RatherBeGolfing

Yes. I think reasonable professionals can disagree on the word by word interpretation of the statute, so I'm not convinced that the guidance is necessarily inconsistent with the statutory language, or the statutory intent.

I think the DOL has taken that position when an EZ was filed instead of a 5500/SF, but I dont think the same applies to SF rather than 5500. 2019 SF Instructions

Do you really need to file DFVCP? I think you can just amend. Im pretty sure the SF still counts as the "same form" for timely filing purposes.

this 100%!

There has got to be more to this...

More IRS guidance. And not on a Friday! Notice 2020-51

Reponding to @Belgaraths question here in an effort to keep discussion in one thread for simplicity Initial thoughts: I think some of the claims are non-starters, and others are troubling (though Im not sure if its enough move forward on). NEVER encourage former employees to keep their money in the plan! I mean why? It creates so much extra work and potential for mistakes. Once they gone, get them out. I dont know how nuanced the "if the market is up you can always keep the money in the plan" statement was, but that is a big no-no to me. It has to be communicated, but I would stay far away from anything that could be interpreted as a suggestion or advice. They screwed up by not providing paperwork when requested. Let them fill out the form! It cant be processed yet, but here ya go! Just not smart as it shows a failure to act on a participant request. Plaintiffs requested a special in 2019 when the market was up, but we don't know how the plan was invested or if plan the plans investments were up as much as the market. Similarly, we don't know if the assets in 2020 tracked the market losses. Stating that the market was up as much as 15% in 2019 and that at the time the special val was determined the Dow average was down 14% and the S&P 500 was down 9% isn't indicative of wrongdoing or inconsistent application of the special valuation. It might help them get past a motion for summary judgment though, as it is a question of fact. Obviously, I dont buy the claim that completing the year end valuation by March 24th is an unreasonable, unfair, arbitrary, capricious delay. Further, the allegation that the since the special val can be done in 30 days it is unreasonable to go beyond 30 days for the year end val is just ridiculous as we all know. Other allegations such as breach of fiduciary duty because of a conflict of interest when the trustee is also a participant should be defeated easily. Biggest issues I see are the "you can always keep the money in the plan" statement, and the refusal to provide distribution forms.

Agreed, I think this could have been avoided or at a minimum handled much better.

That isn't the context of the statement in 2020-50 though. The distinction is made throughout 2020-50 because it is possible to have a distribution that is not rollover eligible but also a CRD, like a distribution to a qualified individual who is a non-spouse beneficiary. The distribution would be eligible for the favorable tax treatment as a CRD, but cannot be repaid/recontribtued. IRS guidance says all distributions and repayments for a CRD must be reported using Form 8915. You don't have the option to not do it if you also want to claim the CRD benefits. If you simply decided to not report the year 3 repayment on the 8915, the IRS could just say that it wasn't proper CRD repayment, so the $100,000 is actually a quite significant excess contribution. I want more definite guidance from the IRS either way, but so far the IRS has not provided a mechanism that enables the the recontribution of a pretax CRD into Roth IRA.

Does notice 2020-50 change anyone's opinion?

So many issues beyond the actual special val if we take plaintiffs allegations at face value...

Still reading it lol

It isn't necessarily a matter of getting out of the obligation, but the details are going to be important. I had a similar discussion with a client not too long ago. "I cant afford the SH contribution" rarely means that they truly cannot get the money to make the contribution. If there is no income, no assets to liquidate, and no line of credit that can be used or established to fulfill the obligation, then it is a different conversation, but most of the time it is more of a cash flow issue. When I had this same conversation with my client, we got to a point where they could at least find the assets to fund the non-owner portion of the contribution. Why? Because the IRS and DOL will ultimately look at the best interest of the participants. If you truly cannot get the cash to fund the contribution, you will be in a much better negotiating position if you can show that you at least found a way to make the non-owners whole. In my case, after the non-owners were funded, the remaining obligation wasn't as impossible to fund when considering that all of the remainder would go to the owners.

How much of the $32K is going to non-owners?

irs.gov sort of addresses the Rev Rul 2014-9 and Form 5310 issue.

Dont forget about DOL...

