Peter Gulia

RatherBeGolfing, thank you for your further thought. And it answers my originating query. If the writing is logically consistent with the IRS-preapproved document and within what Revenue Procedure 2017-41 allows, a user can get a choice without losing reliance on the IRS opinion letter. For all BenefitsLink readers, my citation above should be to ERISA section 402(b)(4).

ERISA § 403(b)(4) commands: “Every employee benefit plan shall specify the basis on which payments are made to and from the plan.” If the plan’s administrator adopts a written procedure that says whether the administrator will or won’t allow a QDRO that specifies a distribution before the participant’s earliest retirement age, did the administrator amend the plan? If the procedure is, meaningfully, a plan amendment, might it be invalid if the administrator is not the same person as the plan’s sponsor and the plan did not provide the administrator power to amend the plan? If the procedure is not a plan amendment, does the plan specify the conditions under which the plan will pay a QDRO distribution?

I found the text RBG quoted in an IRS-preapproved document of a big publisher. Perhaps the publisher (or another BenefitsLink maven) has some reasoning about why the provision is not troublesome under IRC 411(d)(6). But even if there is no problem on that tax-law point, I wonder whether the quoted text is contrary to ERISA section 403(b)(4). And if the plan grants discretion, I wonder what factors a fiduciary would consider in deciding whether to allow or deny an "early" QDRO distribution.

RatherBeGolfing, thank you!!!!! One imagines that this provision might not really grant the Plan Administrator absolute discretion. Rather, if the provision allows any discretion, doesn't ERISA section 404 call a fiduciary to use reasoning and decide similar situations with sufficiently similar responses? If so, what circumstances would support a decision against an immediate QDRO distribution?

Under ERISA and the tax Code, a retirement plan may allow an alternate payee’s QDRO distribution before the participant’s earliest retirement age. ERISA § 206(d)(3)(E)(ii); IRC § 414(p)(4)(A)-(B); 26 C.F.R. § 1.401(a)-13(g)(3). For individual-account (defined-contribution) retirement plans, many plan sponsors permit an immediate distribution to an alternate payee, perhaps because a practitioner or service provider suggested that to do so is simpler than keeping a court order open for many years while waiting for the participant to reach an earliest retirement age. (That’s been my advice.) Yet some plan sponsors might prefer to provide for not paying an alternate payee before the participant becomes entitled to receive a distribution or reaches age 50. (I’m not advocating this choice; rather, I’m curious about whether it’s even practically available.) Does an IRS-preapproved document afford a user an adoption-agreement or other choice for not providing a QDRO distribution until the participant’s earliest retirement age? Does the document your firm uses afford a choice on this plan-design point?

I'm imagining a plan that provides the 70-something working owner once each year exactly the 401(a)(9)-required amount. No less, because the plan is designed to meet IRC 401(a)(9). But no more, because the participant had not elected a distribution.

Lou S., thank you for breaking a logic jam for me. (It's been a long time since I've thought about an in-service distribution beyond a hardship provision.) I was thinking about an owner's required beginning date as a quasi-retirement event, but it's not. For an owner who is employed or deemed employed, a 401(a)(9)-required distribution IS an in-service distribution (even if the plan's document doesn't so label it).

We all recognize the reasons for limiting a plan's benefit to a single-sum distribution. And that's usually my advice to sponsors of ERISA-governed plans. My follow-up query is about a business owner who might prefer to leave some amounts in her employment-based plan after her required beginning date. Let's imagine she has a good reason for preferring it over an IRA. Among other possible reasons, an ERISA-governed plan in some circumstances gets better protection from a participant's creditors. In that situation, might an employer tolerate plan provisions that allow an owner's once-a-year payments?

Belgarath and RatherBeGolfing, thank you for the further information. The answers and reasoning confirm what I expected. A further question for everyone: If a big-enough owner nears age 70 and doesn't want a single-sum distribution, do you amend the plan?

Bird, thank you for the clear and useful information. Other BenefitsLink mavens, would you like to confirm or deny?

