david rigby

The following may or may not be hypothetical. HE and SHE are considering becoming Husband and Wife. Second marriage for both. Both have adult children from first marriage. Both age 70. Both have investments that fall into the common categories: a) individual investments, such as stocks, bonds, mutual funds, none of which are part of an IRA or qualified plan. b) small cash accounts (checking, savings, CDs). c) retirement accounts, including all of the following: traditional IRA, Roth IRA, 403b plan (governmental), and 401a plan (ERISA-covered). All retirement accounts are individual accounts, not defined benefit. None of these accounts have reached Required Minimum Distribution. All accounts existed long before HE and SHE met each other and have no potential beneficiaries other than children. There are no real or potential QDROs. All current accounts have named children as beneficiary(ies). d) There may be other property with small (but non-zero) value such as vehicle, artwork, real estate, antiques. Both parties want the following to happen: Current retirement accounts will not be commingled. Upon the first to die, the retirement accounts and investments of the deceased will remain in existence and the income (and/or RMD) will be payable to (for the benefit of) the survivor. The principal of the retirement accounts and investments would NOT be available to the surviving spouse unless the spouse's investments become exhausted. Non-investment property (i.e., items that do not produce income) of the first-to-die (such as a car) might remain with the surviving spouse or go to the surviving children of the deceased (to be determined). Upon the death of the second, the ownership of all remaining investments (in all categories above) will pass to the children of the original owner. For example, if HE dies first, at the time SHE dies, all of HIS investments and IRAs and accounts will become owned by HIS children, and all of HER investments and accounts will become owned by HER children. What method(s) can be used to accomplish this? Would the marriage automatically alter any beneficiary designations in effect for any of the above investments or accounts? Does it require both pre-nuptial and ante-nuptial agreements to document the intent and actions? What have I forgotten?

This situation is similar to alimony. Have you considered that approach? (Note, remember to make sure there is no temporary status, such as "payments until X date".)

Corollary: what do beneficiary forms and/or SPD and/or any other EE communication say about this feature?

Just to be thorough: was the "new" marriage at least 12 months? If not, does the plan use the 12-month rule?

You might consider requesting assistance thru the American Academy of Actuaries, at this link: https://www.actuary.org/content/pension-assistance-list-pal

A good consultant would have his/her spidey-sense tingling. Ask leading questions to find out what is really going on and/or what the sponsor is really trying to accomplish. (BTW, it's not "Plan wants to amend", but "sponsor wants to amend".)

Good question. Although not exactly on point, there is PBGC guidance on a similar Q: https://benefitslink.com/boards/index.php?/topic/53556-waiver-of-benefits/#comment-232518

Peter, any chance the filters here, https://www.efast.dol.gov/5500Search/, might be useful?

... and do this before paying the distribution.

This is cringe-worthy, because it could have been (much) more easily addressed prior to finalizing the buy-sell agreement. Assuming this proposed spinoff is being done after the corporate transaction, you will want to discuss with the Plan's attorney whether this action (creating a spinoff) might itself create a violation of the anti-cutback provisions.

My observation is that it's almost always a giant red flag to see insurance and 401k in the same sentence. I suggest you search this 401(k) Forum, using the search term "insurance".

Does the plan document have language authorizing a LS upon plan termination? Or could it be amended so?

Ding, ding, ding!

Use the Search feature, with search term "Continental" or "sham divorce".

Not required. If the buy/sell agreement says this, it's wrong. Perhaps the buyer's plan can include a waiver of this 60-day requirement for purposes of accepting rollovers?

The Search feature is very useful. In this case, searching for airline pilots, the term is "continental".

Who is "we"?

This is not my understanding, but it's possible I've misread something above. Reduction in hours worked is not a separation of service, nor a "suspension" (whatever that is). The NRA definition is NOT 5 years of vesting service, it is "fifth anniversary". Yes, this person will be 100% vested on that fifth anniversary date.

Or maybe they mean 4-yr vesting? Or something else. If they do mean the 5%/250 hours as mentioned above, don't forget to describe the additional fee you will charge to administer it. At any rate, the suggestion above by @Bird is the correct approach.

IMHO, this phrasing does not touch the survivor benefit, and the ex-spouse remains entitled to the 75% survivor portion if the spouse survives the participant. Therefore, pay attention to the actual wording in the divorce decree. Better still, actual wording in anything that attempts to be a DRO.

Is this ownership thru a qualified ESOP?

The principle is (loosely summarized) that all compensation paid by the employer to the employee is deemed to be wages unless specifically excluded. You can read IRC section 3401(a), Note, for example, subsection (12) excludes amount paid for a qualified plan. Now you know where to look. https://www.law.cornell.edu/uscode/text/26/3401

Before establishing "blame", it might be prudent to have an independent review of all statements. For example, the original post said, "processing error on the TPA side", and all subsequent comments have assumed that to be accurate. It might not be.

Ah well, some people think 1 out of 2 ain't bad.

... and please, use the correct spelling: counsel.