Bird

Just to expand and clarify, in an individual account plan, where a participant elects to purchase insurance, the money comes from that participant's account. The plan is named as owner and beneficiary. (To name anyone else as owner, say, the participant, would effectively be a transfer of assets, i.e. a distribution, which would be wrong.) If and when the participant dies, the plan collects the money as beneficiary and credits the participant's account accordingly. The proceeds then flow through the plan to the participant's plan beneficiary.

That's actually the right way to set it up. Nothing wrong/nothing to correct.

Agreed that the estate gets the policy. Not so sure about the slam dunk part after that; there was just a thread here that indicated that a pre-nup agreement (I think that was it) to name a beneficiary is unenforceable and I'd guess a divorce decree has a similar problem.

Agreed that the estate gets the policy, or the policy proceeds (cash) if it is cashed in within the plan. But now we're back to who is the beneficiary of the estate? I'm pretty sure the language in the divorce decree is irrelevant at this point since it was not implemented.

A divorce decree doesn't supersede a beneficiary designation. Who is the beneficiary?

Is the ex-spouse still the beneficiary? That seems odd. When you say "The policy was to be transferred to the ex-spouse..." that implies s/he is the bene. Being the trustee and being the bene are two very different things. In any event, no the spouse cannot pay the premiums. There is no way to get money into the plan. This is a good example of why life insurance does not belong in plans. And it being a second-to-die policy compounds the problems, and the long term care benefits, oof. I'm honestly not sure that is even a legit benefit but I really don't know. It's probably best to surrender the policy and take the $200K. The only other alternative I can think of is to have the plan borrow money from the policy to strip down the cash value, then distribute the policy and the cash. Unfortunately that leaves a policy that has a heavy debt load so it will require not only premiums but debt payments. It might make sense to repay the debt over time with the cash that has been presumably rolled to an IRA. This all assumes the ex-spouse is the beneficiary, which again seems odd. It's a mess any way you look at it.

Yes. But administrators and recordkeepers have good reason to insist on percentages. If the designation is "$100K to A, $100K to B, and the rest to C" but there is only, say, $50K in the account, nobody wants to be stuck trying to interpret that.

Shocking, SHOCKING than an advisor would do this (sarcasm). I'd be comfortable asking those who decided to leave it in the 401(k) to sign new forms confirming their change of election. The others, I don't think I would want to cover up for the advisor. Just leave it hanging, have them sign new forms to take the money from the 401(k), and document the whole mess thoroughly. The PBGC would probably be content as long as they eventually got their money as requested. Otherwise you'd have to get the advisor to ask to get the money back from the 401(k) and reprocess. There would probably have to be some legal action to get that going; I don't know. Ultimately the advisor will smirk, say "oh I didn't know" and go on his/her merry way.

Unfortunately this raises questions about past practices, like whether full appraisals were done every year. Assuming yes, about which I have to be skeptical, then I think the only option would be to carve out these illiquid assets and leave them as pooled and the rest self-directed. If the owner keeps them you have a BRF issue as noted.

ok thanks

bumping this; someone must have thoughts...?

Mr. X has his own IRA, is receiving RMDs on that, and is receiving distributions as a beneficiary of an inherited IRA from his father. He passes away in 2023. His wife gets part of both IRAs and his niece gets part of both. Someone decided it was ok to combine the personal IRA proceeds and the inherited IRA, and set up one IRA for the spouse and one for the niece. Is that ok? I'd think that the inherited IRA has to continue at the payout method set up, so if the spouse claims the new commingled IRA as her own, that would be stretching out the inherited IRA payments longer than they otherwise should be. The niece's part would probably be ok under the 10 year rule although I'm not sure what the remaining payout period was on the inherited IRA so maybe not. I appreciate any thoughts. I'm not sure I've seen a situation with the death of an inherited IRA beneficiary but it doesn't seem like you should be able to ignore the original payout method on it.

Assuming you are talking about a DC plan, it is a circular calc; it boils down roughly to 25% of (covered) W-2 comp plus (roughly*) 20% of Schedule C. *There is an adjustment for 1/2 of SS taxes; after that it is 20%. Also note the Schedule C should reflect the employer contributions for employees, so if you are a TPA and are given the raw Schedule C by the accountant, you have to adjust for that as well.