Some individual-account (defined-contribution) retirement plans allow a participant a choice of taking a retirement benefit in periodic payments. Others provide a benefit is paid only as a single sum. Some reason that limiting payout options doesn’t harm participants because whatever one might choose in an employment-based plan’s payout options can be accomplished with an Individual Retirement Account or Annuity [IRA].) A recent Pensions & Investments article describes an Alight Solutions survey, which finds 57% allow periodic payments and 43% don’t. I haven’t read Alight’s report, but I guess the sample is larger plans. I wonder whether smaller plans have a different mix on allowing or precluding periodic payments. So informal survey: Do your clients’ plans allow periodic payments? About whether to allow or preclude payments, do most clients follow your suggestion?

Kevin C, thank you for the further information.

And 26 C.F.R. § 1.401(a)(9)-8 at Q&A-6 gives some details. https://www.ecfr.gov/cgi-bin/text-idx?SID=77332c4381a9782a72be8f1031b7e4b1&mc=true&node=se26.6.1_1401_2a_3_29_3_68&rgn=div8

Whatever tax law (including an IRS nonenforcement policy) might provide about a plan’s tax treatment, it doesn’t end an employer’s exposure to providing the benefit the written plan promised. Yet some employers might hope one’s employees and former employees remain unaware of what they were promised.

Pam Shoup, thank you for this helpful body of information.

Thank you for the further information. But would Millennium or another provider accept a payment if it is not an eligible rollover distribution (because, for example, it is a minimum distribution)?

ESOP Guy, thank you for the further information. BenefitsLink mavens, one of the issues I've been asked to think about is whether it's prudent for a plan's administrator to engage the locator service once each year if the fees charged against a to-be-located participant's account would substantially reduce her benefit.

Kevin C, thank you for the helpful information. Does anyone have an experience with a client having the plan (rather than the employer) pay a locator service's fee? Does anyone have an experience with a client charging the locator fee against the account of the to-be-located participant?

It remains unclear how much effort a single-employer individual-account retirement plan’s administrator must put into finding another address for a participant if the administrator receives information suggesting that the participant no longer is at the address the participant furnished (and perhaps neglected to update). Administrators have expressed concerns that some EBSA examiners suggest unreasonable efforts. Some of the tension results because not all of an employer/administrator’s cost is visible as an expense. Of those service providers that offer § 3(16) services, do any of them offer the service of finding better addresses on “missing” participants? Does that service have a distinct fee, or is it embedded in an overall fee? If there is a distinct fee, is it charged against the account of the to-be-located participant?

The New York Times reports that the IRS would furlough about 52,000 workers. https://www.nytimes.com/2018/12/19/us/politics/government-shutdown.html?module=inline

chc93, Kevin C, and Bird, thank you for your helpful information.

A retirement plan's accounting and reporting year is the calendar year. The plan's administrator would like to file its report on 2018 as early in 2019 as it can. The administrator does not have its own filing credentials, and has in years past authorized its TPA to do the submission. Apart from the TPA's service availability, is there any about Form 5500 software that would make it impractical to file in January 2019?

It seems I assumed too much; Labor has an appropriation. Treasury does not.

During a “funding lapse”, EBSA staff would not work on discretionary rulemaking projects. For the proposed rule on “Association Retirement Plans and Other Multiple-Employer Plans”, comments are due December 24. During a shutdown, EBSA staff would not work on analyzing the comments and other steps the Administrative Procedure Act and other laws require for adopting such a rule. Different practitioners have different views about whether such a delay would be a good or bad thing.

Which governmental activities stop (or continue) during a U.S. Government shutdown? Here’s the Labor department’s plan: https://www.dol.gov/dol/Contingency_Plan.pdf And here’s the Internal Revenue Service’s plan: https://home.treasury.gov/system/files/266/IRS-Lapse-in-Appropriations-Contingency-Plan_Nonfiling-Season_2018-12-03.pdf Other plans: https://www.whitehouse.gov/omb/information-for-agencies/agency-contingency-plans/