rocknrolls2

Peter, I am not sure that I agree with your previous statement that the contingent beneficiary would obtain the remaining benefits if the primary beneficiary dies prematurely. Many times, the contingent beneficiary's status is conditioned on whether or not the primary beneficiary survives the participant (which would be determined within a few months of the participant's death). In that scenario, the contingent beneficiary would not be entitled to anything if the primary beneficiary survived the participant. Prior to SECURE, no one ever thought seriously about the possibility that a beneficiary of an RMD would be able to designate a beneficiary. Plans should be amended to allow for this as part of the SECURE remedial amendment period amendments (with one possibility being the revival of the participant's designated contingent beneficiary becoming the default beneficiary). The other concept I saw referenced in the discussion was that the plan's default beneficiary would take. In many plans, the default beneficiary is often the participant's estate. This latter possibility is also highly undesirable and may prove impractical, particularly if the participant's estate has become closed prior to the primary beneficiary's death. Bottom line, cover this in the SECURE RMD amendment.

Tinman, I agree with Luke about the nonexistence of federal limits on merging the plans. However, one reason to continuing maintaining separate plans that you might want to consider is dependent upon whether the separate groups are unionized, what each promises its members with respect to the plan for its members and the employee relations issues that might ensue if one group got substantially better benefits or was perceived to be getting better benefits than either or both of the two other groups. That said, there is nothing (subject to any state laws with respect to governmental plans) that would preclude the consolidation of the three plans into one, even if separate contribution or benefit rules apply to each separate group and the accumulated assets of each group are required to be maintained separately from the other groups, provided that there is a way of tracking to which group a particular employee belongs, having rules for what happens if an employee in one group transfers to another, etc.

To the extent that any of these participants are age 60 or over, please note that catch-up contributions are not taken into account as annual additions. See Code Section 414(v)(3), Reg. Section 1.414(v)-1(d)(1). If catch-up contributions would have resulted in the participant seeming to exceed the 415 limit, you can heave a sigh of relief.

I disagree with CuseFan only to the extent he says that the plan document should say how the correction will be handled. I agree with him and others who are saying to the extent that the error should be corrected for the reasons that they expreseed. I am fine with language authorizing the plan administrator to correct any error in administration by referencing EPCRS generally. However, I would not want the plan document to effectively tie the administrator's hands to a one-size-fits-all solution intended to work for every situation so that there is some degree of flexibility on the part of the plan administrator. If that one solution does not work in a particular instance and the plan administrator uses a different correction approach that is more appropriate, but contrary to the plan's language, this in itself gives rise to an operational error.

I agree to the extent that those of you who have said that the forfeitures can be used by other participating employers. One thing that has not yet been raised by this thread is that the IRS concept of what is a plan or a separate plan, depends upon whether the pool of money constituting the account balances are segregated. If they are, the IRS considers each segregated pool of money to be a separate plan. See the IRS Regulations at 1.414(l)-1. In my view, you need to read the 1.413-2 regs in combination with the 1.414(l)-1 regs to arrive at the correct result.

According to the most recent EPCRS Rev Proc, even if the plan is under Audit CAP, it is possible to self-correct. In many cases, the agent handling the Audit CAP will specifically allow you to use SCP for the self-correctable items. I see no reason why you could not self-correct merely because you submitted a VCP application. I assume that you have not yet heard from the agent assigned to review the VCP application. In that case, go full speed ahead.

I would view the changes agreed to between the employer and the union in the CBA to be proposals to amend the plan. Since this would be an optional or voluntary amendment to the plan, the IRS guidance on optional plan amendments not necessarily required by plan qualifications generally requires such amendments to be adopted by the end of the plan year in which they are to have been made effective. Accordingly, I would view this as a plan document failure which can be corrected via EPCRS. It would be helpful to know in what year the changes discussed in the CBA to be able to determine whether the change could be implemented via self-correction. If it is within 3 years of when the changes were agreed upon, then the plan could be self-corrected and thus, retroactively amended under the latest iteration of EPCRS.

