david rigby

If we add "J&S" in front of "annuity", is there any doubt about this answer? We assume the plan document, like every document I've even seen, will allow the satisfaction of the benefit promise via purchase of such an annuity.

Thirty+ years ago, I was terminating a plan and had a similar situation, and the EE was only about age 40. The LS was small, only about $4K. Insurance companies did not want to sell a deferred annuity that small (or at all). Thus, the only alternative was an immediate J&S annuity, with a corresponding small monthly amount. We described this to the participant, something like, "you can get $4,000 now or you can get a 50%J&S of $16 per month" (don't do the math, it's just an example). Upon hearing the alternatives, the participant (and spouse) decided to elect the Lump Sum. The original questioner might get similar "simplification" by sharing some numbers with the participant.

Be careful not to conflate Key EE with Highly Compensated EE. (Yes, often they are the same, but not always.)

Ambiguous. Does the first statement apply only to certain participants at a particular point in time, while all subsequent participants are subject to some other schedule? Or is there a different interpretation to your statement/question? Perhaps the answer is irrelevant: any record/statement should show the accurate vesting status/percent for each participant, whether or not they are identical, even if the account balance is zero. Of course, if account source X is 100% vested and account source Y is subject to a different schedule, the statement should also make that clear. Now that I write that, it seems so obvious that (maybe) there is something else (unsaid) going on?

Consistent with the excellent advice above, a stock sale will generally mean the buyer is in charge of the plan after the transaction closes. Of course, the buy-sell agreement may address some specifics. One specific is vesting: under the plan termination scenario, all participants become 100% vested; but under the stock sale scenario, the participants will not automatically become vested at closing, unless specified in the buy-sell and/or a plan amendment adopted prior to the closing. It is common (and highly recommended, by me) to include language in the buy-sell and/or plan amendment to provide such 100% vesting. If someone objects, it is a very simple task to determine the cost of such provision. Over 40 years of such transactions, I've never seen one where such cost was deemed "too much", including prior to 1989 when many plans used 10-yr vesting. Also, to omit such vesting provision will likely lead to some bad PR issues. The recommendation from @Peter Gulia to include consultation with an EE-benefits lawyer is exactly correct and strongly recommended.

Based on (4), it appears this is an asset sale. Is that correct? (If so, the phrasing in Item 1 is not necessarily incorrect but is inconsistent.)

You stated merger, so no, it's not a termination. The question of "downside" could be more complex, which is a question for the consulting actuary. Point of clarification, the term "non-active" can be ambiguous. You might mean (a) "frozen", or (b) "only in-pay status or VT participants" or (c) maybe even something else. (That clarification probably won't have any bearing on how you merge the plans.)

4. One more time, remind the sponsor of their responsibility and the penalties for failure to meet compliance parameters. AND resign. Now.

@Peter Gulia, I have recently learned, due to my own POA status, that some states (including my own NC) limit any POA document by requiring the POA to explicitly state the agent is permitted to do certain things; if not explicitly included, then such action is forbidden. Example1, the agent may not change an existing beneficiary designation unless the POA document expressly grants such authority. Example2, the agent may not delegate his/her POA authority unless the POA document expressly grants such authority. Does your statement above posit that a plan/PA may accept a POA document issued under a state statute without determining if any state POA limitations apply?

The answer might depend on who is "We". If you are the plan/plan sponsor attorney, then the PA can express an opinion but ultimately should defer to legal advice. That sounds like a great summary: the attorney gets to decide.

Also, look for something like "per stirpes".

I'm not sure you (or the plan) cares what is in the divorce order. Look to the DRO (that hopes to become a QDRO) for any "instructions". I see a recipe for error if the attorney and/or the DRO expect the plan to use some "implied" standards or procedures.

Nope. Decline. There is a reason for the referral, and it's probably a deeper problem than you know.

IMHO, yes. However, that does not automatically mean the resulting DRO will be qualified by the PA. Just an opinion.

Before doing that (he said, not knowing if such action is legit), one might try a gentler approach. One might "suggest" to the participant that escheat might happen, thus making it even more difficult for him/her to get the money. Such communication might be more effective if the PA enlists the assistance of some other party (sibling perhaps?) that is more effective in getting the point across. Such communication will likely emphasize the above facts: (1) each payment has already been reported to the IRS, and (2) each payment is already taxable income (along with the corollary fact that the IRS "frowns upon" the avoidance of paying taxes and the avoidance of filing or declaring taxable income). Also, such gentle communication might suggest that the participant can get all of the (remaining) money via direct rollover to an IRA. (Taxation might not change since the IRA must also do an RMD.)