My 2 cents

Referring back to ATA's comments: 1. True, some plans offer pop-up features, but in most instances, there would be a slightly larger reduction for a joint form with pop-up versus the essentially same joint form without pop-up. Theoretically, that could raise a question as to whether spousal consent would be needed for a 50% joint form with pop-up, since the potential spousal benefit would be lower than under a regular 50% joint form. I have never seen a pop-up with an age limit for the pop-up to come into play. It has been my experience that most plans do not offer a pop-up form. 2. True, some plans offer free joint forms to married participants (and straight life annuities to non-married participants). My luck, the first such plan I ever encountered (and there have been but few since) was a smallish plan where the owners were married with a 20 year age difference. The vast majority of the plans I have seen do apply an actuarial adjustment to go from the normal form (life annuity with or without a certain period) to a joint form, spouse or otherwise. 3. If one retires under a joint form, the survivor benefit can only go to the specific person to whom the participant was married when payments began (in the absence of plan provisions to the contrary). I wish great happiness to the participant and the new spouse if the spouse as of retirement date has died and the participant remarries, but there can be nothing payable to the new spouse after the participant's death. Although there have been at least a couple somewhat baffling court decisions to the contrary.

The money is supposed to provide financial support after the person stops working. it is not supposed to sit there as a savings account with extra, awkward rules. That said, human nature being what it is, it would be that much harder to get people to set the money aside in the first place if the rules against pre-retirement access were substantially stricter. My vote is for preemption because the administrators of the plans shouldn't really have to keep track of several dozen sets of laws. But then, many of the states have special rules for reporting and taxation of death distributions, and (one presumes) the administrators are able to deal with them.

You can adopt the benefit in the existing plan if you make the special Section 436 contribution (which would have to be paid over and above the minimum required contribution). I believe that the special contribution would be based on the amount by which the Funding Target would increase as a result of the amendment (the plan already being less than 80% funded). Doing it that way is much more straightforward. If your plan is already under 80%, you really would need to plan to get the new benefits funded right away. Having the funding being below 80% is not a healthy situation, and adopting an increase in benefits without taking action to keep the increase from making things worse is the best way to go.

Would it not be the case that as of the date of plan termination, there would be no liabilities for the person for whom the annuity was purchased and no assets remaining with the plan to be allocated? All assuming, of course, that the annuity purchase itself can withstand scrutiny under the non-discrimination rules and under the restrictions on accelerated distributions. Unless it is a plan big enough for a benefit in excess of the PBGC guarantee to represent less than 1% of the total liability or the participant was not in the top-25 HCE group, to have purchased the annuity would have required that (nominally, at least) the annuity purchase would have left behind assets sufficient to cover 110% of the plan liabilities (even if only on a MAP-21 basis). If the plan was subject to IRC 436 restrictions, the annuity should not have been purchased. Making a commitment to cover 100% of someone's benefit is roughly equivalent to paying a lump sum. If a lump sum could not have been paid, an annuity should not have been purchased. Then there would be trouble.

Was the sponsor in bankruptcy at the time? One presumes that at the time of the purchase, there would have been no statutory or regulatory bars to making the purchase (i.e., if the participant was not one of the top-25 HCEs, the AFTAP was at least 80% and the sponsor was not in bankruptcy, and if the participant was in the top-25, then there would have either been funding after the purchase at 110% on at least a minimum funding basis under MAP-21 or the purchase was less than 1% of the Funding Target, or there was sufficient security set up). If the sponsor was not in bankruptcy and accelerated payments were not limited at the time of purchase, it would seem that the PBGC should have no legitimate basis for trying to unwind the purchase. If there were statutory or regulatory limitations on accelerated distributions, buying an annuity would violate those restrictions. If security was set up, well, this is the sort of situation that security is needed for (to enable the PBGC to claw back at least part of the purchase). Upon the purchase of the annuity, the annuitant ceases to be a plan participant and would not appear to have to be reported to the PBGC as such. The ability of the plan to buy an annuity would be akin to its ability to pay a full lump sum. Have you ever heard of the PBGC going after a participant who was validly paid an unrestricted lump sum a year before the plan sponsor declared bankruptcy or before the plan sponsor filed for a distress termination just because the benefit amount was in excess of the PBGC guarantee?

What does the plan say? In general, are participants permitted to elect any joint option they want (consistent with the 401(a)(9) rules) or are some or all of those options limited to spouses as joint annuitant? I have seen plans that only allows the election of joint forms when the joint annuitant is the participant's spouse. If there is a difference in age of less than a year in combination with an early commencement date, the IRS regs on minimum distributions under 401(a)(9) would not get in the way of electing a 100% joint form. Does the plan have a 100% joint option? If not, the QDRO cannot require the plan to pay the benefit in that form. I do wonder if the administrator, in quoting 1055(d)(2)(B) (which deals exclusively with the definition of the QOSA), is just terribly, terribly confused.

