david rigby

I agree with Effen. Such statements should NEVER show a LS value; as stated, this can fluctuate significantly; if the plan has no LS option, it would be foolish to state or imply any LS amount. Rather, the statement should show the AB, possibly including the years of credited service. If the projected ben is shown, assume zero percent salary increase for future years. Either should probably include a short statement identifying the concept of a life annuity, and (maybe) describing the optional forms available. Any "total rewards statement" should include a generic reference to the Summary Plan Description(s). Also, this is a great opportunity to remind participants about reviewing/updating any beneficiary elections.

If this proposal constitutes a form of payment that is not in the plan, the PA will refuse to qualify the DRO. If this is "horse trading", where the participant wants to pay less to the AP, the PA will be indifferent to what label is attached by the participant and AP.

Great comments. To expand on Peter's comments, consider an example where there is a natural disaster (eg, tornado, hurricane) that interferes with the employer's normal business operations. Governing agencies (IRS, DOL, PBGC) have a long history of providing "disaster relief". One of the foundations of that relief is phrases such as the underlined one above. Thus, the safe harbor described above is not the only method of compliance.

The title asks "must?" No, of course not. However, the employer's procedures for rehires probably do not differ from its procedures for new hires, so Yes. But more to the point, it would be enormously foolish to assume nothing has changed in this person's personal life "after several years".

I ranted about this issue a few years ago. My opinion is unchanged. Especially when a plan is frozen, any "suspension on rehire" provision is contrary to the needs of the plan sponsor and causes no harm to the plan itself.

Make sure you have all your documentation. There WILL be an attorney involved eventually, and you want to make sure you have the evidence, so the legal fees are paid by the "advisor".

@Bill Presson is correct. How can a plan make a "final distribution" if the money has not yet been deposited into the trust?

@Lou S. poses questions. It might be wise to interpret by changing the question marks to exclamation points.

Can? The plan sponsor may wish to consider the expense of amending vs. a phone call to "remind" the participant whose court the ball is in.

Interesting. It has a PIN control. Can you capture some of the questions, and post here for others to read?

QDROphile always provides good advice. However, I read the original post to imply that the "previous employer" was NOT a government entity, in which case the ERISA provisions about QDRO's will apply. The last sentence of the first paragraph "...no QDRO was completed" might imply a different problem: is the lack of a QDRO because no one ever got around to it? or because such property division was not included in the divorce document(s)? (If not included in original property division, the court may be reluctant to re-open the issue.) or something else? The answer to all of the above must start with: You need a lawyer who is very familiar with QDROs.

Potential DOL audit?

IRC 414(q)(2) defines 5% owner for purposes of HCE. That definition references IRC 416(i)(1).

Intent aside, why not a full assault on the statute-writing people (ie, Congress) to fix it? When the statute is clearly in error, or contains a significant ambiguity, a regulatory interpretation is not the best remedy.

Careful readers will observe that the original post included 2 questions, so it's unclear which one received a reply.

I'm skeptical about the above statement. Based on my read of the original post, the plan should process his benefit with a BCD of 05/01/24. The one-day of compensated time on 05/18/24 has no bearing on the BCD or the amount of the benefit. Don't overthink it.

True dat. Also, remember that many severance payments are made via payroll: in this case, the former employee is left on the payroll as a simple mechanism of making severance payments beyond the severance of employment date. This is mechanical in nature and does not define that person as an "active employee".

There is a larger issue here. When creating ANY plan, the sponsor (and by extension, anyone who thinks/acts as a consultant) should ask him/herself if there is ANY need for an Early Retirement definition. If you don't understand my point, note that E.R. came into vogue many decades ago when there was a need to "clear out" the workforce to make room for the post-WW2 workers (the parents of the baby boomers and then the baby boomers themselves). If there is no similar demographic "bubble", there is likely very little need for any set E.R. provision. Alternatively, an E.R. definition should (probably) include a significant minimum service requirement (e.g., 20+ years). (Yes, this could vary by industry and/or geographic location.) Do not fall into the habit of including E.R. provisions just because "it's always been that way".

IRS link for description of traditional IRA, https://www.irs.gov/retirement-plans/traditional-iras

Why does anyone want to assume a "deemed beneficiary"? You are smart enough to ask these questions, so you should be smart enough to make a real beneficiary designation.

Is the judgment taxable?

Does the "legal settlement" differ from plan provisions? If so, does that mean the plan should (must?) be amended to remove any conflict? Can it be amended without violating any safe harbor requirements? Can it be amended without violating any non-discrimination issues?

The explanation from @C. B. Zeller is great. But also take note: both stability period and lookback month should be defined in the plan document. using a one-month stability period and one-month lookback will (generally) provide the closest to "true market value", but that combination is the most difficult to administer. Most plans I've seen use the PY as the stability period, often with a lookback month of "second month preceding".

Would there be a problem with balances (of terminated participants) under $1000?

Generally, getting participants paid out (or annuity purchase) before your plan termination date is a good idea. It simplifies many things and reduces the paperwork. Suppose you do all this during 2024, and then a formal termination date at 12/31/24, you should also be prepared to file a 2025 PBGC premium filing, with all zeros, and the "final filing" check box. This process may not work well if you are allocating excess assets, so think creatively with this process.