My 2 cents

I don't work with 401(k) plans, but how much work could it take to prepare and file a 5500-SF for a new 401(k) plan with no assets - half an hour? Was there a reason for adopting a 401(k) plan, intended to have a calendar year plan year, with an effective date of December 1? Is there the intention of making a delayed profit-sharing contribution after the end of the short year but deducting it in the fiscal year containing the short year?

I remember seeing plans long ago that placed the burden of claiming benefits on the terminated participants, forfeiting anything preceding the date they came looking for the pension benefit. That, of course, is as out of date as bad boy clauses in ERISA plans. The plan administrator has a duty to find and start paying people owed benefits when they get to NRD, even if the plan administrator has to spend money to find them. I agree with Effen - just sitting back and doing nothing only makes things worse. The plan administrator (acting solely on behalf of the plan participants as a named fiduciary) has a duty to diligently carry out the terms of the plan, and the plan undoubtedly says that if a participant separates from service after meeting the requirements for vesting, the vested benefit shall be paid beginning at NRD. Ergo, if nowhere else, there is a requirement within the plan itself that the plan administrator take whatever steps are necessary to get the payments started on time.

Under what circumstances would "compensation they took out before the company shut down" be considered as defrauding the company's creditors (including the 401(k) plan to the extent that promised contributions are not paid)?

How does one apply actuarial increases in a cash balance plan? The accrued benefit is framed in terms of an annuity that has the same value as the current account balance. Technically, there would be an interest accrual from normal retirement age to benefit commencement age via the interest credits and the conversion to an annuity would reflect an adjustment because as the participant ages, the cost per dollar of annuity goes down. The two together could be considered an actuarial adjustment sufficient to make it unnecessary to issue suspension notices or even to make any further adjustments for deferral beyond age 70 1/2. Not providing interest credits in a cash balance should not be considered a legitimate option, even if one issues suspension notices.

Based on my understanding of the law, there is no possible justification for stopping interest credits at age 65 or any other age (absent commencement of benefit payments). Even if a proper suspension notice is given on a timely basis (and the burden of proof to show that it was given is entirely on the sponsor, with no burden being placed on the participant to try to show that they did not receive a suspension notice), stopping the crediting of pay credits such as would be granted to participants who had not attained normal retirement age is a clear violation of the age discrimination laws. All non-frozen plans of every sort (cash balance, traditional defined benefit, or defined contribution) must recognize ongoing service and/or compensation after attainment of normal retirement age to the extent that they would be recognized for plan purposes with respect to participants below normal retirement age. Even if a cash balance plan freezes all accruals, interest credits must always continue to be given. A benefit freeze would only affect subsequent pay credits.

My recollection is that if you beat the safe harbor percentage, you pass. If you fall below the unsafe harbor percentage, you cannot pass, even with a note from the principal. If you fall in between the two, it comes down to facts and circumstances. Does it really say somewhere that you can pass, without resorting to facts and circumstances, just by being above the midpoint between the safe and unsafe harbor percentages? Being at or above the midpoint may be facts/circumstances in your favor and being below the midpoint may be unfavorable, but I don't think that whether one is above or below the midpoint is determinative. The two cites in the original post seem to verify this. I do not see any reference in them to the midpoint.

Now why in the world would I ask the employer how they want their own plan designed? That's a strange question... LOL!!

Or the 13th! On the defined benefit plan side, it is known that quarterly contributions (or final contributions, for that matter) don't get any extra days when the deadline falls on a weekend. And for those, that means making the wire transfer by Friday if there is no real mechanism for doing it over the weekend.

As I understand it, the plan spells out the rules for eligibility, vesting, allowable salary reductions, employer matches, etc. The Trust governs the handling of the money. It may be possible to combine them into a single document. The plan does not have an EIN, but it does have a plan number. The employer has an EIN. The Trust should probably have its own EIN also. Qualification is desirable so the Trust does not have to pay taxes on its investment earnings and the participants do not have to pay taxes as their accounts become vested.

One day, at my local library, I idly looked at a copy of the Oxford English Dictionary for the first time (the volume containing words beginning with "P"). I was surprised to see the word "pinafore" (OK, the OED was completed a long time ago) used as a noun (its normal usage meaning something like a knee to shoulders apron for children to wear to keep their clothes clean), an adjective ("the pinafored children went out to play"), a verb ("the governess pinafored the children and sent them outside"), and, I think, somehow as an adverb but I cannot remember how. You have to love the mutability of the English language! Still, there's something a bit too jargonish in using "safe harbor" as a verb. Just because it can be done does not mean that it should.

If the plan required the person to be an active employee on the participation date, same answer. They would never have become a participant.

Quoting from that article: “...maintain benefit records with respect to each of [its] employees sufficient to determine the benefits due or which may become due to such employees...” Let us suppose that the employer/administrator retains such records, but the provisions of the QDRO cannot be followed because the requirements of those provisions fall outside of what is needed to establish the benefits due or which may become due to the EMPLOYEE so no such records are maintained. Is this a violation of the recordkeeping requirement? The Alternate Payee with the imaginative lawyer is not an employee or participant in the plan. Is it necessary to retain records sufficiently comprehensive to support account splits of every imaginable variety? Is it permissible for a defined contribution plan to exclude, by its terms, provisions of a proposed QDRO that goes beyond applying a service ratio and a percentage against a specific recent (or current) account balance, allowing the plan administrator to reject out of hand any court order requiring more? Just wondering.

