My 2 cents

If the participant continues in employment after the date the unreduced early retirement benefits could have commenced but the plan does not permit early retirement without separation from service, in my opinion there cannot be any impermissible forfeitures, since the participant is receiving something of value instead of pension benefits (known as "wages"). Most plans define Normal Retirement Age as age 65 and specify that terminated participants would commence receipt of their benefits at Normal Retirement Age (although the plan may permit the participant to elect to commence benefits at an earlier date). Even if the benefits at the earlier date would be unreduced, I don't think that the onus is on the plan to get those payments started prior to Normal Retirement Age. The responsibility to get the payments started moves over to the plan administrator at Normal Retirement Age. While plans doing so are few and far between, aren't all defined benefit plans permitted to offer in-service benefits commencing at age 62?

I am assuming the question concerns amounts not paid by the 8 1/2 month grace period, so that there remained an unpaid minimum for the prior year. It would not be considered as a form of asset, but don't forget that the first $X paid for this year is applied towards prior year unpaid minimum contributions. It is only after sufficient contributions, after discounting to the beginning of last year, to cover prior year unpaid minimum amounts have been paid that anything would count towards this year.

I was under the impression that plans don't get to keep changing plan year like that, and that it would not be unexpected for the IRS to refuse permission, especially since the first change was only a couple of years ago. What legitimate reason could there be for making changes like that?

The merger of companies does not result in their respective plans being merged. That requires a separate formal action. If two plans merge as of a given date, after that date any assets held by either plan become the assets of the merged plan without regard to whether any consolidation of investments has taken place. So when Company A (sponsor of a large SH 401(k) plan) merged with Company B, the Company A plan and any plans maintained by Company B continued to exist as separate entities unless formal action to also merge the plans was taken. The 5500 reporting for those plans continues as before unless they are merged, in which case 5500 reporting up to the plan merger date is required to the extent it does not coincide with the plan year ends of the merging plans. Why wouldn't Form 5558 extensions for those filings be available? After the merger, there is no longer a "trust of plan A". There are only the assets of the merged plan, which should have its own trust arrangement. That the assets that had been held by Plan A are now held where the Company B plan had held its assets, while reportable on line 4j of the Schedule H, does not itself result in a plan termination. If there is a merger, moving money from one place to another is a mere investment change, and not an integral part of the merger. For various reasons, the sponsor of the merged plan may choose, for an extended period of time, to maintain the prior separate investments without any consequences to the merged plan. We are not, after all, talking about spin-offs here.

It is my understanding that even benefits or account balances that are explicitly forfeited pursuant to plan provisions because the participant could not be found must be restored when the participant is found. It is also my understanding that in the event that a defined plan under which such forfeitures have occurred must make provision for those benefits (either through the purchase of annuities or turning the participants over to the PBGC through the missing participants program) when the plan terminates. Is this not so?

My question would be whether dividends on employer stock owned by a 401(k) plan (or on any other stock for that matter) is permitted to be paid out in cash in lieu of reinvestment. Does the client have any legal advice saying they could do things this way? It seems to me that the dividends should automatically be put into the 401(k) accounts, to be distributed at such time and in such a manner as called for by the plan's distribution rules.

However culpable the enrolled actuary may have been (an argument more to be made to the jury in a malpractice suit than to the DOL), the enrolled actuary is not a plan fiduciary and the actions that were required but not taken are the responsibility of the plan administrator. Don't expect much sympathy from the DOL if the appropriate actions were not taken as required because the plan administrator was negligent and ignorant. The DOL is not going to treat ignorance as an acceptable excuse for egregious failures. And the failures here sound egregious.

Consarn it, they'll be over the border by then!

Rule number 1: Do not discriminate in favor of the highly compensated. There may be good reasons for allocating the portion of the surplus proportional to compensation and not to the size of the plan termination distributions. Not sure if the person paid in November 2016 (not part of the plan termination?) must be included. Are there others who were similarly situated? Certainly, distributions only a couple of months before the plan termination ought to be thought about, even if they don't have to be included.

