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Might I point out that a D/C loan is NOT a loan at all. The Participant is borrowing from himself and is repaying himself with interest. The interest goes directly back into the Participant's account. See https://www.fidelity.com/viewpoints/financial-basics/taking-money-from-401k It is not like taking out a loan from a bank where you have someone else's money. A D/C loan is akin to taking $20 from the cookie jar on Monday and putting $21 back into the cookie jar on the following Monday. Unless you have some authority, please don't tell me that a D/C loan comes from the "Plan" that holds the accounts of all of the Participants and that there are no individual accounts for each Participant. Every Participant has a vested interest in the plan - just like a partnership, notwithstanding that all of the assets and liabilities of the partnership are in the name of the partnership and not in the separate names of each partner. See https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-vesting “Vesting” in a retirement plan means ownership. This means that each employee will vest, or own, a certain percentage of their account in the plan each year. An employee who is 100% vested in his or her account balance owns 100% of it and the employer cannot forfeit, or take it back, for any reason." David

See https://www.dol.gov/sites/dolgov/files/ebsa/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2023-instructions.pdf and https://wrangle5500.com/form-5500-errors-dol-audit/ The penalty for a typo of the type (pun intended) with which you are dealing is ..... https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcSvGdNyaLvTt4L4Un7XBc-Hd1WusD0wyeMXNUWiJfPjPQ&s=10

I assume you are concerned with how the Plan operates, and not whether or not the Plan must adhere to the registration, tax, criminal, etc. laws of the State(s) in which it operates. If I am correct, once you can conclude that ERISA does not preempt state law you are halfway home. I have never met a Plan that was not created by either Federal, state, county, city, municipal, town, International law or the law of some other governmental entity. I am asked to prepare QDROs with respect to Plans created overseas who are required to accept a QDRO that would be acceptable if the Plan was a US Plan. . The HOA for the subdivision where I live has a 401(k) for it's employees (swimming pool,clubhouse and grass cutting) and they use a pro forma ERISA document. Our Montgomery County, Maryland, Police and Firefighters Pension Plan is set forth in detail in the County Code, and does not provide QJSA or QPSA to former spouses unless the cop/firefighter retired before divorce and elected survivor benefits in which event the election survives the divorce. Public school teachers in Montgomery County participate in a State Pension Plan, a County Supplemental Pension Plan, and can opt into a ERISA 401(k), 403(b) or 457(b). The state of Maryland has 12 pension plan and another on the way all governed by Maryland Statutes and regulations. See https://sra.maryland.gov/members/benefit-handbooks/ The Prince Georges County Crossing Guards and the Washington County Free Library operate under the Maryland State Retirement and Pension System and the Maryland Code of Maryland Regulations (COMAR) - https://regs.maryland.gov/us/md/exec/comar/22. Unions and Church sponsored facilities make up pension and retirement plans what routine demonstrate no understanding of the difference between the shared interest allocation and the separate interest allocation of pension benefits. And every one of those plans will say something like,"This Pension/Retirement Plan hall be read, interpreted and enforced in accordance with the "State Personnel and Pensions Article of the Annotated Code of Maryland and Title 22 of the Code of Maryland Regulations". The first thing we learned in law school about corporations was that they were very likely to be incorporated in Delaware for three reasons: (i) Delaware law was very favorable to whatever it is that Corporations want to as its governing Articles of Incorporation; (ii) Delaware has accumulated a very well regarded body of Corporate law; and, (iii) low or no corporate taxes. But that has nothing to do with the law governing the retirement and welfare plans they will adopt and sponsor under ERISA, or by "The Doghouse" - best steak sub anywhere in I-95 between DC and NYC - under the law of the State of Delaware or New Castle County or Historic New Castle City. https://encrypted-tbn0.gstatic.com/images?q=tbn:ANd9GcS6mizFCOrCEVjW0DXrfGo0f9uXzvGGA4JthwjHpnWSjg&s In order to understand your issue I would need to know the issue. I cannot imagine that any Plan can be created without being approved by IRS in order to provide the umbrella for deferred taxability. And I don't think it matter who the TPA or Recordkeeper is. David

