DMcGovern

I dont understand why you believe that the plan should accomodate an outrageous request by an AP which could expose the plan to a lawsuit by the plan participant for failure to protect with his rights under the plan. Under 414p the AP is only entitled to amounts that are payable under a QDRO which is why the plan is supposed to segregate the amount payable to the AP when it receives the DRO. In your case the AP would be entilted to 41.4% of the account balance plus 46+k in the segregated account. This amount is separate from the participant's account. The AP is entitled to the gains and losses of this segregated amount. I dont understand why you feel that the AP is entitled any more of the gains in the participant's account just because she is asking for it. The plan can just say that it would be administrativley burdensome to recalculate her interest in any other manner and would interfere with the particpant's rights to his benefits under the plan. As a separate matter the plan could be at risk of paying out funds which are the sole property of the participant since the plan is supposed to segregate the AP's interest from the participant's separate interest in the remaining assets in the plan when it receives the DRO. The plan cannot segregate the AP's interest from the amount in the participant's account when it receives the DRO and then at a later date when it issues a QDRO withdraw additional amounts from the Participant's account because the AP wants it. For example, if the participant terminates employment after the plan receives a DRO the plan cannot refuse to pay him the portion of benefits in his account that have not been segregated for the AP. If the plan transfers additional amounts from the participants account to the AP account after the QDRO is approved it will be open to a claim that it reduced the vested benefit payable to the participant. By the way what is the opinion of the plan's lawyer on this issue? Under our QDRO procedure it states that the Plan will pay the designated amounts as soon as administratively feasible, if the QDRO requires immediate payment. The procedure also states "The Plan will maintain a separate accounting (which may include a segregated account) for each alternate payee until the Plan has completed benefit payments under the QDRO." The QDRO provides that the commencement date and form of payment to follow the terms of the Plan. Our plan only allows for lump sum distributions, as soon as administratively feasible upon the occurance of a distributable event. Maybe I'm totally off here, but it is my understanding that based on the language in the QDRO procedure we are not required to physically segregate out the assets for the AP; we do have to do a separate accounting (on paper). We do this by running the calculations of the amounts allocable to the participant and AP as soon as we receive the distribution request from the AP. Since we usually receive the distribution paperwork in a few days, we have not had a situation like this occur before. I'm not sure I agree with you on the risk of paying out funds that are the property of the participant since the principal amounts will not change; only the time period we are calculating the earnings/losses.

And the plan's forms & timing for distributions also come into play here. Ours requires that they take a full distribution as soon as administratively feasible. I know others require that the funds stay in the plan until a specified event. In such cases, it makes complete sense to segregate the assets for the AP. In most cases with our plans, the AP requests a distribution as soon as the DRO is determined to be a QDRO, so a distribution is completed very quickly. In this case I do plan on discussing the option of setting up a separate account for the AP at the investment company with the Plan Administrator. Sounds like it would reduce a lot of issues.

Thank you for your responses! I agree that segregating would simplify the issue at hand. Unfortunately, our QDRO procedure does not require this; just keeping a separate "accounting". In this particular case there were several arguements about this on both sides and in the end it was agreed to go with the separate accounting route. This also gave rise to the latest round of arguements about the alternate payee having access to the account information. We may want to change our QDRO procedure to require segregation in the future. When you do this, is a separate account set up for the AP at the investment company and they are allowed to choose what investments the funds go into?

1. It has been determined that the DRO is a QDRO and notices have been made. My apologies for not making it completely clear that this is a QDRO. 2. I'm confused by this response, but let me try to elaborate. The order provides for the alternate payee to receive 41.4% of the account balance as of May 2, 2011, plus $46,176, plus a pro-rata share of the gains/losses up to the date of distribution. In our exchanges about how to fill out the distribution paperwork the alternatee payee indicated that she wanted to submit the paperwork when the market was more favorable in terms of earnings. Then today she sent an email saying she must have access to the account online to monitor the account. 3. Clearly no help here. 4. All I could find is that under ERISA, an alternate payee is considered a beneficiary of the plan. As such, they have the right to request in writing copies of certain plan documents. I won't list them here, but information about or access to the participant account is not one of the items. The DOL apparently takes the opinion that once the alternate payee is in pay status, they should receive a copy of the SPD.

We are working on a QDRO and the alternate payee is demanding to have access to the participant account so she is able to "monitor" the value. I think her purpose for this is to try and time when she submits her paperwork for the distribution. Does an alternate payee have such rights? Thanks for your help!

Thank you - this was very helpful!

Participant wants to take a hardship withdrawal for tuition expenses, room & board for living off-campus plus estimated utilities & meal costs. We have the invoice from the college for the tuition costs, so that's covered. Not sure about the rest. I found some information on the limitations for room & board expenses (allowance provided under Federal financial aid programs). Anyone have details on exactly what the limitations are for room & board expenses both on- and off-campus? Are estimated amounts for utilities & meals okay? Thanks for your input!

