MoJo

The question is what documentation was required when the spouse's company started participating in the plan? Our prototype indicates that no other company (controlled group or other) participates unless a participation agreement (amendment) is entered into signed by both the sponsoring employer and the participating employer. Too that extent, to "unparticipate" an amendment (removing the participation agreement) is required. Absent that, simple stop participating is an operational error that may require corrections (missed deferral opportunity)

I would not want to take such a situation to court where a fiduciary defines "estate" as something other than what the state defines it as. The simple solution is to merely defining the beneficiaries in the plan as "the duly authorized and fully administered estate as determined by a probate court having jurisdiction without regard to any exceptions for small estates" or something to that effect. But when you use a term that has an accepted meaning, it usually has that meaning. I will, when I have time, review the cases you cite - but the fact that they are case borne of "litigation" - best to be conservative and follow common sense (lest my own retirement get padded defending such things that are avoidable...).

With all due respect, I think you run into a problem there. First, the obvious - ERISA preemption only applies to some state law that is inconsistent with ERISA. It works in tandem with state law that isn't inconsistent. Determining who is the "estate" is purely a state law function - and if an affidavit which on it's face is adequate under state law to determine that an individual (or several individuals) are the "estate" or a substitute for one, then it is so. Keep in mind that most people think of an "estate" as a formal probate court created thing - it is not. An estate is the corpus of one's assets - both when alive and when deceased - the only questions is, who controls it. When alive, it's the individual, unless under guardianship (of the estate), and when deceased, it's whatever state law says - sometimes it's an appointed administrator/executor, and sometimes its individuals who step in under small estate laws (some of which only require an affidavit, some require a simple filing with the probate court). Second, if the bene is the "estate," and state law determines under its small state affidavit who the estate is, then those so deemed to be the stand-ins for the estate *are the beneficiaries* if the estate is the bene of the plan. Changing the rules by imposing a lower limit for acceptance of a small estate affidavit is contrary to the state law that determines the estate - and once these people become the "benes" of the plan, they have an ERISA right to the benefits PERIOD. Who the creditors of the estate are is of no concern to the plan. UNDER NO CIURCUMSTANCES CAN THE PLAN PAY ANY OF THE CREDITORS. It's a simple anti-alienation issue. Once the money hits the hands of the "estate" even if no formal admin is initiated, then it is their problem to settle debts under state law, and assuming the plan administrator reviewed the affidavit to determine that on it's face it complies with state law, the creditors will NOT have any recourse against the plan. In my experience, by the way, there is a rather short time to present claims for debts once an estate is formerly open - but there is no requirement to actually open an estate - ever (and as a parenthetical, one of the great joys in my professional life came when I told a creditor of my step-father's estate that we would not be opening an estate - as there were no probate assets witrh which to pay their claim - and that they were welcome to do so if they wished). In many cases, the time limit to make such claims may be extended until an estate is opened. Creditors can, at least in the jurisdictions I've practiced in, open an estate and force an administrator to be appointed to handle settlement of claims. In any event - it has NOTHING to do with the plan. Once a bene is determined - the bene has ERISA rights to the plan benefits, and the creditors be damned (from the plan's perspective).

I can't speak to California law in specific - but I think if you dig deep enough, there is probably a provision that indicates 1) the claimant has to attest that there are no known claims against the estate, and 2) the claimant is liable - to the extent of the distribution received, should any claims arise. In any event, it isn't the plan's responsibility. The plan and it's trust are not required to turn claims over to creditors (401(a)(13)) - and the small estate affidavit only provides a short cut for bene's to make claims. If under state law no formal estate administration is required, then the plan is insulated in making payments to the claimant (provided the affidavit is consistent with the provisions of the law).

State domestic relations law does NOT supersede ERISA's spousal benefit protections - except in the case of a QDRO that affects parties rights to the plan benefits. The separation agreement may exhibit an intent to waive plan benefits, but only the QDRO can accomplish the task vis-à-vis the plan. As between the parties, if the spouse refuses to actually do that which is necessary to waive rights (consent to a distribution or whatever), the court can sanction that party - but this is external to plan operation.

Most certain - that distinction is important. Many trusts own businesses - and operate them - and the "employer" is typically the operating business, not the trust.

Absolutely agree - but keep in mind that a trust can be an employer without operating a business. Charitable trusts, for example, may have a staff to operate the charitable endeavors of the trust. As an employer, the trust itself may be authorized to provide benefits (suitable compensation) to those who handle the administration of the trust. Often that is outsourced, but if the trust is big enough, it doesn't have to be. Often what we call charitable foundation is actually a "trust." For example, the Bill and Melinda Gates Foundation is a functionally a trust, and has employees (many of them actually)....

Is the trust an employer? Many "trusts" are in fact, employers, and can (and do) sponsor employee benefit plans....

Just to set the record straight - I am *not* Austin's MoJo.... 😁

Just recently (within the last six months or so - I believe), the IRS indicated that if the deceased was in RMD pay status, those must continue throughout the 10 year period for the bene - otherwise, it is what you said - as long as the total is out by the end of hte 10 year period, you are good.

