jpod

Sorry, just realized I mis-read Mike Preston's first sentence. Never mind.

Mike, in my situation everyone agrees that the beneficiary is entitled to everything other than the 2016 RMD. I am surprised you think the beneficiary is entitled to the 2016 RMD. What does a compulsory payout provision mean if it doesn't establish a fixed liability to the participant as of 11:59 pm on December 31, 2016?

This is not a question of "responsibility." It is solely a question of who is entitled to the money that per the plan's terms was required to be paid to the participant by 12/31/16. Not sure IRA situations are relevant because there typically is not the same kind of compulsory pay out language in IRA trust agreements or custodial account agreements (if only because if you have multiple IRAs you don't have to take an RMD from each one).

Ok, we're tied 2-2. I'd love to hear from some of the other mavens who've been around the block a few times like me.

Really? The plan, which in essence is a contract, says it must pay money to the participant by 12/31/16, but it doesn't. So, as you enter 2017 there is an account payable, a debt if you will, owed to the participant, and eventually to his estate as his successor in interest. Given that simple fact please explain why you think the Beneficiary should get it?

Terminated participant left money in employer's plan, and received annual MRDs for a few years through 2015. The 2016 MRD was not distributed in 2016. Participant died in 2017, and 2016 RMD still hasn't been distributed. Assume Plan document has normal 401(a)(9) provisions that REQUIRE that MRDs be distributed by year-end. Is there any doubt that the participant's estate, rather than the death beneficiary, is entitled to receive the late 2016 RMD amount? (Executor is not worried much about the 50% excise tax, but even so he feels he has a fiduciary obligation to the estate to collect this money from the Plan.)

The previous year could have been a partial year; e.g., executive hired in the middle of 2017, then fired without cause in 2018 and his/her employment agreement says severance is 2 years' compensation. Stranger things than that have happened.

The arrogance is compounded, I think, by the fact that if it's over $1,000 and you don't hear from the participant you must do an automatic rollover, and quite often the annual charge is going to be more than $28 per year.

I don't know if there is an advisory opinion on point, but absent one I think it is safe to assume that if the individual worked the full year that year, you can use the W-2 Box 1 amount for that year, and if less than a full year you can annualize the W-2 Box 1 amount. It doesn't say "regular salary," or even "cash compensation;" it says merely "annual compensation." Besides, it's only a safe harbor, isn't it?

Is this a self-directed DC Plan? If so is it typical to charge this type of expense to participants? How exactly do you disclose this? ("Sorry but we incurred $XXXX in professional fees in connection with an IRS audit of the plan and you're paying for it!")

Sorry, it's Section 206(d).

Luke Bailey: I don't know if this changes your mind, but if you're thinking is that a plan merely MAY comply with a QDRO, you're wrong, at least for a Title I plan. Section 206(e) of ERISA says that a plan MUST comply with a QDRO. So, we're back to my original question (which I won't repeat for the umpteenth time).

Luke Bailey: Huh? The statute says a DRO is a QDRO, and therefore binding on the Plan, if it says that the AP can select any distribution option available to the P. Therefore, how can the Plan by its terms restrict the AP to fewer options?

FGC: Yes, I have seen that in the DOL document, but we all know DOL has some strange views on the QDRO rules. Therefore, I was asking what people thought the law really is on this point. Thanks to all those who took the time to respond.

FDC: All good thoughts, but way over-the-top for my situation. All I want to know is what Benefits Link mavens think about the underlying legal issue: Can a plan narrow the forms of benefit available to an AP as compared to those available to a participant?

It is an IDP, not a prototype of volume submitter. You'll just have to take my word for it. I don't know why it was written that way, but it was, and it got by the IRS upon review of the DL (perhaps even for multiple cycles, and perhaps even before the 5-year cycle program too). The question is whether the language in 414(p) and the equivalent Title I provision that says that the QDRO can't require a form of benefit not otherwise allowed under the plan imply that you can't narrow the forms of benefit available to APs, or does the "otherwise allowed" language refer to forms of benefit otherwise allowed FOR APs without regard to the forms of benefit allowed for participants?

Universally? Of course not. However, it could be insulting to the OP to bring up something that is completely obvious unless he or she has given us a clue that we need to point it out. (And I am not suggesting at all that I think ESOP Guy was insulting the OP.)

Fair enough, but I like to assume that the person who posts the question has thought through the obvious issues first, at least where that person is some kind of retirement plan professional or an accountant.

Why are you assuming that? Maybe she is making $20,000 and it's all gravy because she doesn't need it to live so she wants to make the largest 401k contribution possible ($18,000 or maybe as much as $19,000 if she is 50+). You can't do that with a SEP or SIMPLE. She could open her own solo 401k but why bother if her son is willing to go down the MEP road. Of course, I am making assumptions here too, including that the son's plan has a 401k feature.

The point I was trying to make is that the sanction for violating 409A is not the imposition of excise taxes, because there are no excise taxes (unlike, for example, a COBRA violation, which does result in an excise tax). The sanctions are the acceleration of the employee's regular income tax liability on the deferred compensation and the imposition of additional income taxes attributable to the deferred compensation.

I think it is a much tougher case than that if the Plan is silent and doesn't say what happens if the B dies first, although perhaps there are court opinions out there which serve as a basis for My 2 cents' view with which I am not familiar.

Thank you My 2 cents. Yes, the QDRO would be a separate share award. The plan allows the participant to elect J&S options with non-spouse beneficiaries, and a few different certain and continuous life annuity options. The plan says that an AP can get only a single life annuity. I think this is just wrong, and I am concerned that maybe the Plan should ignore those limitations and just follow the law, and not rely on the favorable DL.

Might? What in the law creates a doubt?

Cuse, I'm not confusing anything, but you're confusing me. The issue is this: If the plan gives the participant an array of distribution options, can the plan be written to take those away from an AP? I say "no."

I am looking at a DB plan with a very recent favorable DL that by its terms limits an alternate payee's distribution options under a separate share QDRO to less than what's available to a participant (e.g., can't elect any of the joint and survivor options available to participants). Putting aside the fact that there is a favorable DL, is that permissible? I thought the statute, or at least the DOL's interpretation of the statute, provides that a QDRO can give the AP the same distribution options available to the participant (except entitlement to statutory QJSA rights).