Peter Gulia

It might help to distinguish between when an amount becomes forfeit and when the amount is segregated from the participant’s individual account. If the participant did not yet receive a distribution, might the plan’s administrator now segregate the forfeited amounts and credit those amounts to the forfeiture account? Whether slowness in segregating forfeitures affects other participants might turn on the plan’s provisions, especially if nondiscretionary, about using forfeited amounts. Imagine the documents governing the plan provide that the order is: first, a forfeiture amount sets off the employer’s obligation to pay a nonelective or matching contribution; next, a remaining forfeiture amount (if any) is used to pay plan-administration expenses (or to reimburse the employer for its advance on expenses the employer was not obligated to pay); last, a remaining forfeiture amount (if any) is allocated to participants’ accounts. For many plans, the use of forfeiture amounts regularly stops at step one. So, a delay in segregating a forfeiture might burden only the employer. But I concur with Bri that a delay in segregating a forfeiture matters more if the amount would or might have been used for allocations to participants’ account. This is not advice to anyone.

In the facts of my OP, the decedent’s limited-liability company is the plan’s sponsor and the plan’s administrator. The human who has become the company’s successor manager knows the participant died. Although the plan sponsor could end the plan, the plan sponsor—and the decedent’s beneficiary—might have reasons to continue the plan, perhaps over the next ten years, or even more. After we discerned that a plan’s administrator might not, if no one has submitted a claim, always need to act right away, I imagined another situation, much different from my OP, in which a plan’s administrator doesn’t which participants have died. I regret confusing any reader with my undescribed thinking-out-loud journey, and thank you for taking the thought exercise with me.

Beyond anything about imposing a plan’s involuntary § 401(a)(9) distribution, a plan’s administrator might, after a participant’s death, turn on the beneficiaries’ investment-direction powers and disclosure communications. But that’s if the plan’s administration knows the death happened. If no communication addressed to the participant gets a bounce-back or not-delivered, the plan’s administration might have no reason to classify the participant as “missing” or not located. If no one submits a claim for a death benefit, the plan’s administration might not know that a participant died. It might be unwise to try to determine a participant’s beneficiaries if the plan’s administrator has not first found that the participant died. Although a plan I advise might run a yearly or quarter-yearly sweep on participants’ identifying information, the findings often are inconclusive. And some efforts to confirm that a participant is alive and still receiving the plan’s account statements and other communications can risk identity thefts and other frauds. Some efforts might be helped a little if some participants don’t opt out of a once-a-year paper communication.

For lawyers less knowledgeable than fmsinc, here’s a point some trusts-and-estates or domestic-relations lawyers might miss: For some plans, ERISA supersedes and preempts every State’s law (except a QDRO that ERISA § 206(d)(3) commands a plan governed by that section to follow). Even when State law is not preempted, a plan often specifies the law of a State other than one in which the participant resides or is domiciled. (In the situation that moved me to ask my question, the decedent was an Iowa domiciliary and the estate administration is governed by Iowa law; the retirement plan sponsor is an Iowa company; the decedent’s former spouse is an Iowa resident; and the people who might have claims to the plan’s death benefit are Iowa residents. Yet, the retirement plan is governed by Pennsylvania’s internal law, without regard to any law of conflicts. RTFD.) In the situation I’m advising about, the plan’s administrator need not consider any State’s statute about whether a divorce might revoke a beneficiary designation. Because the divorce was final before the participant’s death, the former spouse no longer was “the person I am married to at the time of my death[.]”) This is not advice to anyone.

For an individual-account retirement plan that provides participant loans, a plan’s loan receivable is the plan’s asset, and typically is allocated to the individual account of the borrower participant (especially so if the plan provides participant-directed investment). Yet, how to account for, and how to value, such a loan receivable for each of several differing purposes involves other layers of questions. For just one example about only two of the purposes, a value shown in an element of a plan’s financial statements might differ from a value (if any) shown on a participant’s account statement. If the only security for a participant loan is a set-off or charge against the elective-deferral subaccount of the participant’s individual account, questions about whether a benefit right is not yet nonforfeitable might be inapplicable. Consider that a retirement plan’s documents might state or describe a benefit right in a way that, while perhaps logically fitting the Internal Revenue Code and ERISA’s title I, has little or no relevance for some practical uses of the benefit right. A negotiator for a nonparticipant spouse might argue that such an alternate payee’s share ought to be determined or negotiated by assuming as the starting point what the participant’s account would be, and what the marital-property portion of it would be, had the participant not taken the loan. That might make sense if only the participant would benefit from repaying the loan. Likewise, domestic-relations negotiators might focus on what amounts could be payable in tomorrow’s QDRO division and distribution. This is not advice to anyone.

