MoJo

I think it would be incredibly "prudent" for the order to 1) specify that the receiver has the power to amend the plan as may be necessary (the "plan: is not part of the assets or the company, nor it's operation - although the obligations inherent in maintaining a plan may be a "liability" against those assets, and 2) specifying that the receiver, as such, may make fiduciary decisions as part of managing the enterprise under receivership, and that when he or she does so, that they will be doing so as an ERISA fiduciary and be protected from claims of creditors (against the company) when doing so may impact the assets of the company. The last few times I've seen a receiver appointed, such language has been included in the order (or sought by the "very knowledgeable" receiver once appointed). Seems to me that the role of employer as fiduciary is different from the role of employer as business manager, and if the receiver is going to wear the "settlor" hat, then they (or someone else) needs to wear the "fiduciary" hat.

Just a thought - why could you not have TWO profit sharing contributions authorized in the plan, one pro-rata, and one integrated, both "discretionary, and then each year, the employer makes a determination of how much, if any, to contribute to each of the two sources? It would require two "buckets" on the record keeping system (a Profit Sharing "A" (non-integrated) and a Profit Sharing "B" (integrated). Haven't rolled up my sleeves to thoroughly "vet" this option - but I've seen various schemes that border on this....

Just an FYI - lawyers CE requirements will vary from state to state. I have licenses in Ohio and Virginia, and the requirements are different. Ohio requires 24 hours every 2 years (with the first half of the alphabet due at the end of the calendar year (12/31) in odd numbered years, and the last half in even numbered years). Of that, there is a "professionalism component" (2.5 hours, I believe). Half of the hours can be earned on-line with self study. Virginia requires (last time I checked - as my license is "inactive" since I do nothing in the "commonwealth") 12 hours every year - based on a fiscal year ending 6/30 - with some hours for "ethics" or professionalism. I used to keep the Virginia license active - but it required taking at lest 6 hours in each half of the calendar year to count towards both requirements - with the ethics part interspersed appropriately.... Too confusing for me....

"I just saw one the other day, and it looked as interesting as a Model T :)" Can't say I've seen one in a while. Last time was in an airport (there were probably 20 empty spaces that used to have payphones and ONE phone left). I very vividly remember reading an article on "top 10" investment ideas for the future - and one of them was "payphones" - because our increasingly mobile workforce needed to stay connected. Glad I didn't bite. Anyway - the DOL should be notified and will handle it.

"That;s what I meant, perhaps my "drop a dime" line was misleading. I just meant report them to the DOL." Sorry - I read the "payphone" part out of context with the "dime" comments.... Interesting how such a phrase as "drop a dime" and payphones seem to hark to another age. Many wouldn't know what "drop a dime" means - nor how to actually use a payphone (and last time I checked - it was at least a "quarter" - although some of them have card readers....

I don't know that this need the "anonymity" of a pay phone. Simply alert the DOL that the plan fiduciary has abandoned the plan, and without authorization (and payment) the TPA isn't going to do anything....

"Does it rhyme with MIAA-TREF? :unsure:" Why do I keep hearing bells - going: Ding ding ding ding! Like someone just won a prize????

I'll bite.... What's the ultimate goal of the owners/company in setting this up? Different "benefit formulas" (i.e. either a cash balance formula or a more traditional formula - of which their are many...) will determine whether the goal will be accomplished (and at what cost/administrative complexity, etc.).

Has a guardian been appointed to handle the affairs of this individual? I would think that one should have been - or could be - and that would be the "safe" bet - getting a guardian to act on behalf of the participant and consent to the distribution.

Hmmm. I know of at LEAST three large recordkeepers that have "funny" policies regarding loan collateral. In my mind (and I believe this has been confirmed to be the "right" mind by the comments above - and the appropriate regulatory bodies) the only collateral necessary is the NOTE held as a plan asset (usually within the account of the borrower). There is that little "pesky" requirement that you can only borrow 50% of your account balance - BUT THAT IS NOT A COLLATERAL REQUIREMENT - it is simply a restriction on the amount of the account that is loanable. Indeed, one of those recordkeeper goes so far as to NOT loan the participant money from their own account - but rather loan it to the participant from the recordkeepers OWN FUNDS - requiring a like amount to invested in the plan's "traditional GIC" account (as "collateral"), where it's locked up for TEN YEARS (for a max 5 year loan). Not saying who that recordkeeper is - but one would think educated participant's (like "teachers" - and the fiduciaries overseeing such plans) would find such provisions objectionable, but I see it often in "non-profit" and educational institution plans....

