Larry Starr

The answer is a definite MAYBE. The following is from Natalie Choat's authoritative book (the bible on this stuff) which every firm needs to own (this is from the on-line version which I pay good money for and it is worth every penny, and it's NOT that expensive. The estate or trust attorney needs to be involved in making this determination. Trust beneficiaries complicate the whole RMD determination. IRS regulations allow a trust named as beneficiary of the plan or IRA to qualify for this favorable form of payout (stretch out) if certain requirements are met. These requirements are usually referred to as the “IRS’s minimum distribution trust rules” or the “see-through trust rules”. The person primarily responsible for verifying that the trust qualifies as a see-through trust is the trustee of the trust named as beneficiary. The trustee is the one who must comply with the minimum distribution rules by correctly calculating (and taking) the annual required distribution. If the trustee fails to take a required distribution the trust will have to pay the resulting 50% excise tax. § 4974(a). It is highly recommended that the trustee of a trust named as beneficiary of a retirement plan obtain a legal opinion regarding the trust’s qualification as a see-through trust (or not). This will show (in case of any challenge by the IRS) good faith effort to comply with the tax rules, or (if the opinion is that the trust does not qualify as a see-through trust) shield against a possible beneficiary claim that the trustee should have used the life-expectancy payout method. The Code allows retirement plan death benefits to be distributed in annual instalments over the life expectancy of the participant’s Designated Beneficiary. § 401(a)(9)(B)(iii). Although the general rule is that a Designated Beneficiary must be an individual, the regulations allow you to name a trust as beneficiary and still have a Designated Beneficiary for purposes of the minimum distribution rules: If the trust passes several rules, it is considered a look-through or see-through trust, and the individual trust beneficiaries are treated as if they had been named directly as beneficiaries of the plan or IRA—for some, but not all, of the minimum distribution rules. The five “RMD trust rules.” Reg. § 1.401(a)(9)-4, A-5(b), contains the IRS’s four “minimum distribution trust rules” (also called the RMD trust rules): 1. The trust must be valid under state law. 2. “The trust is irrevocable or will, by its terms, become irrevocable upon the death of the” participant. 3. “The beneficiaries of the trust who are beneficiaries with respect to the trust’s interest in the employee’s benefit” must be “identifiable...from the trust instrument.” 4. Certain documentation must be provided to “the plan administrator.” If the participant dies leaving his retirement benefits to a trust that satisfies the above four requirements, then, for most (not all!) purposes of § 401(a)(9), the beneficiaries of the trust (and not the trust itself) “will be treated as having been designated as beneficiaries of the employee under the plan….” Reg. § 1.401(a)(9)-4, A-5(a). However, treating the trust beneficiaries as if they had been named as beneficiaries directly does not get you very far if the trust beneficiaries themselves do not qualify as Designated Beneficiaries. Accordingly, Rule 5 is that: 5. All trust beneficiaries must be individuals. The IRS calls a trust that passes these rules a see-through trust, because the effect of passing the rules is that the IRS will look through, or see-through, the trust, and treat the trust beneficiaries as the participant’s Designated Beneficiaries, just as if they had been named directly as beneficiaries of the retirement plan, with two significant exceptions: First, “separate accounts” treatment is never available for purposes of determining the ADP for benefits paid to multiple beneficiaries through a single trust that is named as beneficiary; Second, a trust cannot exercise the spousal rollover option, even if it is a see-through. Reg. § 1.408-8, A-5(a). Hope the above helps you.

Assuming provisions of that sort are legal in the jurisdiction (and the participant - or the plan - might want to check with the local housing agency to make sure he doesn't have redress), then it clearly looks like it qualifies for a hardship. He's a legal notice of possible eviction; to fix it, he needs to give them money (whether it's rent or repair money shouldn't make any difference). If this were one of my client plans, I would make the effort to check with one of my many lawyer clients to see if they know whether such a provision is legit in our jurisdiction. It certainly is different; I've never heard of such a provision before, but that doesn't mean it isn't legit.

That is a question that cannot be answered here. The answer is "it depends" and it depends on her personal situation and assets and other items. That is a question for a competent financial planner who will gather all the relevant information and then (hopefully) offer a reasoned opinion on what might make sense given all her data.