So I presented this scenerio to TAG and it was their response that since the HCEs are excluded from safe harbor contributions, the allocation could not be made as such - even if it is the additional match that meets the ACP safe harbor only and does not have the 100% vesting requirement. It's either a regular discretionary match which would be subject to testing & invoke the top heavy requirements, or it's a safe harbor match that no one is eligible for. With this in mind, TAG felt that the HCEs could not receive this allocation.

But, wouldn't the allocation of the forfeitures as a discretionary match (even if it satisfies the safe harbor conditions) still trigger the top heavy requirements?

In the EOB, Chapter 11, Section XIV, Part H 2.d.2 it discusses variations on using forfeitures toward the safe harbor match. It states, "unless forfeitures are able to be used solely to reduce the [safe harbor] contributions, the allocation of forfeitures will have to be made as a non-safe-harbor contribution and the top heavy exemption would be lost by the plan. It seems like since the HCE's are not eligible for the SH match, any other allocation would trigger the top heavy requirements? I could be wrong or missing something here, tho.

Is the plan top heavy?

Relius (Corbel) has a great volume submitter with a multiple employer agreement which can accomodate your need. Do they sell single-use documents, or does one have to subscribe to their document system? Yes, you may do a pay-per-document with Corbel

DMcGovern, this is true for a failure having to do with the allocation requirement being the reason of the failure, correct? This was a failure due to complete exclusion from eligibilty due the a determinable class such as "intern". this paragraph in EOB explains that some times you still fail the ratio test after using the fail safe options. I can't think of reasons why you would still fail if you were not excluding a class or classes of employees - such as "intern". Yes, the last sentence of this paragraph specifically states you use this to see if the plan will pass coverage without having to cover employees excluded by job classification

EOB, Chapter 8, Section V Part C.6 - additional coverage testing might be necessary after "fail safe" is activated..... Basically, this paragraph says that if you still do not pass the ratio test after utilizing the fail safe options, you proceed to the average benefits test to see if it will pass coverage without adding back excluded employees

Rev. Proc 2008-50, Section 11.07 - you have to include a signed submission (signed by the Plan Sponsor or Sponsor's authorized representative). The VCP checklist does indicate that this must be an original signature.

participant directed accounts are not exempted in any way from the PT rules - DOL Reg 2550.404c-1(e)(3) Is the doc an owner?

how is the company reporting the amount on the payroll or books - as a bonus (that the employee may choose to pay off his mortgage with), or as a fringe benefit

I just found out that we have used an incorrect EIN number for a client since 2006 (off by one digit) Do I have to amend all of the filings? If so, how do you do that for the years prior to EFAST2 filing?

Are you sure the plan document specifies that the match will be "contributed" annually, or is it calculated based on compensation for the plan year? Generally, when the match is calculated based on the plan year the employer may deposit it more frequently, but must to due the "true up" calculation previously mentioned by K2retire. I would double-check the wording in your plan document to verify this.

I think that was the discussion in the link Tom provided in post #2. It was not fully resolved, unless the client wants to obtain a PLR

I hope this is under the correct topic! New cash balance plan on an individually designed document. The sponsor's EIN ends in a 3, so they would be in cycle C. Rev. Proc. 2007-44 provides for a new individually designed plan to file for a determination letter in the current cycle if their regular cycle ends at least two years after the end of the current cycle. This type of filing is given the same priority as on-cycle filers. This Rev Proc also provides, "the initial remedial amendment period for a new plan is extended to the end of the applicable remedial amendment cycle in which the remedial amendment period would otherwise end." With this in mind, I'm not sure I am seeing the advantage to the client for filing now, rather than waiting to file in their regular assigned cycle? If we did file now, they would have to file again (if they chose to) in the next regular cycle anyway, right?

Don't you just LOVE how creative clients can get? Was there an acquisition or merger during the year? Just wondering if the transition rules under 410(b)(6)© would be applicable.

Large plan just completed the ADP test for 2010. Test fails and they have done corrective distributions to all but one HCE. This particular HCE recently took out a loan and hardship withdrawal that zeroed out his account balance, so there are no current funds available to make the corrective distribution. I know they would have until the end of 2011 to make the distribution. Loan payments for the rest of this year may not be enough to cover the full distribution amount. I'm not finding any regs on how to handle this - anyone else have this situation? Any IRS Q&A that would be similar? Thanks!

Is it possible that such an amendment could be discriminatory? If done, 50% of the HCEs would receive this special vesting, versus 33% of the NHCEs. It is my understanding that vesting is a benefit, right or feature that must be nondiscriminatory under 401(a)(4) and the current availability of a BRF would be tested under 410(b). As far as the partial plan termination issue, it seems like it could be argued that the NHCE termination was "employer initiated". I guess it depends a lot on all of the circumstances, but certainly something to address.

The second plan would need to issue a 1099R to report the distribution, but the taxable amount would be zero since the first plan already issued that amended 1099R reporting the amount as taxable. If both plans issued 1099R's as taxable, the individual would have to report it as income and pay taxes on it twice.