jpod

To try to be helpful, let's start with a question: What do you mean when you say "is being litigated," and what role are you playing in the "litigation"?

Ugh. Because the parties and the judge want the AP to get the gross amount, not an amount net of withholding.

This is only a stab, because it's something which should be researched, and I'm not going to do that. I'll answer the question by asking you questions: What is the cause for doubt? Why would there not be w/h? Assuming w/h is required, if the order said DO NOT WITHHOLD TAXES, I think I could get comfortable treating that as the participant's election out of w/h and comply with the order, i.e., I can't imagine the IRS would impose penalties for failure to withhold in that situation.

Isn't the rule that you can have reliance on the Model SEP only if you don't have another plan? So, if you do have another plan, but you follow all the rules, why would there be any adverse consequences of losing "reliance"?

Only commenting on Issue 1. My advice would be to have counsel write a friendly letter to the Judge and the parties' lawyers explaining the error of their ways and explain that penalty risks to the plan administrator if it complied with that aspect of the order in fulfilling its tax reporting/withholding obligations. If the court was local I would also ask for a hearing. Then I would wait awhile and hope for the best. If after waiting awhile there is no satisfactory resolution I would advise the plan administrator to approve the DRO but ignore the provision regarding taxes and comply with the tax law. Having created that record would serve the plan administrator well if the AP's counsel raises heck and tries to drag you into court for contempt or what not.

That answer (from Pub. 969) surprises me, because it seems to be inconsistent with the policy behind HDHPs and HSAs. Assuming that is the correct answer, I find it hard to believe that the employer's cost in funding the HSAs and the "MOOPs" would be less than the cost of health insurance with no or a very low deductible.

I don't see how there would be an RMD because the employee has not reached his/her RBD. For that reason I also question your assumption about a rollover to an IRA.

Yes I think there would be a lot of potential for a 510 claim. However, maybe these docs are just honorable people and won't take advantage of their employer's mistake and won't contribute. As long as it is not the result of any threats by the employer, no problem.

I have had many situations where there was too much room for interpretation of certain provisions and the matter was settled by a letter signed by both parties, or their attorneys, confirming a particular interpretation. I don't have any concern that this approach would put the plan's qualified status at risk. This is to be distinguished from a situation where a material element is completely omitted from the DRO.

David Rigby: I am pretty sure everyone recognizes that. We are contemplating whether and when the plan can be amended to accommodate the deal which the parties have struck, or at least that's what I am contemplating.

Inasmuch as they are physicians by 2019 they may be clearly in the HCE zone.

The client should be advised to bite the bullet and tell these folks - immediately - that they have to be eligible for 2017 and if they become entitled to a match the client will pay it. The client can then think about 2018 and thereafter and if it works to amend the plan to exclude them you could do that, if it doesn't work then they will need to renegotiate the employment agreements.

Assuming the plan allows for designation of charities as beneficiaries, the money must be paid to the charities in accordance with the designation. The Plan cannot pay it to anyone else.

CuseFan. Interesting point. But, on the other hand, the calculated IRA RMDs were "overstated" because the IRA balance had not been reduced from year to year by RMDs.

You can file the 5329s and claim a waiver of the excise taxes and keep your fingers crossed. I think if you provide a thorough explanation demonstrating with appropriate calculations and copies of 1099-Rs how he mistakenly "covered" his IRA MRDs by taking extra MRDs from the PSP you would have a very strong case for a waiver. Of course, you better make sure that the in-service withdrawals beyond the PSP MRD amount were permissible otherwise you are admitting to an operational violation.

I very much doubt that the plan documents delegate to the trustees of the plan's funding vehicle, the trust, with the authority to hire and fire other plan service providers. That is either a plan administrator function or a plan sponsor function. Nevertheless I agree with the ultimate conclusion that while in general any out-of-pocket costs associated with that should be legitimate plan administration expenses, the devil will be in the details when it comes to certain costs.

I think it's a mistake of fact contribution, so you could take it out. Your approach would work too but if terms of plan limit contributions to cash only is this a "cash" contribution?

The scenario Sal describes has absolutely nothing to do with my situation.

I agree with you about the QPSA. So, then we are left with the question of whether anyone has a claim to the other piece of the accrued benefit. Based on the terms of the plan as you described, I don't think the plan is liable for that other piece.

This is a much harder question then mine. I'm not confident of an answer to suggest one.

RTK: I am happy for your vote but I do think that the fact that the terms of the plan - i.e., the contract - require a compulsory distribution is critical to the analysis, not irrelevant as you suggest.

Why do they think that? And, even if under some theory it was felt that the entire benefit should be paid, under what theory could you deny the surviving spouse the legally-required QPSA, and who would receive the balance in excess of the QPSA?

FGC: I am not sure what point you are trying to make here. I have made an assessment of the likelihood that the Executor will succeed on his claim, and was just curious what other BL mavens thought about it, just for the heck of it I suppose.

My concern is not the plan's qualified status or the need to correct an operational failure. My concern is only as the lawyer for a creditor, or possible creditor: the executor of the estate. With that said, the operational failure is corrected if the late RMD is paid to the person entitled to it, but first you have to figure out who is entitled to it!

Flyboyjohn, you raise a fair point but in response I would say that the pre-existing debt trumps the beneficiary's entitlement.