mbozek

Just what kind of plan is going to have such a provision? Under an ERISA plan spouses must be default beneficaries of death benefits. 403b annuity contracts are approved under state law and all provide for beneficiary designations. It is highly unlikely that a mutual fund for a 403b plan would not provide for payments to a designated beneficiary simply because it is a good business practice and avoids unnecesary litigation involving the fund when there is no personal representative such as an executor who represents the estate. How would a 403b plan enforce such a provision if the underlying contracts in which the benefits are held have a beneficiary provision?

It depends. If the plan is subject to ERISA the state law is preempted and the spousal beneficary designation will be valid unless the participant has remarried. If the plan is exempt from ERISA then state law would apply if the state law requiring revocation includes annuity contracts and mutual funds. The problem is that the plan administrator or provider needs to be notified of the divorce. Also even in non ERISA plans the parties could agree to keep the ex spouse as beneficiary after divorce by executing a QDRO or property settlement agreement. I dont see any liabiity to a provider who pays an ex- spouse pursuant to a valid beneficary designation or divorce agreement if it has not been notified of the revocation of the beneficary designaton by the participant.

I think you need to have counsel review the question of whether approval by the plan to pay the benefits is a legally binding contractual obligation to make the payment since the actual distribution of the check is a ministerial act. For example, if the particpant requested that the plan not make the payment after the the distribution is approved by the plan administrator would the plan withhold the check? You need to check cases under claims provisions of ERISA 503 for the court precedents of withholding payments. Of course, there is the option having the participant roll the distribution back to the plan in order to be rehired.

Could you please define the question that you need answered?

If a government plan any applicable state law, such as the UPIA. If its NP plan then the court could fashion a remedy based on the common law since the plan is subject to ERISA and state laws are preempted. But mere hiring of same party to perform 3 functions is not indicative of any impropriety.

The labor organization may be the primary plan sponsor of the 401(k) plan, but I'm sure the employer has adopted into the plan. If its a multiemployer plan the employer merely agrees to make contributions at the rate agreed to in the collective baragaining agreement with the union but does not adopt the plan.

IT MATTERS A LOT. Most divorce decrees incorporate a property settlement between the parties that includes the division of pension benefits. In many states the property settlement is an executory agreement which is binding under the state law of contracts. The QDRO that is issued by the court provides the details of how the pensions listed in the property settlement are to be divided in a manner that will be approved by the Plan administrator under ERISA. If a pension is not listed in the property settlement then a party would have to petition the court to reform the property settlement to include the missing pension benefit. Courts dont reform contracts lightly otherwise there would be no finality to final decisions. In order to reform the contract there would have to be a meritorious reason such as fraud by the other party. The limited facts in Bayern's post indicates that his attorney failed to inform him of a right to his ex's pension which woulld fall into the category of a unlilateral mistake by his agent (lawyer) which would not be grounds to reopen the property settlement since it did not involve fault of his ex spouse. In cases where the retirement benefits are awarded in the divorce decree instead of a property settlement the court would require a meritorious reason to modify the decree similar to setting aside the settlement agreement, other than that the participant's lawyer failed to inform him that he had the right to receive a portion of his ex's pension. The issue of setting aside QDRO benefits comes up when a participant who gave his ex the right to his survivor annuity as well as a portion of his benefits in a divorce comes back years later to request that the QDRO be modified so as to change the survivor annuity to his current spouse because he did not realize that this benefit right would be valuable if he remarried. What basis would there be for a court to modify the QDRO and take away the survivor benefit from the ex?

Question - If there is an existing QDRO on behalf of the ex-wife, is there a timelimit for filing a reverse QDRO? I had an attorney who never informed me about that I could go after my wife retirement also. I dont understand. Is a there final decree of divorce and a division of marital property?

doombuggy This is why plans must keep records of distributions forever. The employee has a presumed right to payment because he has a notice from SSA stating he has a deferred benefit due. The plan has to come with a cancelled check or other proof that payment was made.

The bankruptcy amendments act removed plan loans from discharge under the bankruptcy law. There are some special conditions for participants who file under Chapter 13.

According to IRS Pub 590, P 63, for 2010 an 8606 form will have to be filed for rollovers from an employer plan to a Roth IRA. 8606 is not required for 2009 rollovers.

There are many plans whose administrative procedures limit the time that they will retroactively split the participants account balance to a year on the grounds that longer periods are administratively burdensome. Other plans will splt benefits for a longer period if records are available but will charge the participant for performing the task.

