ESOP Guy

If this is daily value what do you do with the earnings? What if there is a loss? I think they need to stop doing this or suck it up and say what was deposited is going to be allocated.

That I agree 100% with. I will not defend that ever!

What I will tell you is this is more common then you might think. This happens to me for one of my clients maybe 1 or 2 times a year. A check gets sent to one of the big mutual fund houses for a rollover. Their practice is to cash all checks as they come in as part of their security. They don't want a check lost of stolen. They then worry if they know what to do with the money. If they don't know what they are supposed to do they simply write a check back to where the money came from. Every now and then the only reason I find out about it is I am reconciling the cash in the client's account and there is too much cash. It sounds like it is the new plan's problem as it sounds like the new plan failed to send the paperwork they should have to Empower.

That is my understanding. The other choice is to file late and know what your fine is with a DFVC filing.

I don't believe it was ever acceptable. It was more you could get away with it becasue it took them so long before electronic filing to realize it was missing. What I can tell you is I have a couple clients that do this every year. I just a few weeks ago filed a 12/31/2016 5500 with the report. We filed with a note back last October. So far they have never been fined for doing it. But I always tell them they are at risk of it being ruled as incomplete.

One part of your facts are unclear and it might make a difference in my mind. When you say "the plan administrator never gave the authorization to Empower..." Is this the PA at the new plan that was going to receive the rollover authorization (seems like the most likely answer) or the PA from the sending plan? To me at least it sounds like a PA failed to so their job and that caused the problem and it seems like that PA ought to be responsible. I would think sending needed paperwork is a fiduciary responsibility. Maybe the answer won't change anything. I am doubtful the old plan has any duty to the person. They did what they needed to do unless it was their PA that failed to send the paperwork.

In the other thread on the pot topic I mentioned this but don't see it here. Review IRC 280E: https://www.law.cornell.edu/uscode/text/26/280E Many expenses of operating a drug business aren't deductible so even if you get a 401(k) set up how does all of that work? Maybe it doesn't matter I have never looked into it. But a PS cont could easily be paid with after-tax dollars so do you have a basis in the PSP or does the person have to pay taxed again when they take a distribution? If it gets taxes twice it might not be worth it to the owners- maybe even the employees. They might as well as get an IRA and invest after-tax after that.

The other way to put what Lou is saying that by the time the 1st payment is made in the quarter following the quarter with the missed payment the missed payment was paid. Of course that means the current quarter is missing a payment. But that is made up the first payment the next quarter and so on and on. You could go on like that until the end of the loan and have only one missed payment at that time and no default.

Oddly, while the famous line is, "I think therefore I am" his proof was related to doubt. His proof was if you doubt you exist then there must be something doing the doubting. So the "think" he was referring to in the line was doubting as the type of thinking that proves you exit

austin you strike me as one who historically thinks through things well so forgive me if this is pointing out the obvious but I just took over a plan that did a vesting sch change and this issue came up imminently. I would recommend the amendment makes it clear how rehires are handled. Maybe becasue of that base document language it is clear as the vested percentage can't go down. But my new client is going from a 3 year cliff to a 6 year graded and the amendment is silent on how to handle someone who was hired years ago but now rehired. We found a guy with 2 YOS who gets to keep that service. Is he 1 year from 100% vested or 4 years from being 100% vested? It would be nice if the amendment was clear on the topic.

Card has a good point. At risk of getting too much on my soapbox but that part of the law is always in the plan document also. So once again if you read all of the plan provisions about distributions you will hit these rules also.

This is a plan document question. Read very carefully the provision that talks about payments due to retirement. It most likely says something to the effect if the person terminates due to retirement they get paid one way. There is then a provision that says if a person terminates for a reason other then death, disability, or retirement they are paid another way. If it says what I suspect it says then the question is simple, "did this person terminate due to retirement?". If so, then that provisions applied. If not, then that provision doesn't apply and the regular termination provisions apply. Unless you have one of those rare documents that says to account for what happens after the person terminates then all that matters is what was the person's status at the time of termination. But once again THE DOCUMENT will answer this question CLEARLY. Just read it carefully and think about what it is saying.

Yes, that is my understanding of the thinking behind such a provision in a DRO. However since it isn't relevant to me I don't always ask so I can't say if that is always true.

Oddly, I just got a QDRO today that says the Alt Payee is due 50% of the marital share. It defines marital share as the 12/31/2016 ESOP balance less the 12/31/2008 balance. Since we were the TPA since the ESOP's inception I have the data. I however find it interesting (funny maybe) on the very day you say you have never seen one I just got another one across my desk. For what it is worth I wish you were writing the QDRO's that come across my desk it sounds like they would be more thought out.