Ive been out of commission due to a virus (appears to not be Covid though :)), but I wanted to circle back and just wrap up from my perspective. I don't disagree with the policy argument(s), offering protections to both a possible spouse and plan sponsor. My concern is pretty simple, what is the legal basis for denying a distribution to a participant who is otherwise entitled to a distribution. The only reasoning I have seen before is that spouse has an interest because he/she is the 100% beneficiary absent a waiver, but I don't think that is enough. A sponsor could always elect to be subject to QJSA rules, which shouldn't be an undue burden since no one elects an annuity anyway... This is basically the same issue I have with plans that have vague or overly broad QDRO procedures, which can deprive a participant of distribution at the mere mention of a divorce, rather than the receipt of a DRO as required by statute.

Ok, same here, but what does that have to do with anything? QJSAs were primarily put in place because many families were single income with one spouse taking care of home and children. Mandating the survivor part was a way to protect the non working spouse by creating a right top a benefit that had to be waived. Obviously, that doesnt exist in a non-QJSA plan.... Legal reality? I get your point, but where does the legal authority to prevent Mr. or Mrs Dirtbag from blowing the money in vegas come from? Since more and more young people are NOT getting married, what about couples with kids, been together for 20 years, just not married? Same dire need of protection right? Same legal right to a benefit (none) in the non-QJSA plan. We all work with legal requirements right? The same thing that has us saying "sorry, the document is the document" would also apply to things like when someone can take a distribution. There are tons of stuff I would love to do to prevent people from making really stupid mistakes (like no participant directed plans....), but that doesn't mean I can just unilaterally do it.

The big development here was to default to electronic without consent. Part of the reasoning being that it is difficult/inconvenient to get an affirmative election from a large number of people. Presumably, you dont need to default to electronic delivery for a document that is available only by request.

Im sure there are, I have at least heard people talk about them, but what are they consenting to? In a plan where QJSA applies, you consent to a distribution other than the QJSA (where the survivor annuity benefits you directly rather than benefitting the particupant). In a non QJSA plan, what are you consenting to/waiving?

...insofar as such documents are consistent with ERISA

A couple thoughts on this.... When QJSA applies, spousal consent is needed for a form of payment other than qualified joint and survivor annuity, since part of that annuity is for the benefit of the spouse. When a plan is not subject to QJSA, spousal consent is not required since there is no survivor annuity benefit to waive. If the plan still requires spousal consent, what exactly is the spouse consenting to if he/she does not have a benefit to waive? What about the participant's right to a distribution? Can the plan prevent the participant from getting a distribution by requiring someone without a direct claim on the benefit to consent to it? Requiring a notary or plan admin to witness execution of the paperwork is a separate issue. This is to make sure that the person requesting the distribution is actually the participant, to prevent fraud. I don't see any issues there, even if it is inconvenient.

Typical year might vary depending on the number of participants. If you have 50 participants, there are notices and disclosures that will probably not be triggered every year, or even every other year. If you have 1,000 or more, those rare notices and disclosures for the 50 participant plan may happen at least once per year. SAR SPD SMM QDIA Annual 404a-5 disclosure and Investment Comparative Chart Changes in investment alternatives Changes in fees charged to participant accounts (404a-5) Changes in fees (408b-2) Quarterly 404a-5 QACA EACA Annual benefit statement 404(c) Promissory note for particpant loans Truth in lending disclosure (still applies to some loans right?) QDRO procedure upon request QDRO notice (DRO received is qualified or not qualified) Mapping notice black out notice AFN, accrued and vested benefits, 204h, failure to meet minimum funding, funding based limitations [Im sure there are more, I admit I rely heavily on the actuaries to handle the DB related stuff....]

@Luke Bailey if the account balance is $100,000, it will be a $50 fee plus a $99,950 distribution, with a 1099-R for $99,950. If the account balance is $100,050, it will be a $50 fee, $100,000 distribution, and $100,000 1099-R. The fee is paid by the participants account in the plan, not by the participant after the distribution has taken place. Although I have seen one TPA try to take the fee after the amount left the recordkeeper but before it got to the participant. It was a poor attempt to get around 404a-5 disclosed fees by not having the plan pay the fee... If the participants account (the plan) pays the fee, it is not part of the distribution, it is treated like any other fee in the account.

I pretty much agree. The one exception may be the rare participant that outright says "I dont qualify but I really need the cash...." But even then, circumstances can change.