jpod

Does the sister, in her capacity as Executrix, have a lawyer? If so, best option is to get a short letter from the lawyer confirming that the Executrix, acting as the Plan Administrator, has determined that there is no designated beneficiary and is entitled to receive the money on behalf of the estate of the decedent.

AndyH, you're right in terms of the "$225,000," I was just addressing it more generally.

Of course age is important. I just didn't want to get into any details because information secured from this message board would be no substitute for a conversation with an actuary (including the actuarial fees and other costs of carrying the plan in relationship to the anticipated level of tax-deductible contributions). Also, the client's tax advisor should weigh in on the extent to which the QBI deduction could be impacted here.

It sounds like he could be a good candidate for a DB plan (which doesn't necessarily have to be a cash balance plan) if he doesn't have too many NHCE employees (taking into account IRC Section 414 aggregation), but he needs to confer with a pension actuary.

I got a bit tired reading your facts but it sounds like you are simply amending the two plans to change the accrual formulae prospectively and not changing the timing of distributions, and you are not "terminating" anything for purposes of 409A or otherwise. As long as the employer's contractual obligations under the existing plans permit this I don't see any issues (other than perhaps some difficulty explaining to the participants what you're doing).

Based on the stated facts it seems that he is still an eligible participant so he is a "participant" for purposes of the ERISA disclosure requirements and a valid claimant under the Claims Procedures rules. However, I don't see how he could possibly be entitled to information about his ex-spouse's account or that this would even be a matter that is subject to the Claims Procedures. He may have a perfectly valid reason for wanting/needing the information, but that doesn't mean he is entitled to get it from the Plan.

CB Zeller, I think the S Corp would have to be set up after April 1 of the year after he turned 70-1/2, but I agree I did not specify that in my example. (That's another odd thing: If you set up the S Corp on April 1 the loophole doesn't work, but it works if you wait until April 2.) I also agree that the statute and the regulation say what you say they say. I am just having a tough time wrapping my arms around the rollover gimmick, but unless there is no caveat about rollovers buried in the regulations elsewhere I guess it works. This enables my Fortune 100 Executive to avoid RMDs for so long as he keeps working, which may be forever.

Is this loophole - i.e., the definition of "5%" owner - something that everyone knows about except me? It seems wholly inconsistent with the objectives of the MRD rules. Let's take a more likely example. Joe Smith retires as CEO of a Fortune 100 company at 70. He has $3MM in that company's 401(a) plan which he leaves there except for annual MRDs. After retirement he sets up an S Corp through which he acts as a consultant to some large companies, raking in fees every year in the health 6 figures. At age 72 his S Corp sets up a DC plan to which he makes generous annual contributions AND rolls over the remaining balance from his former employer's plan (net of the MRD for that year). The assumption here seems to be that he does not have to take MRDs from his S Corp plan, even MRDs attributable to the rolled over amount. This surprises me.

Forget about it. MoJo's response sounds completely logical and is the only one that is relevant.

I am inclined to agree that you have to go with (1). However, isn't she entitled to the full survivor's benefit given that she was the spouse at the ASD?

A possible, but complicated, way around it was discussed in the prior string which CuseFan mentioned. It might work for NHCEs and/or very modest contemplated per-person contributions, but other than that I would stay away from it.

Wishing all BenefitsLink Folks a very happy and healthy new year! I have learned so much over the past 15+ years or so from actively participating and also just lurking from time to time.

It is based on the number of participants at the beginning of the plan year (which is broader than "eligible employees").

First, any such order would make sense only if the APs share is to be segregated to a separate account for the AP under the plan, as opposed to an immediate distribution. Given that, what in Section 414(p) says that a QDRO can't dictate the investment sources of the alternate payee's share? This is assuming that the terms of the plan don't prohibit that, although I would question whether the terms of the plan COULD prohibit that.

Will there be any tax reporting associated with the proposed fix of retitling the account? I hope not. I would not recommend taking any corrective action vis a vis IRS, at least not yet. What I would recommend is (a) she should hire a lawyer, and (b) the lawyer should contact the broker and the broker's firm and explain that they are going to be held responsible for any adverse tax consequences and try to get a tolling agreement or otherwise file a lawsuit, unless the limitations period has expired. If the limitations period has expired then Luke Bailey's idea is excellent.

There can be plenty of other pt scenarios besides selling to a family member. This is not the forum for providing a dissertation on the pt rules. If you give us the important facts, unvarnished, perhaps someone can help you determine if there is or could be a pt involved.

I don't see the need for an appraisal. Of course: (a) it better not be a pt; and (b) the plan - and not the participant or the employer entity (if there is one) - must pay all of the expenses associated with the transaction.

My recollection is that those "brands" didn't come into existence until the significant liberalization of the rules in the 2001 tax legislation (which made one-person 401k plans better than one-person SEPs).

Agreed, but he may not have to pay if he can get it fixed as I described. I have to think that the ex-spouse has some exposure to a claw-back notwithstanding the QDRO, but that involves local domestic relations law which I know nothing about.

I am not a malpractice lawyer, but I think in this case the malpractice is evident without the need for an expert (assuming the facts stated are true) and the damages are likely modest, so the insurance company will not want to waste time or money on this, assuming no good SOL defense. Naturally I am also assuming that the lawyer has coverage. On the other hand, if the damages are less than the deductible that could throw a monkey wrench into the works, although I don't know why the attorney would want to defend a small lawsuit that is going to make him look so bad.

Of course revising the QDRO will accomplish nothing. There may be recourse against the ex-spouse, which the lawyer should try to achieve without charging a fee; otherwise, his insurance company may be happy to have this go away.

One person's "hefty" is another person's "bargain." Your administrator/vendor has made an investment in developing, or at least purchasing, the IRS pre-approved documentation, and then needs to spend time making sure the specs for your particular plan are accurately reflected. I can assure you over the life of your plan, and as compared to the tax benefit you are getting out of it, you are getting a bargain as compared to the costs of hiring a competent ERISA lawyer to draft an individually-designed plan and amending it from time to time as required by changes in law and regulations. And this is coming from someone who cut his teeth on and used to spend most of his professional hours drafting individually-designed qualified plan documents and amendments to qualified plans.

Not sure what ERISAAPPLE and draper1 are getting at. Based on the facts presented this looks like slam dunk malpractice: the lawyer did not make sure the DRO was drafted in accordance with the clear intent of the parties as expressed in the MSA. There could be a statute of limitations defense, but that doesn't mean there wasn't malpractice.

I am sure it is the same as the equally meaningless "Solo 401(K)."

It is extremely unlikely that you have any claim against the plan or anyone involved in the administration of the plan. You should contact your lawyer and find out if he can get this fixed in some fashion that makes you at least close to whole (at which point he probably will contact his insurance carrier because he knows he may have some exposure if he cannot get it fixed). If that lawyer is not interested in talking to you then you should contact another lawyer.