MoJo

I'm not sure I agree (although I can argue it either way, depending on who my client is). The "four missed payments" are *NOT* cured when payments resume. The resumed payments are "current payments" for the "currently due" amount of the loan, leaving those four missed payments hanging out there until the end of the quarter following... at which point the loan defaults. To look at it any other way (i.e. the "first" resumed payment cures the "first" missed payment, etc. - always leaving the loan 4 payments behind) is 1) to make a mockery of the legal enforceability of the loan (a requirements, and one which probably says a "cure" (a *real* cure) must occur within a time frame specified, and indeed, defines "cure" in a way that actually never cures the problem; and 2) continues the loan as a "delinquent" loan for an indefinate period of time without a "default" ever being possible. A result I would not like to defend. That said, others have taken the "rolling cure" position - but I haven't seen any IRS opinion on it....

I limit my opinions to principle. I would never advise a client to sue for a small amount. I would, however, always advise a client to spend the time to talk to the prosecutor (no out of pocket costs except for the time spent) and pursue the issue. Whether or not a jury can be convinced factors into the price equation. Not the "right" equation.

The question is one of knowledge. If the son had knowledge that pension benefits were still coming, an argument could be made that the requisite mental state existed to prove the crime. Clearly the OP didn't provide sufficient information. At the very least, a constructive trust could be imposed to obtain recovery of the overpayment. Granted, recovery could only be had to the extent that the assets are still in the possession of the son, *but* since money is fungible and to some extent traceable when converted into other assets (like a new pickup truck or a boat), then the trust could be enforced. And yes, prosecution is not the same as conviction. But I could give you the inmate numbers of more than one person who served time as a result of crimes associated with post death benefit continuations....

I respectfully disagree, and have successfully obtained prosecution against several for having obtained a benefit under "false pretenses" and "forgery" (either by cashing a check, or by obtaining an unauthorized withdrawal from an account).

Not to be a stickler for detail, but the requirement is that the funds are "segregated" from the employer's account in a timely fashion (and failure to "invest" may be a breach of another stripe). What account was the check drawn on? Is it arguable that the funds were segregated timely (but not necessarily invested timely). Just sayin'....

While I would ordinarily agree - I question why the rental income is on Sched C instead of Sched E. To the extent that a "management" or other "active" business operation exists that does more than own realty and collect the rent, it is possible that some portion of that income is "earned" for plan purposes. More detail clearly would be required by a compentant adviser (legal/accounting) to make that determination (and there is a lot of gray areas).

"Like" "Like again" In our experience, if a complete "re-enrollment" takes place, the new provider takes current contributions from that point in time (which may preceed the asset transfer date). If a mapping occurs, typically the contributions don't go to the new provider until after the asset transfer date, and *if* the prior provider can't take contributions once the blackout commences (which seems archaic to me in this day and age), the lag is typically about an extra week (i.e. two weeks from the salary deferal date to deposit date). We have the conversation with the plan sponsor, the providers, and if a glitch is anticipated, we give them the "set up a segregated account in the name of the trust" speech, but typically that doesn't happen, nor does the lag extend beyond that whicharguable is "as soon as practicable" as a result of the conversion.

Keep in mind it is *not* reported as a distribution, it is "deemed" distributed SOLEY for income tax purposes - and the resulting tax consequences to the defaulting participant. Your question really is "at what value" is the defaulted loan carried on the books of the plan after it is defaulted and deemed distributed. Some would argue that the value is zero, as the likelihood of it being repaid is nil and at the time of distribution it becomes a nullity, while others would say that until an actual distribution occurs, it's value is par plus accrued interest (which is the amount the participant must repay to wipe the loan off the books).

1) The loan clearly is in default, and that does make it a taxable "deemed" distribution; 2) Depsite the fact that the it is a "deemed" distribution for tax purposes, the loan itself remains an asset of the plan, and is considered an existing loan for all plan purposes (so, for example, if the plan only allows for one outstanding loan at a time, he is considered as still having a loan outstanding). Theoretically, he is still obligated to repay the loan, although as a practical matter, most don't. If he does, the repayment isn't technically considered "after tax" but more appropriately, he would have a tax basis in his account equal to the amount repayed that was previously taxed as a result of the "deemed" distribution. Tracking that is the issue, and many recordkeepers are deficient in that regards; 3) Not necessarily. It depends on when the tax consequences are to hit (2011 or 2012). Read the provisions of 2008-50.