Peter, I understand what you are driving at with respect to your first post. Could you perhaps look at it in the following way: if the participant's account balance does not exceed the specified dollar amount threshold as of the last day of the plan year, then the involuntary cashout provision is invoked. What happens subsequently (with respect to investments) should not cause the account to be precluded from being cashed out. Also, in an involuntary cashout scenario, you mentioned the 402(f) notice. My understanding is that, in that scenario, the account balance is simply distributed to the participant in the form of a single sum. Regarding your second post, since the participant is entitled to elect whether or not to do a direct rollover to another eligible retirement plan to the extent the account exceeds $1,000 but does not exceed $5,000, I could see that that would take slightly longer a period of time between the end of the plan year and when the distribution/rollover is actually implemented. However, if the account balance as of the close of the plan year does not exceed $5,000, the plan could still implement the distribution/direct rollover, in spite of interim investment gains.

Peter and CuseFan are correct that the Plan language would only automatically revoke the spouse's designation as a beneficiary. As to why the participant does not simply complete a new beneficiary designation, that would certainly be the preferable way to approach this. However, in most cases, a participant only completes a single bene form at the beginning of his/her career with the employer and never revisits the decision at any future point ever. I know that plan administration best practices suggest that plan administrators periodically contact participants and urge them to complete new bene forms, but those calls are, all too often, unheeded. Regrettably, the initial bene selection too often does not reflect the participant's wishes upon his/her retirement or death. Also, regrettably, that is the stuff that results in heavily-contested ERISA litigation.

Belgarath, you should be aware that, in some cases, the plan document may specify how the plan may be amended, including how an amendment may be adopted. You should consider both the plan document and corporate law (with the advice of an attorney) to get the correct answer. If the Plan document contains such a provision, then it would override otherwise applicable state law to the extent consistent with ERISA and the Code.

In my view, the best result would be to lobby to eliminate this arcane relic of the tax law so that the nonspouse alternate payee is responsible for his or her own tax withholding and any order providing for 100% of the participant's account balance becomes the alternate payee's account balance, subject to such withholding as well as repeal the exception to the mandatory 20% withholding requirement. But, unless someone has some great contacts in Congress, the IRS or the Treasury Department, and such orders generally have to be followed, I vote for determining that the order is disqualified unless the alternate payee signs a written consent to allowing the order to become qualified the account is subject to income tax withholding on the part of the participant.

My response is "Hell No!" Both the primary people at EBSA and members of the HELP and Finance Committees on the Senate side, and the Ways and Means and Education and Labor Committees on the House side should be forced to sit through a four-hour course of ERISA fiduciary duty requirements before they come up with some other hare-brained scheme to cast persons who are not, and should never be, characterized as fiduciaries, into them. If they fail to get the message on the purpose of these requirements, they do not belong in a policymaking role in government at any level. Until this cryptocurrency pronouncement, EBSA (and its predecessor, the PWBA) took the position that no class of investments is per se imprudent. In designing the plan and making the decision to allow participants to invest in certain types of investment funds, the plan's fiduciaries should take into account the level of investment sophistication of the average plan participant. Perhaps they should warn them about selecting investments that are or could be extremely risky or should perhaps limit the menu of available funds for selection as part of their fiduciary duty. Or, perhaps they should disclose the need for participants to determine, on an individual basis, their own risk tolerance as well as the period of time their accounts will be invested in the plan (such as proximity to retirement age) in determining whether a particular class of assets is appropriate for them. Otherwise, casting certain types of persons as a super-fiduciary or watchdog defeats the purpose of providing investments for retirement.

In addition to what was discussed above, other than an obligation on the employer's part to make sure that the transferee plan is qualified and getting it to make covenants to preserve optional forms of benefit under Code Section 411(d)(6) (except to the extent the plan administrator eliminates one or more of them pursuant to regulations specifically authorizing such elimination) and getting the transferee plan's commitment to comply with any applicable reporting and disclosure requirements under the Code and/or ERISA, , I do not see any potential liabilities on the part of the employer of the transferor plan.

