributed assets are rolled-over. It is what it is. I work with my clients to provide the best option - and in my mind, that is merging - unless there is a really, really good reason not too.

That's where the value of good "consulting" comes in. Risks can be identified and managed. Tell an employer that if the newly acquired employees won't be able to retire an any reasonable age and your health care premiums will SKYROCKET, and they tend to listen. By the way, lost of information on the subject of the higher cost on non-retiring employees out there - mostly from the financial wellness purveyors. Financial Finesse has been documenting this for a while. Same is true for "leakage."

Differences in philosophy, differences in result. I ALWAYS try to preserve the benefits accrued by the employees acquired - and I explain why to my clients. Nothing is so broken that it can't be fixed and nothing is so complicated that it can't be simplified. If you terminate, you must vest up, so why not just vest them up anyway and not deal with the multiple vesting schedule issues? Protected benefits? Not too many to not deal with - and if they are good for the goose, they might be good for the gander as well. Evaluate and make consistent. It's a value add service to clients that they really appreciate.

It's complicated. If you work for any entity that is part of a "controlled group" of companies (regardless of where you work, or how you are paid) you continue to accrue vesting service credit (and indeed, you don't have a distributeable event allowing you to take a distribution from the plan sponsored by the US member of the controlled group. BUT... the HQ "company" you are going to work for may or may not be part of a "controlled group" that includes the US based company you worked for. It's a matter of ownership. If the US company is a "wholly owned subsidiary of the HQ company, I'm pretty confident that it would be a controlled group. If the US company is a joint venture, or a company that is less than "wholly owned", then questions arise. I don't think that being an ex-pat (as TPAJake calls it - a "non-US person") is relevant, and the non-US income may have a bearing on whether you can be an "active" participant in the US based plan - but what counts for "vesting" is "service" - not place of residence or income, and service is based on service with any member of the "controlled group." I'd go back to HR and further inquire.

Define: "get rid of" the target's plan? I agree maintaining separate plans is often not tenable, but "termination" to get rid of it is vastly different than "merging" it, to get rid of it. The former (if done correctly) causes (in my experience) significant leakage which generally results in an ill-prepared for retirement workforce - which can have real business consequences (older workers being more expensive to provide health benefits to, greater absenteeism, lower productivity, etc.).

I'm not sure I agree. In an "asset" acquisition, I would say it is typical for the acquiring company NOT to acquire the plan as part of the deal. In a "stock" acquisition, in my experience, it is almost always the case that the plan is acquired, and merged into the acquiring company's plan. There is a lot of variability here, and it seems that the smaller the acquiring company is, the more likely the plan is not merged - but I've found that that is because the attorney's handling it generally have no ERISA experience (and indeed, are afraid of it) and don't have "big firm" expertise on which they can draw. That's where I come in - to provide some expertise so that a plan merger can occur - and we (a bundled and unbundled r/k firm) help by performing due diligence and corrective actions (including VCP filings) if necessary. Bottom line - anything can be fixed. Make that part of the "deal" and don't suffer the consequences of retirement plan drain by your newly acquired employees....

To answer your question, yes, there would be a successor plan - and the issue is as Tom points out - the establishment of a successor plan (withing the 24 month period beginning 12 months before the plan termination and ending 12 months after) would mean there would not be a "distributeable event" from the terminated plan for any of it's participants. That would leave two options - 1) maintain the existing plan (and any evil it contains - which in my mind would be the only reason to consider it's termination); or 2) merge the plan into the new one (which would merge the evil into the new plan, tainting it). Now, you arguably could give participants the option of leaving balances in the old plan or "rolling over" to the new plan (but not taking a distribution), but in effect, that is a "partial" merger of assets which a good lawyer could/would argue taints the new plan as much as a complete merger. My recommendation: If there is a problem with the existing plan - FIX IT. Everything can be fixed - the only variable is the time and money it takes - but IF ITS BROKEN, IT NEEDS TO BE FIXED. Then, don't worry about "termination" and new plan set up and successor plan issues....