Put that way (and in light of the spate of recent lawsuits), it does make you wonder how the trustees are making sure that they are not paying unreasonable fees. How do they know, for example, that the investment company is not collecting 5% annual fees through indirect compensation? Perhaps it would trouble the DOL if a plan sponsor tolerated the failure of an investment company to comply with the applicable disclosure rules.

I can dimly recall that there used to be plans whose Social Security offsets were based on the assumption of no future earnings. As I recall, one bases the projected Social Security benefit to be used for offset purposes on an earnings history only through the current date. It is not significantly more complicated than calculating offsets based on the assumption that the current rate of earnings would continue until Normal Retirement Age. While we would have created a pre-hire earnings history in either case, the extra complication you have of only counting post-hire earnings is not materially more difficult than also building in an assumption of no earnings after termination of employment. You would, presumably, adjust the Social Security offset down for early commencement at age 62.

Does the SSA letter say how much or just that they may be entitled to something? And even for ongoing plans, challenges asserting that the benefit must be bigger than what they are being given election materials for are not unheard of. "I worked there for over 15 years! It must be bigger than that!"

The RMD due for 2017 (which must be received by April 1, 2018) cannot be rolled over. It is my understanding that the participant cannot just calculate the 2017 RMD, subtract it from the current account balance, roll over the rest (leaving the 2017 RMD in the account) and then take the 2017 RMD in 2018. So if the participant wants to roll over the largest possible amount, they can take a full distribution in 2017, rolling over all but the 2017 RMD, they can (if permitted) take a partial distribution in 2017 (rolling over the amount of that distribution minus the 2017 RMD) and the rest in 2018 (with the 2018 RMD not being eligible for rollover), or they can take a full distribution in 2018, rolling over all but the 2017 RMD and the 2018 RMD. Note that anything rolled over in 2017 will create an RMD for 2018 from the other plan or IRA. If there is a partial distribution in 2017 from this plan, there will thus be two RMDs for 2018 (one based on the 12/31/17 balance in this plan to be excluded from any potential rollover in 2018 or otherwise paid from this plan and the other based on the 12/31/17 balance in the other plan, to be paid from the other plan). At least that is what I think (soooo glad I don't get involved in providing advice to be followed concerning RMDs!).

The problem with that is many of the claims resulting from the SSA notice come long after the records have been purged or are otherwise unavailable. Say the person was paid out in 1988, the employer merged into Company A in 1994, Company A merged into Company B in 2002, Company B was sold in 2007... Who can produce a copy of either the paperwork or a plan fund statement from 30 years and 3 or 4 companies ago? Besides which, if the employer can locate the distribution record, everyone's life is simplified by the employer providing a copy to the claimant as soon as possible (who will never get to the point of even threatening litigation, since even non-lawyer claimants know better than to bother with lawsuits based on not being able to remember a transaction for which the other party can produce evidence).

I agree that the DOL's action, if triggered by the entry on the Schedule C, appears overly zealous and misplaced. Is there any kind of fiduciary duty (implied or explicit) for plan trustees to shun shady investment advisors (as evidenced by their not providing the mandated information)? Perhaps the appropriate course of action is to tell the investment company that if they don't provide the mandated information by [date based on a not unreasonable but short turnaround time, for example if demand were given today July 12th, then a date no later than the end of July, assuming that the 5500 filing deadline has been extended] then you will consider them as having violated the terms of whatever contract would otherwise stand in the way and pull all of the assets they hold for the plan and put them somewhere else. The letter should probably come from the sponsor's legal advisor. That is the sort of complaint that investment companies are likely to treat seriously.

To clarify the above post: The original post said that the participant is terminated in 2017. There would be no 2016 RMD. His distribution (if in 2017) would have to exclude the 2017 RMD from the rollover. If his distribution is in 2018 (on or before 4/1), then the 2017 RMD and the 2018 RMD would both have to be excluded from the amount rolled over to another plan or an IRA.

