RCK

I am not claiming that their position is correct, but I would guess that they would be relying on the 5500 instructions, that say several times in the instructions to questions 6 and 7: This category does not include an individual if an insurance company has made an irrevocable commitment to pay all the benefits to which the beneficiaries of that individual are entitled under the plan. I think that position is somewhat defensible for a DB plan that is distributing annuity contracts, but have trouble with the DC side--isn't it implicitly a rollover to an IRA?

Referring back to PJK's response, I believe that the answer to Moe Howard's question is "yes". I would make them ask specifically for that document, and woudl not automatically volunteer it. It is well known that the sponsor can charge the participant reasonable copying costs. But NOTE that the alternative is that the sponsor has to make it available for their review at any geographically convenient site that has some minimal number of employees--I think that it was 25. RCK

The assets of any plan are to be used for the exclusive benefit of the participants. Using the assets of plan two to reimburse plan one for a blunder is clearly not acceptable. I'm not even sure that you could do it within a single plan. pax's suggestion that you look for precedent is always a good one, but we'd certainly like to think that there have not been so many mistakes that we have a precedent. RCK

I would take a practical perspective on this situation. I agree with earthy--an amendment of the order is not necessary. But since this is presented as a DRO and not a QDRO, that means to me that neither you nor the prior plan have certified it as Qualified yet. If there is anything else in the order that you are going to require be changed, then get the plan name changed too. But if the order would be otherwise approvable as is, then let it go as is. RCK

The primary question is whether the additional contribution is based on salary for eligibles (what I think of as a pure profit sharing contribution) or is based on the employee deferrals (a profit sharing Match). We have plans done either way, but I don't think that we have one that does both. The question as originally phrased was a "pure" profit sharing contribution, and as paraphrased by pax was a profit sharing match. RCK

Gary, My only comment is that I don't know anything about Railroad Retirement benefits, so Tier 2 does't mean much to me. Intuitively (which means that I don't have any facts to confuse me). I'm back with part of my original observation. You're still going to have to do general testing to pass 401(a)(4), and you can impute Social Security benefits, but only SS benefits. I'd guess that passing 401(a)(4) is going to be tough. RCK

Ouch. I mis-read the formula. I assumed that the formula was 1.5% of FAP times YOS less 2/3% PIA times YOS. Based on your second posting, and re-reading the first it must be 1.5% FAP times YOS less 2/3 PIA. Then you'd be right--this is not going to pass anything. It's formulas like this that helped give us ERISA in the first place--the sponsor is implicitly claiming credit for 2/3 of the Social Security benefit, despite the fact that the employee paid for 1/2 of it, and any other employers that the employee had paid for their share. RCK

I was kind of surprised that you had not gotten a response to this post in nearly a week, so I'll take a shot at it. I think that you have to test for 411 (B) compliance based on the net benefit, but you should not have a have problem passing. The regs say that you can do the projections using a static compensation figure and and static social security benefits, and it seem to me that if you do that your formula is essentially fractional. So your formula is not backloaded. The bigger problem seems to be 401(a) (4) compliance. You don't have a safe harbor formula, so you have to do general testing of the net benefit. But in the course of that testing you do get to impute Social Security benefits. That's not to say that you will be able to pass--it should be interesting. RCK

This may sound like a dumb question, but here it goes anyway. I realize that when the alternate payee takes a distribution from the original plan, that distribution is not subject to early withdrawal penalties. But if they roll that distribution over to their account in a different qualified plan, is it still entitled to a free pass from EWP, and if so is it only the dollar amount of the rollover, or the portion of the entire account attributable to that rollover (initial amount plus gains/losses)? RCK

It appears to be unanimous. The participant's benefit as of the date of divorce is zero, and you could facilitate creation of a QDRO that divides that benefit. But I think that you are doing everyone a disservice if you allow the process to continue. Contact whoever submitted the DRO to you, and explain that you can proceed, but that you don't see the point in splitting a $0.00 benefit. RCK

There is no simple and accurate way. You can have simple or you can have accurate. Assuming that you know the interest rate, you can get close by using either a financial calculator or a spreadsheet program, and figuring out the present value of a benefit stream. You know the annual benefit, the annual rate of return, and can guess that the period of payments is about 27 years. Plug those into whatever you use, and voila--a present value or lump sum. RCK

The employee cannot defer any earnings after they reach the $170,000 level, and employer contributions cannot be made on earnings in excess of the $170,000 level. So if you allow employee contributions of at least 6.2%, the employee can reach the $10,500 limit before they reach the $170,000 limit. If the employer contribution is a true match, then it has to be defined as a percentage of the employee deferrals. And if you defined the match as 50% of the first 6% of ee deferrals, then the employer match would be 50% of 6% of $170,000, which equals $5,100. It gets really interesting if you have a non-calendar year 401(k) plan. Then, the $170,000 is a plan year limit and the $10,500 is a calendar year limit, and trying to maximize the employee contributions and the employer match can become pretty challenging. RCK

