SearchLight

I've seen firms that offer a fiduciary service to review and approve QDROs and/or a non-fiduciary "offer observations only" courtesy review service of the sort ESOP Guy describes as part of their larger bundled services. It's a fairly new offering in the marketplace, though, so it doesn't have a big track record yet. In practice, it's generally much harder to get the fiduciary-level service (when it's even offered) because those that offer it typically have a long list of plan provisions/operations/history that are on their internal no-fly list because of co-fiduciary liability issues. Even something as seemingly unrelated as a past history of late deferral deposits (even corrected ones) can be enough for the service provider to nix it. It's also not uncommon to see more DROs turned back to the parties for revisions/amendments/clarifications in court when the provider is the fiduciary for the same risk-limiting reason.

I'd suggest taking a look at the loan program's language and any language buried in the loan application/terms to see if it sheds any light on the matter. I've seen these kinds of documents with language that says "if you don't use it for a principal residence purchase, you have to tell the plan administrator and make arrangements to reamortize over a 5 year (or shorter) period." Ability to enforce that is certainly up in the air, but I have seen sponsors search for cover on this topic by placing an obligation on the participant to tidy up if the deal falls through.

I'd handle this one the same way as GMK. The only time I'd go further on a plan name error is if it's so wrong that one can't tell which plan it's for (such as putting in the name of the recordkeeper/TPA in place of the plan) or if the sponsor has multiple plans and the DRO isn't precise enough to determine which plan(s) are affected by the order. Even then, a stipulation to the order stating the correct plan name that's signed by both parties and notarized might be enough to get there without going back to court.

Here's a link to an IRS forum on this topic: http://www.irs.gov/pub/irs-tege/forum13_roth_conv_opps.pdf The nutshell version is that "rollover" is for amounts that would otherwise be eligible for distribution from the plan, while "conversion/transfer" is for amounts that are not eligible for distribution.

I think that could be an aggressive position to take, particularly given the "nasty records requirement for balances" QDROphile cited earlier (ERISA Section 209, to be precise). If a prospective alternate payee really wants a dogfight and has no qualms about the time and expense involved in litigation, it's plausible he or she could make a case out of a sponsor's failure to produce sufficient records to calculate a benefit. Within the DOL's guidance on evaluating DROs, they do note that a plan's QDRO procedures should include "an explanation of the information about the plan and benefits that is available to assist prospective alternate payees in preparing QDROs, such as summary plan descriptions, plan documents, individual benefit and account statements, and any model QDROs developed for use by the plan." One could try to read into "that is available" to create cover for rejecting an order that depends on unavailable information for a calculation, but that doesn't seem like enough to create an exemption from the Section 209 requirements. Here's a nice article I found that discusses both ERISA Section 107 (which is where the oft-cited 6-years-post-filing guideline comes from) and ERISA Section 209, which can expand the retention requirements for certain records to life-of-the-plan-plus-some: http://www.employeebenefitsupdate.com/benefits-law-update/2012/9/27/retention-of-records-for-employee-benefit-plans-how-long-is.html

My take on "life of the marriage" awards is to be completely upfront about the difficulty in obtaining balance records, particularly when the dates are far back in time and/or not aligned to typical reporting periods (quarterly/annually). When I get one to review where I know that my organization lacks the records, my typical approach is to inform the sponsor that I can only go back to a certain date (usually the date they engaged services) and any necessary records prior to that will need to be provided by the sponsor or by the participant. I've only ever seen such records produced once or twice. This approach is almost always effective in making the parties stop to think about which matters more to them - the precision in the amount awarded or the speed at which the award amount can be transferred to the alternate payee's account. Once they can see that trying to obtain records for a balance on 9/18/86 is likely to be a drawn-out and perhaps fruitless search, attitudes start to shift. Much of the time, at least one of the parties is willing to take a financial hit simply to have the issue settled quickly.

I've got an open one on this topic with the IRS now, and methodology has been the source of 95% of the questions from the agent on it. The correction was handled as you describe and the agent thus far seems satisfied with that approach - the questions are largely requests for walkthroughs to verify the validity of the math. Including step-by-step, show-your-work breakdowns of each mathematical operation involved in your supplemental materials will likely ease the process.