It's not the IRS that extends it every year, is it? Isn't it Congress? Wouldn't that make it (excuse the expression) "Ya gotta love Congress"?

How would taxable receipt of the RMD and subsequent donation of the same amount to a qualified charity differ in net result from the tax free donation of RMDs to which you refer? Probably clear from this question that I am not a tax expert!

I would think that the question would come down to whether preservation of spousal status by the QDRO would be enough to defeat the usual 401(a)(9) limitations on non-spousal survivor benefits. Don't know the answer to that. Of course, if the AP is not more than 10 years younger than the participant (more if the benefits are to start before the participant's age 70) then there would be no issue, would there?

Aren't people covered by a CBA automatically considered as being on notice with respect to any changes agreed upon in the bargaining agreement?

I suspect that that would be most unlikely. Would that make you lean towards amending the filing or towards not amending? Suppose that the plan covered 100+ participants and beneficiaries, and a valuation date of 12/31/12 would have been impermissible. Would that make not amending the filing more reasonable or less?

Not a tax expert,and just trying to understand how this would work, but if the stock was purchased at $20 per share using money in his 401(k) account, the stock is now $45 per share and he ultimately sold at $60 per share, assuming that the RMD payout is supposed to be 2,000 shares (current value $90,000), wouldn't the following all be true? Ordinary taxable income of $90,000 this year, with none of it eligible for capital gains treatment or any other special treatment Tax basis of shares becomes $90,000, never mind that they were purchased in the 401(k) for $40,000 When he sells for $120,000, $30,000 is taxable as realized capital gains How does that differ from the plan selling the shares, giving him $90,000 in cash, and he uses that to buy 2,000 shares of the stock? Why is there any advantage to doing it as in-kind, especially if it is a readily available popular stock? Is it not also true that even if the plan permits the maintenance of participant-directed brokerage accounts, it is not "his" brokerage account while it is held under the plan?

Anything to prevent the plan paying the participant in cash and the participant then using the proceeds to buy the stock as a personal investment? Wouldn't paying the stock out in kind require a proper current valuation of the stock, to make sure that the participant is paid no more and no less than what he or she is entitled to under the plan? It could be really messy if the stock is closely held. There is also a question as to whether the transaction could adversely affect the plan or other participants (presuming that there are other participants - not at all sure what rules apply if there are no others). Unless the plan's assets consist entirely of shares of that stock (which would look shaky with respect to the fiduciary duty to diversify investments - this was identified as a 401(k) plan, not an ESOP), the participant would be given a disproportionate share of the plan's holdings of that stock if the RMD were paid out entirely in stock shares.

They know who you are and where you live! Get used to it! If any amounts were contributed to the plan before the person opted out, the person is a plan participant until paid out, and reporting the information to the government when they are paid out (with Social Security Number) cannot be avoided. Access to such information is acceptable when on a need to know basis, and, without question, those servicing the 401(k) plan have the need to know.

Just wondering: If the revised QDRO called for allocating more of the account to the alternate payee (but not more than what remains in the account), it might legitimately be considered to be qualified. However, how could a court order to pay a total less than has already been correctly paid be qualified? The plan cannot pay out minus $50,000. If anything is to be done, money should be changing hands (directly or through account transfers) between the alternate payee and the participant. If the decision is made (by them!) to do so and the request is made to the plan administrator to have the difference rolled back into the participant's account in the plan, then perhaps there is a decision (in light of the plan language and administrative practice) to be made by the plan.

Yes, great idea! Get around their reticence by pointing out to them that their dragging their feet makes them fiduciaries (and poor ones at that)! That ought to get them moving!

If there is a proper, qualifed DRO, that does not condition payment to the alternate payee on benefit receipt by the participant, how could the participant possibly have any say with respect to following the terms of the QDRO? What "paperwork" is there to come back from the participant? The money specified in the QDRO is literally no longer the participant's. In your 2007 or 2008 situation, what would have happened if you had handled it like this: a. The QDRO says to transfer, at the alternate payee's request, 50% of the account balance at that time. b. The account balance, as of the date the alternate payee requested payment, was $50,000. c. For whatever reasons, the payment to the alternate payee was delayed pending some sort of paperwork from the participant. d. At some point, either the paperwork from the participant was received or the decision was made that payment could no longer be delayed. At that time, the account was worth $40,000. e. Based on the amount due originally, the alternate payee is paid the $25,000 that would have been paid had there been no delay, leaving the participant with $15,000. Seems fair to me!

