My 2 cents

If you mean sashay over permanently to a rocking chair, say so! Coming at this from a defined benefit perspective, anyone leaving the employer's service on or after meeting the age and service requirements for early retirement has elected an early retirement date, even if choosing to not immediately commence benefit payments, and whether or not they go to work somewhere else, including the arch-enemy of the sponsor's owner. One presumes that in the case at hand, others may have left after meeting the age and service requirements for early retirement without actually withdrawing from employment (albeit not so brazenly as this person, who went to work across the street for a competitor). How were they handled? If someone left to go run a charming bed and breakfast, were they denied the exemption? To start working at an unrelated business? Let's just say that if there have been precedents set, to try to stick it to this ingrate might not be that defensible. One presumes that there are no non-competes in the picture.

The material for EA-1 doesn't change much from year to year, does it?

Many plans would say that if the person is on leave or layoff on the date they would otherwise enter the plan, they would enter on the date on which they return to active service as an eligible employee (if the age/service rules had been met), without having to wait for the next entry date. Is this an ERISA requirement?

Consider a plan with a single entry date equal to the first day of the plan year. All people who became eligible to enter this year are not in the end of the year count for last year, but they are in the beginning of this year count. Note that the count for PBGC premium purposes is to be established at the end of the prior year. Suppose there were 300 people in the plan at the end of 2012 (calendar year plan), 30 entered on January 1, 2013, 15 people ceased to be participants during 2013, and 31 people became participants on January 1, 2014. The 2012 5500 shows 300 participants at the end of 2012. The 2013 5500 shows 330 participants as of the beginning of 2013 and (330-15=315) as the number of participants at the end of 2013. The 2013 PBGC form bases the per-participant premium on the 12/31/12 count of 300. The 2014 PBGC form bases the per-participant premium on the 12/31/13 count of 315. Note that some determinations must look at the number of people as of a given date and some are based on the highest count during a year. People count upon entry and only drop out of the count when entitled to no further benefits under the plan.

I don't work with 401(k) plans, but - Similar to another recent thread dealing with outstanding loans greater than assets still invested. I think the conclusion was that the participant's account balance would be treated as $20,500. $20,000 goes to pay off the remainder of the loan and only the invested $500 is left to go to the beneficiary. The loan balance cannot just be forgiven for tax purposes. The money already paid to the participant when the loan was taken, to the extent not repaid, would be ordinary income (perhaps with excise taxes on top). Isn't that how it would work?

Wouldn't the run-of-the-mill bonus always be reported on the W-2? Being reported on the W-2 does not make bonuses count for plan purposes. Are bonuses the only exclusion under the plan?

In prior years, reporting people who were paid out on the SSA was not mandatory. If we only had known all the trouble that reporting them as D's would save in the future!

Basic answer is no, the account balance cannot be seized. If there is a distributable event and the participant is willing (for whatever reason) to take a distribution and use it to reimburse the sponsor, that is OK, but otherwise non-alienable means it cannot be grabbed to satisfy any debts (other than under a tax lien). The only exception is if the participant's actions as a plan official harmed the plan.

Suppose a defined benefit plan was hard-frozen several years ago. As no key employees are currently benefitting under the plan, it should be clear that no new service accrues for the top-heavy minimum benefit. 1. If the top-heavy percentage was below 60% when the plan was frozen, is there any reason to be concerned as to what it would be as of any subsequent date? 2. If the top-heavy percentage was above 60% when the plan was frozen, is there any reason to be concerned as to what it would be as of any subsequent date? 3. If the top-heavy percentage was above 60% when the plan was frozen and, if remeasured, would remain above 60%, would it be necessary to adjust the top-heavy minimum benefit (with respect to top-heavy years of service prior to the freeze) on account of compensation increases after the year of the accrual freeze?

If there is a partial termination, how far back does one have to look? Presuming that it cannot be demonstrated that the person was discharged for cause, wouldn't it look like someone who terminated only a few months ago was at least influenced by the conditions that led to the asset sale? Wouldn't a termination within a year of the partial termination be swept in?