Bri: I don't recall reading anything in metsfan026's post suggesting that the loan was in default. How are you defining "default"? What does it mean when a plan "terminates"? Are there DoL regulations setting forth the steps in the process, and is the timing or the protocol set forth in the Plan Documents? I am pretty sure that the account balances survive the "termination". They don't disappear...poff....do they? Or are the account balances immediately distributable as taxable income to each Participant? No? I wouldn't think so. Do the Participants have a time frame within a rollover can be made to the Participant's IRA or other eligible retirement account? Or to elect a taxable distribution? Doesn't a Participant with an outstanding loan balance have until payments are due to make the payment...or payments that may stretch into the future? I would think so. Or does the "termination" automatically accelerate all of the loan payments due? I read these posts in the hope of reaching enlightenment with respect to the administration of ERISA plans. Why? Because my legal involves the preparation of QDROs for divorcing couples and the amount of outstanding loans can impact the amount available to pay the Alternate Payee the amount or percentage awarded to her. In 40 years of preparing QDROs I have never had to consider Plan termination as a factor that I needed to address in the QDROs I prepare or as a factor for the parties should consider in drafting their Marital Settlement Agreement or that the Court should address in the Judgment of Absolute Divorce. Do I need to add, e.g. "In the event that the Plan shall terminate prior to full payments of the amount awarded to the Alternate Payee in this QDRO it shall be conclusive be presumed that all outstanding loans have been or will be paid in full by the Participant prior to computing the amount payable to the Alternate Payee." I found this article, but it doesn't deal with outstanding loans the Plan termination. https://www.milliman.com/en/insight/pension-plan-data-plan-termination-clean Aspects of this issue were addressed on BL in June, 2024 at - And I just discovered https://www.dol.gov/node/25154 where the DoL says: "In drafting orders dividing benefits under defined contribution plans, parties should also consider addressing the possibility of contingencies occurring that may affect the account balance (and therefore the alternate payee's share) during the determination period. For example, parties might be well advised to specify the source of the alternate payee's share of a participant's account that is invested in multiple investments because there may be different methods of determining how to derive the alternate payee's share that would affect the value of that share. The parties should also consider how to allocate any income or losses attributable to the participant's account that may accrue during the determination period. If an order allocates a specific dollar amount rather than a percentage to an alternate payee as a shared payment, the order should address the possibility that the participant's account balance or individual payments might be less than the specified dollar amount when actually paid out. Reference: ERISA §§ 206(d)(3)(C); IRC § 414(p)(2)" But no explicit mention of plan termination. David

Expert with respect to what? The applicable law? Construction of a nuclear submarine? Diagnosis of PTSD? It matters.

You began by saying this was to be a shared interest allocation of benefits. You then ask about determining a separate interest. And NOBODY noticed? Just to be clear with respect to shared...... The alternate payee's portion of the participant's defined benefit plan cannot be determining until the participant retires. The formula for a shared interest is, for example: "The alternate payee shall be entitled to receive as her share of the participant's retirement annuity benefit, an amount computed by taking fifty percent (50%) of the unreduced* amount of each monthly payment, if, as and when payable to the participant, multiplied by a fraction, the numerator of which is the number of months during the marriage of the parties that the participant accrued creditable service toward retirement, and the denominator of which is the total number of months of creditable service accrued by the participant at the time of the participant's entry into pay status." *by the actuarial reduction in the retirement annuity required to fund survivor annuity benefits for the alternate payee Computing the alternate payee's share prior to the time set forth above may be interesting, but has no practical use. The parties normally have the power to AGREE to change from and shared to a separate interest allocation, especially when the parties or their attorneys for the trial court have failed to properly articulate the proper formula for a shared interest allocation. Note that I did not mention pre- and post-retirement survivor annuity benefits except at * above. Separate interest allocations don't have survivor annuity benefits. If the Plan Administrator ("PA") has "actual notice" of the pendency of a QDRO and acts contrary to that information, then the PA has breached his/her/its fiduciary duty to both the participant and the alternate payee. Refer them to me and I will be happy to sue in U.S. District Court for damages and my legal fees and expert witness fees. Attached is a Memo re: shared v. separate. Shared v. Separate - 12-31-2024.pdf David