But is the DB accrued benefit a security interest permitted under the DOL regs? I am assuming that the DOL reg provisions are not included as part of the IRS approval process and further this excerpt is only instructions. All I am saying is caveat emptor.

Yes but the employee must put up collateral for the loan since the the employee has no account holding assets in the plan to secure the loan. The collateral is their vested account balance. Am I missing something? Yes. In a CB plan there is no individual vested account balance under IRC 414(i) in which the participant's benefits are based solely on the amount contributed to the participant's account as there is in a DC plan. The CB "account balance" is strictly notional under ERISA and the IRC. My recollection is that problem has someting to do with the adequate security requirement under the DOL loan regs since there are no assets individually credited to the employee in a DB plan which can be used as collateral for the loan because the "accrued benefit" is not an asset that can be foreclosed upon or disposed of upon default of payment of the loan as required in reg 2550.408b-1(f). If there is authority to the contrary I would be interested in seeing it.

While pension plans can only pay the accrued benefit payable under the plan, the courts have and will intervene under the equity provisons of ERISA to prevent financial harship on participants who receives excess pension benefits due to mistakes by plan sponsors. In Bocchino v. Trustees of District Council Ironworkers Funds, 2009 WL 2038645, a 69 year old participant who expected to receive a benefit of $2800 a month was informed 2 days before retirement that his benefit would be $4000 a month. After he retired the plan discovered the benefit should have been $3200 a month and reduced his benefit accordingly and demanded that he refund $4000 in excess payments. While the 3rd circuit upheld the denial of the participant's claim to retain the $4000 monthly benefits on the grounds of a fiduciary breach since the participant could not demonstrate the he relied on the erroneous estimate to his detriment, it upheld the disctrict courts decision on equity grounds to allow him to keep the $4000 in excess payments received. In the case described by 401k Chaos the participant was continually informed over a period of many years of a benefit right up to the date of retirement that was 12 times the benefit actually accrued and then the incorrect benefit was paid for seven years before the mistake was discovered. If there ever was a defense of latches to deny a return of excess benefits this is it since it is more egregeous than the other two cases cited where courts intervened to deny repayment of excess benefits. How much the benefits should be reduced going forward should also be subject to the courts equity powers to prevent hardship to the participant. I dont think having the taxpayers pay for the plan's mistake by giving participant welfare is equitable but then I dont know how CA pays for its welfare benefits.

Yes but the employee must put up collateral for the loan since the the employee has no account holding assets in the plan to secure the loan.

Its been a while since I last looked a this but I think this arrangement would subject to the nondiscrimination requirements for benefits, rights and features known as current availability under the IRS regs.

A Top hat plan subject to ERISA is exempt from the J & S rules. In Dickerson v. United Way, 2009 WL 3521283 the Second circuit held that spousal consent was not required before lump sum benefits under a SERP could be paid to the participant spouse merely because of the wife's status as spouse of a participant. Also it would be difficult to bring a claim of interpleader in federal court because the spouse would have no standing if she were not designated as a beneficiary under the plan and the plan was exempt from the J & S requirement. The plan should treat the request for benefits from the children as a claim for benefits under ERISA 503 which is one of the few provisions of ERISA that applies to top hat plans and proceed to review the claims of all parties under the claims procedues rules and deny benefits to spouse for the above reasons. The plan administrator would award the benefits to the children and thus create an administrative record which would be difficult for the spouse to overcome in the event she sues. Of course the plan should have a definitive provision for beneficiary designation and default beneficiaries.

The bank can do so, and they often do arrange to recover the overpayment as described. The original poster needs to remember this: they are in possession of much more money or assets than they were entitled to receive. They have no equitable position to demand more overpayment. soCal In a similar case involving overpayment for 9 years due to an error by an employee of the plan, a court denied the plan's motion for summary judgement to recover overpayments by reducing the participants correct benefits by 10% on the grounds that the funds erroneous pension information raised equitable concerns as well as the issue of latches to equitable claims of the participant. See Kaliszewski v. Sheet Metal workers National Pension Fund, 2005 WL 2297309. At the minimum I would request that the plan provide the full actuarial calculation of how the plan determined the benefits under the plan formula and the cause of the error. That's the excitement of legal practice... getting something you don't deserve by a clever argument. It more satisfying than being an an escape artist actuary who wants to be immunized from liaiblity for mistakes that cost the plan money. I know a plan sponsor who sued an actuarial firm that calculated excess plan benefits for all plan participants when aDB plan was terminated which resulted in the plan getting a lower refund. The actuaries blamed the employer/HR for not reviewing the calculations which where I come from is called Chutzpah. It took a while but the employer received a satisfactory settlement. I dont see any problem under ERISAs rules of equity in limiting the amount of a recovery by the plan due to overpayment to the period available under the statute of limitations that applies for claims filed against a plan, e.g., the applicable state law remedy, say of 4 years subject to a further reduction in the case of financial hardship on the participant.