My 2 cents's worth: The contractual agreement between the sponsor, the trustees and the service provider should spell everything out, including which service fees can be deducted from the funds, which fund(s) should be used when expenses are to be deducted etc. I would expect most service providers, especially those who handle plan assets, would have procedures in place to deal with slow payment of proper, billable expenses. Termination of services would presumably be a last choice action. The existing agreement would serve as adminstrator/trustee approval. The plan must specify that expenses may be paid by the plan if not paid by the sponsor, and plan assets should not be used to pay expenses incurred for settlor functions. If the sponsor does not want the plan assets charged to pay expenses, the sponsor should take care to pay them within the period for covering expenses as described in the contract/service agreement. Plan sponsors would not be able to just refuse to pay legitimate expenses from their service providers any more than they can refuse to pay for their raw materials or other business expenses.

If a service provider did not provide the mandated information, does that imply any lack of diligence on the part of the plan fiduciaries? If so, they should have sought to drop the service provider as soon as it became clear that they were not appropriately forthcoming. Just because the service provider came out with the information does not mean that everything is fine. Are the expense charges reasonable? Rather than worrying about the statute of limitations, the plan sponsor/administrator should be actively making sure that any potential issues concerning their fiduciary obligations are corrected.

Remember - if a DRO has been provided to the plan and meets the requirements for qualification and is accepted by the plan administrator, the plan administrator MUST follow the terms of the QDRO. There is no duty on the part of the plan administrator to be on the lookout for sham divorces. None. In fact, it may be a violation for the plan administrator to try to assert that a divorce is a sham and refuse to qualify the order or otherwise fail to go along with it. The only way a plan could have a provision permitting an alternate payee to cash out one year after the divorce is if that is earlier than when the alternate payee would otherwise be able to cash his or her benefit out. If the participant can cash out as of any earlier date and the QDRO gives the alternate payee the right to be paid as of any date on which the participant could claim benefits, then that would prevail over the one-year provision.

A good reason to not backdate anything, ever! Mess up, miss a key deadline, and get a plan disqualified, at least you don't have to worry about having to go to jail!

Short of carbon dating the ink, how can you prove that something was NOT backdated? Is there no burden of proof to show that a document was, in fact, backdated? Guilty until proven innocent? Backdating is not like tax fraud. Backdating a document needed to have been signed by a given date to maintain compliance (but which was not signed by that date) IS tax fraud.

Is the auditor really threatening disqualification without saying why? What do you mean by "We refuse to acknowledge any disqualifying defect"? Do you mean that the auditor has pointed out what he considers to be one or more plan failures sufficient to disqualify the plan but that you refuse to accept that they are failures? Presume, please, that whatever agony the IRS would have to deal with to disqualify the plan is nothing compared to what you would have to deal with if they did. Disqualifications may be rare, but it is not because the IRS is unwilling to push that hard. If they are rare, it is probably because most plan sponsors will realize that going through audit cap would be less expensive and disruptive than if the plan were to be disqualified so they agree to go through audit cap. Have you engaged the services of an ERISA attorney to help you? It might be a good idea.

Proof of divorce, maybe. Proof of marriage, probably. Proof that divorce decree did not grant pension rights to ex-spouse, no. In changing the beneficiary, probably should be enough to receive a written assertion from the participant that Spouse #2 is his or her spouse and should be put down as the beneficiary. Look a little more carefully if the participant retires (especially if there would be issues with the alleged spouse being a joint annuitant under the plan if not really a spouse) or dies. In practice, what does the plan require for proof that the claimant is the deceased's surviving spouse in the absence of there having been a previous spouse? Unless the ex-spouse has spoken up in some fashion, it should be acceptable to presume that the ex-spouse has no rights under the plan.

It would seem fair to me that if the recipient of indirect compensation, who had failed to properly report the mandated information, but who has seen the light via DOL scrutiny, wants the 5500 revised badly enough, they should pay for revising the 5500 filing. Why would the client need a new audit (was the absence of mandated information noted in the first audit)? Why would the client's attorney think that an amended 5500 is necessary? The Schedule C properly reported the service provider's lack of mandated reporting. If that service provider continues to provide services to the plan, they will do better next year, right? Isn't dropping a dime through reporting on the Schedule Cs what the DOL wants? It is not the plan sponsor's responsibility or the plan administrator's responsibility to force the information out of the service providers, is it? They shouldn't need to refile to protect themselves.

I still think that the participants should have to pay back the outstanding balance of the loan, else the plan administrator must go after them for repayment. Especially if there are other participants! The plan adminstrator's duty is not to the owners but to the plan participants (and to see to it that the plan provisions are properly carried out). If the distributions were bigger than they should have been (based on the plan provisions), the plan administrator must actively seek restitution to the plan from the recipients of the overpayments. Having terminated, how is the wife-owner repaying the loan?

