justanotheradmin

Glad you got your answer. I think what I, and some of the other folks are questioning is why there was a need for a new plan? An imperfect analogy: If I own three trucks, and I want to own one, usually just selling two and holding on to one is simplest. The more cumbersome approach would be to sell all three and then buy a new one. If the plans are the trucks - why were all three shut down and a new one started instead of just keeping one open and merging the other two into it? There are a number of great reasons to keep an existing plan going. There are fewer reasons to shutter everything completely and open a brand new one. I, (and I think some others) were curious as to what the reasons were to open the new plan. Was there a specific reason? A specific business need that was trying to be met? Was is just that someone didn't understand keeping a plan open and continuing it was an option? One plan could have absorbed the other two, and all of the money can be held at Empower. A new plan doesn't need to be set up to move the money to Empower or use Empower as a service provider, so the plans would have realized the cost savings your describe regardless. I realize this wasn't your original post question, but if there was a good reason to structure the merger / new plan the way it was done, we'd be curious to know that reason.

Some clarification is needed. If you really did have three plans - and started a completely NEW plan, then I don't believe the new plan can't rely on the audit waiver rules that require lookback. It's a new plan. If you had three plans, and one of them was updated and absorbed the other two plans the plan left standing would be able to rely in the audit waiver rules that require lookback, because there is a prior year to look back to. With a new plan, there is no prior year to look back into. the 80-120 look back allows the audit to be waived completely if requirements are met. The short plan year simply combines the audit with the longer regular length plan year, but the plan is still audited for the short period along with the regular length plan year. I'm not which which rule you are trying to use.

I agree with Bill. If such an amendment is effective mid-year, it would take the plan out of safe harbor status, as it's not a permissible mid-year change to safe harbor.

This issue would exist even if you had two different plans, as they would need to be tested together for the most part. It's common for HCE to have/want brokerage options but not offer them to NHCE. Is the HCE a plan fiduciary? If so, how do they justify that the investments in their account are good for them, but all of the other participants have to stick to a recordkeeping platform? I'm not saying it can't be done, but it would be a difficult argument to make, and not one I would attempt. There are several recordkeeping products out there that include a brokerage option / window. Alternatively, I have seen plans give out annual notices to participants informing them that the default is XYZ at recordkeeper ABC, but that a brokerage option through DEF is also available, here are instructions on how to do that and the person to contact to set it up. But it makes the plan much more complicated, and I would hazard is rarely done correctly. It's not clear to me what your role is in relation to the plan. If you are in an advisor capacity (either as an FA or producing TPA), my first question is are there limitations to what kind of investment options you work with? There are some low cost recordkeeping options out there, particularly if there is a large transfer coming in. Can you research those and provide other options to the employer?

I have not - but wouldn't the third party handle the payment? Same as when it was paper? When checks were sent the sponsor couldn't send a check in with their information, so a third party (an attorney maybe) would have to facilitate payment to maintain anonymity. I suppose a cashier's check could have been used and it wouldn't have identifying information. So if the attorney has an escrow or trust account, that's what I would expect the payment to come from, not the plan sponsor's account or CC. What about a pre-paid visa card or something similar? they could load it with the amount of the fee for a one-time use?

Spot on Bird.

I agree with you Bird, I found fmsinc's comments antagonistic. It is hard to read tone into electronic communications, but the BOLD lettering, and demanding nature of the comments did not seem helpful to me. I was hoping my comments would provide some clarity, and the original poster could choose to clarify or not clarify as they felt appropriate. Hopefully i'm not coming across as annoying either. Edit : based on my earliest comments - I think I got the gist of his question fine enough too.

I should clarify - a regular plain old annuity, the private personal kind purchased through an insurance company, is not what any of us are talking about. That kind of annuity account /policy would not be subject to a QDRO . Since you mention the annuity being subject to the DRO 20+ years ago, the assumption is that the annuity is part of some sort of tax qualified retirement plan, and NOT just a personal annuity. If it was just a personal asset - the DRO wouldn't have been necessary (though it would probably still have been addressed by the property settlement agreement).

