My 2 cents

I am not a lawyer, but it seems to me that the first step is to decide if the form designating the sister as the participant's beneficiary is in order. If it is, there doesn't even appear to be a legitimate conflict. Tell the ex-spouse and her new husband "The participant completed a more recent form and named someone else as the beneficiary, so unless you have substantial grounds for challenging this designation, the proceeds will be paid to the newly designated beneficiary." Give them a little time to react, and unless you hear back from them or their attorney, it should be safe to pay it out. Wouldn't the plan administrator's determination that the participant changed his beneficiary prior to death be given deference in a court of law, should the proceeds be paid out and a later challenge filed? We aren't talking about common law spouse versus common law spouse here. The participant was divorced and nothing was filed with the plan limiting the participant's ability to change his beneficiary. There isn't any question as to whether the new beneficiary is actually the participant's sister, is there? Absent something arbitrary and capricious on the part of the plan administrator, don't courts have to defer to their determinations on matters like this? Wouldn't the first thing that the plan would do, should the ex-spouse file a suit claiming the proceeds, be for the plan to seek summary judgement? And under what circumstances would that be denied?

But short of accusing the sister of fraud (assuming an acceptable beneficiary designation form was used), how could the sister's claim be denied? I would be surprised if a beneficiary designation, properly signed by the participant, would be treated as invalid just because the form was not received by the plan prior to the participant's death. And I stand by one thing I questioned a few posts ago - how long ago was the beneficiary form signed? If it was signed on the participant's deathbed, absent evidence of improper influence from the sister (and where would that kind of evidence come from?) or incompetence, that would tend, in my mind, to make it more likely to be valid. GIven that the participant and the ex-spouse had been divorced and (one presumes) no attempt had been made to obtain a QDRO, wouldn't it actually be more likely that the participant's wishes would be that the money go to kin?

Granted that in this instance, it should not have to go to the default beneficiary provisions. You have ostensibly valid claims, but they cannot both actually be valid. However, if the plan says that ex-spouses have to be redesignated or they cease to be the designated beneficiary upon the occurrence of the divorce, and the sister's claim is also rejected, you might be facing a no valid beneficiary designation situation. Appointed task for plan administrator - must determine if designation of sister was a valid beneficiary election or not. If it was valid, then it would per se have revoked the ex-wife's designation. It might be a good idea to allow a limited amount of time for the ex-wife to contest that determination. If it was not valid, then it might be a good idea to allow a limited amount of time for the sister to contest that determination. If the other contests the plan administrator's determination, what choice would there be but to interplead it?

If there is no valid designated beneficiary, the plan should lay out a hierarchy of default beneficiaries. For example, some plans have spouse, children, parents, siblings then estate, while others may go directly from spouse to estate. Look at the plan for your answer!

That would be my expectation (although as the 5500 is not a tax form, the existence of a holiday in the District of Columbia might not be determinative for the 5500), but the 5558 should still ask for an extension to 4/15/17.

Gotta ask - what does the plan say? Are there established plan procedures requiring submission to the plan before the beneficiary can be considered changed? Can it be established that the signed beneficiary designation sent in by the sister was not a forgery? How long before the participant's death was it signed? Has the ex-spouse claimed benefits? Don't you need conflicting claims to gain access to an interpleader action?

I did not mean cutback as applied to any specific employee. I meant substantial reduction in number of active non-HCEs. 401(a) issue, not 410 or 411 issue. Sorry if I was not clear.

Watch out for the amendment timing issue in the non-discrimination regulations, however. If the amendment follows a substantial cutback in rank and file employees, it could be considered discriminatory on a facts and circumstances basis.

"...and then the actuary needs to submit instructions to the financial services operations people telling them to invest the funds per the plan sponsor's investment directives on file." Is there any chance that the process can be made more efficient by the financial services operations people just automatically following sponsor directions when a contribution comes in? What possible catastrophic error is this silly procedure supposed to prevent? Maybe shERPA has it right, and it was just a bunch of committee members choosing to stick it to a defenseless actuary. How do they handle deposits to 401(k) plans if there is no enrolled actuary? Or, for that matter, what do they do when the actuarial services are performed elsewhere and there is no actuary on staff responsible for any aspect of the plan? Does the enrolled actuary have the authority to direct the financial services operations people to do anything other than to invest the funds per the plan sponsor's investment directives on file? "Wait, don't do that! I have a premonition that the market is going down 10% in the next few days. Put it all into the money market fund!" or, worse, "I got the horse right here, his name is Paul Revere! [quoted from Fugue for Tinhorns, from Guys and Dolls] Put it all on Paul Revere!"

In my experience, it is common for the first two quarterly payments for this year to be made before the final contribution for last year. My take on this would be that until the full 2016 contribution has been paid, no prefunding balance would arise, even under a standing election. Example: Minimum 2016 contribution is $250,000, and quarterly contributions for 2016 of $40,000 each (the 2015 minimum having been $160,000) were timely paid, leaving something near $100,000 still to be paid. $62,500 was paid in April and July 2017 for the 2017 quarterly amounts, but now everyone decides to count them for the 2016 year (why are we doing that, again?). The April payment, when recharacterized to be for 2016, leaves some $35,000 of the 2016 requirement unpaid (so nothing is added yet to the prefunding balance). The July payment, when recharacterized to be for 2016, finishes the 2016 requirements with some $27,000 left over. That $27,000 then goes into the prefunding balance (assume it had been $0 going into 2016) and can be applied, three months late, towards the quarterly that had been due in April. When they pay $100,000 in September for 2016, it all goes into the prefunding balance, covering the rest of the April quarterly (5 months late) and all of the July quarterly (two months late). Did you remember to notify the PBGC on a timely basis that the first two quarterlies were not paid on time? Bottom line: It doesn't work out too well! By the way, I did not use a calculator for the example, so the numbers may be off a bit. The dynamics, however, should be on target.

