My 2 cents

What happens to the property settlement if one member of the couple dies before the settlement is formalized?

Not a lawyer, don't get involved in the pre-plan-review phase of QDROs. First question is what happens to the divorce process itself? If the death does not make the divorce process moot, I would certainly leave the headache concerning what to do about the QDRO to the court to figure out. Would the fact that the alternate payee died before the plan's acceptance of the order as a QDRO be sufficient grounds for rejecting the order (especially if it did not explicitly recast the method to be followed for satisfying the order, given that the alternate payee had died)? All this is predicated (of course) on the participant not having been complicit in the alternate payee's death!

I do not work on multiemployer plans, but it would probably be a good idea to verify, yes or no, whether the proposed action would raise any possible withdrawal liability issues. Besides that, allowing participants to opt out may require a plan amendment and would certainly require approval by the plan. You ask whether there is any legal reason employees could not be allowed to opt out, and the absence of any plan language permitting them to do so could be a sufficient legal reason to prevent it from happening.

My guess is that Sports Authority, as a for-profit enterprise, was not a governmental entity. Wouldn't the deprived participant only be able to take a tax loss to the extent that after-tax money was involved?

It is my understanding that if it is an RMD, it must be paid. To do otherwise would most likely violate the plan and IRC's minimum distribution rules, resulting in an excise tax on the participant and possible disqualification of the plan. Ideally, the participant would sign off on the way that the RMD will be paid (i.e., if it is a defined benefit plan and the benefit is to be paid as a periodic annuity, the participant would elect the form of the annuity, while if the plan permits lump sum payouts, the participant might elect to be paid a lump sum). The plan is likely (if it is a defined benefit plan) to contain language saying that if payments are to be made and the participant does not elect a different form, it will be paid in the form of a QJSA. The TPA should try to get the participant to sign a distribution form, but if the participant won't do so, the payments should be made under the default option anyway. The "R" in RMD stands for required.

If the person is receiving periodical benefits paid once a year, it is my understanding that they are all going to be payable on April 1 (if the first payment was made on the latest possible date). Most of the RMDs I have seen were either full lump sums or monthly periodic payments. True, the first payment is due on the April 1 following the later of the calendar year in which the participant attains age 70 1/2 or separates from service (if not a 5% owner, in which case the RMD is not delayed by not separating from service. The second RMD is due that December 31 (i.e., first RMD is April 1, 2017, second is December 31, 2017). If the person cashed out or took a periodic annuity, the second and subsequent RMDs only come into play if the participant accrues any additional benefits, which must then also commence payment.

My guess is that they expect you to electronically file the 1099-Rs posthaste. Why haven't they been filed yet?

The pension plan and its service providers should not ever be parties to the divorce action. At most, the divorce action would generate a court order dividing the benefits/account balance under the pension plan, which would be subject to acceptance or rejection (for good reason) by the plan. Even in California.

I, too, automatically assumed that the discussion was about a defined contribution plan. Defined benefit plans cannot pass along the extra administrative costs of processing a QDRO to the individual participant.

Give it a look-over. Mark down everything that looks amiss. If it appears to meet the requirements for a QDRO and appears to be capable of being administered, say it appears to be suitable (and, if you have the authority, qualify it). If not, say what is objectionable and send it back. The responsibility for coming up with a suitable DRO that can be qualified does not belong to the plan, the plan administrator, or those who provide guidance to the plan administrator. Put it back on the court and the lawyers! $700? Sounds awfully high for fulfilling the limited responsibilities belonging to the plan. If it won't do, a quick sketch of why it won't should be sent off to the parties. "Sorry, we cannot treat this as a qualified DRO because A, B and C", and let them try again. How many QDROs a year have to be dealt with per 1,000 participants?

I understood that the 20% withholding is not required when the distribution is below $200. Under $200 - probably appropriate to pay with no election and no withholding. Probably a good idea to include the tax notice.

1. If it's payable to the participant and the participant is dead, how can the check even be cashed except by the representative of the estate? 2. Doesn't the participant's death affect the previously scheduled payout arrangement? 3. People who make distribution elections of that sort would usually be the kind of people who have estates, wouldn't they? One presumes that the deceased was not a rank and file participant.

I don't practice in the 401(k) area, but wouldn't collecting salary reduction amounts and finding suitable investment vehicles for those amounts essentially be two, independent, functions? I don't see why not being able to invest the funds with the specific investment house should get in the way of having people sign up for salary reductions (let alone making it impossible for people to defer) and implementing those elections. Are there no banks in the area that could hold those funds temporarily?

The following is my understanding of how this would work: It would surprise me greatly for it to be acceptable to use the excess assets in way with respect to the PS plan until all of the DB plan benefits had been paid out in full. What if you put DB assets into the profit sharing plan and then the DB assets lost 30% and became insufficient? Seems like a bad idea to me. Incidentally, you may need to allocate a chunk of the excess assets as EXTRA benefits under a replacement plan to avoid having to pay a 50% excise tax on the reversion. Money from the DB plan into the PS plan to cover normal PS contribution obligations there is a reversion to the employer which is then used by the employer to fulfill pre-existing obligations. Before you can use it to pay for normal PS contributions, the excess assets must first have reverted to your control, and would be subject to excise tax as such unless used to provide extra benefits under the PS plan. For it to count as contributions to the replacement plan, you may also have to make the contributions within a limited time period (which could mean that it could not be held until as late as 12/31/17). Not sure what those parameters are, though.