It generally will apply the 5 year rule OR start immediate annual distributions.

Yeah, and he might also want six extra weeks of vacation and a $10,000 raise. He can't get those either.

Indeed. All the more reason to give us everything up front and complete. Change my response with regard to adding the $1.2mill to the payout.

A beneficiary is subject to RMD's? Oh, maybe I should have said the life ins. policy is not in her account. Yes, you need to read up on the distribution rules; suggest you (and everyone else!) purchase Natalie Coates reference Life and Death Planning for Retirement Benefits. The requirements will depend on whether the individual dies before or after his Required Beginning Date. Having said that, the insurance issue is different. The only issue appears to be IF she wants to keep the contract in force when participant dies. No problem. The plan strips out the maximum cash value (via loan) and transfers the maximum loaned policy to the ex. The taxable amount will be minimal (assume max borrowing of 90% leaving $12k of value on which she will have to pay income taxes. The remaining 90% (or $108,000) can now go into an inherited IRA for the benefit of the beneficiary along with the rest of the $1.2 million, out of which RMDs will now be required, based on the life expectancy of the beneficiary or the deceased depending on how old he was when he died. Make sure there is someone who is authorized to wind up the affairs of the participant following his death who will be responsible for making the loan and distributions in accordance with winding up the affairs of the plan as well. And lastly, PLEASE EVERYONE, start with a full explanation of what the situation is to avoid wasting the time of good people who are trying to help. The opening one line question is CLEARLY not the real question that needed to be asked. Everyone should endeavor to give MORE information than you think we need, and then tell us what it is you are trying to accomplish (in this case, it wasn't keeping the plan in existence, it was dealing with the stupid life insurance in the plan!!!!!) which certainly wasn't covered in the opening volley!

Interesting; how do you figure he is a "former key"? He is STILL a key employee, just not participating in the plan.

Almost every one of my clients with a non-elective safe harbor calls it a match and I am always reminding them to STOP DOING THAT, but it doesn't seem to have any holding power... I would not worry about what it is called; it matters what it actually IS. For example, we ALL talk about 401(k) plans as if they exist, when really they are all profit sharing plans with a cash or deferred election. Yeah, there is no such thing as a 401(k) plan, but try to make stick! :-) As long as the plan language allows for what the employer is doing, they can call it anything they want so long as they don't mis-explain what they are doing (ERISA rights can attach to explanations that are in error, so it does matter how they actually explain it, even if they use the word "match"). Hope that helps.

The specific information needed is "what did you write in the plan" with regard to the question you are asking. If you were clever, you would have dealt directly with that issue and could have gone either way. While I most likely would have written it so that once you were no longer union, you were no longer grandfathered and if you later because union, you were like any other non-grandfathered employee who went to the union; you were no longer a participant. So, this is a clear case of having to RTFD and see what it says; specifically, you will have to see how the grandfathering language was written.

Here's the recent article describing Abbot's program. It was actually covered in the NY Times. It is simply a contribution to the participant's account BASED on some function of his student loan repayment, verified by an outside firm. Not all that creative; as long as the participant's are NHCEs it will work very well. If you put each employee in his/her own rate group, then you don't even need special language in the plan to make it happen. Hope this helps. Abbott Uses 401(k) Matching as Incentive for Student Loan Payments https://www.cebglobal.com/talentdaily/abbott-uses-401k-matching-as-incentive-for-student-loan-payments/

Almost definitely this plan does not provide a normal form of payout as an annuity but as a lump sum; therefore, it is REQUIRED BY LAW that your mother be the beneficiary for 100% of the account and it doesn't matter if a prior beneficiary designation was signed. I have written articles about this problem (which is disinheriting children of a prior marriage, which might be wanted he wanted), but nonetheless, that is almost definitely the case here. And even if the plan did provide the annuity as a normal form, than your mom is entitled to at least 1/2 of the account BY LAW. Now, that assumes that she did not sign any forms after they were married that waived her rights; but if she did, they would have to provide a copy of this form. Call the employer; ask to speak to whoever administers the plan. Whoever called your mom was talking out of their proverbial ass! You probably don't need a lawyer (yet); you need to talk to someone in charge of the plan and see what they say.

