chris

jmarini: I pulled that file. Granted it was 1998, but the inside address is as follows: Internal Revenue Service North Carolina-South Carolina District Office ATTN: Disclosure Officer 320 Federal Place, Rm. 209 Greensboro, NC 27401 The body of the letter basically began..... " Dear Sir/Madam: This request is made pursuant to Rev. Proc. 94-22. XYZ, Inc. is termnating the XYZ, Inc. ...plan. ................. Please find enclosed a form letter to be forwarded to the persons whose names, SSN's and last known addresses are set forth on the enclosed list...." Nine days later (one week from the return receipt date) I received a response to my letter indicating that the IRS would forward the requested info.... You should be able to locate the address of the Disclosure Officer of your district. If not, try your local IRS office and see where you end up. I believe I may have started with the phone number in the Rev Proc, but ended up getting bounced around a few times before I got the info.

I had a good experience with the IRS letter forwarding program a few years back. We had a plan that had improperly excluded approximately 48 people over the course of a few years. The IRS will not tell you if they were able to deliver the letter/info. so make sure you include every bit of contact information you can so the people will be able to get in touch with you. They basically forward the info to the last known address they have on file. I believe we ended up locating just about everybody. Some participants had to be tracked down via other family members. We may have done the 100% withholding on a few as well.

Kirk: I agree as to the creditor protection issue. From the plan perspective, letting all parties know that a distribution will only take place pursuant to a qdro takes the heat off of the plan administrator as the atty-in-fact had been calling left and right re getting something transferred. A distribution to the ex-spouse-to-be pursuant to a qdro (if one is ever obtained) would allow her to roll it over into her employer's plan and name kids as ben's. Going that route would not seem to jeopardize the exempt status of the rolled funds.

He's a former employee. As far as I know, other than this initial contact the plan administrator had no knowledge of divorce action. Agreed as to your third point. Now that the administrator is aware of the divorce action attys for both participant and spouse will be notified that the plan will only make a distribution to someone other than the participant pursuant to a QDRO. Also, participant's account would be held until qdro received or until participant's atty certifies that no qdro will be obtained and that the psp acct balance will remain the participant's sole property by providing a copy of a signed property settlement agreement....

Agree on both counts. Atty-in-fact believed that distribution to him FBO participant, then transferred to ex-spouse to be and then into ex- spouse to be's employer's PSP would be a rollover. After some choice words about attys in general I believe he finally understood that a QDRO was in everyone's best interests.

Profit sharing plan participant is in poor health. Plan participant was involved in lengthy divorce proceedings prior to health issue. Participant's atty-in-fact is afraid that hospital will attach plan benefits. In that regard, atty-in-fact and participant spouse (soon to be ex) have agreed to move $x out of the plan and into participant spouse's name to shield $x for the spouse and kids. Talk about issues... From the plan administrator perspective, a QDRO would be helpful, but according to all involved there's no time to go that route. It appears that the PSP balance would be exempt from creditors. Thus the plan administrator's first option would be to just wait for a QDRO to be presented. The atty-in-fact and the ex-spouse to be offered the following.... Have the ex-spouse to be sign off on the appropriate waivers/consents, etc. Then the plan could distribute the $x to the atty-in-fact FBO the participant and let the atty-in-fact in turn transfer $x to the ex-spouse to be. Clearly going the QDRO route would avoid the front-end tax to the participant on the initial distribution as well as provide maximum protection to the plan administrator. The drawbacks of the proposed scenario appear to be: 1) tax to the plan participant upon distribution 2) limited protection to the plan administrator re making the distribution (although the to be ex-spouse would have signed off on it) 3) turning assets exempt from creditors into assets available to creditors. Anyone see anything else? Thanks for any suggestions...

See IRS Notice 2000-3, Q&A-6 as to timing, etc..... Also, you will need a corporate resolution regarding the amendment to the plan as well as an amendment to the plan signed off on by the employer/plan sponsor and the trustees

The other thing that comes to mind is the participant's getting a divorce. That way all involved would be protected...

Find an attorney that handles collections. The note should provide for attorney's fees if there's a default in payment and collection action must be taken. Typically, notes will also provide for a higher interest rate after default.

Not sure, but wouldn't the plan be able to stop payment on the checks post 12/31? Also, what if one of the checks doesn't get cashed or if a participant cannot be found? Just off the cuff if you know all participants are there and all checks will get cashed immediately upon receipt then file the 5500 for the pye 12/31/02 as the final 5500. If the plan received a bank statement for january 03 showing assets still there, then you'll need to file a 5500 for 03. ??? I'm assuming distribution of the assets was not contingent upon receiving a favorable determination letter upon termination..?

That's where I was coming from in terms of suggested steps to take to locate the spouse. Didn't know if any different approach should be taken. Would be a good idea to take same steps since spouse would probably show up upon participant's death and want the money. This way the designated beneficiaries and the plan should be protected from any such potential reappearance of the spouse. Thanks for the input.

Employee to become eligible in employer's profit sharing plan and MPP plan. Employee has told administrator that she has not seen her spouse in 8 years. I know Code Sec. 417(a)(2)(B) allows for spousal consent to not be obtained if plan administrator is satisfied that spouse cannot be located. What does/should a plan administrator do to become "satisfied" from a fiduciary point of view? try to obtain last known address of spouse, use letter forwarding service to get form to him to sign, etc............??

Any issues to be on the look out for where participant directs plan trustees to purchase annuity with portion of participant's account balance (plan to be owner and beneficiary and participant is, of course, the annuitant)?

Treating the loan as a participant directed investment at the outset (which a majority of our plan doc's do) would minimize any downside to the general trust, correct? Thus, the participant (and not the plan) is the one who loses all the way around, i.e., taxable distribution, low/no assets in account balance, etc...?