I think the answer is no. The cite RBG provided indicate a choice is required. If you mandate *all* catch-ups be Roth, you have now eliminated that choice between pre-tax and Roth (despite the mandate for some) and in our opinion, is an ineligible Roth provision. (absent some creative guidance from the IRS which I'm not holding my breath on receiving before htis needs implemented (like, yesterday to program and proceduralize to be effective at the beginning of next year)

We are a recordkeeper and we've been discussing that for a while and have heard it mentioned - but no solutions other than we can no longer do that. Roth rules require the "contribution" to be designated at time of deferral - so, if the contributions that cause a test to be failed, theoretically, they can't be recharacterized as Roth to correct the failed test - leaving the only option of refunds. We've talked with our trades (ACLI, SPARK, ARA, etc.) and their comment letters to the IRS have raised this issue.... Many many problems with Roth catch-ups.... Even more so with Roth employer contributions....

That is our understanding as well. Absent the ability to make Roth deferrals, one cannot have Roth catch-ups - despite being mandated by Secure 2.0 for some people. We've raised this issue in requests for guidance through various trades - as the only other option for plan sponsors that don't want Roth generally, is to eliminate catch-ups completely.

Fundamentally, not allowing a participant to share in future growth in the INVESTMENTS held in the plan would be a serious fiduciary breach. We can have all kinds of discussion about what contribution any OWNER of a company makes to it's on-going success (and I can assure you I make no contribution whatsoever to AAPL's success - don't use it's products at all, but still own shares and there is value to them in using my "capital") but all of that becomes irrelevant in the context of plan. The trustee MUST make the assets productive. Now, I've seen ESOPs where by the corporate by-laws only current employees can be shareholder or beneficial shareholders (engineers, doctors, lawyers, accountants, etc.) where usually by law only licensed individuals can ne owners of a practice requiring their license, so that is a possible exception. In any event, just to "freeze" the share price or to put them in a non-productive investment in my mind is buying a lawsuit - and one that could be costly....

And in many ways, the lack thereof is what keeps me employed!

You're qualifiers here are that 1) a law firm is involved (with some depth/breadth in various areas); and 2) a "good" (M&A) lawyer is involved. We deal with 50-100 clients doing some sort of corporate transaction per year (many doing more than one), and half or more have a solo general practitioner handling the deal. In many cases, it's a "handshake (literally) and we find out after the fact. Just sayin - reality is what it is.... Even firms with an EB practice, it is often the case that the lawyer doesn't understand the details of how something actually happens (and on more than one occasion have asked us who will be available at midnight to receive the assets being transferred), and details like when is the plan zeroed out for 5500 purposes. We often deal with attorneys who claim the old plan isn't done until assets transfer (until we point out you can have separate custodians and even separate trustees for different parts of the same plan) if the documents are set up correctly before it happens. Always fun... My secret weapons is I have on my staff an ERISA attorney who used to work for LTV Steel (and various other names it went by before and after) who worked with 170 or so acquisitions, numerous spin-offs dispositions, two major bankruptcies, and twice was in-house counsel for cases that went to the SCOTUS with respect to retirement plan issues. And she shakes her head at things some of our clients do.....

Always a balancing act, but enrolling newly acquired participants is often totally independent of merging the plans. Often, newly acquired employees enter the plan (old plan frozen, new plan offering participation) after the close of the deal, but before the merger of the plans (under the direction of the acquirer who acquires the plan as part of the deal - our preference, BTW, lest the acquirer acquires a bunch of new employees with brand new pickups and bass boats, but no retirement savings). Every deal is different. Details matter (amazing how many times people forget to freeze the old plan resulting in eligibility continuing, and "missed deferral opportunity corrections resulting in a windfall for those employees). The key (and the biggest challenge) is ensuring the benefits professionals get involved early enough when the plan sponsor(s) have more options....

Easier said than done. We routinely "merge plans" without merging assets which takes some time. "Zero balance" occurs when the assets are "deemed" to now be part of the surviving plan, despite still being held in a trust account established by the former plan. We always spell out in merger documents that the plan is deemed merged precisely at midnight. Arguably then, the disappearing plan has a zero balance at that point, and has a final 5500 for the prior year, and the new plan has assets transferred in as of the subsequent year. An artifice for convenience? Darn tootin'. But absent guidance, a defensible position. Merger lawyers (all but the best) don't seem to understand this....

Yea, well, it's been one of those days/weeks/months/years/decades.... 😃

Understand wha ...SQUIRREL - LTPT.... oh yea - audit requir ...SQUIRREL -Roth employer contributions ... Yea, I get it, money savin ...SQUIRREL - PLESA accounts... Yea. Not much else going on....

They already are. Mass layoffs. Auditors jumping out of windows (ground floor only - they are a conservative lot). You know, all the stuff that proves this was a good idea! Just kidding, of course (about mass layoffs, etc.) Some of my good friends are (or should I say "were") plan auditors....

Just curious as to why the participant didn't say something for TWO YEARS? I'm not sure I'd want to hang my hat on this but our statements and other confirms say after two notices that evidence the error everything is presumed to be "correct."

Uh, no. They get the benefit of being fully vested on termination. In our experience, the IRS takes a dim view of attempting to forfeit pending a termination, and I've actually seen them make you go back and restore account balances previously forfeited. How much is involved? The employer can't get he money, nor in my opinion use it for plan termination expenses (that's a settlor function/expense). It'd have to be reallocated to others, but is it that much to be concerned about?

I am unaware of any service provider that has an "effective date" on a deferral election form, and to do so would be an administrative impossibility. The only delay in implementation that we handle is a delay to an initial eligibility date - if in the future. I don't see any way to remove the money from the plan. Easiest answer is to prospectively reduce deferrals until the amount is recouped.

When was the document signed? Deferrals can never be made retroactive, so at most, the deferral opportunity would start when the document was signed - and then, there is some "administrative leeway" in order to begin deferrals....