Working on defined benefit plans, I have seen plans that provide prorata credit (proportional to 1,000 hours) for the first or last year of service, and I have seen plans that provide credit for every year (including the first and last year of service) if an only if there are 1,000 hours in the year, and I have seen plans that tie benefit accruals to a benchmark higher than 1,000 hours in a year, but I don't think I have seen any plans that require more than 1,000 hours for the first or last year but give full credit for 1,000 hours for the intervening years. As this is disadvantageous to the participants, why does the sponsor want to do this? Examine the driving motives in light of the IRS objections. Side note: If the plan grants partial service credit, I think that earnings must be annualized if partial credit is being given. Example: Earns $25,000 in a year with a 2,000 hours = 1 full year's accrual rule but the person only worked 1,250 hours. While you can use a service credit of 0.625 year, the formula must be applied against an annualized earnings of $40,000 (=$25,000 X 2,000 / 1,250) to keep from there being a double reduction.

Speaking as a humble taxpayer and not as a practitioner dealing with sole proprietor plans, if I understand the situation correctly, his PS contribution would not actually be limited more than is permitted under the deferral rules, but the extent to which his contributions are tax deductible might be. Not quite the same thing. Perhaps the tax rules are intended to keep people like your sole prop from stashing too much away on a tax-favored basis. It used to be the case that contributions and/or benefit accruals were subject to a hard limitation on a combined basis under IRC 415 but I believe that to no longer be so. I leave it to people who do work with sole proprietor plans to make suggestions as to how to optimize his contributions relative to the deduction limits. Perhaps he should hold off on establishing the DB plan until 2015 (and coordinate his 2015 PS and DB contributions accordingly) or establish a DB plan small enough to keep things deductible this year and then improve it next year. Or pay some taxes.

That is so if you file the SB with MAP-21 rates by 12/31/14. I will not expect to have to ask for a "corrected" election from any of my clients with calendar year plans. What about plans with later filing deadlines? Also, does anybody have any thoughts about the absence of any mention of dates in the IRS guidance concerning the HATFA provision concerning paying accelerated benefits from a plan sponsored by an employer in bankruptcy?

Noting again that I do not work on 401(k) plans, I thought that a large number of 401(k) providers sponsored or used prototype plans. Did you talk to any of the larger national recordkeepers and/or companies that handle substantial 401(k) assets?

1. So does this mean that I need to redo all of the elections to defer I sent to my clients (nearly all of which have been signed) because they did not include the EIN and plan number? 2. Am I correct in reading the notice to specify that the elections must be irrevocable but does not require them to include language to that effect? 3. It was our understanding that the HATFA change to 436(d)(2) would not be effective until plan years beginning after December 31, 2014. The following appears to be the only reference to 436(d)(2) in the notice. Is that supposed to that mean that it is NOT acceptable to pay lump sums for the rest of the current plan year in a plan sponsored by an employer in bankruptcy if the AFTAP determined using HATFA rates is at least 100%? "Section 2003© of HATFA provides that the limitation on interest rates based on the corresponding 25-year average segment rates does not apply for purposes of § 436(d)(2) (relating to limitations on accelerated benefit distributions for a plan sponsored by an employer in bankruptcy)."

I am not a 401(k) plan practitioner, but what if you adopt a prototype 401(k) plan? They don't usually go through a determination letter process since they have been pre-approved by the IRS. Would a copy of the master document, the adoption agreement and the approval letter for the master document suffice to satisfy the plan from which the assets are to be transferred? [is this a multiemployer plan? Do such plans get to use pre-approved documents?] If the plan is treated as qualified by virtue of being a pre-approved document rather than by virtue of having a determination letter, that should be good enough for the employers who are supposed to contribute to the plan.

Is it not the case that they can require 5 years of service for eligibility purposes and/or 20 years of service for vesting, if they want to?

People are still attaching the 8895-SSA filings to the 5500 filing??? Are they paying any attention at all? It has only been a separate filing for something like 5 years (not to mention the improper handling of Class 1 information!). Have they also been properly filing them or have they repeatedly failed to submit the required filing? Tacking it onto the 5500 filing does not satisfy the 8895-SSA filing requirements. That also reminds me of a pet peeve - actuarial valuation reports for defined benefit plans with comprehensive participant information (names, dates of birth and hire, salary information, benefit information, sometimes even Social Security Numbers) included as part of the report. The time is long gone when that would be considered an acceptable practice (which would have been around the time that stores stopped requiring Social Security Numbers to accept payment by check and RMVs stopped putting Social Security Numbers on driver's licenses).