It is my recollection that one can be excused from providing an accountant's report for a short plan year. Is there anything for a first plan year? I was presuming that the plan would not have to deal with an accountant's report for the December 2016 plan year in any event. So filing a Form 5500 would not be the same kind of effort it would normally be.

Is it a short (12/1/16-12/31/16) plan year or is the first plan year 12/1/16 - 11/30/17? If it is a short plan year, wouldn't you file a 5500 and show no assets at the beginning of the year and (cash basis?) nothing at the end? If it is for a 12-month plan year, there will be assets, so presumably the first plan year is one month long. Wouldn't you have to report on the number of participants at the end of the year (anyone who had amounts withheld on 12/31/16 would be a participant at the end of the short year, right?). I don't think that there is an industry standard kind of common law applied in the absence of relevant instructions. What do the instructions to the 5500 say? When was the plan adopted - before or after 12/1/16? If in place well before 12/31, why did it take until then to get the payroll withholding started?

Arbitrators are supposed to develop their decisions using sound analysis of the facts and the applicable legal documents (i.e., your service agreement). There are such arbitrators, but if the perception is that the tendency is for arbitrators to arbitrarily split it down the middle because doing otherwise would require hard work and might anger one side or the other, that is a problem. That is not how arbitration is supposed to work. If your case was decided without regard to the merits, perhaps you should be glad that the decision was not to award you nothing because that client is a frequent filer with the arbitrator. It seems unlikely that a careful analysis would have given you less than your agreed-upon fees if the only aspect that was less than fully satisfactory was that the client did not like your answer. Was a justification given for splitting the amount in the arbitrator's decision? By the way, if the new actuary is really "questionable", have you thought about reporting them to the Actuarial Board for Counseling and Discipline for possible violations of the Code of Professional Conduct? The days when "How much do you want it to be?" can be given as the answer to "How much is two plus two" have, one hopes, long ago ended.

The following is how I understand this: 1. "Frozen" is irrelevant. You either pay benefits after rehire or you don't. The only difference between frozen and not frozen is that there is no accrual for the period of rehire. The suspension rules remain the same. 2. No proper notice should mean that you either keep paying or you actuarially adjust the amounts for the period of suspension. 3. The administration of the plan is required to be consistent with the plan document. If it was not done right this time, even without a VCP filing, you are acting in correction mode. Doing it wrong consistently does not change it from being wrong.

It wouldn't surprise me if the IRS uses some sort of automated program to process 5558s, in which case if you built the weekend delay in, the program would reject the filing as asking for an extension of more than the 2 1/2 months allowed. So don't bother to do that.

Just wondering what they were thinking when they decided to interject the actuary into the deposit/investment process. That doesn't make much sense to me!

The difference is that, frozen plan or not, a previously retired participant should not (presumably) be able to both get paid and collect ongoing pension amounts unless the sponsor wants the participant to continue receiving pension benefits while actively employed. What reason would there be for eliminating the suspension of benefits during rehire? Also, it is not clear that the plan has been frozen for 10 years. Possibly the participant started receiving monthly benefits in 2006, the plan was frozen in 2014, and the participant was rehired in 2016 or 2017.

Doesn't sound as though there is a problem to me. The person was rehired. In accordance with the plan (assuming that the required beginning date did not occur while the person was terminated), give the notice and stop making benefit payments. If the person becomes subject to minimum distribution requirements while still employed, start the payments up again, otherwise don't make payments. The plan being frozen, there would be no need to consider whether the benefit amount would require adjustment upon recommencement. The only complication that could arise would be if the participant's benefit was being paid from a purchased annuity.

Unless I am missing something, don't you have to give the excise tax to the IRS??? I presume that you do not mean to say that you pay the excise tax to the IRS and then deposit a like amount to the participant accounts. Form 5330 is supposed to be accompanied by a check to the government.

In general, it is my understanding that if a plan has frozen accruals, there should be no need to amend suspension language. With proper notice, participants blocked from starting benefit receipt for working past NRD (if so provided by the plan) would legitimately receive nothing for the period of suspension even if the plan is frozen - no actuarial increase and no accruals. This is, I believe, fully acceptable.

[To be sung in the key of A] What does the plan say? Does it say to suspend payments? If so, does it call for issuing a suspension notice? If it calls for suspending payments, at the risk of sounding churlish, why didn't that happen? Does it say to continue making payments? If so, why wouldn't the payments just continue to be made? If the plan doesn't say what to do, is there an established practice? How does the plan administrator interpret the plan? I don't think that there is any legal or regulatory requirement that would mandate suspension of benefits. If there had been a bona fide separation from service, I don't think that continuing payments after rehire would be considered to be an in-service distribution.

Are disappointed doctors supposed to be better losers than lawyers? Technically, if a plan is just well-funded enough to pay one lump sum but would fall under 110% if they were to pay a second, then the first one out of the gate wins. But wouldn't it be cheaper to fund up enough to meet the full demand for lump sums than to have to try to defend against litigation?

Just don't attach an accountant's opinion! Oh, you mean how to file a 5500 without an accountant's opinion and suffer no adverse consequences! THAT might not be so easy. Why not have the plan pay for an audit - I think the expense of preparing an audit for attachment to the 5500 is an allowable plan expense.

Wouldn't the fact that this was a law firm argue against pulling a stunt like that? Watch out who you turn into enemies!

Asking for information on the last 5500 filed isn't going to get you anywhere if there had never been one filed!