EPCRSGuru

I work in HR for a large-ish employer (about 40,000 participants but in a total of four plans). I have found the Department of Labor to be an excellent resource for participants with "issues" while at the same time being fair-minded about facts presented by the employer. When my company has been the object of a complaint the DOL representative has keep the process moving without undue delays and so far all the cases have been resolved in our favor. Current events may have left the Department understaffed, but I would not give up on the DOL yet. But the other steps such as requesting the SPD, filing a formal claim for benefits, etc. are very appropriate. There is a financial penalty if the plan administrator does not provide certain documents in a timely fashion--as high as $110 per day.

I have never seen this happen. One of our participants had a contentious divorce. Defendant spouse is filing and appeal of the court order finalizing the divorce. Spouse is claiming that she needs to remain covered under our medical plan until her appeal is heard. Participant is objecting. Has anyone ever had this happen before? I am purposely omitting the state involved and recognize that might make it impossible to answer but I figure it is worth a try.

I am not terribly familiar with this topic but I know that we have a signed agreement agreement with our 457(b) service provider authorizing them to report the distributions on a W-2. The funds are paid from the 457(b) account directly and do not pass through the employer's accounts.

12 weeks?!? My husband died at home (unattended) on July 28 and we had the death certificate on August 4. Maybe I watched too many true crime shows during the pandemic but my spidey senses are tingling--wonder who was driving? Would a so-called "slayer statute" potentially come into play? And it was many months before we started seeing our share of the medical bills after the insurance company did its thing.

It does help; thank you. We have not been successful at asking the recordkeeper to reimburse the participant, which is why we are trying to muddle through ourselves.

I am posting this in several Benefitslink boards as I am not certain where it best belongs. We have a retiree who worked for several years for us (a U.S. company) while living in the US. She is a Canadian citizen and was here on an H-1B visa. She has since returned to Canada and was receiving regular monthly installments from a 401(a) plan until her account was depleted in 2024. When we changed recordkeepers the new recordkeeper did not receive a W-8BEN from the prior recordkeeper so they withheld 20% in Federal taxes. Apparently this was an error and they should have withheld 15%. Now the participant is unhappy and wants the new recordkeeper to refund her the additional 5%. The new recordkeeper has declined to do so. We recommended that she get assistance from a Canadian tax advisor, but she reports that the fees would be higher than the amount she would recover. So we in HR are attempting to help her with the so-it-yourself route. She now has 1040-S forms for the open tax years (2021-2024). Is it as simple as filing a 1040-NR and requesting a refund? I assume the income is "effectively connected with a US Trade or Business" because it was earned while she was a US resident employed by a US employer? Can it really be that simple?

I was always under the impression that we as fiduciaries or sponsors were unable to escheat unclaimed funds to a state unclaimed property fund. Is that still true? We are now looking at companies such as Retirement Clearinghouse and Inspira for our unclaimed small balances. I believe we have a much better chance of finding our missing people than they do, although our state does an excellent job reuniting people with their money. I'd rather give it to the state or keep it ourselves rather than give it to a company which will deplete the balance with fees, but we got dinged by the DOL in our latest audit for not distributing funds to people who were dead with no survivors, left the country with no forwarding address, ignored letters AND phone calls, or were undocumented and used fake names and SSNs, just to name a few of our problems. There are people in my organization who feel we need to absolve ourselves of responsibility and possible DOL action by offloading those accounts, but I am not convinced that is in the best interests of the participants.

My testing is rusty--is there an advantage in testing if the owners are not contributing by choice, vs. non-contributing because they are excluded employees by terms of an amendment?

I have been on both sides of a DOL "intervention" and I have found them to be very helpful to the participant and also reasonable when the employer can explain why its actions were appropriate. You might want to contact the DOL after filing the formal claim, but I would not wait to hear the Plan Administrator's response.

What does the Plan document (or the Loan Policy) say? Does the Plan even allow for loan repayments to be made after termination of employment? I think most plans nowadays say that repayments are only made through payroll deduction and a loan is due and payable upon distribution of the participant's benefit.

TL:DR--Does Fidelity monitor 402(g) limits for individuals who participate in two unrelated plans if both those plans happen to be recordkept at Fidelity? I work in an industry that employs highly-compensated people who are often highly-compensated by two employers and are eligible to contribute to two 403(b) plans. We inform people in a number of ways that the 402(g) limit is a "person" limit as opposed to a separate limit for each plan to which they contribute. Usually our 402(g) refunds are due to new employees who contributed to both their old and new employers' plans, but I have a case now which I have never seen before. We received an email from a participant who has two current employers and contributed the max to both plans for the years 2018-2024. (2018 was the first year she contributed to ours.) Our advice was "get thee to a tax advisor ASAP" but her response was interesting. We had previously had our plan recordkept at Fidelity but changed recordkeepers in 2019. Her other employer's plan is still recordkept at Fidelity and she says that in the past Fidelity had enforced the 402(g) limit because they had access to the salary deferral data for both plans. She blames her overcontribution on our recordkeeping switch--although that does not explain how she was allowed to defer twice the annual limit in 2018. In all my many years in this position I have never seen Fidelity limit any of our participant's salary deferrals based on their deferrals to another plan. They would give us regular monitoring reports and stop our participants' deferrals when they reached the max in our plan, but never, as far as I can tell, based on activity in another employer's plan. Fidelity clients, does this make sense to you or is this participant just trying to deflect the blame from her own lack of attention? I don't imagine this population prepares their own tax returns but I guess it is possible, but it surprises me that a tax preparer or the IRS themselves has not picked up on this before now.