Yes, but.... His research (first point) references the regs on "segregation" and his questions references the "deadline" - of which there actually is none for "depositing." That is a fiduciary issue. Hence, my comment relating to the DOL's treatment - in at least one case - of the postmark issue (and if it ain't segregated, it can't be deposited)..

While I agree this is "still" the rule, I had to deal with a client that mailed a check to Vanguard ON PAY DAY, and the DOL still hit them up for a delay in segregating assets - arguing the company (a 160 employee HVAC contractor) could have used electronic means to ensure DELIVERY within 3 days. Still shaking my head, but....

I am really surprised that these type of "uncooperative" TPAs seem to survive. When I worked for a TPA and we had advisors who spread their book around, we used to tell them (the advisors) to add a request of TPAs in the RFP process (or what ever selection process they used). The request was to provide the names and contact information of any business LOST that went to one of the other TPAs being considered in the search. Failure to provide any was disqualifying. Providing names that said the transition was painful to another provider was disqualifying. Stopped the belligerence almost immediately. This is a small industry and unfortunately the number of true "professionals" is even smaller. Time to call them out on it.

I actually was allowed to enter a plan early - by mistake - and my employer was a TPA (and as it turns out, not necessarily a "good one.") The issue - as you point out, Austin, is the PRECEDENT. If an employer had previously NOT allowed in those inadvertently allowed to participate and refunded money, and then allowed one who "technically" was an NHCE but would be an HCE going forward, I would think an auditor/investigator might ask questions. It may be (and I believe it is) "technically" ok to do this, but do you want to set the precedent - or have been inconsistent. In my experience, "inconsistent" is harder to explain than "oops."

Interesting topic - and one that depends on State law. Where I've practiced, the Separation Agreement is COMPLETELY revocable up until the Court orders the divorce/dissolution. Indeed, the Judge or Magistrate is REQUIRED to ask the parties if they have read the Agreement, if they have any questions about the Agreement (or have they discussed it with their attorney), did they sign it voluntarily and without coercion, and if they still agree to the terms of the Agreement "today." If so, the Court will enter the decree of divorce - which at that time fixes the property rights of the parties. If the Agreement calls for a DRO, and one party dies AFTER the decree of divorce but before the DRO is issued, it will still be issued, and the estate of the deceased steps into the shoes of the decedent. If the party dies BEFORE the divorce decree is issued, the Separation Agreement (unless already part of an order of the Court - as in a "legal separation" proceeding) is OF NO EFFECT WHATSOEVER (they haven't "verified" it as discussed above), and the parties are still "married" at time of death. Go to probate court....

Um, I just feel compelled to say: We don't have earthquakes or hurricanes, but we have an abundance of fresh, drinkable water - which is why I stay in the midwest/Great Lakes states....

Someone ought to explain that to the DR bar in CA - because I get 4 or 5 of these for CORPORATE plans a month....

Just to get back to the OP's query and the very correct commentary concerning the reasonableness of the fee. We currently charge either a flat fee of $250 or an hourly rate of $150 (depending on our service agreement with the plan) for complete QDRO outsourcing service (the "Q" determination, letters, etc., everything up to an alternate payee requesting a distribution - which is handled as a regular distribution). I think that is low. Average time to complete is about 5 hour - with half of that being "professional" time, and half being more clerical/systems related. Factor in risk, and the price could, and possibly should, be $700 - but market forces being what they are, I think that wouldn't fly.

Just curious here, why is it necessary to join a plan to the domestic action? I work for a service provider and we get these ALL THE TIME "naming" us as the contact for the plan and we respond with - absent a DRO determined to be qualified, go to you know where.... Fundamentally, a DR court has no jurisdiction over a plan except through a QDRO. People seem to forget that the service provider and the plan are not the same - and we service in a non-fiduciary capacity (and in many cases don't even hold the assets - the TRUSTEE does) so serving us is really just inappropriate. Some enterprising attorneys has agreed - but then get an injunction or other device AGAINST THE SERVICE PROVIDER (if they have jurisdiction over them) to not process a distribution pending the outcome. That, at least, makes legal sense to me.