ESOP Guy

I don't see a problem. Maybe one could make a case in terms of recordkeeping the plan should show the assets were split and the Alt Payee got her own account. At which time she did become a participant for many purposes (for example it has always been my the Alt Payee who keeps their balance in the plan is due all notices a participant is due). Then there was a benefit payment from her account. The 1099-R code is correct with a G. I don't see a problem with the rollover being done as it was.

Like so many rules in this field is there a need to work on fees and so forth? Ok, you can get me to agree to that idea. On the other hand all the other regulations on this topic have either done no good or hurt things in my opinion. I mean we have notice after notice about fees now being mandated. Who reads all that silly stuff as it tends to be too long. It is like prospectuses when buying a mutual fund. Great idea until you get a several hundred page book stuffed with language only a lawyer would care for and I think I know plenty of lawyers who would deny they care of it. Can anyone explain to me how anyone has benefited from the new Sch C disclosures and all the "how many angels can dance on the head of a pin" discussions of direct vs indirect fees/income? As far as I can tell all this had done is drive up people's cost to send out notices and prepare Form 5500s and has shed no light at all on fees. Either people knew about them already or they now have vague discussion of indirect fees in notices. Although when those rules first came out it was a boon for people who sell CE classes to TPAs as people tried to explain that mess to people. It really did seem to me these rules could have hurt the middle class by simply making the risk of giving advice to anyone without a large balance not worth it. You couldn't generate enough fees to cover the related risk. The government is terrible at making rules that balance cost/benefit.

Back when I worked 401(k) plans (2009 and earlier) I saw it but it was very, very rare. It tended to be companies that just treated their employees very well and valued their alumni relationships. In fact the one company that stands out in my mind is a company where their alumni often times left to become management in other companies and they often times tried and use that connect to win business. So they felt it was important to cater to alumni. But easily 99.99% of all 401(k)s didn't allow it where I worked. In fact the standard promissory note we offered our clients was written such that payroll deductions was the only allowed method of loan payments. No one wanted to bother with an employee sending in a check. That was the real issue. No one wanted to have to handle and track checks coming in and making sure they got deposited timely. What happens if the check bounces? What happens if your system says the check came in and the check isn't deposited?

Can you make a check payable to someone other then the participant and not violate the anti-alienation rules? I am thinking of a time I had a bank client and a teller embezzled funds. She agreed to reimburse the bank using her ESOP account's funds as part of her plea agreement. All the lawyers agreed the ESOP distribution check couldn't be written to the bank. It has to be written to the former teller. She then had to deposit the check into an account at the bank of her own free will. She then had to sign the bank account over to the bank of her own free will. The "stick" that was used to make sure she did this was the judged refused to sentence her until she had complied with this condition. Everyone agreed the reason you had to go through those steps was the anti-alienation rules. The stick in this case did not negate the idea she used her own free will to turn the funds over to the bank. You can't make payments from the plan to a creditor even with the participant's permission has always been my understanding. I am willing to be told I am wrong here but I have never seen a hardship distribution or loan made payable to a college for tuition for example. It was always sent to the participant and payable to the participant who had to take cash the check and then pay the college to pay tuition.

How does the Plan Administrator control what the person does with the money after it leaves the plan? I have always thought this is possible to see happen. The person gets the check and doesn't use it for the purpose they used to justify the hardship distribution. I just don't ever recall from my 401(k) days anyone being so brazen as to not spend the money as stated and then ask for more with the same reason. To me this falls under the Plan Administrators powers to reasonably interpret the plan document provisions in a nondiscriminatory manner. I think the Plan Administrator needs to decide how they want to handle this situation, document it and be consistent. It seems logical to deny the withdrawal otherwise what is to stop this person to just keep coming back for more and more money which seems to violate the spirit of the rules and provisions if nothing else. I have never seen a written rules that covers this fact pattern.

The person is working and the plan still exists so the terms of the plan rule. I think you have to make the in-service distribution.

I just got a POA the other day. The POA was very clear the son had the authority to ask for a distribution for the father. No one at our firm or the client seem to have an issue with it. We can at times have an issue if it is silent about qualified plans or seems very limited in scope as to raise doubt the POA was intended to allow the POA to have the needed authority. For what it is worth I deal only with DC plans. As such almost none of them need a spouse to agree with the distributions.

Do the math like GMK says. It is one of our standard census checks we do with all our client's census data. We ask them for gross compensation, 401(K), Roth 401(k), 125 and so forth and we ask them for W-2 taxable wages. Our system will take gross and subtract the pre-tax amounts and see if it equals what the client is reporting for W-2 taxable. If not we stop and talk it out with the client if so we move on to our other census checks/scrubs to see if we think we have good data. This will answer your question it would seem like. You will know you have a good understanding of gross and W-2 taxable. If the client can't get you gross wages or W-2 taxable I would stop and have a talk with them. There accounting/payroll system has to have both of those numbers some place. Their system has to have the various deductions since they can produce check on a regular basis.