A tax law rule suggests a beneficiary need not begin one’s distribution until about ten years (or a little more) after the participant’s death. “Distributions satisfy this paragraph (c)(3) if the [participant’s] entire interest is distributed by the end of the calendar year that includes the tenth anniversary of the date of the [participant’s] death.” 26 C.F.R. § 1.401(a)(9)-3(c)(3) https://www.ecfr.gov/current/title-26/part-1/section-1.401(a)(9)-3#p-1.401(a)(9)-3(c)(3). On my hypo, the beneficiary’s distribution need not begin until December 2035. (It must be completed by December 31, 2035.) If no one submits a claim, may the plan’s administrator do nothing to impose a minimum distribution until December 2035? Or am I missing something?

blguest, thank you for adding information that tends to support my surmise that Vanguard used similar beneficiary-designation software for a few kinds of retirement plans.

blguest, thank you for your observation about domestic-relations negotiations and divorcing persons’ preferences. Some plan sponsors or plan fiduciaries might have a different outlook. Some recognize that restraining payouts might permit an insurer to use assumptions that allow crediting rates higher than those that would be necessary if the insurer assumes participants could, and some would, take payouts more quickly. And some recognize that a choice between an investment with payout restraints and an investment with immediate redemptions might be a choice to be afforded to participants for each participant’s decision-making. Yet, I recognize divorcing persons’ and their lawyers’ frustrations in negotiating around interests in retirement plans and other property rights, some of which are not easily divided and some which cannot be divided.

Vanguard’s programmed click-on “To the person I am married to at the time of my death” might help an IRA holder guard against one’s forgetting to change a beneficiary designation. It’s astonishing that Vanguard Fiduciary Trust Company seems willing to accept the burden of receiving and evaluating evidence about whether an IRA holder was married and to whom she was married.

I'm not looking for details, only an anecdotal and general sense of others' experiences.

Many plans include a provision for segregating the beneficiaries' portions into separate accounts, and then applying the plan's distribution provisions, including minimum-distribution provision, regarding each separate account. Check whether your client's plan includes or omits those provisions.

A § 401(a)-(k) plan’s only participant dies without having begun a distribution, and before the plan, following Internal Revenue Code § 401(a)(9), required a distribution. Assume the plan allows a beneficiary the widest possible choices about a distribution, with no more constraint than is necessary to meet § 401(a)(9) rules. The participant had no spouse. The participant’s beneficiary is not an eligible designated beneficiary. The participant’s death was September 17, 2025. Assume all possibly relevant years are the calendar year. What is the latest date for the beneficiary to specify to the plan’s administrator any choices the beneficiary might make regarding the form of a distribution and when it begins? What is the latest date a plan’s administrator may wait until, absent the beneficiary’s choice, one must impose the plan’s default minimum distribution? I imagine I could sort this out by reading the tax law regulations, but I’m hoping a BenefitsLink neighbor can save me some time. Thanks.

blguest, thank you for pointing me to a Vanguard explanation that tends to confirm some of my educated-guess suspicion. It seems Vanguard permits an IRA holder (and might have permitted an “Individual 401(k)” participant) to specify a spouse beneficiary without a name, instead specifying the relationship. (Vanguard explains that such a designation might guard against some potential consequences of an IRA holder’s failure to change one’s beneficiary designation.)

Before Vanguard exited its “Individual 401(k)” business, Vanguard sent a customer a “beneficiary verification” that included this information: Beneficiary To the person I am married to at the time of my death Backup Beneficiary Benjamin Brother 50% / Roberta Relativebyaffinity 50% Here’s what I don’t know: Could the lingo “To the person I am married to at the time of my death” have resulted from Vanguard recording exactly what the participant typed in the website? Or had a participant tried to type in that phrase, would Vanguard’s system have rejected the entry because it was too many characters or because it seemed not to be a name? Did Vanguard set up that lingo as a programmed choice a user could click on? Did Vanguard set up that lingo as a plug-in for a situation in which the participant declined to name a beneficiary and Vanguard’s records about a participant showed the participant as having a spouse? In the circumstances I’m advising about, whether “To the person I am married to at the time of my death” resulted from the participant’s considered writing (which might be plausible because the participant had filed a divorce petition, and was lawyer-advised), or partly or wholly because of something Vanguard set up might matter in how the retirement plan’s administrator interprets the participant’s “backup” or contingent beneficiary designation. BenefitsLink neighbors, thank you for your gracious help.

