RatherBeGolfing

While I'm sure it wasn't the answer you wanted, your ex really isn't getting more than if the amount was transferred on the day the decree was signed since he/she is only getting earnings on that amount.

The anguish should be minimal if done correctly. Lets say that the EE (not catch-up eligible) deferred $20,000 in 2017, resulting in excess deferrals of $2,000. The W-2 should reflect $20,000 deferrals but only reduce income by $18,000. No 1099-R is needed to let the participant know to include it in income since the W-2 (should have) already included the $2,000 excess in as income in 2017. In 2018, the plan distributes the $2,000 excess plus earnings on the excess, lets use $200 for earnings. The plan issues two 1099-Rs for 2018 1099-R for $2,000 with code P (taxable in the deferral year) 1099-R for $200 with code 8 (taxable in current/distribution year) The W-2 signaled to the IRS that there was an excess of $2,000 and the 1099-R for $2,000 with code P has now signaled that the excess was distributed.

2007 or 2017?

I haven't looked at this one yet, but this mornings NAPA NET did point out some issues with the Small Business Employees Retirement Enhancement Act (S. 3219) and the Automatic Retirement Plan Act of 2017 (H.R. 4523).

One argument is that the deferrals can be distributed after the April 15 deadline if the excess deferrals would cause the plan to violate 401(a)(30).

This 100%. I had to argue with a DOL "investigator" in response to a participant complaint last year. She was troubled by the fact that the participant was not afforded an opportunity to direct her 401(k) contributions... In a trustee directed plan. Yea that was an interesting conversation

Yep, "fair" is just another four-letter word...

Ok that makes sense. Good reminder to proof read your work before submitting it to the government I do like the tone of this letter better than the late deferral ones that caused a stir a while back. Its always interesting to see what comes out of Philly...

This is for a transgression other than late deferrals right?

Sure, it is possible that QDRO procedures could segregate and administratively hold the assets without a court issued DRO, but not for 15 years. [ERISA §§ 206(d)(3)(H)] (H)(i) During any period in which the issue of whether a domestic relations order is a qualified domestic relations order is being determined (by the plan administrator, by a court of competent jurisdiction, or otherwise), the plan administrator shall separately account for the amounts (hereinafter in this subparagraph referred to as the ‘‘segregated amounts’’) which would have been payable to the alternate payee during such period if the order had been determined to be a qualified domestic relations order. (ii) If within the 18-month period described in clause (v) the order (or modification thereof) is determined to be a qualified domestic relations order, the plan administrator shall pay the segregated amounts (including any interest thereon) to the person or persons entitled thereto. (iii) If within the 18-month period described in clause (v)— (I) it is determined that the order is not a qualified domestic relations order, or (II) the issue as to whether such order is a qualified domestic relations order is not resolved, then the plan administrator shall pay the segregated amounts (including any interest thereon) to the person or persons who would have been entitled to such amounts if there had been no order. (iv) Any determination that an order is a qualified domestic relations order which is made after the close of the 18-month period described in clause (v) shall be applied prospectively only. (v) For purposes of this subparagraph, the 18-month period described in this clause is the 18-month period beginning with the date on which the first payment would be required to be made under the domestic relations order.

This isn't adding up for me. If the plan designated OP as the AP 15 years ago and continues separate accounting of the assets now, they must have already received an order. Surely this was not a unilateral decision...

I agree that this would make sense, but what if the participant is both missing and does not have a SSN? The program addresses missing or unresponsive participants, but you still have to identify the participant. If the participant is not cooperating, and you do not have a valid SSN or TIN, what do you do?

Good point.

I have read about this before but never looked at all the detail. The way I understood it at the time, it was a employer contribution made to the plan conditioned upon student loan payments, but regardless of whether the participant makes 401(k) contributions. I think it was a PWC product aimed at larger corporations. I have also seen a different approach, but again I havent really looked at the details. This approach would be that the participant with student loan debt defers comp to the plan, and in turn, the company makes a payment directly to the student loan company. Lets say the company agrees to pay off up to $1,200 per year of student loan debt if the employee defers at least $1,200. So the employee defers $100 per month, and the company makes $100 a month in loan payments. The loan payments would be taxable income to the participant, but the participant is also building a balance in the account.