What should plan do where participant took loan a while back and account balance used as security and now participant terminates employment when value of participant's account won't cover balance owing?

You need to check the plan doc re eligibility. However, since you said the person was a former "participant" that tells me they were eligible to receive the safe harbor contribution b/c other than the initial eligibility requirements no restrictions can be imposed on the SHNEC, e.g., 1000 hours or employment on the last day of the plan year.

401(k) plan has issue re late deferrals for a number of pay periods. Apparently, company would write one check per quarter for e/ee deferrals, e.g., company would wait until Apr. 1 to write check for e/ee deferrals for Jan/Feb/March. Is it worth it to go through the DOL's VFCP filing or better off just computing the requisite interest and self-correcting it?

Maybe this falls in line with your point regarding the IRA beneficiary's succeeding to the rights of the deceased IRA owner, but in the facts of PLR 9842058 the surviving spouse set up an IRA after decedent's death in the name of decedent with the surviving spouse as the beneficiary. The surviving spouse then transferred two of decedent's pre-death IRA's by way of a trustee-to-trustee transfer into the post-death established IRA. The PLR doesn't address the post-death IRA in decedent's name other than to assume that it met the requirements of 408(a).

Assuming the surviving spouse rolled it over to an IRA in her name, subsequent distributions from the IRA would be subject to the 10% penalty tax unless there were an exception. The "on account of death of the participant" exception would no longer apply. Thus, to the extent that the surviving spouse is younger than 59 1/2, the 10% penalty tax would apply. If the monies could stay in the plan that would be best b/c the 72 t penalty tax would be avoided. But they cannot, thus the alternative of an IRA in the name of the decedent...

As I said above I had seen the few PLR's allowing for an IRA to be opened in the name of the decedent in order to receive a rollover from an IRA which the decedent maintained prior to death, but that I hadn't seen anything regarding the surviving spouse setting up an IRA in the name of the decedent when no prior IRA existed. However, I ran across the following in some of RIA's research materials: RIA illustration: Husband dies at age 47 with $300,000 in his employer-funded qualified plan account. Wife, age 44, is the designated beneficiary of the account, and must set aside $100,000 of her husband's retirement plan funds to pay for pre-age-59-1/2 expenses (e.g., her children's college tuition). Using trustee-to-trustee transfers, Wife can transfer her husband's plan account balance into two IRAs in his name (with herself as beneficiary). IRA A will receive $200,000, and IRA B will get $100,000. She then withdraws all of the money in IRA A and within 60 days rolls it over into IRA C, which she opens in her name. Wife then proceeds to withdraw money as needed from IRA B. The example was based on PLR's 9608042 and 9418034. The problem is the 72t penalty b/c the decedent's acct. balance is due to be distributed from the PSP soon and the spouse will need access to those funds.

As I said above I had seen the few PLR's allowing for an IRA to be opened in the name of the decedent in order to receive a rollover from an IRA which the decedent maintained prior to death, but that I hadn't seen anything regarding the surviving spouse setting up an IRA in the name of the decedent. However, I ran across the following in some of RIA's research materials: RIA illustration: Husband dies at age 47 with $300,000 in his employer-funded qualified plan account. Wife, age 44, is the designated beneficiary of the account, and must set aside $100,000 of her husband's retirement plan funds to pay for pre-age-59-1/2 expenses (e.g., her children's college tuition). Using trustee-to-trustee transfers, Wife can transfer her husband's plan account balance into two IRAs in his name (with herself as beneficiary). IRA A will receive $200,000, and IRA B will get $100,000. She then withdraws all of the money in IRA A and within 60 days rolls it over into IRA C, which she opens in her name. Wife then proceeds to withdraw money as needed from IRA B. The example was based on PLR's 9608042 and 9418034.

Under the Plan's distribution provisions it looks like decedent's account balance will have to be distributed by 12/31 of the calendar year containing the fifth anniversary of decedent's death. Based on the facts that's 12/31/04. Thus, exploring alternatives... Also, I ran across a few PLR's allowing for the rollover of a decedent's IRA into a new IRA in the name of the decedent. However, I have not seen any guidance on whether an IRA can be opened in the first instance in the name of decedent. Here, the decedent's acct. balance would be distribued and rolled to an IRA in the decedent's name with spouse as the beneficiary. Again, I don't know that this can be done under these facts...

Surviving spouse is considerably younger than 59 1/2. Surviving spouse is designated beneficiary on decedent's acct. balance in PSP. Surviving spouse needs to be able to take advantage of 72(t)(2)(A)(ii) exception to 10% penalty tax. Would it be possible for the surviving spouse to open an IRA in the name of the decedent and roll over the qual plan benefits? Anyone know of financial institutions which will allow for the opening of an IRA in the name of the decedent?

Surviving spouse is considerably younger than 59 1/2. Surviving spouse is designated beneficiary on decedent's acct. balance in PSP. Surviving spouse needs to be able to take advantage of 72(t)(2)(A)(ii) exception to 10% penalty tax. Would it be possible for the surviving spouse to open an IRA in the name of the decedent and roll over the qual plan benefits? If so, anyone know of financial institutions which will allow for the opening of an IRA in the name of the decedent? I remember PLR's allowing for a rollover of a decedent's IRA to a new decedent's IRA, but I don't recall anything addressing the ability to open a decedent's IRA... Also, I guess the plan document may constrain the ability to do this as well..

So, the following eligibility/ participation req's would seem to be ok.... PSP contribution elig = age 21 and 1 yr of service part = retro to first day of plan year Deferrals elig = all participants employed on Mar. 1, 2003; thereafter age 21 and 1 yr of service part = dual entry 3% safe harbor elig = same as deferrals part = same as deferrals