An employer has a § 403(b) plan, elective deferrals only, with only TIAA-CREF. The employer is considering a different provider for ongoing § 403(b) elective deferrals. The employer assumes it lacks power to remove assets from TIAA-CREF. Even if it might have some such power, the employer would be reluctant to interfere with an individual’s choice to continue with TIAA or CREF for previously accumulated assets. If it matters, this governmental plan cannot be ERISA-governed, no matter what provisions or restrictions the employer might set. If an individual considers rollovers, if 59½, or § 403(b) transfers from TIAA or CREF to the new provider: What exit expenses will that bear? Is there a lock-up on all or some of the TIAA credited-interest contracts? What else should an adviser to this employer or its participants tell them to worry about?

A fiduciary might consider whether to delete or display terms not used in any of the plan's communications and also not used in any of any designated investment alternative's communications. I can imagine reasoning in either direction.

If the MEP also is a PEP, consider that a pooled-employer plan must “designate a named fiduciary (other than an employer in the plan) to be responsible for collecting contributions to the plan[,] and [must] require such fiduciary to implement written contribution[-]collection procedures that are reasonable, diligent, and systematic[.]” ERISA § 3(43)(B)(ii). Even without that statutory command, a non-PEP multiple-employer plan might have a fiduciary other than the participating employer responsible to collect contributions. The participating employer might ask the plan’s administrator or, if distinct, a contribution-collection fiduciary about that person’s procedure for collecting a past-due contribution and adjusting individual accounts to make good the elective deferral and an investment-opportunity loss.

Is this plan ERISA-governed? For example, if all participants are self-employed individuals (and the plan never covered an employee), the plan might not be ERISA-governed. And whether ERISA or a State’s law governs the plan, consider how remedies might differ regarding a partner. When a participant who is an employee has an amount intended as an elective deferral taken from her otherwise due wages and the amount is not promptly contributed to the plan’s trust, the participant might be due a plan investment adjustment. But an amount not contributed as a partner’s elective deferral might not have been segregated from the partner’s income or capital interests under the partnership agreement. That might affect related measures partnership values, plan investment values, and interacting opportunity losses and gains. Yet, consider also full correction of nonexempt prohibited transactions. If there is a correction for the retirement plan, the plan’s administrator might want its TPA’s help in coordinating with the employer’s accounting for partners’ income interests and capital interests. This is not advice to anyone.

A fiduciary assembling an ERISA rule 404a-5 disclosure to participants and other investment-directing persons plans to use a “Sample Glossary Of Investment-Related Terms For Disclosures To Retirement Plan Participants” collected by The SPARK Institute, Inc. and other trade associations and related charities. The document the fiduciary has is labeled “Version 1.01 April 26, 2012”. A visit to https://www.sparkinstitute.org/resources/best-practices-industry-standards/ shows that 2012 version. But is that first version still the current version? If not, what is the current version? BenefitsLink neighbors, thank you for your gracious help.

Recognizing some ambiguities of ERISA § 104(b)(3) or of 29 C.F.R. § 2520.104b-10, I’m curious: What conventions do designers of software for administering health plans use to set whether a former participant, a former beneficiary, a former alternate recipient, or a former continuee routinely receives a summary annual report on the plan-accounting year in which one was not former?

DSG, for an analysis of some (not all) of the issues, read or re-read In re Marriage of Janet D. & Gene T. Shelstead, 66 Cal. App. 4th 893, 78 Cal. Rptr. 2d 365, 22 Empl. Benefits Cas. (BL) 1906 (Cal. Super. Ct. 1998). Interpreting ERISA § 206(d)(3) and applying § 206(d)(3)(K), the court reasoned that an order can be a QDRO only if it restricts its alternate payee—including a successor-in-interest to an original alternate payee—to a spouse, former spouse, child, or other dependent of the participant. While a California court’s opinion sets no precedent for any Federal court, some judges might adopt or adapt Shelstead’s reasoning. Some plans’ administrators might follow Shelstead’s, or even harsher, reasoning regarding a would-be alternate payee who died before the order one hopes is a QDRO is made. For an order directed to an individual-account (defined-contribution) retirement plan, a plan’s administrator might be less likely to deny QDRO treatment if the order, instead of providing for a payment to some named person other than the decedent, provides that a separate interest not paid or distributed before the alternate payee’s death is distributable to the alternate payee’s estate. This is not advice to anyone.

