MoJo

Plans and trusts are two different things. The plans can merge as of a certain date - but then it simply has two trusts holding the assets until such a time as the assets can be moved/merged. We have even had situations where two recordkeepers are recordkeeping different parts of a plan, uuntil the records can be combined. We do this all the time..... One just has to keep in mind the financials/assets have to be combined for reporting purposes/Form 5500.

Well, we're playing in hypotheticals here. The bottom line is that 20% is but a default and bears no relationship to the actual tax due on any given distribution. We tend to "awfulize" (see the worst case scenario), and have also been told by counsel that *not* giving the participant the right form (W4-R or W4-P) means the participant didn't actually make a choice, and consequently if you withhold 20% and the actual tax rate applicable is higher, and if it isn't paid, then the payor bears responsibility. It's a stretch - but we've seen similar things happened (where the withhold was wrong itself). Interestingly, we believe that you *must give* the participant the form, they don't have to return it - but then that is an election to use the defaults (and our package makes that perfectly clear). Easier to just send a fillable blank pdf of the form than to try and do something else.....

The penalties are that the "payor" is liable for not withholding per the statute. The IRS has interpreted the new rules to mean that failure to do what they say is by definition failure to withhold correctly (i.e. how do you know what is the correct withholding *unless* you've used their forms). It has always bee the case that the "payor" is liable for the taxes due. Generally (at least in the past), as long as the correct tax was ultimately paid (i.e. the participant filed their 1040 form correctly), then it was a wash. However, our "project" on implementing the new forms has determined that inaccurate withholding can trigger many other penalties (and I won't enumerate them here). Outside counsel (well known, large law firm) has "strongly recommended" using the IRS forms verbatim - and that is what we are doing (well, we've "duplicated" the forms to be included in the DocuSign distribution package, and annual notice to participants receiving installment distributions). Lots of people not happy about that (including our operations/disbursement teams), but ....

I've not heard of any requirement that the dwelling be fixed. For years, we've allowed hardships for the purchase of a boat as the principle residence. It must have a roof, a bedroom, and a bathroom. Also, wouldn't probably fly on the shores of Lake Superior, but other place - sure. Certainly not fixed... I can only imagine that with remote work, work from anywhere, and with pretty good portable internet, this is going to become more popular (apart from fuel costs). My boss has one, and she has been known to work on the road.....

I thought it was the day after Labor Day (i.e. *after* labor comes retirement). That's what PSCA pushed for a long time....

Other than a QDRO, nothing outside of the plan overrules anything within the plan. There may be circumstances where an enforcement may be had against someone for something outside of the plan, but it can't alter the plan's provisions (including a bene form). In the Honeywell case - I believe they are pursuing the ex-husband (who properly received the funds) under the theory that the divorce decree bars him from keeping that distribution. In other words, he received the distribution properly, but holds the money in "constructive trust" for others (and the plan is out of the picture). Interestingly enough, Sally's named bene's may not be those who get it. If ex-hubby doesn't get to keep it, and if Sally's bene form is invalid, the money will go to Sally's estate, and be distributed accordingly, either per her will, or per state intestacy law..

Never - but it is amazing how some financial institutions (not sure how the Honeywell plan was administered, or by whom) don't do basic math. I handled my mother's estate, and Schwab (which is where I worked at the time) would NOT split her accounts based on percentages (some went 50-50 and, some went 1/3, 1/3, 1/6, 1/6). I was required to specify *exactly* how many shares of each security (in whole numbers - despite her owning fractional shares due to dividend reinvestment - which had to be cashed out), and how many dollars of cash went to whom. Painful. In the Honeywell case, while it may not have been a breach of fiduciary duty for Honeywell to not change the bene's, it just seems wrong that 1) they wouldn't have been more helpful; and 2) Sally didn't follow up after how may years of statements....

Way too many ERISA nerds around here (and I be one!).

Because the question is clear and is only asking as to what happens to the beneficiary designation in a divorce when the now ex-spouse is the primary bene with contingent beneficiaries named in the same bene designation. It isn't "who gets the money" but rather after all other claims including those of an AP (or two, or three) with what is left that must be distributed per the bene rules. I though it was perfectly clear.. We're not giving legal advice here - but rather trying to discern a theoretical that happens. And, stop shouting - it hurts my ears/eyes. For what it's worth, I would also suggest those who write plans write them to indicate "in a divorce, if the spouse is named as primary bene, the spouse shall be deemed to have pre-deceased the participant with contingent beneficiaries receiving as if that were the case, unless the participant creates a new bene designation" - wordsmithed, of course. It's what our docs say - to avoid this situation entirely.

There are time when we "should" charge some clients for the inefficiencies they cause us - but we don't with a few exceptions. We do for our group annuity product charge an additional fee for *not* using our plan documents, and a fee for submitting census info *not* though our automated portal. But for requiring plan sponsor sign-off on all distributions (regardless of type), we don't (and that really slows the process down). Lots of other examples. Lots... And BTW, for the cycle 3 restatement project - of the over 2200 plans we restated, all but 1 e-signed the plan documents and related stuff. The "one" was out of the country, and just elected to sign a hard copy when he returned (and he was a late amender).

Oh, we've thought about it - but implementation of different fees for paper vs. e-signed is probably more work and not worth it. Participants are told though that e-sign is a faster process than paper - so if they want the money sooner, they should e-sign.

