Mike Preston

The plan must allow for the rollover of non-spousal monies. In a plan termination, the IRS will allow adding this provision after the termination date, although I think it would be better practice to add it before or coincident with the termination itself. There are some documents where the pre-PPA language could be read to enable such non-spousal rollovers without the need for an amendment. But, if the plan allows it, then it should be something you can get done.

Could it be the reduction to account for the fact that the recipient is younger than the participant? I wouldn't call that the "survivor annuity reduction factor", but I guess I can understand why someone might.

Just curious, mjb, but how, exactly, is your response even remotely related to the issue being discussed?

Isn't the Code pretty clear on this? If one receives more than $10,000 in an annual period, then it is not a de minimus benefit, as that is defined. Do they really need a reg to clarify something that is already unambiguous?

Gosh, I hope nobody takes you up on your offer to accept an email with the article attached. If the article were published here I would certainly delete it forthwith, as it is copyrighted and available only to those who subscribe to a premium service offered by Mercer. Might I suggest you go to their website and pay for the service necessary so that you can gain access to the article in question legally?

kprhok, you have it right. Keep in mind that if the employer's choice of SEP-IRA involves an investment which is specific to the institution, while it theoretically can be moved, the intended recipient IRA may not want to accept it. Similarly, if the employer's choice of SEP-IRA investment has any sort of built-in discouragement, such as a requirement to leave the funds in the institution for a certain period of time or else the investment suffers what may be called a "market value adjustment" or "deferred sales charge" then the movement of the funds may involve a significant decison on the part of the participant.

With the above said, the specific answers to your specific questions are: 1) I don't believe that a plan sponsor can force the disposition of assets from a terminated plan to be transferred to an IRA (such as what would be associated with a SEP-IRA) without participant approval. 2) The plan sponsor can establish the SEP-IRA accounts at the institution of the plan sponsor's choosing. The participant cannot force the plan sponsor to deposit funds in an IRA of their own choosing.

The more technical term for what you have referred to as a "SEP" is a "SEP-IRA", I think. Essentially, once monies have been deposited into an account established by the SEP sponsor on behalf of a participant, that participant has an IRA. A personal IRA. Hence, the participant can manipulate that IRA the same way they could manipulate any other IRA they have. They can make withdrawals. They can transfer monies to an alternate IRA, etc., etc. Of course, any movement of the funds would be subject to whatever rules are in place at the IRA, so the participant could be charged an early termination fee or market value adjustment if the investments in the IRA called for same. But the basic answer to your question is that once the account is established and funded, the sponsor no longer has any control over the disposition of the assets. The account is a personal IRA account of the participant.

Well, you and I are on opposite sides of the Hopkins issue. I just don't think we reach Hopkins at all if the DRO is a QDRO and it, by itself, provieds that the 30 remaining payments are already "owned" by the P. Hopkins stands for the presumption that if the DRO is silent on the issue and the plan has already established an unambiguous beneficiary with respect to the 30 payments remaining, and that beneficiary is not already P, no amount of post-death manipulation on the part of the court will result in an entitlement to those 30 payments for the P.

I don't disagree that following the plan's claim procedures may be the best course of action. However, if the claim involves interpreting the existing QDRO/plan language, I see no reason why modification of the QDRO is even on the table. If it isn't on the table, there is no reason to see anything about state law vis-a-vis modifying QDROs.

Chiming away.... You have succeeded in confusing me, austin, but no matter. I'm frequently confused. Yes, pay date rules. However, if the election form was received so late (e.g., Friday, June 29th at 4:59pm) as to make it impractical for their payroll processes to establish the deferral from the July 3rd paycheck, I see no harm in having the deferral begin as soon as administratively practicable. In a perfect world, the SPD would say just that: You can change things by submitting an election form before January 1 or July 1 of any year. However, any change you request will become effective no sooner than the date it is administratively practicable to implement. Or something like that. On the other hand (famous actuarial phrase, that), if the election change was submitted well in advance of July 1st and the only reason these good folks were denied their plan-given right to defer was because the good folks in charge of these things were, shall we say, misguided in thinking that the pay period must begin after January or July 1, well, I think you should let them know that they shouldn't do that (unless they have specific advice from ERISA counsel) and that they should correct the error in accordance with the rules of EPCRS. A pain? Yup, a pain!

