RatherBeGolfing

If participants distributions for the year are less than $200, the plan does not have to provide a direct rollover option and is not required to withhold. Just pay out and 1099. Notice 2018-74

If your document is W-2 comp no exclusions, its included. See prior discussion here The ERISA Outline Book has a good explanation on why it is included as plan compensation. CHAPTER 1A: IMPORTANT DEFINITIONS -PART I - Compensation - Part A - Item 1.g.

What is the timeline here? Did AP get a notice that the PA received a DRO or made a determination? Once the court issues the DRO and it is sent to the plan, the plan is required to give you notice that they have received it (and some additional information). The plan then determines if the DRO is qualified (a QDRO), and is required notify you of that determination. If the DRO is a QDRO, it has to pay the AP according to the terms of the QDRO. One QDRO can be very different from another, so it is impossible to say if someone is right or wrong without more information. Can you give us more details of what the DRO required, when this took place, what kind of plan it was, etc?

I disagree. The unreimbursed medical expense itself is deemed to be a hardship under the safe harbor rules. The fact that the participant had to rob Peter to pay Paul in order to actually get the procedure does not make the medical expense ineligible for the hardship distribution. This question has been put before IRS panelists who agree that it is the nature of the expense itself that qualifies for the hardship.

An example of why fiduciary insurance might be a good idea though...

NOTE: My answer assumes that the plan uses the safe harbor definition of hardship. I think it does qualify as a hardship because the nature of the expense is what determines eligibility under the safe harbor hardship rules. In my example that was submitted to the IRS Q&A (answers are the opinions of the panelists not the IRS), hospitals in my are started to require payment before procedures, though I believe it was limited to deductible and co-payments rather than the full expense. If the patient couldn't cover it, they would establish a credit line through a commercial medical financing company like MedMax or CareCredit. So rather than having people pay $10 a month to the hospital forever, they now basically have a credit card debt. Because of timing issues, it would be difficult for the patient to apply for and receive a hardship without causing delays to the procedure. So my question was, is this now simply a commercial debt (still a hardship) rather than a medical debt? Does it no longer fit under the safe harbor hardship rules? The IRS panelists agreed that it didn't matter that the payment was made with other assets (in this case medical credit) because the medical expense created the hardship. In your case, it is a little different because the use of savings rather than credit means that there is no longer a debt for the procedure like you would have with a credit line. I don't think that it should matter. If I have $1,000 in my bank account that Is budgeted for future expenses and I use that $1,000 to pay for a medical procedure, I still have a need for $1,000 that I wouldn't have had were it not for the medical procedure. The hardship was created by the medical need, and the hardship is still there. I'm sure the participant still has a need for his savings. He had to make the payment to get access to the medical procedure, THAT is the hardship. Had the doctor not required payment before the procedure, the participant would have had a debt to the doctor that no one would argue ineligible for a hardship under the safe harbor rules just because the participant has savings. Right? That is because it is the nature of the expense that controls. As the participant, I would appeal. Under Reg. § 1.401(k)-1(d)(3)(iii)(B), This is still an expense for medical care. In my opinion, the Plan Administrator improperly denied the hardship. Since a medical expense is deemed to be to be on account of an immediate and heavy financial need, it would be improper to consider additional facts and circumstances determine immediate and heavy financial need. If the plan does not use the safe harbor definition for hardship distributions, it is a facts and circumstances determination. I would not have a problem approving the hardship under a facts and circumstances test, but I don't think I would go as far as saying that it would be improper to deny it. I would still appeal either way as the participant, and considering the significant amount we are talking about, I would take it to the DOL if my appeal was denied.

As long as it is not covering the same expense twice it should be fine. In other words, I have a medical bill for $10,000. I believe that I have $5,000 available elsewhere so I take a $5,000 hardship to cover the balance. I end up not being able to pay the other $5,000 so I need another hardship. As long as the combined hardship withdrawals do not exceed the documented expense it shouldn't be a problem.

Cool. Will be interesting to find out more for sure. The announcement didn't really go into if they feel they have figured out a way around the risk of forfeiture and money laundering issues that have been a concern, or if they have simply decided to do it because they feel they are on solid legal footing and are willing to be a test case if the feds come after assets or proceeds.

FYI for everyone following this topic: I reached out, and Empower Retirement will NOT take on this type of business at this time. To many concerns in regards to how many comes in and goes out. I'm not aware of any major RK who will take it on.

I would argue that the computation period is not over (and the EE has not accrued a YOS) until the last day in the period is over. Entry 1/1/2019.

@ESOP Guy @jpod This was a first for me too. The participants children actually offered up the birth certificate issue. My guess is that they have had an issue with it somewhere else since they brought it up. My dilemma was that since they offered up the information we can't ignore it.