I agree with your tentative position, assuming that you use standard safe harbor hardship language. The hardship was final when you approved it and ordered the check cut. The fact that she did not use the hardship distribution check as she (and you) expected it to be used is immaterial. I'd tell her it is too late, that it is not a reversible transaction, but that she is undoubtedly going to try another purchase and she should save the money for that. In reality, she could probably come back to the plan in a month and get a whole new hardship distribution (I think that we have a few people who have done this). RCK

The position of a well-known recordkeeper during their conference call on military leave issues was that it definitely would apply. But given the perspective that the participant is paying the loan back to themselves, they might not want to have their loan rate reduced to 6% for the duration of their leave. RCK

freeerisa is a great resource. To ANNEBV: it works best if you can search by EIN, and you should be able to do that. Searching by name can be a challenge, because you are dependant on the exact wording that the person filing out the form used. It seems like that should be obvious, but I have had trouble in the past finding documents I knew existed. RCK

We sent a bunch to our district IRS office in St. Paul in June, and got several responses yesterday. Leads me to believe that they did not forward them for at least 3 months. One of the recipients said that his letter arrived in a hand addressed envelope. RCK

My answer was based on reg 1.401-1(B)(1)(ii) and Q 14.44 and 14.45 of the 1999 401(k) Answer Book (old, but still relevant in this case). It does apply only to 401(k) plans that are part of a Profit Sharing Plan or a Stock Bonus plan, but my experience is that most 401(k) plans are based on PS plans. The 401(K) Answer Book does include a reference to a very old Rev Ruling that allowed "withdrawal of all funds", but it is a pre-Erisa Ruling. The bottom line in the question originally started by Carl C is that he is very likely out of luck, because this 2 year rule (if it is indeed still valid) is extremely rare, may not apply to ee deferrals, and certainly is not going to be included in his plan. RCK

In general, MGB is right There are more possibilities though. The obvious ones like loans and hardships undoubtedly would not help in this situation. Similarly, death disability and attainment of age 59 1/2 probably don't help much. The only possibility left seems that plans can allow the distribution of funds that have been in the plan for as few as 2 years. It is something that the sponsor has to decide to do, and it is a pretty unusual feature, but maybe your plan allows that or the sponsor might be willing to amend. RCK

Assuming that the distribution took place this year, and that the withholding check was made out to the IRS, I'd be going back to the bank that cashed the check. They have contributed to this fraudulent act, and will probably be even more concerned when you tell them that the check that they mishandled was made out to the IRS. They will have more leverage with the participant, and may be able to get this all unwound before the end of the calendar year so that no reportable event has occured. RCK

No. Question A-1 of the proposed regulations under 401(a)(9) says that the proposed regs apply to plans qualified under 401(a) and annuities qualified under 403(a). RCK

As I understand it, a Special Tax Notice is supposed to be provided no less than 30 days and no more than 90 days before an eligible rollover distribution, and the 30 day notice can be waived under certain circumstances. We do offer waiver of the 30 day period. But we have not always monitored the 90 day requirement. We are allowing web-initiated distributions, and those are of course OK because the notice is there when they make the request. But if the participant gets the distribution form and Special Tax notice from their local HR person, we have no way of tracking the date that it was delivered. So my question is whether other sponsors actively monitor the 90 day requirement, or if there is some way around it. Any advice would be greatly appreciated.

I agree. Upon receiving a bankruptcy notice, we automatically suspend loan payments and follow our normal loan default provisions. We will continue or restart loan payments only if requested to do so by the participant and approved to do so by the court.

Good question. I believe that the court in question is a Federal District court, located in Illinois.

As always, I agree with pax. We have done transactions many different ways. But if you are looking for a more definitive answer: We tend to bring participants in immediately if they were eligible for a predecessor plan, and make them wait for an entry date if they weren't eligible yet, or the predecessor employer did not have a plan. Don't overlook the purchase agreement as a source of information--no telling what someone has already committed you to.

My standard disclaimer: I work for a plan sponsor, with a lot of plans that we inherited in acquisitions ( I think we're down to 28). We have gotten to the point that we look for any way that we can eliminate a plan via merger instead of termination (we will always file for a determination letter). The cost and hassle of the termination process is generally much worse than an inconvenience of a merger. In your case, assuming that you have roughly the same population in both plans, I don't see why having the Joint and Survivor requirement apply to a larger account is much of a problem. On the other question, I think that you could restrict rollovers to those coming from a particular plan. You could always do the sneakier approach of allowing rollovers from any plan for the period that you are makidn distributions from the MP plan. As soon as the MP distributions are completed, you stop accepting rollovers.