There are a lot of (potentially) significant issues in a scenario such as this - and unfortunately THEY SHOULD HAVE BEEN ADDRESSED PRIOR TO THE SALE. Ok, I'll get off my soapbox now (I'm a "recovering" ERISA attorney and sometimes the "beast" resurfaces). The sold employer CAN (and should) have it's own plan. That can be accomplished in a couple of ways. I usually recommend a "spin off" of the portion the original plan that contained benefits for the sold employees into a plan maintained by the sold employer. Not having been involve PRIOR to the sale may cause problems to exist - including, has the structure of the sale resulted in a distributeable event to the those participants? Will the plan sponsor cooperate? What has been communicated to the employees? Does a spin off change the demographics of the existing plan such that there are pricing considerations for the recordkeeper? Are salary deferrals continuing for "sold" employees and if so, where are they going, and who is responsible (as a fiduciary) for those contributions/balance? There are many other issues too numerous for a post here at BenefitsLink.com If the sold employer starts a "new" plan without capturing the assets from the old plan, that too has pricing implication for the sold employers plan (startups are expensive to recordkeeper/employer/employees - until sufficient assets exist to support the plan (based on the business model of the service providers). Bottom line is: The plan sponsor(s) need to consult with competent counsel to discuss and evaluate the (remaining) options....

Bird: I wouldn't ignore the fact that a 1099 wasn't filed either. If you look at the penalties - they accrue DAILY until the report is actually filed. Wait at your own peril. It's one of those things where the risk of getting caught may be perceived to be small - but the consequences can be catastrophic. And as far as being right on the "technicalities" - well, isn't that what keeps us in business? This is a "technical" industry that is highly regulated, and not really susceptible to short-cuts (especially in an area (loans) that has very explicit regulations governing how to handle the situation)....

Bird said: "If you're not going to report it, then you can't create basis just because it should have been reported." No offense, but I could not disagree more. First, "deeming" is NOT a bookkeeping issue - it is an operational issue that has both qualification ramifications (failure to abide by the terms of the written plan document) AND fiduciary implication. In addition, there is an income tax consequence to the participant WHETHER OR NOT A 1099 FORM WAS ISSUED. Failure to account for "income" at the personal level is both a civil violation and possibly criminal and it is NOT AT ALL dependent on receipt of a 1099 form (just as non-receipt of a 1099 form by an independent contractor does NOT excuse payment of tax on monies received as such - you are PERSONALLY responsible for ALWAYS paying tax due, whether or not you get a slip of paper indicating so). The loan is DEEMED by operation of law whether or not the plan records reflect it - and failure of the plan records to properly reflect it is another problem. Filing of a 1099 form is ministerial in nature - and has separate (non-plan related) penalties attached to it - under the failure to report timely provisions of the Internal Revenue Code (just as if your bank failed to timely give you a 1099-INT, or your employer failed to give you a timely W-2). Not considering the loan "deemed" just because the 1099 hasn't been properly issued is just wrong - and the fix is not to ignore it and not properly recordkeep the repayment with a basis attached to it, but rather the fix is to remedy the failure to file the 1099 form (and paying associated penalties) by filing it - albeit late. Will the plan get caught? Who knows - but if the plan is large enough to get an annual audit for the 5500 and there is a good chance that they will find it (the auditors I routinely work with certainly would) and if the plan gets a regulatory audit, then it could be an even bigger problem.

Thanks Belgarath. I think there is a major misunderstanding here (and amongst others) that the "deeming" of a loan is something that has to be done - and even that it occurs only with the filing of the appropriate 1099. Aloan is "deemed" by operation of law when certain conditions exist - whether one takes action on it or not. The "deeming" of the loan is a taxable event - and as with many taxable events, there is a reporting requirement OF THE FACT THAT A TAXABLE EVENT HAS OCCURRED - and not as an indispensable part of the act of deeming the loan in the first place.

I think the "taxable" event occurred at the point in time the default occurred. The filing of the 1099 is merely reporting of the event, and it's timing is irrelevant to the issue of tax being due. Hence, the participant now has basis in his account equal to the amount repaid (after-tax).

BG - you can actually get a "proof of mailing" from the Post Office at teh time of mailing (but you have to go to the PO and pay a fee for that. Just as an aside, I worked with a company who's auditor flagged some issues with late remittances - and they did exactly the same thing. Payday was Friday - and on Monday or Tuesday (anytime there is an "or" in that phrase, you know there is a problem) they mailed the deposit to Vanguard - where it was received usually 2 to 3 days later, and allocated a day or 2 after that. Not what I would consider the most "sophisticated" of approaches - but "arguably" compliant. We reviewed 4 years worth of deposits, and flagged far fewer than the auditor though was problematic and worked to craft the argument and documentation. Unfortunately. the client didn't want to continue to pay us (arguing that if it was "alright" then why did they need to pay us to produce documentation proving it? They then got audited by the DOL. The DOL said they didn't "necessarily" agree that "mailing" the money the first business day after payday was "quick enough" and in any event, they had no documentation showing the appropriate business practice justifying the approach. Penalties were almost 4 times what we would have charged (and not saying we would have been successful, but....). Two morals to the story - first, the DOL is serious about timing - and "mailing" is under scrutiny. Second, pay me now, or pay me later....

but we could argue that it suffices.... Based on your prior post (that they don't want to go back for a separate qdro), it looks like there is no choice. As always, I'd recommend "documenting" that it was determined to be a QDRO (as difficult as that may be) to demonstrate that the plan operated appropriately (except for the shorting of the distribution - which is rectifiable).