It's not a fringe benefit; the employer is paying a personal expense of the employee and it should be included in W-2 and withholding and SS taxes are applicable.

There is no specific cite; the IRS in Q&A sessions has said that it is a violation of BRF rules, since the benefits are no longer "equal".

The fact that the father is a participant in the plan is irrelevant. Make believe he ISN'T a participant and things will be clearer. How would it be handled if the son died and the father (non-participant) was the beneficiary? Initially, the son's account needs to be changed to a beneficiary account. Here is a good description of the possibilities available to the beneficiary; you do need to know what the plan says about death benefit payouts, so do RTFP ("fine" , that is!). Written as advice to the father. If the person you inherited the 401(k) plan from was not yet age 70 ½ (he wasn't), the 401(k) plan will allow one or both of the options below: 1. The 401(k) plan may require you to take all of the money out of the plan no later than December 31 of the fifth year following the year of the person’s death. You could take a little out each year, or wait until the last year to take it all. You will pay regular income taxes on the amount withdrawn, so you may want to take more out in years where you expect to be in a lower tax rate. 2. The plan may allow you to take the money out in annual amounts over your life expectancy according to the required minimum distribution life expectancy tables. You may be able to do this by leaving the money in the plan or by rolling it over to an account titled as an Inherited IRA. This option is often referred to as a "stretch IRA" because if you are much younger than the person you inherited from, you can stretch the distributions out over a long period of time. So, those are the options that I would expect to be offered. Of course, it seems unlikely that the stretch IRA is going to be useful to the father. One other possibility that could be available is to have the father disclaim the benefit, in which case it would go to either a listed contingent beneficiary or the next individual on the plan's default schedule. While that might be legally possible, the normal schedule of payouts might no work so well. Typically, it goes to spouse, children parents, estate. If there is no spouse and no children, and the only living parent disclaims, it goes to the estate and then, probably, back to the father. So in this case, I would doubt that a disclaimer would make any sens

Movement needs to be fast; the AP can be sued and should be immediately (even before waiting for a voluntary response) to prevent him/her from spending the loot. Then, hopefully, the recipient will return the funds that are not his/hers and all will be ok. The recipient is no more entitled to the funds than if your bank deposited $100,000 into your account by error and you withdrew it and spent it before they figured it out. You need competent counsel on this one, and FAST. It is not likely that the funds can be withdrawn "automatically". You will need the recipient's permission to take anything out of his/her account (even if it was by error; the bank involved does not want to be a party to this issue, unless the court enjoins it).

Sorry RSmith, but this is just the wrong place to be trying to get an answer to your situation. Your statement of the facts is very confusing so we really don't have all the information that is needed. More importantly, you need a competent advisor (whether an ERISA attorney who thoroughly understands QDROs or an attorney who has someone - like me or any other competent QDRO person - in tow to help figure out your situation). Whatever is said here, we just don't have the detailed understanding of the situation; free advice is worth ever penny you pay for it, but in this case, you need competent and specific advice and for that, I'm afraid, you are going to have to find competent personal advisors and not an anonymous web site. Best of luck; QDROs can be quite complicated because of the lawyers and judges involved who just don't know what they are doing when they decide how something should be divided that can't be divided the way they decided to divide it!

Well, what's the problem here? Would be nice to succinctly have all the information without having to figure out what is going on. For example, are we to assume that a new 401(k) plan was established for the calendar year beginning 1/1/18? Let's do that based on your comment about SIMPLE accounts being transferred (which raises a bunch of questions by itself which we will not deal with here). So, there is a 401(k) plan in effect 1/1/18. You previously had a SIMPLE plan that was in effect prior to 1/1/18. You terminated the SIMPLE so you could have a 401(k) effective 1/1/18. Those are the assumptions we are going to work with. A paycheck issued 1/7/18 had SIMPLE deductions taken from it. You give us information that the check covers pay for the period 12/16 - 12/30/17. The important thing is that it matters not one iota what period the check was for; it was a check paid in 2018 when there was no longer supposed to be a SIMPLE in effect. The error is that no one told the payroll people to stop the SIMPLE deferrals from the employees as of 12/31/17; no check issued in 2018 should have had a SIMPLE deferral and the fact that it covered payroll "earned" in the prior year is just immaterial. Of course, I do wonder what was done about 401(k) deferrals as of 1/1/18, but you do not provide that information and I will not make an assumption since it doesn't really affect the issue raised. What is the fix? Well, the SIMPLE is not a SIMPLE for 2018. However, the contributions were made to an IRA. And given that it was only one payroll period, I would suggest you just leave the money in the IRA and fix (correct) the payroll system to treat it NOT as a SIMPLE but as a payroll deduction IRA contribution. It is highly unlikely you exceeded the annual IRA limits with that one check. The employees have a small contribution in 2018 to their IRA which they can deal with as they wish and when they file their 2018 1040, they will reflect that contribution as treat it as required by their 2018 return.