I admit to being smothered by all of this. I don't understand how the Participant can FAIL to make full repayment in 5 years. Logic, (in my world), would be that at the end of 5 years the balance due would automatically become a taxable distribution - and done. Does the Plan Administrator have any duty to notify the Participant that the payment is coming due, or that the abyss is in sight, or of the adverse financial consequences what are on the horizon? My interest in this matter is that I handle divorce mediation and the preparation of QDROs (and similar documents transferring retirement benefits between divorcing parties). The parties are ALWAYS in financial distress. The borrow from their 401(k) plans, they take hardship distributions, they even quit their jobs so they can take post termination distributions in excess of the 50%/$50,000 loan limits. They explore the possibility of SECURE alternatives what would allow immediate in-service annuity payouts. They want to pay for the kid's braces, pay off credit card balances, pre-pay college expenses, cover legal fees and court costs.

DAVID D. Can you cite me some authority for your comment? Thanks,

It's not really a loan like you would make from a bank. The Participant has borrowed his own money, pays himself back, pays interest to himself. Just because the source is the entire plan account doesn't change that reality. Make a taxable distribution to the Participant and the "loan" will be paid off in full .

Whether you are guilty of 1st degree murder, manslaughter, negligent homicide or self defence is matter of intent. Cry havoc and let slip the dogs of war. On the other hand, just because you're paranoid doesn't mean they're not really out to get you. And what matters in court is not what's true. It what you can prove to be true. How do we hate bureaucracies? Let us count the ways? Fraud is like pornography. You know it when you see it. Have a few qualifiers: https://www.law.cornell.edu/uscode/text/18/part-I/chapter-47

State Judges have no problems entering nunc pro tunc QDROs or Judgments: (i) unless the law mandates otherwise, or (ii) unless the parties fail to request it in a timely manner. The PPA of 2006 had no problem providing post-mortem or posthumous QDROs. Caselaw in Maryland permits post-mortem entry of an EDRO with respect to a Maryland State Retirement and Pension System Plan. I have prepared Memos dealing with Post Bankruptcy QDROS I have always wondered why you Administrators are so frightened to do ANYTHING to correct an honest mistake unless you can find a law or a regulation or of Plan Document authorization to do to. The key word in your inquiry is "falsely". Nuance matters. A mistake can be false but not purposeful or intentional or intended to accomplish an immoral or illegal purpose. Or maybe it was intended a accomplish an immoral or illegal purpose. If I call one of my 5 daughters by their wrong name (all the time) what sort of statement have I made?

You should keep in mind that computers were not widely used until the late 1990's. IBM AT - Release Date: August 14, 1984. Original Price: Approximately $6,000 (around $19,400 adjusted for inflation). Discontinuation: April 2, 1987. Processor: Intel 80286 running at 6 MHz and later 8 MHz.Memory: 256 KB to 512 KB IBM XT released in 1984. Maximum conventional memory space of 1 MB I had both. Data on a failed motherboard could not be retrieved. Everything has to be backed up on floppy discs - 5-1/4" and 3-1/2". "A" drives don't work on computers with Apple OS or computers running after Microsoft Windows 7. See attached: Not everybody used these computers until the Wide World Web was created by Tim Berners-Lee in 1989. So you should not assume that anybody will have computerized or retrievable records that will help you find the answer to your questions. You are more likely to have records that were trashed long ago (no "shredding in those days either). The burden of proof is on the parties. Old legal maxim: "In court it doesn't matter what's true. It only matters what you can prove to be true." Niels Bohr: ""nothing exists until it is measured". Christopher Hitchens: "That which can be asserted without evidence, can be dismissed without evidence." Carl Sagan: "Extraordinary claims require extraordinary evidence." Did the REA of 1984 address the issues that would have been applicable in 1996? David

Random comments: Some states have statutes of limitation with respect to the entry or enforcement of a QDRO. This happens most often in states that view a QDRO as a judgment rather than a Court Order intended to implement another court order - the Judgment of Divorce. Other states will examine laches - https://www.law.cornell.edu/wex/laches Another problem is that even if you can trace the plan form then to now, the most recent plan will not have the historical records necessary to adjust for gain and losses and investment experience. This is a problem that I deal with today everytime the in-house Plan Administrators changes its TPA (record keeper). Adjustment for gains and losses can only be made from and after the new TPA is hired. I think this is BS, but nobody has the money for a court battle. You best bet is an interpleader. Let the former spouses fight it out and the judge decide. Your task is ministerial. N.B. I have had QDROs where the Judgment of Divorce was entered as far back as 1993 and no QDRO was entered until the 2010s and it was possible to trace the Plan to date. CYA David