The Treasury rule sets no definition for the phrase “primary residence”. So, unless the plan’s governing documents define the phrase, an administrator must form its interpretation, doing so with exclusive-purpose loyalty and no less prudence—including care, skill, and diligence--than ERISA § 404(a)(1) requires. Even if one reasons that an interpretation logically consistent with Federal laws generally, or with Federal tax laws particularly, should be preferable, that reasoning might yield no obvious conclusion. The United States Code generally, and the Internal Revenue Code particularly, each has many uses of the phrase “primary residence”. And all those are for a purpose different than deciding whether a retirement plan should allow a participant to invade one’s savings before severance-from-employment. If one interprets the § 401(k)-1 rule’s use of “primary residence” to refer to a common-law meaning, a leading dictionary defines both primary residence and principal residence as “[t]he place where a person lives most of the time.” Residence, primary residence, principal residence, Black’s Law Dictionary 1568 (12th ed. 2024). But that one-phrase construct does not say what measure of time to look to. Is it the most recent year? The most recent five years? Ten years? One generation? A whole adult lifetime? Or the time since the most recent establishment of domicile? A plan’s administrator might form the best interpretation it can while not incurring an unreasonable expense. This is not advice to anyone.

If the plan’s administrator denies the hardship claim, follow ERISA § 503 and the plan administrator’s claims procedure. That includes giving a denied claimant an opportunity to present evidence and legal argument to support one’s claim. That might include showing facts and explaining reasoning about which place is the participant’s primary residence. If hardship claims are on a § 401(k)(14)(C) self-certifying method, does the plan’s administrator have actual knowledge that the participant’s certification is false?

TPApril, this might not answer your question aimed at what might be one way to appease a participant; but consider, if the plan’s trustee might be willing to pay in currency: What place would the administrator tell the participant to go to? A bank lobby? If not, what are the security arrangements? What steps would the plan’s administrator and trustee use to satisfy themselves, prudently, that a person who appears is the participant? What compare-to documents does the administrator have to check that a person is the participant? To the extent that the plan’s administrator uses the employer’s records, were all or some records destroyed after the employer’s records-retention period ended? Who will do the work of identifying the participant? (Some might be unwilling to be in the participant’s presence.) Will the plan’s trustee or administrator require the participant’s written receipt-and-release? Will the plan’s trustee or administrator require that the participant sign, and acknowledge, the receipt-and-release in a notary’s presence? How confident are the plan’s fiduciaries that a court would find that the receipt-and-release is sufficient evidence to prove that the distribution was paid. Will a bank’s convenience fees, the notary’s fee and add-on convenience fees, and other expenses of arrangements to pay the participant in currency be charged against the participant’s account? If the participant’s account balance is not paid in a single sum, are the plan’s fiduciaries ready to repeat the pay-in-currency arrangements every year? These are only some of many questions.

Yes, as R Griffith suggests. BenefitsLink’s generous neighbors, including Patricia Neal Jensen, don’t want a BenefitsLink reader to think there might be a nongovernmental § 457(b) to § 403(b) rollover. Not every reader would have discerned that Patricia Neal Jensen likely meant to describe a transaction involving nongovernmental § 457(b) plans regarding both transferring and assuming sides of a transfer. Further, while I’m aware there’s a business usage of rollover that’s wider than the tax law meaning, I find it more helpful to think about a transfer. Using a distinct word might remind us that, if the transferring and assuming plans so provide, one employer’s obligation is satisfied because the obligation is transferred to the other. (For a nongovernmental employer’s unfunded deferred compensation plan, the obligation is not an obligation of an exclusive-purpose trust.) Returning to WolverineBenefits’ originating post, if establishing a § 457(b) plan for a nongovernmental school’s employees would not set up an opportunity for a § 402 rollover, the school might reconsider the school’s and its to-be-compensated employees’ plan-design preferences.