Not a 401(k) practitioner, but doesn't the plan require that the person be in employment on the entry date? If so, a normal interpretation of the plan would have resulted in the now former employees not becoming participants. My vote (based on what I would expect the plan to say) is that there should not have been anything withheld since they never became participants. Of course,it always does come down to "what does the plan say?", doesn't it?

What, 0.15% not enough for you?

Speaking (as usual) as someone not practicing in the defined contribution arena, I was thinking of plans that are valued every day that do not keep long-standing records to permit recreation of the current balance. Perhaps my use of the term "balance forward" was not what I meant. When I said "balance forward" I was thinking of plans that keep track of the current investment holdings for each account and that value them every day but that cannot supply any information as to what was there two years ago. There is a need,of course, to go back to balances a year or so ago and to be able to say what the after-tax basis is, both for normal tax reporting, but how would information from 2011 be needed to "calculate benefits" under the normal operation of the plan? Implementing a QDRO that requires information not needed when administering current account balances does not fall under my concept of "calculating benefits". If the QDRO requires information from long ago or complicated splitting of the balance based on historical investment performance, let the burden of providing that information fall on the divorcing parties.

I don't work on defined contribution plans, but aren't the vast majority of those plans administered on a balance-forward basis, with no real year-by-year history of balances? Is it incorrect to say that being able to support any kind of demand for historical account information for a QDRO goes well beyond what is needed for "calculating a benefit" under the regs? The "benefit" under a defined contribution plan is, generally, just the current balance as adjusted for vesting, isn't it?

The article I mentioned calls that approach "subtraction". I am not involved with designing or handling QDROs for defined contribution plans, but I KNOW I want nothing to do with what the article calls "tracing assets"!

There was a short article cited just yesterday in BenefitsLink called "Breaking Up (the Pension) is Hard to Do". The article gave three different ways to structure QDROs involving defined contribution plans and three other ways to structure them under defined benefit plans. I think that they called the method you are most accustomed to seeing "coverture". The other methods dealt with ways that one could handle a situation where there was $50K when the parties married and $150K now (coverture essentially paying no attention to the original $50K). If you still have yesterday's BenefitsLink email, you may wish to look at the article.

Claiming no expertise with respect to your situation or ESOP plans at all, if the ESOP was invested primarily in your employer's stock (it being my understanding of ESOPs that the assets are normally invested in the stock of the sponsoring employer), if the net worth of your employer went to zero, then (alas!) so would the value of your account. Can an argument be made that the owner who withdrew $1 million had either embezzled the funds or defrauded the company's stockholders (which would include participants in the ESOP) and creditors by doing so?

Q1: What does the plan say? Please understand that benefit accruals are not tied to the actuarial valuation in any way. Q2: Depending on the plan and on the reasons for the person not entering on 1/1, might the person be considered excludable for testing purposes? If not excludable, the testing would be based on the actual accrual. Again, how the person was handled for the actuarial valuation would not really matter when it comes time to perform coverage/participation/non-discrimination testing.

Not a lawyer but it seems to me that stock ownership is not relevant when assessing whether someone is to be treated as active for plan purposes.

There would be a MRD for 2015 at least (even though the first distribution would not have been due until 4/1/16). As noted by others, there would be no MRD for 2012, 2013 or 2014, since the individual was still active through the end of those years. There would also have to be a MRD for 2016. I am not sure on this point - does that have to be held back from the 5/15/15 rollover or can it be taken from the IRA in 2016?

Didn't question and answer 4 of Notice 97-75 explicitly permit the offsetting of new accruals by actuarial increases applied to benefits already earned? So it would not be necessary to tack on new accruals for a year after attainment of age 70 1/2 if they are not more valuable than the actuarial increase being applied with respect to that year to prior accruals?

Any annuities purchased for that person in connection with the plan termination would have to have, built in, the possibility of this person growing into the early retirement benefit. That is, if the plan terminates next year and buys an annuity for someone with 10 years of vesting service who continues in employment with the sponsor, if they remain in employment meeting the plan's conditions for service accruals, that annuity would have to provide that upon completing 15 years of service (including service after the termination of the plan) and attainment of age 55, whichever is later, while still employed, then the annuity would permit that person to leave employment and receive the early retirement benefit under the plan for the accrued benefit as of the freeze date.

For what it's worth, put me in the camp of those saying that any changes would be prospective only, and the plan would have no reason to get involved in getting amounts already paid to the AP returned to the participant. If the plan received a valid court order that met the requirements to be treated as a QDRO and paid benefits accordingly, and then a valid court order is issued making the prior court order null and void, the most that could be required of the plan is to make all future payments to the participant. I am having some trouble seeing how there would be adverse selection issues, unless the participant and the AP have been gaming the system. Even then, the valid court order would have to be followed, wouldn't it?