Just wondering, under the circumstances, why there should be any excise tax mitigation procedures available? Pay the 50% tax and get on with things!!!!! The time for action was decades ago. The only excise tax mitigation strategy I can think of involves allocating a sufficient portion of the excess assets to employees under a successor plan, but in this case, that doesn't sound as though it is available. No employees to allocate assets to! How did the defined benefit plan exist for roughly one year and wind up with so shockingly large an excess? Mike Preston refers to the plan's actuary. As it has not been terminated and is a defined benefit plan, by law they had to be receiving annual minimum funding valuations from an enrolled actuary. Have they? Have they been completing all required federal filings, plan restatements, etc.? Ugh!

...and don't take "we already paid it out" for an answer. Worst comes to worst, they could, if you prevail, be forced to pay you anyway. Not your problem whether it comes from employer funds or deductions from the other account balances. If you had signed a waiver, for sure they will show it to you (as a reason for denial) when you claim the account balance. If the signature was forged, report it to the police and also tell the sponsor that the signature was forged and that you have reported it to the police. But as things will go more easily if you push before they pay anyone, please do not delay!

As they have no legitimate claim on the assets payable from the plan, no effort should be made to run them through the estate so the creditors can get a cut. As for the legitimacy of the lawyer trying to get the pension distributions run through the estate to beef up his or her fees, well, I am having trouble finding words suitable to express the contempt in which I hold such practices!

I work solely on defined benefit plans. Could never happen there (at least, not without a notarized signature by the spouse or active fraud). If it was an old (pre-marriage) designation, it would automatically become void after the marriage. I don't think that most 401(k) plans require spousal consent, though. I am not a lawyer, but if the money is big enough, you might want to talk to one, to see if there are grounds for challenging the designation. You may also want to let the plan administrator know as soon as possible that you will be looking into that.

1. So they are paying OASDI taxes on the sale price plus ordinary income taxes? 2. If the IRS chose to audit this situation, do you think that the IRS would consider the "wages" to be compensation for services rendered and not some kind of sham? Especially if when all is said and done the taxes wind up lower than they would under the usual approach? One presumes, for example (supposing the new employer sponsors a 401(k) plan), that there will be an attempt to reduce the immediate taxation through a "salary reduction agreement", also deferring indefinitely taxation of the resulting investments.

Afterthought - if they did go to the trouble and expense to set up some trust thing in the estate, how is it possible that everyone involved was so careless as to not coordinate that by designating a suitable beneficiary?

My guess is that they want the money to flow through some kind of trust arrangement. Of course, if the money is big enough, whatever flows through the estate could be subject to estate taxes irrespective of it then moving out through a trust arrangement (right?). I did think that it would only make sense if the 4 children would get the same equal shares through the estate, but then it occurred to me that it may be gummed up by some sort of trust thing. And then, of course, as it appears that the deceased's parents are still alive, you would have to get their disclaimer also for the money to go into the estate (since they come higher than the estate in the default scheme), and (notwithstanding blood being thicker than water) what incentive would they have to do that? But the governing principle here is that no arrangement made with respect to the estate can ever prevail over the provisions of the pension plan until and unless the plan provisions call for putting the money into the estate. The attorney says otherwise? Surprising.

The original post described the benefit as a single life annuity. As such, there can never be any payments made with respect to periods after the death of the annuitant. Any checks for periods after the death of the annuitant would have been issued in error. If the form involves a certain period (certain and life), it should not be described just as a single life annuity (which bears a strong implication that it is payable for a period if and only if the annuitant is alive).

I am not a lawyer but (a) amounts payable to the participant prior to death ought to be paid to the participant's estate not the beneficiary under the plan (who would, even under whatever the plan's provisions may be, only be due amounts payable after the participant's death - which would be $0 for a single life annuity) and (b) it is my understanding that the uncashed checks could not be characterized as a "lump sum payment", even if being replaced by a single aggregated check.

Based on what I read in the proposed regulations, it appears that the IRS has, for the years after PPA, been designing their static tables for minimum funding in a way to more or less duplicate the impact of a generational projection (and then basing the 417(e) table on the male/female rates from the funding tables). They are continuing that in the new tables for next year. The differences in the base rates and the projection factors added 3%+ to the liabilities for a plan with no retirees for the lower segment rates (i.e., for the PBGC and 417(e) rates). It's a newer table with greater inherent longevity built in, so expect an increase. As noted above, the level of the segment rates can easily have a greater impact. They are one-month spot rates for 417(e), so would more immediately reflect movements in the market interest rates than those used for funding (even in the absence of the funding relief).

And then there are the situations where you don't find a terminated participant until they are 72 years old. Aren't retroactive payments needed to cure the RMD violation?