Last I looked, the 410 rules concerning excludable employees (for coverage testing) did not treat individuals for whom pension benefits were contrary to their religion as excludable. Prior to benefit commencement date, the contributions would be to the plan, and not the individual, so the individual would not be receiving pension contributions (and how do those differ from wages?). Agreed, it may just be "kicking the can down the road", but sometimes people spurn receipt for all sorts of reasons, not just religious. Would it be acceptable for plan provisions to explicitly exclude Amish people? It doesn't seem to me that the plan should be able to.

Some documents require participant consent if the benefit (or account) is worth more than $1,000 (i.e., plans where the plan administrator does not want to set up a default IRA provider), but in those instances, it is perfectly acceptable for the plan to not allow any payment method other than a lump sum if worth less than $5,000 and to not require spousal consent if worth less than $5,000. That is, if the benefit is worth between $1,000 and $5,000, the plan might not force an immediate cashout, but at whatever point the benefits are to be paid, there is no requirement (unless imposed voluntarily by the plan) to allow any form of payment other than a lump sum and there is no requirement (unless imposed voluntarily by the plan) to obtain spousal consent. Further, in an underfunded defined benefit plan, lump sums under $5,000 (even if voluntary) may be paid without regard to IRC Section 436 restrictions, even if the plan has no involuntary cashout provisions.

Perhaps the point of confusion arises because, unlike the dollar limit, it is not possible to directly calculate, a priori, what the percentage of pay limit would be if there was a $6,000 catch-up. They would have to say "1. 100% of the participant's compensation (plus $6,000 catch-up contributions if applicable), or". Maybe they should have done so, to make it more unambiguous.

Qualified ERISA defined benefit plan or defined contribution, unless specified otherwise in the plan document, spousal consent is unnecessary if the value of the total benefit is under $5,000. The law and regulations do not require spousal consent if the benefit is worth less than $5,000, so it is only if the plan specifically requires it that spousal consent is needed.

As noted by BG5150, the rolled amount must be reduced by the 2017 minimum distribution.

Part II of Schedule C is where you list service providers who "fail or refuse to provide information". Tailor-made for this situation. Too bad for the investment company if your reporting them there causes them grief! If you want to file the 5500 and don't have their information, put them in Part II and file.

If it is a defined benefit plan, the benefits, if not to be paid, are forfeited, serving to reduce future employer contributions. If it is a defined contribution plan, the balance, if not to be paid, must be reallocated as forfeitures to the other participants. This is a 401(k) plan per the original poster, so giving the money to everyone else would be the alternative to paying it to the first cousins. It is not for the great-aunt to spurn the money. One or more of the cousins should be contacted. In any event, as noted by others, nothing should ever be escheated to the state directly from plan assets.

What do you mean "we" would be charged $1,000 for a late Schedule SB? All 5500-related fines are assessed against the sponsor, not the actuaries! True, to the extent that the actuaries would have been at fault, the tendency would be for the actuary to make it up to the sponsor, but that is absolutely not the case here. If the sponsor is hit with fines, tell them it was because they did it wrong, not you, and refuse to compensate them.

Does holding a deed in the USA for a piece of foreign property subject that piece of property to the jurisdiction of US courts? That, apparently, is crucial for the property to be considered qualifying. If a US court (as a result of participant litigation with respect to the plan) orders that the property be sold and the proceeds divided among some or all of the plan participants, would that have to be done, or would the property really be outside of US jurisdiction for that purpose? Considering that this is a DB plan thread - it's not just a matter of prohibited transaction rules - would the plan's enrolled actuary be compelled to recognize the piece of foreign property as a plan contribution, possibly for the purpose of meeting the plan's minimum funding requirements? What about recognizing its value for purposes of determining the plan's AFTAP? And at what value?