Austin, for $3,000, I'll write a letter to the IRS on the plan's behalf. That solves the problem, doesn't it?

First, did the "materials" they receive taken together and as a whole comply with the requirements for a QDRO? Not pretty, but I've seen some that do (although I don't recommend it). If the decree of divorce gives effect (as an order of a state court of competent jurisdiction - which it appears to be) and hte Separation Agreement contains sufficient language to meet the requirements - it arguably could be considered a QDRO. I see nothing in the QDRO "rules" that require it to be a separate, stand alone document - but as a practitioner who sometimes reviews QDROs, I really don't care to have to weed through provisions on who gets Scruffy the dog and the Weber barbecue.... Second, I would simply treat the alternate payee as a participant (because they are) who was short changed on a distribution - and needs to be made whole. That would include an earnings adjustment, as may be appropriate.

An interesting review of what the various positions are - coming to no real conclusion (but point out the DOL's "waffling" (my term) on the issue of escheatment): http://www.bakerdonelson.com/an-in-depth-look-at-employee-benefit-plans-and-unclaimed-property-laws-05-26-2010/ Based on "uncertainty" of if/when/how state escheatment is proper, I still advise for forefeiture....

2cents said: "when a check is issued, the plan's funds are charged with the amount of the check and the money moves over to whatever kind of holding account the financial institution itself uses to cover the checks it has issued. So it cannot be said that the money remains in the pension fund pending cashing of the check." I think you reach the conclusion by stating the conclusion ("So it cannot be said that..." - but some contend that moving the money from "one account" to "another account" simply changes the holding account without changing the character of the money (i.e. it is still "protected" under ERISA). A simple test to prove my point: At what point can a creditor "garnish" those proceeds? Not while it is in transit in that checking account - but only AFTER the actual check has been cashed. Up until that point in time, the funds still have the "spendthrift" protections afforded qualified plan money. As far as the escheatment issue, I believe the DOL has indicated that they do not believe it is ever appropriate to escheat funds (clearly not while "in trust" as you define it) but also when in a distribution checking account. I'm looking for references to the DOL's position and will post them when I find it (and I don't believe it was a "formal" position - as in an AO, but rather an informal position - guidance, but not directive). I agree with the "forfeit within plan" option as the "best" but only the best among really bad alternative. One of the "fiduciary obligations" is that the funds must be made "productive." Hard to argue that restoration sans earnings is "productive," although I've seen no case law on that issue (yet.)

The million dollar question is who "owns" the check? Putting the money in a "common" checking account (usually of the service provider) for convenience in making the distribution does not necessarily effectuate a "distribution." For example, in the DB context, often the "checking account" is in the name of the plan, and hence, the assets remain "plan assets" until such a time as the check is cashed. Why would that be different in a DC plan? Now, practically speaking, many actually consider the distribution complete when the assets are removed from the INVESTMENTS and placed in the provider's distribution checking account, and in the "good old days" if the check was uncashed, after the prescribed period of time the funds would "escheat" to the state. The DOL has major problems with that - which in my mind indicates the DOL would consider that funds STILL to be assets of the plan. As such, would not the distribution notice - and hence the consent to distribution - become stale at some point? Indeed, how can one argue that an over the cash-out amount EVER be distributed in a form (rollover) NOT consented to in the first place (which, in the OP was a "cash" distribution - hence the checks being cut)?

Over the cash-out threshold and I don't think you even have the right to start a distribution. Under the "facts" you posit - that checks were issued and became stale - apparently there was a valid distribution request. The question I would raise then, is when does that distribution request become stale requiring the whole process to be restarted - which puts you back in the boat of "over the cash-out threshold" you have no options....

Can someone explain to me when the DOL acquired jurisdiction over the contents of the plan document? ERISA requires a "written" plan document - but the only requirements I'm aware of are those for "tax qualification" under the Internal Revenue Code - which then, under the IRS program , are reviewed in issuing a determination letter under the M&P program guidelines. When does the DOL even look at it?

FGC said: "Your last paragraph shows why an ERISA-governed plan's administrator shouldn't need any State's law." Sorry - but ERISA doesn't define everything that is required for an ERISA covered plan. See mbozek's comments above - and I would include that state law does in fact govern may of the duties and powers of a trustee. Indeed, if you use an institutional trustee, that "entity" may be organized under the laws of a particular state. For example, EVERY ONE OF SCHWAB'S TRUST AGREEMENTS SPECIFIES CALIFORNIA AS THE STATE LAW THAT GOVERNS THE RELATIONSHIP - and that is NOT negotiable (I used to work for them, and even some of their largest clients were unsuccessful in getting that changed. Schwab Trust Company is a California chartered "State" Trust Company.