Wouldn't think that any documentation would be needed with respect to any rights of the prior spouse that would have been preserved. The onus would be on the prior spouse to make sure that the plan administrator is notified. Certainly, if appropriate evidence is provided to indicate that the spouse has changed, that ought to be enough, especially if no distributable event has taken place. It is even possible that there has been no action to preserve the ex-spouse's rights but that such an action could take place before the benefits are paid out. Absent notice to the plan administrator that there has been a DRO with respect to the ex-spouse, it would appear that the plan administrator should have no duty to the ex-spouse. No plan administrator should have to initiate an inquiry.

Enough to fill the Albert Hall!

One does need to check the plan language with respect to handling of benefit accruals after Section 436 forces a freeze. It is permissible to provide in the plan document that if a plan's accruals are frozen in accordance with Section 436 and the plan's AFTAP rises above 60%, the accruals will stay frozen. If the plan has such a provision and the plan's AFTAP falls below 60% for any reason, if the plan's AFTAP is certified at 80% or more, reopening accruals (whether prospectively or retroactively) would need a plan amendment. I do not agree that restrictions, once applicable, could continue to apply once the plan's AFTAP has been certified as 80% or more (excepting the period from that certification to the end of the plan year if the AFTAP was not certified by the end of the 9th month of the plan year. No amendment could ever be required to restore availability of the restricted options for new benefit commencements once the AFTAP has been certified as being 80% or more. Anything to the contrary would be a direct violation of the prohibition against eliminating payment options under the plan. The plan could not condition restoration of access to those options after the AFTAP is certified as being 80% or more on any action by the sponsor. If the AFTAP fell below 60% due to the AFTAP not having been certified prior to the first day of the 10th month of the plan year, nothing anybody can do could restore access to the restricted forms until at least the beginning of the following plan year. The restrictions must apply for the remainder of that plan year. If the enrolled actuary certifies that the AFTAP for a plan year is 80% or more but does not do so until the 11th month of the plan year, the restrictions on payment options, that became effective on the first day of the 10th month of that plan year, would go away immediately on the first day of the next plan year. Otherwise, they would go away immediately once an AFTAP of 80% or more was certified. No amendment would ever be needed to do this because the plan must already say that those options would be restored. The only reason to have to check the plan provisions when a plan that had been restricted under Section 436 is certified by the enrolled actuary to have an AFTAP of 80% or more is to see if people whose benefit starting dates were during the period of limitation must be given the opportunity to elect a new annuity starting date. Those with annuity starting dates on or after the 80%+ certification have unfettered access to the restricted options (25-high HCE's excluded). .

Not involved with 401(k) loans, but here are my opinions (for what they are worth), even presuming that the 50% of balance restriction only applies when the loan is issued: If I correctly understand the original post, the history might look like this: Husband (owner): Had an account balance of $200,000, borrowed $50,000, has paid the loan down to $40,000. Has taken withdrawals of $170,000, so account balance is now only $30,000. Loan offset of full account balance would leave $10,000 unrepaid. Wife (ditto): Same numbers. ["...should she receive a full distribution" - hasn't she already received in cash more than 100% of her account balance?] No matter what, the owners should be compelled (through legal action, if necessary) to pay the remainder of the loan amounts back to the plan. Forgiveness of that indebtedness should not be an option. If it were an option, however, wouldn't the entire amount forgiven be treated as a taxable distribution (i.e., pay nothing more, receive nothing more, but the $10,000 still owed is forgiven, ergo $10,000 treated as a taxable distribution)? How or why would they have been allowed to withdraw amounts large enough to leave an account balance insufficient to cover the rest of loan? Would any of this have been considered a fiduciary violation? A prohibited transaction? It doesn't sound right to me.

It is my understanding that as soon as the AFTAP has been certified as being 80% or more, new benefit commencements would not be limited under Section 436. If the paperwork is timely distributed to the participants and the benefit start date is on or after the date the AFTAP is certified as 80% or more, no delay is required. Handling of people whose benefits started while the official AFTAP was below 80% depends on the plan provisions. And, of course, there are the 25-high restrictions, which cannot be ignored just because the AFTAP is 80% or more..

Obviously, I am no expert on real estate investments (especially in Iowa)!