Belgarath

There was a question that I was replying to, and it apparently disappeared, or at least I can't find it again quickly. It was asking about the definition of "dependent" and questioning whether it had changed after 2004. So here's the response I made, or tried to make, in case anyone is interested. The final regs did modify it. Section 1.401(k)-1(d)(3)(iii)(B) makes some modifications. Hopefully I got the reference right...but it changes the definition of dependents to ..."(as defined in section 152, and, for taxable years beginning on or after January 1, 2005, without regard to section 152(b)(1), (b)(2) and (d)(1)(B)." That's for tuition, etc - I think the other applicable changes refer just to 152(d)(1)(B). Anyway, I'm sure you will want to look it up.

Kind of hard to venture any opinion without knowing the specifics of the plans you are talking about. That line isn't completed for PS plans, which are the bulk of the plans out there these days. Are you talking about pension plans, that did in fact pay lump sum distributions?

Agreed, but this is a disclosure to the fiduciary, not to participants. I don't know if the DOL utilizes (unofficially) a different standard than they do for participant disclosures, particularly where the fees are not being paid from the plan. As I re-read this, perhaps not the most lucid of posts. I added in a factor which really isn't germane to the issue, so I'm removing it.

I'd be cautious about definitive determinations on this, without knowing the facts and circumstances. Do I agree with the above comments? Yes, with the caveat that you should check this with ERISA counsel. It may be, for example, that the corporate reorganization can be legitimately characterized as two separate and distinct corporate events. And the ERISA counsel could conceivably advise no PPT whatsoever under the right combination of circumstances. Likely? No. Possible? Yes. I know there has been some litigation in this arena, including Matz, and Sea Ray, among many others. I don't know many of the details, and certainly don't presume to offer an opinion as to the possible interpretations and application of cases to this particular situation - that's up to the attorney! Also, I don't know how much money is involved. Often it is cheaper to 100% vest than it is to hire counsel, risk IRS ire, possible litigation, etc... Now, if that isn't a wishy-washy answer, I don't know what is! Have fun!

Just playing Devil's Advocate - or perhaps they were attempting to have every combination in one disclosure, so that is would not be possible to give the wrong disclosure. Particularly if it is given by their agents/field force, the possibility/liability of incorrect disclosures for a given product or product combination is probably staggering.

It has been many years since I worked for an insurance company, but the distribution is reported on a 1099, it isn't a taxable distribution. It goes in a separate box - perhaps box 8, but you should look at the 1099 instructions to confirm what needs t be done.

Oh, I thought I had forever banished some of this from my so-called mind. However, an annuity contract that is nontransferable may be distributed with no current taxation. Payments subsequently received from the contract will be subject to tax. I think the citation is 1.402(a)-1(a)(2). This will also refer you to other sections. I don't recall all the permutations, but it sounds like MM is correct.

Maybe he's just being nice, and the actuarial increase by the time he must start RMD payment will give her a higher monthly payment. Of course, he could jump off the Saginaw bridge, and then she'll get nothing. Wouldn't THAT show her. And I apologize for my strange sense of humor - some people don't get it, and may be offended by such a joke.

MoJo - just curious - if you had to "guess." As a non-lawyer, I'd think that in the absence of unusual circumstances, if a valid divorce decree and QDRO have provided for a certain settlement, and one party wants to modify that to their benefit, and to the detriment of the other party, that the judge would be unlikely to grant it. Is that reasonable, or is it a completely unwarranted guess in your experience?

I know my parents always told me that they were "divorce-proof," since they had an agreement that whoever ASKED for the divorce had to take 100% custody of us kids!

Just a matter of idle curiosity - now and then, in a QDRO situation, an attorney includes the entire divorce decree, or draft decree, or whatever it might be called. This is the exception rather than the rule, but it happens. I was wondering if this violates any sort of privacy rule, client confidentiality, etc.? It isn't that I mind receiving them - in fact, they sometimes make for fascinating reading - I've seen some crazy, zany, entertaining, humorous, and sometimes incredibly sad stuff. Just wondering if it is allowed, or technically a no-no?

No one can answer that question for you. But consider this: You aren't out one single penny. You got paid the after tax contribution, that would otherwise have gone to the plan, in your paycheck. Do you really want to risk the potential ire (and retaliation - officially they cannot retaliate for this, but there are ways!) to be greedy and get some "free" money to which you aren't really entitled by most common sense standards? If I were in your shoes (and I'm not, so my advice is at best uninformed, and most likely useless) I'd lighten up and drop it at this point. And don't forget - the argument can be made (although I don't think the argument is necessarily valid, as I stated earlier) that under the Revenue Procedure, no correction is due. Good luck.

Ah - thank you both!