CNB Consulting: Please note that the American Jobs Creation Act of 2004, which amended Code Section 1563(a)(2) in thie way you describe also added a paragraph (5) to Section 1563(f). The change essentially means that for purposes of any provision of law (other than the part relating to consolidated returns), including for qualified plan purposes, the two-part test (i.e., at least 80% and more than 50%) for purposes of determining a brother-sister controlled group is retained.

I am not in disagreement with any of the previous responses. However, I wanted to make the following point. The QJSA was elected by the participant's own free will whether or not the plan provided for one with respect to an unmarried participant. The Plan had no reason to believe that the facts were false at the time the election was made and therefore there was no duty on the part of the plan's fiduciaries to do an investigation. Since the participant and not the plan made the misrepresentation, why not leave the participant where he lies? I have seen a court case on somewhat similar facts that was decided by a federal trial court in the 1980s. Posthumously providing the participant with the difference between the QJSA and the SLA would amount to unjustly enriching the fraudster. Leave things where they lie!

I am firmly behind Peter's position on this and I would NOT inform the DOL. However, if your client is a fiduciary with respect to the plan with potential knowledge of a fiduciary breach, then either work with your lawyer to write a letter to the allegedly breaching fiduciary threatening suit unless s/he makes any deferrals up to the plan with earnings as soon as possible but no later than a short period of sending the letter or sue the breaching fiduciary for fiduciary breach, in which case you would have to furnish a copy of the complaint to the DOL.

The IRS position on this is crystal clear. They regard it as a violation of Code Section 410 (a) which permits a maximum eligibility condition due to plan eligibility of one year. There are a lot IRS Revenue Rulings from the 1970s and 1980s clariifyng how this rule works.

Nate S, In addition to the points you have raised about what has to be preserved, you also have to preserve the optional forms of distribution available under B's plan (which can be limited to the amounts being spun off into A's plan). The IRS regs do provide plenty of options for validly eliminating some of these via amendment without running afoul of the anti-cutback rule.

It was my understanding that the SECURE Act change regarding long-term part-time employees was not directly a vesting change. The requirement is merely to make them eligible to make elective deferrals to the plan. Elective deferrals have always been required to be 100% vested at all times. The employer is not required to make a matching contribution with respect to elective deferrals for such employees. However, if it does, it is not required to provide any more vesting than that which is provided to matching contributions made on behalf of full-time employees.

Since no RMD was required to be paid to the participant for 2021, no RMD would be payable to a beneficiary attributable to the 2021 distribution calendar year. The post-death RMDs must begin by 12/31 of the year following the year of the participant's death. Based on your facts, the beneficiary would need to commence RMDs by no later than 12/31/2022 with respect to the 2022 account balance.

Building on Peter's latest response, another factor worth considering is whether the church or association or convention of churches made the election described in Code Section 410(d)(1). If it did, then the nondiscrimination provisions would nevertheless apply. Please note that, once made, the election is irrevocable.

Building on Peter's last post, in addition, legal separation might not exist under local law, in which case, the judge would properly refuse to issue the order.

I tend to agree with Cuse Fan to the extent he says that the spouse at the annuity starting date is locked in regardless of what happens afterwards and david rigby when he points out the importance of the divorce decree. According to IRS Reg. Section 1.401(a)-20, Q&A-25(b)(3), "If the participant was married on the annuity starting date, the spouse to whom the participant was married on the annuity starting date is entitled to the QJSA protection under the plan. The spouse is entitled to this protection (unless waived and consented to by such spouse) even if the participant and spouse are not married on the date of the participant's death, except as provided in a QDRO." I wanted to point out two things in response to the cited regulation: (1) I have not seen a single court case that did not hold that the benefit could be paid to anyone other than the spouse as of the annuity starting date, even if there is a QDRO providing to the contrary; and (2) most defined benefit plans I have seen lock in the spouse at the time of the annuity starting date as the designated survivor annuitant and do not allow for it to be changed in any respect.

While not disagreeing with Bri's answer, another approach is to have the trust agreement provide that, to the extent a trustee is an employee of the plan sponsor, she or he shall be deemed to have automatically resigned his/her trusteeship upon terminating his/her employment with the plan sponsor.