I never ever ever showed fees in a pooled environment. First of all, I don't trust what shows on the statements, second of all, it is inherently unfair (you could have a mutual fund that just shows net returns with no stated fees, vs. a managed account which nets out to the same fees but the fees are direct, or even the same mutual fund with different fee structures; that is, the same management fee baked in but the advisor fee could either be built in or charged separately). These issues are not unique to pooled plans, but at least there's no requirement to show them on the statements.

Assuming a self-directed platform, loan payments will generally go into the investment "mix" selected by the participant for contributions.

AI has a tough time saying anything meaningful about pension topics, as evidenced by the prior post.

Yes it is possible. Generally, your employER contribution is going to drop from a max of 25% to 6%. After taking into account the max 401k deferral and the 6% max employER, the remaining money already contributed might be able to be considered an after tax contribution. If you are a sole proprietor, it's fairly easy. If you are operating a corporation and getting W-2 income, not so easy. It might be considered aggressive because in theory the money going in should be designated as what it is when it goes in.

Just to be argumentative, to put the Schedule C proprietor on the same playing field as an employee, they can make contributions during the year. The only possible problem is exceeding the 100% of pay limit and that is solved by removing the 415 excess.

So sorry to hear this. I go back to PIX days.

I don't want to go down the rabbit hole of making decisions based on facts and circumstances. We* set a limit of 2 loans or maybe 1 loan, and then just apply the policy without having to think about it. A defaulted loan is still on the books and counts. if it is repaid, so be it; that frees up availability. The government doesn't care if one or two loans default; 4 or 5 I can see being problematic although the next enforcement of allowing "too many" loans might be the first. *"We" being the TPA. Our (small) plans look to us for guidance.

I'd really like to know the answer to this. PS, you come up with some really bizarre situations that just "happened" as if by random chance. The practical problem is that the IRS has $80,000 in error. There is a way to get it back but I never had to figure it out so don't know. But that's what has to happen, along with corrected reported as noted above. The real problem is that someone didn't think enough about the ramifications of paying the estate and withholding $80,000 (!). I think we would all be curious to learn how this could happen. FWIW I have never heard the term "cross tax correction."

You ask a great question(s). I'm nearly fully retired now; just can't wean myself from this board and some direct work activities, but sometimes wondered the same thing towards the end. I couldn't quite bring myself to pull the trigger but we too spent an awful lot of time getting "our" account statements to equal the recordkeepers'. Most of the time it was some kind of import problem, but often enough there was some kind of contribution deposit error or whatnot that wouldn't be caught without going through the whole process, so I always felt that was part of our job (catching such errors) and kept it up. But it's frustrating when you know others aren't doing that. It's not exactly "right" but a solution to the TH testing and 5500 count is to import everything from the vendors and not worry too much about reconciling. Being forced to deal with crappy systems like FasCor is one of the reasons I got out. And of course the incessant changes in the law.

IMO, no. These investments/tail-wagging the dog scenarios are almost always problematic.

There are several possibilities. One is that the reports are wrong; that is, the vested calcs are messed up because of the loan(s). I wouldn't immediately assume that but I've seen it. Another is that loan fees could be eating at your account. Yes your non-loan balance might increase overall due to contributions and loan payments, but you might be experiencing losses due to loan fees. Loans might have fees of $150 or more at inception, plus ongoing quarterly fees. Not judging, but if you still have loans, you might consider increasing your loan payments rather than increasing your contributions. Conventional wisdom says to maximize your contributions, but if it means you have to turn around and borrow for small expenses, then that is self-defeating.

Unfortunately different situations might have different "right" documents. For the vast majority of us (?) using pre-approved documents, "it is what it is." What prompted someone to say "IRS regulations state that grandchildren are not eligible to receive distributions" is beyond me. And then I guess that "misunderstanding" (being polite; it's just stupid) led them to not pay the granddaughter even though the plan says she is entitled (although I remain skeptical of that detailed language, sorry). Plus you have the son bringing in an attorney, which is going to cost him half of what he received, if this plays out. It's a cluster f*ck. The lesson here is, IF YOU DON'T KNOW WHAT YOU'RE DOING, DON'T DO IT.