Yes

Does the plan allow for loans? I know that is swapping one kind of debt for another but the terms and interest rates might make it worth while. I would add your plan might be a bad idea from a tax point of view. If you are under 59.5 if you get the money you have to pay income taxes (could be 20% to 25% easily) plus a 10% early distribution excise tax plus state taxes (could be 0% to 9%). So you could find taxes will take 40% or more of your distribution when you get done paying all the taxes. That is an expensive source of funds. You might want to get some financial advice first. I would add if you are in real bad shape and you think bankruptcy is in your future as a general rule money in retirement plans is exempt from being taken in bankruptcy. So the only way your creditors can get that money in case of bankruptcy is if you first take the money out on your own. They can't force you to do so as a general rule. So at risk of repeating myself you might want to get some financial advice before you take money out of retirement funds.

For vesting all the hours count always. That is the only reading of the DOL regulations about vesting and hours. I don't remember how that goes with the allocations.

This goes back to one of the basic ideas to me. Why is the payroll company telling the plan and sponsor what can and can't be done vs the plan document and the sponsor telling the payroll company what needs to be done? The sponsor and the plan are the customer for crying out loud! The plan document not the payroll company determine what can and can't be done in the plan. The sponsor is most likely paying the bills. Yes, I understand the payroll company has its ways but if the 401(k) deferral was legit the payroll company needs to find a way to make the W-2 match reality instead of people trying to get reality to match what the payroll company wants to see happen.

Good luck with the negotiations.

Yup every plan document I have ever seen has the answer to this question. It tells you who is the beneficiary. It tells you what happens if the named beneficiary dies before payment is made.

The other thing you might want to search on the John Hancock site is if there are pdf of old statements. It has been over 5 years since I worked on a 401(k) plan on John Hancock so I just don't remember how far back you can get data off their website. But I know some of the ones my money is in I can go back a good number of years. I think you are on the right track however.

he plan was invested in funds only, no stocks/bonds. I believe I made some changes to the funds since 2009. Our point is the funds are made of stock and /or bond investments. So see what kind of funds they are stock funds of bond funds. You might want to hire your own CPA if you can't get the actual records.

Yeah I have seen plenty of balance forward plans that the only individually directed asset was the participant loans.

It would be in the section that describes earnings allocations. I used to do a good number of balance forward 4ks and PSP back in the day and most plan documents didn't say. So we pointed to the section of the plan that said if the document the Plan Administrator has the right to interpret the plan document in any reasonable way that is nondiscriminatory. So most put the interest back to the individual. I did have one plan that put the participant loans in the "bond fund". Almost 50% of the earnings were those loans and not actual bonds. I think this plan allowed people to choose to change their funds once a quarter but it was balance forward otherwise. Once again if the Plan Administrator interprets the plan and is consistent I don't ever recall a problem.

Here is what I tell clients all the time about my fees and the fees of other good TPAs. It is cheap insurance. By that it tends to save you money in the long run. I am not trying to rub salt into an open wound here but the little extra you would have paid a TPA would have saved you the cost of the TH contributions. You can either pay for good advice up front to avoid problems or pay for good advice on how to clean things up. In the end you will pay for good advice. This is field is too complex to use the cheapest provider in my mind but I could be seen as have a self-interest in my own advice so do what you want with it.

You might be able to debate the S&P 500. Do you have current statements? Are you invested in funds that are a mix of bonds and stocks? Do you typically invest in balanced funds or age dated funds? If so, counter the correct method is a blended rate of stock and bond returns. If you can show you don't switch fund ask the earnings be computed on the current fund mixes returns since 2009. Unless the court ruled the gains/loss has to use the S&P 500 it sounds like you ex-spouse is merely staking out a position for negotiations. Yes, since 2009 stocks have pretty much out performed every other kind of investment found in a 401(k) plan. So counter with your own rate of return.that is reasonable. The above is assuming actual records can't be found. The actual earnings is still the best. But after that this just sounds like a business deal treat it that way and negotiate. After actual earnings can't be determined there is no law or rule that says S&P 500 has to be the method so it is ok to push back if you desire.

I would ask your employer if they have the annual reports going back to 2009 which would include your account balance data for those years. The two companies you name would send an annual summary report of everyone's balances to your employer as the plan sponsor. If they are good at keeping records they might have the data

We need to back up here a bit. Was the QDRO approved by a court? When? Was the QDRO submitted to the plan back in 2009? Did the plan accept the QDRO? When? The account should have been split back in 2009 when the QDRO was submitted and approved a good by the plan administrator. Some thing sound off here. A splitting of 401(k) benefits in a divorce decree isn't enough. There had to be a QDRO approved by the courts.

Another thing a good TPA could help you with is if a Safe Harbor plan makes sense for you company. If you are having both ADP testing problems and Top Heavy problems it might be worth looking into a Safe Harbor plan that can be set up and ran such you get a "bye" on both of those tests. There are required contributions in a Safe Harbor plan but they can run a cost/benefit analysis for you to decide if it meets your goals at a cost you can accept. I agree with others. In any metro area of any size there are people who do nothing but help administer these kinds of plans. Also, some CPA firms have departments that do nothing but help administer these kinds of plans.

I am going to throw my voice behind the idea undoing the deferrals is not an approved correction method.

The plan administrator is supposed to keep these records. Do you represent the plan or the person getting the QDRO? If you are the person getting the QDRO talk to the plan and see if they have the records. By the way they are supposed to do the computation. If you represent the plan talk to the people who help you administrate the plan. See if you can get the records you need.