Hi Luke - we'll agree to disagree on this. I don't think it is thin support at all. I think it is explicit. "Contributions are made pursuant to a cash or deferred election only if the contributions are made after the employee's performance of service with respect to which the contributions are made (or when the cash or other taxable benefit would be currently available, if earlier)." With forfeitures, the funds were contributed to the plan long before the service was performed. It is interesting to note the specific difference between this, and the exception offered for matching contributions - see 1.401(m)-1(a)(2)(iii)(B). I doubt that this is coincidence. "Tis an interesting question., regardless of which interpretation you choose. Personally, I wouldn't want to have to argue this with the IRS, but I'm generally pretty conservative on most of this stuff. Anyway, I have no pearls of wisdom to offer!

Thank you for the response. However, where, if at all, do you find a requirement for advance notice of an amendment reducing future benefits in an HRA? For example, calendar year HRA provides that once a participant pays $1,000 out of pocket, the HRA kicks in. If the employer decides that they want to change this to $1,500 effective October 1, 2017, is advance notice required - and if so, what is the specific timeframe? In the qualified plan world, we have ERISA 204(h). What, if any, is the corresponding citation for an advance notice requirement for an HRA? Thanks!

I'd say no. See 1.401(k)-1(a)(3)(iii)(C).

But it wasn't "due" until 4/1/2017. So you report it on the 2017 form, if you are going to report it at all.

The instructions on the SF appear to be different than for the 5500 See the following from the instructions for the Schedule I: Line 4l. You must check “Yes” if any benefits due under the plan were not timely paid or not paid in full. This would include required minimum distributions to 5% owners who have attained 70½ whether or not retired and/or non-5% owners who have attained 70½ and have retired or separated from service, see section 401(a)(9) of the Code. Include in this amount the total of any outstanding amounts that were not paid e continued to remain unpaid. Pardon the incomplete copy/past above - it didn't completely work, but there's enough to get the gist.

What Mike said. One other issue I'd possibly be concerned about (and admittedly this may be a stretch) is a possible breach of fiduciary duty. PARTICIPANTS are being allowed to direct investment of plan funds to which they are not yet entitled. To me, this is different than someone who just isn't 100% vested in their account. Again, as Mike said, the whole thing is a very bad idea.

I don't believe there is any advance notice requirement, even if ERISA applies, correct? Yes, any eligible expense incurred prior to the amendment date would need to be covered, but still no legal/regulatory requirement for advance notice, similar to a 204(h) notice in the qualified plan world? Thanks.

Just off the cuff without really thinking about it... You may not need any documentation - a partial plan termination means that every affected participant becomes 100% vested. No documentation needed for that. Does the employer intend to contribute to everyone, or only those who MUST receive a contribution? Reason I ask is that obviously you will fail coverage with a last day requirement. So, the plan may have "fail-safe" language which mandates the specific process of who gets a profit sharing allocation, up to the point that coverage passes. If so, then in order to give an allocation to everyone, the plan will need to be amended. Plans typically contain language allowing for valuations, other than on specified dates, for any date deemed necessary or appropriate, etc. by the Administrator, so you are probably fine there. These are just terminated participants - it isn't yet a PLAN termination, so unless there is a big rush, why not just wait and do a normal 12/31 valuation? Why do two? Just a thought. There are likely other issues - as I said, this is just a quick bunch of random thoughts.

I know the language may say that, but good luck getting an auditor to agree. I don't think it stands up based upon official guidance. If you ask Relius, I expect they might agree. This language is nice to hopefully prod a participant to pay attention, but I would not want to try to hang my hat on it if trying to defend the employer's failure. (Yes, if audited, you'd use that 'cause it's all you have got, but I'm not confident the auditor would agree. But hey, I've seen some fairly lenient audits, so you never know. I just wouldn't decide NOT to correct based upon this language.)

Isn't the 401(b)(6)(C) dispensation for coverage only, and not for nondiscrimination? Although a design-based safe harbor under 401(a)(4) can often be deemed to pass, but these days, such plans are becoming fewer and fewer, at least in our small plan market.

First, are you doing an "in-plan" Roth rollover of your after-tax contributions? If not, I don't see that it is necessarily such a big benefit, particularly for just two payrolls. I can't speak for your employer, but if correcting an error, I think there is latitude to temporarily exceed the 50%, until the error is corrected. But that's up to them. One of the principles of self-correction is to put the plan and participant in the same situation they "would have been" absent the error. As long as no IRS limits are being exceeded, shouldn't be a problem IMHO. How much, in actual dollars, was "missed?" And I don't know how much you are contributing, but although the deferral limitation doesn't apply, the IRC 415 maximum does - presumably your employer is tracking this. Good luck.

p.s. as 401noob suggests above, the correction in Appendix A.05(5)(b) for missing after-tax contributions is 40% of the "missed" contributions. Personally, I think this is crap, as it gives the employee an undeserved windfall, which is one of the things the changed Revenue Procedure was supposed to prevent. If an employer self-corrected using the "new" procedure (no QNEC) I wonder if an auditor would object? Or, if you submitted it through VCP, if the amounts were high enough to be worth it, if the IRS would approve the filing? I can't answer those questions, as I've never had any direct experience with this situation. Any thoughts out there?