While I tend to agree with QDROPHILE on most things, there appears to be an ambiguity here. If the QDRO states that the participant is entitled to some portion of the AP's benefit, then the participant is entitled to some portion of the AP's benefit. Normally, I would expect that this sort of provision would apply to a benefit that is not yet in pay status. But I don't see any reason why it couldn't also, if drafted explicitly, apply to an AP's death benefit payable from the plan. In this case, the continuation of the payments for the guaranteed period (the remaining 30 months) seems like it is up for grabs. If the QDRO was intending to force the Alternate Payee to select the participant as the AP's beneficiary and this was "accomplished" by the AP not selecting a specific beneficiary on a plan beneficiary designation in the (possibly mistaken?) belief that the QDRO would then be interpreted as providing the intended result, there is definitely a controversy here. I'm not sure whether interpleader is the correct course of action or whether there is another legal avenue that the plan and/or participant can or should pursue. That is a discussion reserved for an ERISA attorney. But if a QDRO can state that an AP is the P's surviving spouse for ERISA purposes, it should be able to state that the P is to be the beneficiary of any death benefit payable to AP's estate.

If a loan doesn't have a required provision, which you refer to as a mandate, doesn't the loan inch toward, if not race toward, losing the prohibited transaction exemption?

What the Fish said. Under IRC. However, there may be a different result under ERISA. The fact is that we just don't know. Yes, yes. I know. The IRS has jurisdiction over all things "accrual." Nonetheless, if a participant wanted to claim this was protected, I doubt there is a court in the land that would consider it a silly lawsuit. Sometimes the "correct" course of action isn't the one that is legally defensible at a cost. Instead, it is the action that ensures one needn't defend anything - legally defensible or not.

If he no longer has a security interest in the property then the loan should be repaid. <clears throat> The original loan WAS recorded, was it not? As long as the property stays in his name, the loan doesn't "go poof". But if the property is transferred, the loan must be paid off, just like any other secured loan. Right?

I'm not aware of any rules being violated as long as the document doesn't preclude it. That is, the Code and the regulations don't seem to have a prohibition on multiple loans of this kind. However, the plan or the loan policy might have been drafted in such a way as to preclude this circumstance.

Anything is correctible. It is just a matter of how deep into the pockets one must reach.

Boy, I wouldn't want to be the actuary for this plan if it were referred to the ASB. What part of the funding calculations fall under the definition of reasonable? I suppose it is possible that the client was kept abreast of not only the statutory minimums, but also the calculations of something that might satisfy the definition of reasonable.

In one thread you bemoan the fact that the client isn't read the riot act regarding taking a position which is arguably supportable (or, conversely, arguably unsupportable) and now you come off indicating that the client (in this case a non-owner no less - which while not determinative is certainly an indicator that he really wouldn't relish taking on the IRS over this - especially in light of the fact that it is likely to be a relatively small amount of money) might consider this course of action? A little heavier on the warning, please, for nothing more than consistency.

Wasn't intended that way. It was intended to highlight just how difficult it would be to get the IRS to go along with it. His client may decide to go forward and may even win audit roulette, but he shouldn't even begin to suggest that the client play it without legal advice indicating the dual relationship is legit. And just based on the question, I find it beyond comprehension that ERISA counsel would go along with it.Call me cynical today.

jpod, the circumstance you describe is incredibly rare. Much more likely an episode from SNL starring a new Whiner. Dr Whiner!

No, they would welcome it. They have a country's budget to balance, you know. What better way than to have another plan to disqualify?

wsp, this is not your father's IRS we are dealing with today. Would that it were the way you describe. Ahhh, for the good 'ol days.

We certainly have precedent for your taking comfort in this position. But I wonder if that comfort is misplaced? Historically, the 1992 401(a)(4) regulations were chock full of examples that didn't make it into the final 401(a)(4) regulations. The IRS made it clear back then that removing the examples in no way disenfranchised them. We have therefore taken great advantage of those examples even though they were removed, for precisely the reason you mention: they were not referenced in the final regulations as being removed because they were in some way misguided. However, that was a special case. The IRS admitted that they pulled those examples just so they could shorten the 600 pages down to a more manageable 300 or so pages. This was done to make it look like they were simplifying things in response to the cacophonous (there's that word again) cries from Congress that the new regulations were "too complicated because, for heaven's sake, they are (now everybody raise their voice with me, please) 600 PAGES LONG". The IRS made no bones about the fact that the reduction to 300 pages was a political ploy that got Congress off their collective backs.No such similarity exists today for the 414(v) regulations, so I wonder if pulling that example didn't indicate that the IRS has indeed "rethunk" their position.

If somebody wants to comment on 401(a)(26) they have to be a bit more forthcoming than what was initially posted. In this case, it doesn't matter because the plan that is used as the offset satisfies the definition in 401(a)(26). But let's assume, for a moment, that it didn't. We would still not have any information that makes me believe 401(a)(26) is an issue. Could it be an issue? Sure. But then the original message was woefully inadequate.