Mj1804 - Your initial post did create confusion because the as fmsinc points out - for many industry professionals the term "annuity" is used ONLY with pension plans. Pension plans, by their very nature, are required to be structured with an annuity. So if someone tells me they have both an annuity plan and a pension plan I would think they aren't familiar with retirement plan terminology. It is not common anymore for 401(k) plans to have an annuity provision, and even if they do, in the industry they aren't referred to as "Annuity" or "Annuity plans" because that makes it sound like a pension plan, and folks don't want to conflate the two. If your first QDRO covered a 401(k) plan that happened to have an annuity provision , for clarity's sake, it would be much more helpful to refer to it as a 401(k) plan, and NOT use the term annuity. Something like: Plan A: 401(k) Plan Plan B: Pension Plan The concern / question I think some of the commentators are getting at is - Do/.did you really have two retirement plans? Or is there only one plan? Many of us are used to participants, employers, even occasional advisors, CPAs, or attorneys, not understanding the technical terminology of retirement plans. If it isn't something they work with everyday it tends to all get jumbled up when they ask industry professionals questions. Then someone like fmsinc has to try to decipher what they really are asking about, and its hard to do without more information.

I agree, you need an attorney. If the original settlement does not mention the pension - there is your problem. And that is distinct from the DRO. If you are concerned about the plan paying a benefit to the ex-wife before you can get it resolved, well, an attorney can advise as to your options there. Good luck.

I'm confused. You have an employer sponsored Annuity, which is completely separate from the pension? Is the Annuity part of a retirement program? Is this correct: Annuity (part of something other than the pension) - a DRO was filed 20+ years ago, ex-wife was awarded part of it. Pension Plan benefit - a DRO is filed present day, it awards ex-wife part of the benefit. Original divorce property settlement agreement from 20+ years ago is clear that pension is 100% awarded to the husband - ZERO to ex-wife. So there are two DROs, for two different retirement programs / plans? In that case you don't have competing DROs on the same plan.

I agree with shERPA. If you think of it as the RMD accrues on 12/31 of the year prior. His 2019 RMD is based on his 12/31/2018 Balance, regardless of when during the year he actually turned 70 1/2. Similarly, you analyze his ownership status when the RMD accrues (well technically 1/1/2019, but you get the idea). If he divests himself on January 2nd, it doesn't matter.

"Mega Back Door Roth" is a marketing term. An after-tax contribution is done, then converted to Roth. A better phrase would be "after-tax contribution with a Roth conversion". Sometimes we see plans with after-tax contributions but no one remembered to do the Roth conversion part (which is pretty important) so the participant finds out later that there is tax due on the earnings on the after-tax money. And I agree with JackS, the news / marketing cycle churns this up periodically and it's nothing new.

I guess I missed that the loan was already defaulted. Plans track defaulted loans every day. The fact that it might turn into after-tax basis if payments are ever made isn't a new thing. For me, its not a big enough pain to consider a very unorthodox approach to loan management. If you are looking for agreement/ validation or a blessing to your approach - I don't see much here. But the boards have been wrong before, and the IRS does sometimes surprise the industry in how it chooses to interpret things. So who knows. I'd love for someone to pose your question to an IRS panel at a conference and see what they say. I would take this as a lesson to design plan loan policies more carefully, including which sources are used for loan proceeds from the outset. One TPA I know of encourages a hierarchy where loan proceeds are taken first from employer money sources for this very reason. It is often easier to offset than if the loan was taken from deferral.

So if match is a distributable source why not take a distribution from Match - and then use the proceeds to pay off the loan? Mandatory withholding would make the distribution larger, but if the ER is willing to front the 20% to go towards repaying the loan, it doesn't have to be. For example $5,000 distribution, $4,000 to participant after withholding. ER gives Participant $1,000, participant uses the $4,000 + $1,000 to repay the loan. It would avoid the rebalance question entirely.

So - Here's a question - is this really necessary? Does the plan allow for more than one loan? Based on your fact pattern Deferrals $10,000 real money, $5,000 Loan = Total $15,000 Match $7,000 real money = Total $7,000. I'm going to assume 100% vested. Analysis would obviously be different if not. Total Account balance $22,000 Maximum Loan 50% = $11,000 Current outstanding loan balance $5,000 If the plan allows for a new loan - New loan maximum amount $6,000 (assuming there isn't an issue with the high loan balance within the 12 month lookback period). Take a NEW loan from Match - repay the old loan into deferrals, problem solved. I'm sure the actual numbers are different, but if the total account balance is large enough, it might be doable.