Not unless it allows for an in-service distribution. Read the document again. Unless there is an in-service distribution provision all other distributions are will say they happen after some kind of termination. It doesn't say when one is no longer eligible. Going to get on my soapbox on this one.... This really is one of these questions that is very easy to answer by reading the document.

I get where the other group is coming from but I have always told clients my recommendation for this is pay an RMD by 4/1/2018. I think when an IRS agent comes in they are going to see a 2017 DOT and expect an RMD 4/1/2018. The other answer requires you to convince an auditor you are correct. Like I said I get the other answer. If you search the board I think we have had this conversation before. Just too late on Fri for me to do the search.

Just as an aside if they did declare your loan a deemed distribution (properly which needs to be addressed first) that raises issues about the payments you are currently making. By making the loan deemed you paid taxes on the loan principal. However, they are still putting loan payments into the plan. Those payments should be creating an after-tax basis in your account. You don't have to pay taxes twice on the loan coming out of the plan- once when it was deemed and again when the cash your putting into the plan is paid to you. In a sense I am getting ahead of things. You should primarily focus on the other advise and figure out what happened and was it deemed properly. Only if you determine it was deemed properly should you start to follow up on how the payments are being accounted for by the plan.

To Fiduciary's point can you disqualify the QDRO for lack of data? Doesn't the plan have an obligation to keep the data? The few times it has come up since my hard lesson the way I frame the conversation with people isn't the DRO isn't qualified by the data seeming not to exist but the cost of the split is going to be huge if you make us track down the data from prior TPAs. They are going to charge to get data from storage plus their time. This doesn't include the time it could take. That simply convinces the husband and wife to go back and come up with an amount/method we can compute quickly and affordably.

What Mojo said is why I see the need for old data. In fact I learned a very important lesson early in the career about these kinds of QDROs. I had been tasked to go through our firm's QDRO check list to see if we would recommend if the DRO was qualified. I went through the check list and said "yup the plan should accept this as a QDRO" because it met all the requirements to be a QDRO. It was the type of QDRO that said you had to give the AP 50% of the benefits earned between two sets of dates. I didn't check to see if we had the data becasue that isn't part of the legal question. It turned out the data no longer existed and we didn't find that out until after the judge had made the QDRO official. The firm I worked for ended up agreeing to pay the legal costs to get a new QDRO approved with a number the husband and wife could agree upon. It was one of our larger clients and no one was willing to upset them over this issue. I now check to see if the data exists before we make a recommendation about the QDRO.

I don't think this is a problem if the plan says forfeit after 5 BIS and doesn't require a termination. Then there can't be a restoration if there has been 5 BIS. I have clients whose document says forfeit after 5 BIS. It doesn't say and terminated.

Although to be clear I have had documents that simply say forfeit after 5 BIS. At which time you do that even if they never terminated. it is odd looking but what the document says.

Yup never increase the chance for lost participants.

Your facts are a little confusing. It might be you aren't sure of all the facts. You say a QDRO was done in 2017. Was if brought before a judge and made official? Did the plan accept the QDRO as qualified? One of you might have to talk to the attorneys who helped do that QDRO. They might have records from the judge and plan. If the DRO was accepted by the plan as qualified and thus a QDRO and they failed to split the accounts the plan has an problem as they didn't do their job. If there was in fact a QDRO in 2007 then your ex-spouse doesn't need another QDRO to get her funds she needs the plan to do its job and split the account. It is their problem to get the needed data. If the 2007 DRO was never accepted as qualified then there are other issues. I would advice to the plan administrators and see if they have any records regarding if the DRO was determined to be qualified by the plan and thus a QDRO. If so, then find out why the account wasn't split. If not, see if they have any records why not. Also, if not then there is no need to modify anything as there was no previous QDRO to modify. There is a good chance you are going to need an attorney in my opinion.

I don't know if you are thinking of mostly south of the border or north of the border as source but there are plenty of credible stories of bad/fake pharmaceuticals from south of the border. Mexico doesn't have something like the FDA. Canada at least you can trust more in my mind in that regard. Does the plan have any liability if they send someone to Mexico to get a prescription on the cheap and it is fake or bad? Nothing above is an endorsement of the idea just an observation and question.

This reminds me of back in the '80s people who would market trips to Mexico in late December. It included a quick divorce on December 30th and remarriage on January 2nd. Back then if you had a high enough income each the saving by undoing the marriage penalty in the married filing joint status vs single could more then pay for the trip. There is now an IRS regulation about this and sham divorces for tax planning reason. I was working of the IRS back then and the cynics would always joke but what happens if one party doesn't agree to get remarried. It would be interesting how these people manage that risk. How does it stop the : Thanks for 100% of your million dollar 401(k) plan but I am not remarrying you and going to the tropics with my 25 year old lover says the Alt Payee!