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No, its more along the lines of an unnecessary expense to the plan. They either have to have certain balance in the account that could be invested elsewhere, or they have to pay monthly fees for an account that might not be used for several years.

Many financial companies will not issue third party checks/payment, they will only issue a checks/payment to the trustee. If the plan does not have a checking account with check writing capability, those payments to the trustee are often deposited to the sponsor's operating account Which then issues the payment to the participant. So the plan pays the sponsor who then pays the participant. Usually, the payment to the participant is made as soon as the sponsor gets the assets from the plan. There is no gain to the sponsor in terms of interest or earnings, it is merely a conduit. The alternative is for the plan to open and maintain a checking account which will usually mean fees and/or minimum balances. I see this a lot with pooled plans where there is very little turnover. They might have to process a distribution every 2-3 years.

The "good" news is that even if they wont remove the penalty completely, you could go through the EZ late filer program and pay $500 per plan year. Still stinks but better than $15k

You have to disclose the fee. Most 404a5 questions are answered by FAB 2012-02r. FAB 2012-02r Q1: A plan has both participant-directed and trustee-directed investments. Participants have the right to make investment decisions with respect to the portion of their accounts attributable to employee contributions. The plan's trustee directs the investment of the remainder of their accounts (e.g., employer contributions). Is this plan covered by the regulation? A1: Yes, this plan is a "covered individual account plan" under paragraph (b)(2) of the regulation. This means the plan administrator must comply with the plan-related disclosures in paragraph (c) and the investment-related disclosures in paragraph (d). However, the plan administrator is not required to provide the investment-related information required under paragraph (d) of the regulation for the trustee-directed investments. Rather, the plan administrator's obligation under paragraph (d) is limited to the plan's designated investment alternatives.

Look at FAB 2012-02r, specifically Q29 & Q13 (emphasis mine)

I'm going to get the ball rolling here since we have a lot of issues to get through... What was the AP actually awarded from the plan in the divorce? It sounds like a flat amount of $80K at the time of the divorce, is that correct? Why? If the divorce decree said $80K, where is this percentage and years of marriage coming from? Presented to who? Was it issued issued by a state court and approved by the plan? Or are we talking about a proposed change to the original DRO? Contradictory because of the 2014 date? Its not really clear to me what you mean by determination date of 2014. Going back to 2004 for interest/earnings is what I would expect to see since that was when it was awarded. It makes no sense freeze that benefit for 10 years and then accrue interest from 2014 to now. Why do you think this would be illegal? Approved by who? To be a QDRO it has to be issued by the court and approved by the plan. It sounds like the judge won't issue an order with the "correct percentage" because that was not what the decree awarded to the AP. The DRO can't create a right that was not awarded in the decree, even if you disagree with it.

On a practical level, it still happens all the time with pooled plans. Most of the time its because the financial institution will not issue a third party check so they issue it to the trustee who then issues the check to the participant. With an explanation, I have never had a problem with it on audit.

There are differing opinions in the industry (and here on benefitslink). It has been discussed in detail in this thread While I agree with the ABC & CD method over ABCD method, the unofficial IRS response is that neither method is unreasonable

Of course they know. What is the alternative, tax participants on the fees paid by money they never got?

Sort of... There is a case out of the 9th Circuit (Mack v. Kuckenmeister, 619 F.3d 1010) where the estate of the AP was allowed to receive the benefits. It has been a while since I read it, but it basically goes like this: P and AP agreed to the details of the divorce, with all or a part of Ps 401(k) account going to AP Before the order was signed, P killed AP and shot the Judge APs estate got an an order nunc pro tunc dating the order to a date before the death of the AP. I think the AP is still the AP on the order, but the estate is allowed to collect the benefits on APs behalf. There are a lot of other things going on in this case, but I believe the estate was allowed to collect because they got a retroactive order dating back to when AP was alive. It also gave the state court the SM jurisdiction to decide that a DRO is QDRO. OP is in the 9th Circuit and it sounds like the plan is asking the court to enter an order (state court can determine its order is a QDRO) to pay the benefits to APs estate since AP died after the divorce was final but before a DRO was issued.