Except for spousal consent situations, and death distributions, the norm for us is e-signed distribution paperwork. I'd be happy to talk to Nationwide clients about switching to us! 😁

No. A rollover may have unrestricted distribution rights. There is no distributable event, so under no circumstances can this be a rollover. We map the account over as if it were a spin-off from plan A and merger into Plan B. If the plans aren't (substantially) identical, this can be problematic...

It's not a distributable event - so it's not rollover - which requires a distribution. If the document(s) are silent, then it can't happen. We have plans like this that provide specifically for a trust to trust transfer (but usually they are from union to non-union plans). Also, keep in mind, that if the transfer doesn't happen and the participant has balances in both plans, then the participant count for audit purpose may need to be considered...

Oh, absolutely. The plan shouldn't get in the middle of it. But if someone (anyone) proffers payment on the loan, the plan should take it.

That's the participant's problem. S/he can rollover the net or make up the amount withheld (or anything in-between) and then when they file their tax return receive a credit for the amount withheld. Still not the plan's/service provider's issue....

Interesting question - but think of it this way - has the 60 day rollover period started? The participant has control of the funds - and can cash the check at any point in time - so I would argue yes, it has. Our position is that "from the plan's position" - once the check is cut, the distribution is complete and we do not allow changes in the form of distribution. This would be especially important if the original check was cut in December, and the request to change it came in January. When is it taxable. Assets have been liquidated, assets have (arguably) been removed from the trust and put into a distribution (checking) account, and it's done. The participant can still roll it over into an annuity (and IRAnnuity) or into any IRA and then annuitize it.

True, participants have a right to demand it - but let's be clear here - the right can *only* be enforced against the plan fiduciaries - not the service provider. Service providers can define their offering as they see fit - and it's up to the fiduciaries to determine if that is appropriate. When we take on a new client, we restate them onto our document - and ensure that it contains only those provisions that we can handle. BTW, I know it is only an example, but any service provider that can't handle voluntary after tax contributions won't be in business long....

The plan doesn't care who repays the loan. Indeed, a prudent fiduciary would be hard pressed to *not* accept money in repayment of a loan regardless of the source. Theoretically, I'd be cautious about whether an estate can or should be the one to repay that debt. That's a matter of probate law in the jurisdiction in which the estate is in existence.... The issue in my mind is whether those who would suffer the tax consequences of the loan default are *exactly* the same as those who would benefit from the estate if the loan is not repaid.

Voya is an insurance company. I would expect that the "separate accounts" are held under a group annuity contract that is a "registered" product. That's how we handle 403(b)'s in our group annuity business.

The problem is that there likely is no authority on point - especially at the state level. We take a very practical approach - and would do so even in the case of the trustee issue you reference as being discussed in the other thread. It is a "business" that sponsors the plan. Regardless of the nature of the form of entity that business is conducted under, upon the death of the "owner/operator" the decedent's estate representative (Administrator/Executor) now has control as having indicia of ownership. In a corporate setting, it's easy. The estate rep now controls the shares, can call a special meeting of the shareholder, appoint themselves as director, etc., and then manage the business entity - including with winding up of the plan. In pass through situations, it depends. LLC's are more like traditional corporate structures and it's the same. Sole proprietorships are the personal property of the sole proprietor/decedent, and as such, come under the control of the estate rep, who not only has the power to wind up the affairs of the business side of the decedent's "persona" but also probably has an obligation to do so as well (receivables? Payable? - They are assets and liabilities of the estate). The plan is both an asset and a liability. The asset is the benefit due, the liability is the tax consequences if it isn't done right. The estate rep steps into the shoes of the decedent to handle that as well. In the other thread where the financial institution is being intransigent, I'd haul their a$$ into probate court - not attempt to get a court to appoint a successor trustee. My experience is that probate courts don't mess with a lot of BS. The asset of benefits due needs to be collected, the court can (and I've seen it happen) and will issue an order directing the holder of those assets to turn them over to the estate rep (as successor trustee or whatever) to get it wound up. The financial institution now has a piece of paper to put in the file, and usually will comply.

Clearly, an operational error in not complying with the terms of the plan. I would suggest that prior to doing the amendment, a verification process occurs. In most case, we - as the recordkeeper - already know if the loans/CRDs were issued when the "record" indicate the client did not select to allow them (as simply the loan/CRD would not have been processed until the client said to do it - and we changed the "records" to so indicate) but we wouldn't no - necessarily - if the client said yes to loans/CRDs (our default was to allow COVID loans if the plan already had loans, and to allow CRDs if the plan had hardships, but not if they didn't unless affirmatively elected) - but then didn't actually allow participants to get them.

Exactly!

I think the obligation to pay remains, unless discharges in bankruptcy (and there are specific sections of the bankruptcy code for municipal bankruptcy - which is well beyond my area of comprehension, let alone expertise!)

Well, there was a collective "sigh of relief" from our document team who almost immediately after the end of July began the process of doing about 3000 amendments.... Our approach for SECURE Act was to send our clients a set of "default" elections indicating that this is how we would administer your plan *unless* you told us otherwise. 80% or more didn't respond, so they get the default. Certain things had to be affirmatively elected (like QBADs) so, so far the tracking is easy. Every once in a while someone will ask for a QBAD and when informed the plan doesn't have them, our client wakes up, and implements them - among other things.... We took a similar approach with CARES Act stuff - with a little more variability (i.e the default for enhanced loans was to offer them, but only for plans that had loans already. CRDs - for only those plans that had hardships.). Lot of moving parts on that one....