In almost every case an Alternate Payee who is to receive a share of a Participant's 401(k) in accordance with a QDRO entered by a Court has the following options: (a) All or any part of the Alternate Payee's share can be rolled over tax free to an IRA or other eligible retirement plan [like a 401(k) for example - but check with the 401(k) Plan Administrator and make sure they will accept a rollover from a former spouse's account. They may think that the intent is to roll over funds from the another account owned by the Alternate Payee, but that is not the case.] Note that if the Participant's 401(k) account has both Traditional and Roth components, the Alternate Payee will need to have two IRA accounts to receive the rollovers, one for the Traditional portion and one for the Roth portion. As a general rule, the Alternate Payee should not roll over Traditional account funds into a Roth account without first discussing potentially negative tax consequences with a tax accountant, CPA or financial advisor. The amount rolled over to the Alternate Payee's IRA or other eligible retirement account will become taxable income when it is distributed in the future. By law, Roth accounts cannot be rolled into Traditional Accounts and must be rolled over into another Roth account. See "Note" below and attached IRS Rollover Chart. (b) All or part of the Alternate Payee's share can be paid out as a taxable "distribution" - a term of art. It will be subject to state and Federal taxes, but not to the 10% early withdrawal penalty regardless of your age. See IRC 72(t)(2)(C) and - https://www.irs.gov/taxtopics/tc558 and https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-tax-on-early-distributions But see the strange T.C. Memo. 2017-125, Summers v. Commissioner at - https://scholar.google.com/scholar_case?case=4327573022055470859&q=T.C.+Memo.+2017-125&hl=en&as_sdt=20000006 that seems to suggest that an IRA can be exempt from the 10% penalty if transferred directly to the Alternate Payee pursuant to a domestic relations order as defined by IRC §414(p)(1)(B) which relates only to ERISA plans (I think) and not to IRAs. The Plan will explain the options for Federal and State withholding. The amount withheld will be available when the Alternate Payee files his/her income tax returns for the year in which the distribution is made - just like W-2 withholding with respect to employment income. Actual taxes may be more or less depending on the Alternate Payee's total income from all sources, deductions, filing status, etc. Note: that if the Alternate Payee elects a tax-free rollover to an IRA, and a few months later decides that he/she really needs the money that was rolled over into the IRA for something important, the distribution at that point will be subject to state and Federal income taxes AND ALSO the 10% penalty if the Alternate Payee is under age 59-1/2. If the Alternate Payee elects a tax free rollover to another eligible retirement account sponsored by, for example, a current employer. the Alternate Payee may not be able to take a distribution unless and until the Alternate Payee's employment is terminated, for example, by retirement, resignation, discharge or death; although it might be possible to take loan equal to 50% of the vested balance in the account but not more than $50,000.00 - a tax free transaction at that point in time. The foregoing is the information that I give to all of the clients for whom I prepare defined contribution plan QDROs. Unfortunately I think the election in J. Simmons's case cannot be revoked and that the Alternate Payee is SOL and should consider suing whoever suggested the two step unnecessary rollover. IRS Rollover Chart.pdf This is what happens when attorneys who draft Marital Settlement Agreements and Judges who don't know the law enter Divorce Decrees try to use pre-tax retirement assets to adjust for post-tax assets such as the equity in the family home. Assume for illustrative purposes that in the J Simmons scenario the amount of the 401(k) to be rolled over to the Alternate Payee was $200,000. Assume that the Alternate Payee wanted to retain the family home, that the equity in the family home was $100,000, that there were no potential capital gains tax issues, and that the Alternate was to pay the Participant $50,000 for his/her interest interest in the family home. All you have to do it solve for the following equation assumed a combined state and Federal marginal tax rate of 20% or whatever marginal rate can be computed by a CPA or experienced tax preparer. $50,000 (post tax) = .80X X = $62,500 (pre-tax) Now just deduct $62,500 from the $200,000 due to the Alternate Payee = $137,00 rolled over or distributed to the Alternate Payee and you are done. David July 9, 2026