david rigby

No matter what resolution, make sure you consider the future: what do you need to do to make sure this does not happen again?

Not if it's an ERISA plan. But, it can be amended to limit the number of years of service (for example, 30) included in the benefit formula.

There have been a few prior discussions on this topic. As I recall, at least one of them had a reasonable suggestion. Try using the Search function. Suggested key words include embezzle, embezzlement, embezzled, theft, etc.

I'm shocked. Shocked!

Very likely, the use of "retirement" refers to an event, not an eligibility.

Does anything trump 415?

I'll take a stab at this. Just my hunch: The third-party service provider is exactly that: third-party, not part of the original employment or NQ relationship. The responsibility for upholding the terms of the plan, and for tax withholding belongs to you, as the (former) employer, not to the external vendor. Thus, you should do whatever is necessary to make sure withholding is applied properly. If that means you run it thru your payroll, go ahead. (BTW, logistically, this should not be difficult.) Just make sure you don't inadvertently make this person an "active employee" for any other payroll-generated purposes.

At this link, http://benefitslink.com/index.html, look at "Events"

Before going to any extremes, consider whether there are other "advisors" that might be able to assist. For example, does the sponsor have an accountant or attorney that might be able to offer an opinion? Sure, this is an "end run", but it may produce a better result for the plan, and (indirectly) for the other participants.

Of course, before you resign, you did advise him of the problem, in writing, didn't you?

...in writing.

Just guessing, but it's likely the trustee is not a separate financial institution.

Here's hoping they charge DC plans an annual fee to pay for it! Stupid regulation! Stupid legislation!

While I doubt there is anything definitive, I'm skeptical that permitting such change, even if permitted by the Code, would be in the best interest of the Plan. Most actuaries will cringe at the thought of adding this to any plan. If my client asked about this, I would probably suggest that it's a bad idea. - As SoCal suggests, spouse signoff is important/mandatory. Also, the entire communication process between plan and retiree should be carefully planned. Remember: retirees don't like change, and spouses like it even less. - Don't forget to make sure this does not favor HCE's. - Finally, ask the actuary if this plan provision might lead to an increase in the plan's long-term cost, primarily due to revision of the actuary's assumptions about retirement patterns.

ERISA section 514 (29 USC 1114): http://www.law.cornell.edu/uscode/text/29/1144

I had a similar case last year. We followed the plan document. It is difficult to defend any other procedure.

A couple of thoughts: Sure typing is easy, but punctuation and capitalization are useful to the reader. BTW, if your question is a continuation of an earlier discussion, then appending your question to the original discussion thread is much better than starting a new thread.

At the risk of being obvious, what does the Plan say?

Some people might replace "leverage" and/or "influence" with "average".

Is this information you have shared with the actuary? You ask for a "strategy", but your actuary is better informed than this Message Board, assuming he/she knows all the facts you've presented here.

"Why e.g. is a 401k subject to FICA taxation?" Better answer: because we are talking about what comes out of the plan. Distributions from a qualified plan are not subject to FICA. Note that the employER contribution account(s) in the plan (in the form of match and/or other contributions) are also exempt from FICA taxation when distributed.

Good point. Probably the first task is to verify plan's effective date, which is not necessarily the same as the signature date. If it really is effective 12/19/12, what is the plan's definition of "plan year"? Is there a short first plan year?

In general, FICA taxation applies to "wages". Internal Revenue Code section 3401 defines "wages" as everything except for specific exclusions. The actual language is: "all remuneration ... for services performed by an employee for his employer, including the cash value of all remuneration (including benefits) paid in any medium other than cash; except that such term shall not include..." This section goes on to list several exceptions, one of which is qualified plans.

You have (almost) answered your own question. Distributions from a qualified plan are not subject to FICA. But, since you expressed some doubt, it would be prudent to make sure your plan really is qualified (which is more - much more - than just asking the "salesperson"). Got an accountant? an attorney?

Assuming the term "public plan" refers to a plan sponsored by a governmental entity, I think Code section 414(p)(11) will cover QDRO's for such plans, at least in some circumstances. Note that state or local statute might already require such coverage, making the Code section irrelevant. I've never seen a QDRO of any kind that addressed the question of disability; be very careful about assuming that disability will automatically change any existing court order.