Keep in mind, as well, that every participant is a potential plaintiff. What is the value of the missed deferral and match projected out to one's retirement date? May not be "insignificant" to them.

Republish, yes, but not necessarily update. Investment info is based on the calendar year, so what we just did by 8/30 will be the same as what is republished, say on 12/1. Unless the other information requires updating, simply republishing (redistributing) on 12/1 resets the 12 month clock and puts you on regular schedule. We've contemplated this ourselves, but 1) that makes the investment comparative information somewhat dated raising the ire of (the few) investment savvy clients/participants; and 2) ticks off our clients (as they are the ones who will have to distribute the notice AGAIN, so soon).

He can cash out the "cash" (non-loan) portion of his account. The portion of his account invested in the loan remains in the plan, and turns to cash as each payment is made and the loan balance is amortized. There is no need to keep any "additional" amount in the plan - the loan itself represents the balance that continues to secure the loan.

I've never seen a participant sign a QDRO, and many times have seen judges issue them over the objections of the participant/participant's attorney. That said, the judges I've practiced before would prefer agreement, but it isn't a requirement....

I recently was involved in such a situation, and the Administrator of the Estate (not a beneficiary of the estate or of the plan) did step in as Plan Administrator (reluctantly, and without a clue - which is why I was involved). I think it is, in fact, a dangerous practice for the estate to get involved (although I fully recognize that there aren't always many options) as it potentially exposes the estate to liability with respect to any problems on-going with the plan (and arguably the estate is already on the hook for whatever liability the decendent had prior to their death with respect to the plan). In addition, if the Administrator of the estate is the plan administrator, might they not have a claim against the estate that they are administering for anything the decedent owed the plan (especially if the benes of the plan are different thant the bens of the estate), and be in a position of making a claim against themselves? When the plan was sponsored by a self employed (non-corporate) individual, and covered no other participant besides the deceased, AND the plan benes are the same as the estate benes (which covers most of these situations), then I think there is less potential for problems. But, and this is the case I was involved in, once the decedent died (and it was an "owner only" plan with no Form 5500 requirement), it became a "two participant" plan - with on-going issues.... Advanced planning is the only cure.

Hmmmm. I read it. I can't say I like it. I will read it more thoroughly when time permits. Thanks for posting the decision. My question is, why the plan did not report the theft to the criminal authorities (and would that not be a potential "breach" of their fiduciary duty to protect/recover plan assets when they became aware of the activity of the former spouse (who truly had no right to access the account under any theory I'm aware of)? There are several potential criminal violations involved here (including even mail fraud - as she requested a user ID knowing it would come through the mail, and then opened mail addressed to another to obtain the ID). It would be interesting to see what the court would rule if this situation occurred and the parties were not "ex-spouses" but were rather un-related parties (such as you sell the house to someone and move, but don't change the address). Trust me, we have hundreds (if no thousands) of participants who are "lost" as a result of this happening).

A frozen DB plan is now terminating, and for a limited "window" period a lump sum option is being offered. The communications expert (working for the plan sponsor) wants to provide on the distribution paperwork the amount of the lump sum applicable to the participant, but NOT disclose the amount(s) of the normal form of benefit (QJSA) or any of the alternate forms (other annuities, etc.) and only wants to put a general description of normal form and those alternates on the form - requiring the participant to inquire, if they want to know what the annuitized payment stream would be. The comm expert says she doesn't want to "confuse" the participants, nor does she think "anyone in their right mind would select anything but the lump sum" (which, of course, has a more favorable impact on the plan's funding status at termination, costs the plan sponsor less, and which, in my mind is reason enough to have to disclose the values for the other forms of benefit payments). Other than "it doesn't smell right" and in my mind, it is clearly the much more prudent as a fiduciary to provide all salient information to participants who have to make decision, is anyone aware of any specific authority or requirement for the contents of a distribution request form (other than the tax notice, etc.) that governs the specificity with which alternate forms of benefits need to be described/values provided? I've searched, but haven't found the majic google keywords, nor have I found anything in my ERISA/Code/Regs library. Thanks.

Assuming they are clueless, and obviously this prospect is rather "cheap," why not just "pass" and tell them "no"?

How about we just need a "congress" - a definition of which I found to mean: "the act of coming together; an encounter; meeting" and "a formal meeting or assembly of representatives for the discussion, arrangement, or promotion of some matter of common interest" (emphasis added).