The viability of paperless review definitely depends on whether or not the basic structure of it works for the way you think. Paperless review works best if you tend to be systematic in your approach (i.e., you always check A first, then B, then C) and like to review the same sort of thing in the same sort of way each time. It does not work as well if you're more of a holistic thinker who takes in several elements at once and then assembles them mentally like a jigsaw puzzle. But really, the only way to know if it works for you is to try it and stick with it for a good length of time (at least 6 months, I'd say). You don't have to apply it to every process, or every part of every process, but pick one or two tasks where you're committed to a paperless approach, map out in advance how you propose to do it, and apply it every time. If you're concerned about paperless review being faulty at first, you can pick a low-risk process or supplement with a slimmed-down paper review until you feel like you've got a good paperless system going. At the end of the 6 months, you can assess and see if you saw the improvement you wanted, or even if there were unexpected benefits (like saving more time than you thought). It's always OK to take it a little at a time rather than leaping in full force.

I started out in a paper-heavy small TPA, but now that I'm with a much larger firm I've had to go to paperless simply because the volume's too high to make doing everything on paper feasible. I also end up reviewing work for others in offices on the other side of the country from me, so handwritten comments on the work start to become burdensome when I then have to type them up anyway to send them back. My paper-loving office mates sometimes laugh at my e-vangelism, but it's been a major boost to my efficiency once I got past the initial learning curve. The biggest hurdle I see in adopting a paperless approach is a lack of trust in software to do what it's good at, like mathematical calculations, comparisons, and avoiding duplicative data entry. Teaching myself formulas in Excel helped me understand that a well-written formula really does do what you expect it to do. Having the confidence that you really can rely on the computer to calculate something correctly frees up time to think about those aspects of our work that require a human to think about them. Excel can't interpret a document provision or explain to a client why Mr. Bigwig is a getting a refund, but it's actually pretty darn good applying simple rules to participant data quickly and accurately. The more I go paperless, the more I like it. And it means I spend a whole lot less time swearing in front of a jammed printer.

Lori, are you asking when the participant would next get an opportunity to start deferring if he took a pass on the opportunity offered on his (re-)entry date? The entry date will remain the same, but there might still be a deferral commencement date to consider. The document I use (Corbel) handles this as an administrative procedure rather than a document provision, but it does provide a space for the plan to define when the next deferral commencement date is if the participant doesn't start deferring on his entry date but later decides he wants to defer. Other documents might handle this differently, though. There's no requirement that this commencement date be the same as the plan's entry dates, although they're often the same for administrative ease. The only limitation the Corbel procedures place on this date is that it can't be less frequent than once a calendar year.

Seems consistent with EPCRS to me - what you're proposing is pretty much exactly what 6.06(2) of EPCRS says to do. The only situation in which I wouldn't take that approach is if the excess allocation is from deferrals, because in that case, distribution to the participant is more appropriate.

Participants can (and often do) argue almost anything they want under the idea that's a breach of fiduciary duty. Here, I guess the logic would be that giving PII to a third party is imprudent, even if the sponsor's obligated to do so by the terms of the service agreement. Beyond that, the options for recourse are probably limited to whatever's available under state/federal privacy law. That's probably not a lot, though, given that the actual service agreement is between the sponsor and the provider rather than the participant and the provider.

Speaking from a recordkeeper perspective, I ask for two things before dividing accounts - a copy of the final court-approved DRO and the Plan Administrator's written approval of it as qualified. I typically work with PAs to help them in their approval/review process and let them know if I see anything that might hold up the division process, and sometimes those situations do require participant input to resolve. Those are only about 10-15% of the DROs I see, though, and the issue is almost always resolved before a PA approves rather than after. From there, I don't require the participant to sign anything to authorize the creation/funding of the alternate payee's account. Their consent to a court order saying "give my ex such-and-such amount" carries way more weight with me than any form I could ask them to sign, and I'd rather not muddy the waters by creating an extra layer of sign-off that a disgruntled ex could use to drag me into a fight I want no part of.

Austin, I'm sure we can all do better in reminding clients about retention. This topic came up for me recently when I had a new client who had to reach back to 2 providers ago to locate some records, so I've made the recommendation for the intake team to talk to clients about the subject, at least in a high-level way. At a minimum, a client needs to be aware if their records are incomplete and make a conscious decision about how they want to handle that rather than simply assume that missing records are no big deal. I agree that new clients (and their advisors, where present) are often eager to simply get things moving and dislike the dig-around-in-the-file-cabinet aspect of changing providers, so many are reluctant to drink the records-retention water we lead them to. If they balk or decide against a VCP to fix a defect, I can understand their point of view even if I don't endorse it. It eases my mind to call attention to it, though, and it gives me something defensible to point to when the inevitable "you never told me about that!" conversation comes up.