No designation, no will, no direction at all. While I haven't looked at the document myself, I was told the default order in this case is spouse, children per capita, and then estate.

It was considered, but as far as they knew there was no adoption.

We decided to punt to the clients ERISA atty and let them handle it.

Well, Empower isn't really Canadian. Great-West Lifeco is Canadian. Great-West Lifeco US is their US subsidiary. Great-West Life & Annuity falls under Great-West Lifeco US. Empower falls under Great-West Life & Annuity as a wholly owned subsidiary of Great-West Lifeco. So since it is would be a legal operation in Canada, I can see why Great-West wouldn't have a problem with it. I don't know if their US subsidiary would be though. Empower falls under the US subsidiary, but the parent company is Canadian. Our discussion at ASPPA Annual was based on using JH since its "Canadian", but its not directly Canadian either. JH is the US subsidiary of Manulife Financials, which is Canadian. Im sure I skipped tons of steps in the corporate structures of moth GW and Manulife, but this is sort of the birds eye view as I understand it.

Participant "P" dies with no beneficiary designation. There is no spouse. Participant had two children, son "S" and daughter "D". S and D have both been located, but they have added a twist. S and D both acknowledge that P is the father of both children, but D's birth certificate does not name the father. My understanding is that D would not be a beneficiary unless she establishes paternity through the courts. D does not want to go through the trouble for her share of an account that is worth about $10K. If S makes a claim and the plan pays him the full amount of Ps account, the plan should be in the clear right? Even if D decides down the road that she does want to establish paternity, the plan would have paid the benefit to the only beneficiary at the time of the claim. Whats throwing me off a bit is that both S and D acknowledge that P was the father of D, even though its not official. Has anyone dealt with this type of situation before?

Thanks Peter. Great-West makes sense to me because its based in Canada, so I don't doubt that they would take on a business that is legal in Canada. I think that Empower falls under GWs US subsidiary, but maybe they want to be the first big RK to wade into these waters now that Sessions is no longer AG (since Sessions was seen by many as one of the bigger federal speed bumps).

Really? Is this recent? The reason I ask because a bunch of us (including someone from Colorado :)) discussed this at last years ASPPA Annual. The question was then put to the full panel of "ask the experts", which included Sal, Ilene, and a few others. At that point, none of the major recordkeepers were willing to play along. Ilene also pointed out that it would be hard to find an attorney or TPA to service the plan because any fees collected could be seized by the feds at any point. Just curious if you know of any recent changes.

I think it has a limited application. If you use Dewey, Cheatem & Howe for your plan document needs, do you really need Sue, Grabbit & Runne to audit their work? Do you trust DCH to not make mistakes or to stand by their work if one is made? I think most clients would. There are some clients who wants belts and suspenders, so it might appeal to them.

The way it was explained to me by one of the people involved, it would be a third party "document audit" with some sort of report. In order for it to have value, I would assume that the law firm performing the service would have to stand behind their work. The point of establishing a program would be to streamline the process for efficiency and affordability, rather than just dropping off a box of paperwork at your local benefits attorney and asking them to form an opinion as to qualified status. If the fee is reasonable and the law firm backs up their service, Its probably prudent. As to whether there is real value, I'm not sure. I haven't reviewed any of these services myself, I have only had casual conversation with some people who were working on it.

I second this. I know some of the major ERISA law firms have launched or are in the process of launching services to fill the void.

Is it really that common to for the company to handpick the charity or charities that will qualify for the volunteer PTO? Whenever I talk to someone who works for a company with that kind of policy, they get to pick the charity themselves. If its a lesser known charity or organization they just have to provide some kind of documentation from the charity.

Favorite answer, it depends. What location? An entry level in Alabama will be cheaper than an entry level in Florida, Florida cheaper than California, etc... What functions will the admin perform? entry level vs experienced doesn't necessarily mean as much as what the admin will actually do. Same with number of plans. What does the admin to "per plan"? What kind of plans? Are they all on platforms? Are they All DC plans? How complicated is the plan design? For a decent answer, I think you need to at least narrow it down by region and responsibilities.

There are plenty of ways to do it other than just beginning balance, but pro rata by comp ain't it...

The taxes were paid, so no one really has a claim on additional funds. That said, I think the plan fiduciary and by extension the service provider could still have an IRS problem. The plan is required to withhold and deposit the taxes. This is supposed to be done electronically via EFTPS with the appropriate 1096/1099/945 to report the transactions. Doing estimated tax deposits circumvents the plans reporting requirement. The employee is supposed to be able to take his/her W-2 and 1099-R and report that on his/her tax return. I could see where a less than financially literate employee could screw their tax return up because things weren't done the right way. I also think its a liability to do it this way. It is giving the IRS an excuse to dig deeper for more errors, and even if there are no other errors its a PITA and a waste of time.