What surprises me is that you found "conflicting" information. Distribution options are clearly a 411(d)(6) protected benefit as it relates to funds already accrued. You can change it for future, but you have to protect the option for already accrued funds; you can't just eliminate it totally. Mike's answer is absolutely correct.

Yes, I am the one that originally figured this all out when the law changed and taught the world and all the software vendors how to do the calculations. Ultimately, the software of most of the vendors now provides all you need, but my outline still shows you why and how you have to do this and why you absolutely cannot depend on anyone else to give you the correct numbers. If anyone sends me their email address and asks for my self-employed calculations outline, I'll be happy to send along the most current version of it. Send your email to larrystarr@qpc-inc.com.

You first need to ignore what they did, and instead calculate their net self employment income for plan purposes (which will include the various reductions for Sec 179 deductions claimed, unreimbursed partnership expenses claimed, and the always popular (but rarely seen) oil and gas depletion allowance claimed. You also have to apply the reduction for the employee share of the plan contributions allocated to each partner. Now, you have a number you can work with for the purpose of the individual partner deferral and safe harbor allocation (and the circular calculations that the employer contribution entails). NOW, you are ready to compare those "correct" numbers to what was actually done, and if what the did is wrong, now you apply normal corrective methods. You CANNOT always depend on box 14a to provide all the information. We like to have the K-1s for each partner PRIOR to the employee allocations, how much of the employee allocation is allocated to each partner (if it isn't based on their calculated net income), the special deductions claimed by each partner (noted above) and, of course, the "deferrals" intended for each partner. Now you have all the "stuff" to do the numbers correctly, and the results will tell you what fixes you have to make.

As a notary, I deal with both jurats and with acknowledgements. The vast majority of notarizations are simply acknowledgements. Rarely do I have to provide a jurat. Here are the differences from the notarization standpoint. Jurats A jurat is used when the signer is swearing to the content of the document. The notary must administer an oath or affirmation to the signer in order to complete the jurat. A jurat also requires that the signer signs in the presence of the notary. It is possible to glean this information from the jurat certificate its self. The wording states “Subscribed and sworn to before me…” – subscribed meaning “signed” and sworn meaning that an oral oath or affirmation was given. “Before me” means that both were done in the presence of the notary public. Acknowledgements An acknowledgement is used to verify the identity of the signer and to confirm that they signed the document. They are not swearing to the truthfulness or validity of the document, they are simply acknowledging that they signed the document. For an acknowledgement in the state of California, a signer is not required to sign the document in the presence of the notary public, but they are required to personally appear in front of the notary to confirm their signature. While it is important for a notary to understand the difference between the two, California notaries public are not allowed to determine which type of certificate a signer uses. To do so would be considered practicing law without a license. A Notary can only ask the signer which form they prefer; if they don't know, the notary will refer them to the originator of the document for an answer. Now, a Jurat can also be a person, which is probably how it is meant in this circumstance (a sworn "officer" who is swearing that the content is correct as far as he knows it - under penalty of perjury stuff). a sworn officer; a magistrate; a member of a permanent jury. Of course, this is probably more than anyone want to know! :-)

Agreed! :-)

Very unlikely that REMOVAL of a breast (and the attendant reconstruction) would EVER be cosmetic surgery. If that is what is going on, there is no issue here.

FWIW, our election has a separate provision with regard to non-regular pay so as to avoid this issue. And, the participant can change their election at any time (prior to getting paid) so they can change their mind and just change the bonus election section of the form. We changed the form to include this option maybe 10 years ago but before that it was not clear and could lead to problems.