Does the 457(b) plan document allow an Alternate Payee to maintain an account under this circumstance?

The regulations on the Special Tax Notice are in §1.402(f) and require that notice be given no less than 30 days or more than 90 days before a distribution is made, but the participant can waive the notice requirement if they want to receive their distribution earlier than 30 days after receiving it.

I am no longer a record-keeper, thank goodness, but in my previous life we absolutely informed our clients in a way very similar to what MoJo described. Like MoJo, we did not advise or decide, but we did sometimes talk to clients' attorneys at their request and provided links to helpful resources. Smaller clients seldom have attorneys or accountants who are conversant with benefits law!

Our plan document uses the IRS safe-harbor rules for hardship withdrawals. Am I correct that overdue student loan repayments do not count as approved reasons for hardship withdrawals? I don't want to deny the request until I am sure.

I am sure your family law attorney can answer these questions or refer you to someone who can.

My guess--only a guess--is that being communicated timely to participants would also be required.

I am happy to see that there is such a diversity of views here; now I don't feel so bad about not knowing the best way to handle this stuff. Here is the fact pattern which prompted my original question. In May of 2020 we received a draft DRO from the AP's attorney. We placed a hold on the participant's account which lapsed after 6 months and was not renewed. We heard nothing until this week when we received a new draft for review. We have instituted a new freeze which prevents distributions for the time being (RMDs are not an issue), although all other rights and features remain available. We have other DROs that have been pending for years--some drafts have been reviewed three times and we still have not received a final for approval and it surprises me that the parties would let such an important issue drag on for so long.

We freeze when we receive a draft DRO from an attorney, or a request from an attorney for a model DRO stating their intention to draft and submit a DRO. We allow participants to exercise all their rights under the plan except for taking a withdrawal. Is this outside what other employers do?

We as a plan sponsor place a "hold" on a participant's benefits to prevent distributions when we receive notice that a DRO is being drafted. Our record-keeper freezes benefits for a maximum of 6 months, but we have DROs that are submitted and qualified as long as four YEARS after we first receive notice that a DRO is being drafted. How many times can we renew a freeze before we give up? We send model DROs to the parties for their use but we have had changes in recordkeepers and fund lineups and if any of these years-old DROs come in based on obsolete models we are going to have a difficult time complying, not to mention that participants can still manage their investments and may no longer hold the funds they held at the time the DRO was first discussed. Our own DRO procedures do not contain a specific time that a hold will be in place. It just states that the hold will last until the earlier of certain evens occurs--receipt of a DRO, notification that a DRO will not be requested, etc. I am not sure this is compliant. Thoughts would be appreciated.

I think I know the answer to this but please can someone confirm? I have a 403(b) plan funded exclusively by participant contributions. Under universal availability, EVERYONE is eligible but, since there is no match and there is a separate employer-funded plan, we have a large number of eligible employees who elect not to contribute. We report them as participants on the 5500 but without balances. We are a large plan and there is no question that we need an annual audit. New for the 2023 forms, the audit requirement depends on the number of participants with account balances. "Both Form 5500 and Form 5500-SF, and their instructions, are revised to reflect a change in the methodology for counting the number of participants used to determine when a defined contribution pension plan may file as a small plan, including determining eligibility for the conditional waiver of the independent qualified public accountant (IQPA) audit requirement. Beginning with 2023 plan year filings, a defined contribution pension plan counts participants with account balances at the beginning of the plan year, except for new plans which use the number of participants with account balances at the end of the plan year." But the definition of Active Participant remains the same as previous years--Active participants (i.e., any individuals who are currently in employment covered by the plan and who are earning or retaining credited service under the plan). This includes any individuals who are eligible to elect to have the employer make payments under a Code section 401(k) qualified cash or deferred arrangement. Active participants also include any nonvested individuals who are earning or retaining credited service under the plan. This does not include (a) nonvested former employees who have incurred the break in service period specified in the plan or (b) former employees who have received a “cash-out” distribution or deemed distribution of their entire nonforfeitable accrued benefit. So as long as someone is eligible to contribute we count them in this section, whether they contribute or not--right? Just checking to make sure I am not losing it--Secure 2.0 is testing my patience.

We had unlocated participants who were not aware they had benefits--immediate eligibility, immediate vesting, no participant contributions, short service. When we located the participants we provided an explanation on our letterhead to atatched to the 5329 and none of them were assessed the penalty as far as I know.

Thank you, AndyH, and thanks for reminding us all to recognize the amazing resource that Dave and Lois Baker have created for all of us. As I have moved between HR and TDA and back again I have benefitted from BenefitsLink and especially the forums to refresh my memory or to get up-to-speed on a new facet of retirement administration. Best wishes, AndyH, on your retirement, and gratitude to the Dave and Lois!

I work in HR benefits management and just got two odd letters from the Social Security Administration about two of our employees. They were basically performance appraisals. They asked questions such as "did the person show up for work on time?", "did they need extra assistance in performing their jobs?" or "did they need additional time to perform their duties compared to employees in similar positions?" I have never seen anything like this before in my very long career. One person is retirement-age but the other is not anywhere near old enough for OASDI benefits. Does anyone know what on earth this is about? Has SSA potentially "outed" employees who might be applying for or receiving disability benefits?

I feel like I should know the answer to this one but I don't. We sponsor a 403(b) and one of our participants deferred the maximum to both our plan and his former employer's 401(k) plan in 2022. (Yes, 2022.) He is now (December 2023) requesting a refund from us. Can we do it? He is active and under 59 1/2 and we do not consider him to otherwise have had a distributable event. If this were a 401(k) I would say "no" but I am unsure about the 403(b) aspect.