ERISA is a law of equity and the rule of equity swings both ways for the participants as well as the plan. Most courts have adopted the principle that a QDRO must be filed with the plan administrator before benefits commence because the plan needs to know its liabilities to pay benefits to all parties since any benefits to an ex spouse will be a liability to the plan. See Samaroo 193 F3d 185, where the 3rd circuit rejected a DRO issued by a state court after the death of a participant before retirement which modified a QDRO issued prior to the participant's death so as to add a pre retirement spousal death benefit that had been omitted in the QDRO approved by the plan. In the case of an unmarried participant, vested benefits can be forfeited because of death prior to retirement and the plan treats the savings as an actuarial gain. Where the plan has no notice of any contingent benefits payable to an ex spouse under a QDRO it books the entire actuarial amount of the forfeited beneft as a gain to the plan. Where the AP delays filing notice of a proposed DRO with the plan until after the death of an unmarried participant the plan can reject the DRO on the grounds that there are no benefits payable to the AP under the plan at the time the DRO is filed since an unmarried participant's benefits are forfeited at death. The plan could also deny payment under the equitable doctrine of latches which is the unreasonable delay of 15 years by the ex spouse in filing a DRO which caused detriment to the plan -financial liability to pay the survivor benefits that was not anticipated.

The bank can do so, and they often do arrange to recover the overpayment as described. The original poster needs to remember this: they are in possession of much more money or assets than they were entitled to receive. They have no equitable position to demand more overpayment. soCal In a similar case involving overpayment for 9 years due to an error by an employee of the plan, a court denied the plan's motion for summary judgement to recover overpayments by reducing the participants correct benefits by 10% on the grounds that the funds erroneous pension information raised equitable concerns as well as the issue of latches to equitable claims of the participant. See Kaliszewski v. Sheet Metal workers National Pension Fund, 2005 WL 2297309. At the minimum I would request that the plan provide the full actuarial calculation of how the plan determined the benefits under the plan formula and the cause of the error.

I think the first question is whether the plan permits distributions to be requested by a personal representative of the participant when a participant is able to make decisions and secondly whether the appointment of an attorney in fact by the court without the participant's consent is permiitted under state law. If the answer to either question is no then the plan should deny the request for benefits under the claims procedure rules because payment is not allowed under the plan. If the answer to both questions is yes then I would consider interpleader or outright denial of the claim on the grounds that the payment to the attorney in fact would be a breach of fiduciary duty because it is not for the exclusive benefit of the participant. If the plan pays the attorney the participant could request a payment when released from prison because he is entitled to a vested benefit The better alternative for the plan would be to pay the benefits to the participant and let the court appointed attorney sue the participant under under a state law claim such as restitution.

As I understand it Proposed reg 1.125-1(g) limits participation in an FSA to employees and self employed persons are excluded from participation. Under IRC 1372 a more than 2% owner of a S corp is considered self employed for taxation of fringe benefits. In otherwords any fringe benefits paid by the S-Corp on behalf of or to the owner are included as taxable income to the owner subject to available deductions, e.g., health insurance which is included as wages on the owner's w-2 and deducted on line 29 of the 1040. The above would imply that FSA amounts paid to the owner would be regarded as a taxable fringe benefit for which no corresponding tax deduction is permitted but I cannot find a confirmation of this answer. Is there an IRS cite?

Why would you wan to do that since the funds will escheat to the state after a period of 3-5 years or less if not claimed which is the usual case since most missing participants never return to collect their funds. Why not just forfeit the benefits under IRS reg. 1.411(a)-4(a)(6) and use them to pay for plan admin cost or to distribute among the remaining participants? There's that pesky rule about following the terms of the document. If the document says it goes to a default IRA rollover what choice do you have? Amend it. If it cant be amended then its a waste of plan assets to escheat the funds to the state.

Why would you wan to do that since the funds will escheat to the state after a period of 3-5 years or less if not claimed which is the usual case since most missing participants never return to collect their funds. Why not just forfeit the benefits under IRS reg. 1.411(a)-4(a)(6) and use them to pay for plan admin cost or to distribute among the remaining participants?