I would agree with the "12 month" rule - although for no reason other than consistency is better than inconsistency. We are "debating" now how best to do so (next August (unlikely), consistent with other notice distributions (safe harbor, QDIA, etc., "possible, but would have seriously lagging investment information"), staggered (extremely unlikely), or at some other point in time - but that entails possibly duplicative annual disclosures (if we have to adhere to the 12 month rule) to "get us on the right cycle." The problem we have is that as a non-producing/consulting TPA, we deal with 78 different fund companies, all of which may also be on different schedules as well (and some of which tend to not keep us in the loop - having distributed their piece to plan sponsors in advance of ours, requiring a second distribution and lots of angst and confusion - if not outright anger). I think what we would like to see is a schedule that allows distribution as part of one of the quarterly participant statements - but that (for us) would entail a significant amount of coordination with those disparate fund companies.

Eliminate loans going forward (my fav, but always a tough sell).... Have the plan sponsor accept loan payment checks during the summer from participants and forward them to the plan/trust. Deem them (if they get behind enough) and maybe participant's will think twice next time. Sorry, but I show no mercy for loans/borrowers from plan assets.

What ERISAToolkit said is absolutely correct. I would add one thing - and that is with regard to your statement about pulling the money out of your whole life policy.... If it's been in force for only 3 years, there probably isn't much to pull out. Most whole life policies use a portion of the premium to 1) buy the life insurance protection (an expense paid for that coverage); 2) to pay the agent (commissions - and first year commission can be huge relative to the premium); and 3) to build cash value (whatever, if any, is left after 1 & 2). That is an oversimplification - but in reality, cash value doesn't build significantly until the policy has been in effect for a number of years. Step one in any insurance decision is to determine how much you need. So, for example, if you want to fund college educations for kids and a bit of a buffer for the spouse (but not make them rich), then you need one amount. If the spouse has a good income, then you may need a lesser amount. Also determine the end point the insurance proceeds will be needed for (life, till the kids graduate, 5 years as a transition to allow for the sale of the house and downsizing, etc.). Then determine how best to achieve that "financial goal." For me, being "self insured" is the goal (that is, accumulate enough wealth that life insurance (for living expenses for my dependents) is not necessary (but it still may be necessary for liquidity, estate taxes, etc.). Hence, I use term life insurance - with a renewable term to get past the poitn in time where I believe I will have sufficient assets to fund what I want should I die. Term for me (and I stress "for me") is a better choice, as I get the protection ("pure protection") for less than whole life, and can invest teh difference as I see fit. Others would see whole life as more of a wealth accumulation vehicle with protection in the event of death.

Technically, it is a qualification issue, so worst case, the plan could be disqualified, and that would not be fun for anyone (and I am currently woirking through one of those - and the penalty asked for by the IRS was $60k. The VCP filing is rather easy and relativcely inexpensive. The only problems I've seen with it are 1) plan operations consistent with what should have been adopted (and/or an appropriate fix for that as well), and 2) "other" issues the plan may have that are discovered by the IRS during the VCP process. With respect tot he lattere, I always try to fix everything fixable first, and include everything that is necessary in the VCP filing.

Unless they can find the signature pages, sounds like a nonamender filing with the IRS is the only solution.

We have the same issue - and have yet to find an exception to the rules that would allow us to not provide the notice. Theoretically, if the plan remains participant directed until the assets are depleted, the notice appears to be required. While drastic, some have suggested amending the plan at the time of termination to eliminate participant direction - but that raises other (fiduciary) issues.

I actually tried and after five minutes began to wonder what in the heck I was doing. I got as far as: Pursuant to real estate law in some states, there is a process of effective eviction. For instance, if your landlord takes the front door off your apartment, then that would be an effective eviction because this action made it impossible to live there. Then I tried to relate that to the fact pattern and began to ask what in the heck I was doing. Yea. Not a road you want to go down. I actually had a tenant (I moonlight as a landlord) that stopped paying utilities, and eventually stopped paying rent. I ended up evicting him, but by the time everything happened, the electric, water and gas had been off for 9 months (the wheels of justice turn slowly sometimes in Ohio - and Christmas intervened - with a judge that didn't like to throw people to the curb at that time of year).... Not what I would call an "imminent" financial hardship for him (but a serious one for me....) By the way, if the power has been off for a while, don't open the refrigerator. Just buy a new one, and have them haul the old one away. I speak from experience on this....