Well, maybe I'm pointing out the obvious - but plenty of plans/sponsors/participants have extenuating circumstances. I think we've likely all lived through a recession or two, seen companies go bankrupt, lay off workers, walk away from unfunded plans, seen business owners lose their homes etc. Just because there are extenuating circumstances doesn't mean the action is allowed. Also - what does the loan note say? Was there any other loan paperwork (such as payout instructions) that specified the sources and repayment process? The one we use references a security interest in the vested interest of the Participant's benefit in the plan. If the participant is not fully vested in the match source you propose using - or vested enough to cover the loan balance - the other arguments against notwithstanding, I don't see how the loan could be shown as being part of non-vested money. Also you'd have to make sure the plan even allows for different investments by source. I've seen participant requests to invest Roth money differently than pre-tax money for example, and not all recordkeepers are able to accommodate that, even if the plan wants to allow it. If you are using balance forward brokerage accounts that wouldn't be an issue. I'm still of the mind it's not permitted, but even if permitted there would be numerous issues.

Correct - You have to fall into one of the categories in order to be an authorized person on the Form 2848. If I recall, there are 10 or 11 categories, things like CPA, employee of the employer, attorney, actuary, Enrolled Agent, ERPA, etc. Applying for a PTIN is not sufficient.

Are you making this option available for a short time only to a specific employee? Cause that seems like something that would need BRF testing....and could easily be discriminatory (assuming it's even allowed - which I'm of the mind it's not - but I open to being convinced otherwise).

Our documents typically specific which sources are available for loan. Some say pro-rate across available sources, others restrict it to 100% vested sources, others restrict it to deferral (pre-tax and or Roth), and other still restrict to Non-deferral sources. Other have a hierarchy for loan proceeds sources. I've never heard of the participant getting to choose which sources the loan is taken from - or in this case repaid to. Which is what you seem to be asking, if I'm understanding it correctly. For example: If the loan is from an employer source and the loan is defaulted and the plan allows distributions from ER sources the loan can be offset and the plan does not have to track it. If the loan had been taken from deferrals, depending on the participant's age, offset might not be an option. Then the defaulted loan would have to be tracked until an offset event occurred. Similarly, if a participant is allowed to take a loan from a non-vested source, and then defaults on it - how would you propose the plan account for it? If your scenario is allowed, a person could take a loan from their deferral $, transfer the loan to an unvested match source, then quit. All sorts of problems would ensue.

Thank you RatherBeGolfing, I appreciate the information.

They can't just sit on them. There are other threads on this topic - money deposited to the trust by the end of the plan year MUST be allocated and cannot be carried forward. True forfeiture (non-vested money) is an exception to this rule. So if an employer deposits more than they intended - it has to be allocated as SOMETHING unless all participants are at their 415 maximum.

I would probably view those amounts as incorrect deposits. Not necessarily match, or non-elective or anything specific, until the terms of the plan are used. So the plan has extra deposits (that might be coded as match at a recordkeeper- but they might not be match) - what does the employer want to use them for? Does the plan allow for an additional discretionary match on top of whatever fixed match you say they exceeded? Does the plan allow for nonelective / profit sharing? Once the plan decides what the extra money is - and the amounts are calculated and allocated - then you run the ACP test using whatever amounts are accrued (not necessarily what is actually in people's accounts - since adjustments between participants might be necessary). And I would not refer to them as forfeitures. They aren't.

There's no chance of QSLOB status? I would do testing (maybe pick a few years as a starting sample) and see if it passes. If it passes - then there isn't anything to correct. If it fails - then look at VCP, cause most likely yes, it would be hard to categorize this as a insignificant failure.

I think you've got it right. Only to the extent applicable is doable. I suppose from a practical purpose it means if a participant dies without a beneficiary designation the domestic partner would be first in line for the benefit (before any children, parents etc.). I would wonder if there are step-children if they would need to treated the same as regular children under the terms of the document. That might get hairy. If one dies with both children and step children and some how the benefit has to be split equally among them. Hmm. I'm sure there are a number of permutations that would be tough to parse out. I feel like this ordinance and it's intersection with Federal law would be a good topic for a law review article. Maybe there is one out there. If someone knows of one or writes one, please let me know. Ratherbegolfing - does the document for your client just reference Domestic Partners (to be treated the same as Spouses to the extent possible)? Does it make similar claims for the treatment of Step Children (to be treated the same as Children to the extent possible)?