I've been on the receiving end of those inquiries, and more often than not I've been able to help - it's a hassle sometimes, but a good karma builder. It's part of why I also recommend to new clients not to burn their bridges with past providers, even if they're really unhappy with the service they were getting. In this business, you just never know when that provider you loathed will be your last hope to escape a more threatening foe. I'd love for the IRS and DOL to get their act together and set a reasonable boundary, but until then, my clients get one message - Plan Documents Are Forever.

The document I use has the same forfeiture provision at NRA, but I hesitate to use it. The major downside with the forfeiture option is that doing so makes the fact that the individual is entitled to a benefit fall off the map, which is a pain in the neck if the individual comes forward at some point in the future. If you forfeit someone today and they get a letter from the SSA in 2044 saying "hey, you might have a benefit in the XYZ plan!," will you have the records to figure out what you did, why you did it, and how much you might owe that participant? I'd prefer to never deal with that headache, so auto rollover to a provider with a robust search process would be my top choice. While I know other providers prefer the $1K cashout limit to avoid the hassle of auto rollover, your situation is one of the reasons why I've come to like the $5K with auto rollover. The initial rounds of validating who's truly missing and getting the cashouts done is a pain, but once you've built a good process, staying on top of it isn't so bad. We also supplement this process by regularly doing address searches and keeping a tight eye on returned statements and updating address records promptly - the best way to avoid the problem is to keep from losing the participant in the first place.

Out of curiosity, I pulled up the new Form 5310 instructions to refresh my memory on how far back your documents have to go in that scenario. In addition to supplying the current document, there's this: "Note: If the plan does not have a DL for the preceding RAC (remedial amendment cycle), the plan sponsor must include with this application filing copies of interim and discretionary amendments adopted for the preceding cycle." This is a change from the old 5310, which made you go back as far as the last DL. It's a small movement, but does at least show some acknowledgement that DLs are becoming a thing of the past for many plans and provides some clues as to what the eventual outer boundaries might be.

If I've got it straight, Grumpy, what you're asking is if a plan amendment to change the default beneficiary provisions could, via a retroactive effective date, create a wormhole that a potential beneficiary could reach through to invalidate a plan's previous determination of a default beneficiary under the old rules. The sequence of events you're envisioning would then look something like this: * Dave dies 8/1/14 * Plan determines default beneficiary is the estate on 8/15/14, makes payment accordingly * Plan signs an amendment (effective 1/1/14) to change the default beneficiary provisions on 9/1/14, with the result that Dave's default beneficiary under the new rules is no longer his estate Ideally, the prudent amendment drafter doesn't use a retroactive effective date and specifically states in the amendment that it kicks in only for deaths that occur after a specific future date. But if you inadvertently introduced a change like this through a retroactively effective restatement? I can see fixing that one getting rather messy.

I'd add that if they do allow the in-service as they should, they also need to make sure that the loan isn't offset automatically as part of the distribution process. Some recordkeeping systems (cough cough) are coded such that offset is the default action when a distribution occurs, even if that's not what should happen.

One thing to note is that once you've added it, it's a protected benefit. And as with all protected-benefit issues, it tends to rear its head during a plan merger or the transition to a new recordkeeper that doesn't support it well. It's a small thing, but easily overlooked when you're dealing with a raft of more pressing quandaries. The other, which is likely moot in most instances, is that you have to impose the 6-month deferral suspension like you would under the safe harbor hardship regs. The downside of it almost never having a practical impact is that the one time it does, you probably won't catch it until the mistake has already been made.

This link may help you - it's IRS discussion about casualty losses generally, and discusses the timeframes for a casualty loss to be deductible for tax purposes. Since the safe harbor definition references losses that would qualify for a deduction under section 165, it seems reasonable to look to whether or not it would still be deductible in assessing how-late-is-too-late: http://www.irs.gov/taxtopics/tc515.html

Tacking on to Kevin's point, the key things to know are where the child lives and how much money's involved. State law typically governs payments to minors, usually under UTMA or something similar. Most states will allow the plan to designate a custodian and make payment to that person on the child's behalf under certain conditions. You'll need to know what the state in question requires and any dollar thresholds the state sets where certain options (such as facility-of-payment) are no longer available. The handful of times I've dealt with these situations, the plan has been able to make payment through the surviving parent. Sometimes it's been to a UTMA account the parent establishes on the minor's behalf, and sometimes it's been directly to the parent (something like Jane Doe, for John Doe, a minor) - varies by state. In one case, the child was a teen and able to take payment directly in her state. I've never been fortunate enough to have one where the participant formally designated a custodian for their minor beneficiary prior to death, but it would certainly simplify things if you can skip that step.