K2retire

We have an executive with one of our plan sponsors who is waivering between manufacturing a hardship situation and getting a DRO to pay for the final annual installment of his alimony. Because we know he would be deliberating creating the hardship, we're a bit uneasy with that option. His attorney is telling him that the DRO won't work either because it would require the ex to roll the money to an IRA. There is nothing in the plan documents to support that suggestion, and it is contrary to everything I've heard about QDROs. Have I missed something?

If the money wasn't deposited until 2015, why not use it for 2015 expenses that haven't been paid yet?

Distribution of salary deferrals before age 59 1/2 without a distributable event?

As a practical matter I know of people who have lived in their RVs with no other primary residence.

The small bit of good news is that I'm pretty sure Fidelity did not and will not issue a 1099-R for the distribution from the plan since that distribution was made by Empower. The participant's financial advisor, is acting as the go between with Fidelity, and has not had any luck. In fact, initially they were told that Fidelity is not able to set up an IDA for a plan that they don't control. When we referred them to the account number of another participant in this same plan, we got past that hurdle. I'm torn between trying to fight Fidelity and simply advising the participant to contact her CPA for further advice. She really shouldn't have to pay the tax on $270,000 because she moved it 6 weeks before she turned 59 1/2!

We have a plan that permits IDAs. In 2014 a participant requested a transfer to a brokerage account at Fidelity that the plan trustee understood would be an IDA in the name of the plan. In fact, the account at Fidelity was set up as a rollover IRA. It is not clear if the error in titling the account was Fidelity's or the participant's. The funds were not eligible for distribution. All of this was discovered over a year later when we (as TPA) requested copies of the 2014 IDA statements to prepare the 5500-SF. The plan did not issue a 1099-R, as it was not understood to be a distribution. Fidelity has issued a 5498 showing receipt of a rollover. Fidelity is unwilling to re-title the account in the name of the plan. Instead, they propose to open a new account in the name of the plan, liquidate the assets, and have the participant request a distribution from the IRA to the plan as a "return of excess contribution". I am afraid that doing it that way will trigger some sort of tax liability. Since the distribution in question is large, we'd like to avoid that if possible. And if I'm incorrect about this detail, I'd love to hear that! Any suggestions about how to fix this?

This is a perfect question for the Department of Labor EBSA benefits advisors. http://www.dol.gov/ebsa/contactEBSA/consumerassistance.html

Once the grantor dies, the revocable trust becomes irrevocable.

What does the plan's loan policy say?

I'm dealing with a DOL audit of a pooled plan that held two mortgages on unrelated real estate. Between them, they made up 30% of the plan's assets. Even though the trustee was able to point out that his plan increased in value in 2007 and 2008 because of these high interest loans, the auditor is NOT amused. (And we don't have any PT related party issues.) Talk them out of it if you can.

Yes. We have a similar situation with a $1.3 million bond.

If one of the basic rules of QDROs is that they cannot require something that the document doesn't allow, couldn't it be rejected on that basis?

This detail is often a surprise to the parties who negotiated the contract.

The SE tax is instead of Medicare and FICA, not in addition to.

I think that they should be making up the missed match. But, there is more to it -- does the document match per pay period or some other period?

I'm working on a similar correction. In our case it was taxable fringe benefits, not bonuses, but the concept is the same. We suggested a retroactive amendment, but the client's ERISA attorney advised calculating the missed deferral opportunity and missed match as far back as the client can find the records, then submitting it for VCP as a good faith effort.

Yeah, missing the birthday would probably get you in more trouble than the other two.

Perhaps he should revise the plan's investment line up!

Also, is he on the payroll of the company?

I thought the rule was that in years when the only contributions were deferrals and SH you were exempt from TH. That would seem to apply to years when no one receives a THM.

Listed as owners individually, or listed as owners as trustees?

The guy who believes that 3 percent of pay is going to be enough to live on in retirement?

Actually, I think there are some of each. Thanks for all the suggestions.

I know I've seen articles and ads about companies that specialize in receiving force out distributions as IRAs for unresponsive plan participants. Of course, now that I have a terminating plan with 3 unresponsive participants, I can't find any of them. The plan is bundled with ADP and they are no help. Any suggestions?

I've run into similar issues with multiple recordkeepers. The really frustrating thing is that the recordkeepers all communicate with the clients as though their preferred solution is the correct and accepted way to solve the problem. One recently told the mutual client that they cannot send out the notice until the actual entry date, so no one will be automatically enrolled until 30+ days after they become eligible. I'm curious to hear if anyone has run into an audit with a vendor using such procedures. It would be very helpful to point to that result when explaining to the client why I don't think the recordkeeper's solution is appropriate.