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Found 24 results

  1. Our Mom passed away just after receiving two 401k rollover checks made out to a new IRA account FBO her name. My sister and I are named beneficiaries on both accounts. We have the checks in hand. One plan is adamant that because it's a qualified distribution a new check can only be made out to the estate. The other plan is considering reclaiming the check and issuing out proper beneficiary distributions to us but remains to be seen. It's my understanding that the distribution is a plan asset and ERISA, DOL, IRS would urge fiduciaries to work in our favor? I hope there's some more legal guidance on this that I've missed in researching. These aren't uncashed checks because we're missing or mailed to the wrong address. I know there's been a ruling and chatter from the agencies about taxes on uncashed checks and what to do with them if they stay unclaimed but... This should in theory be straightforward to fix and honor. Any thoughts to change their mind?
  2. A 401(k) plan has many participants making very small contributions - $4-$5 a week in some cases. The plan sponsor records participant termination dates with the recordkeeper after each pay period. The recordkeeper has taken it upon themselves to forfeit small balances for former employees after the plan sponsor enters their termination date. They are forfeiting employee pre-tax and Roth salary deferrals without any direction from the plan trustees and with no apparent reason other than it's their "policy" not to cut a check for less than $25. In one instance they forfeited $80 of an employee's pre-tax salary deferrals - about $20 at a time because the plan sponsor made 3 $20 deposits after the employee's termination date was entered. All of the others we have found were $10 or under. Has anyone out here come across this practice and is there anything I'm missing that would allow it? The plan document certainly doesn't say a small balance can be forfeited vesting be damned. I'd feel better about it if some of the experts on BenefitsLink have experience with similar approaches by recordkeepers and/or have had the IRS or DOL approve the practice.
  3. Client received a 2020 w2 with wages from services performed as a minister. His housing allowance was included in his gross wages for social security and medicare. He retired and began receiving distributions from the rabbi trust. Per the plan, 25% of the annual distribution from the rabbi trust is designated to a housing allowance. Should the client have received (2) w2s? The client only received one and the $25k received from the rabbi trust was not included in box 1, but only reported in box 11.
  4. We've had several deaths (post-SECURE Act) in different defined benefit plans, unfortunately, by participants who did not have designated beneficiaries on file. Our defined benefit plan (volume submitter master) document identifies the following hierarchy for distributions to non-designated beneficiaries: surviving Spouse; children, per stirpes; surviving parents, in equal shares; estate. My overall question is - under current regulations, is a defined benefit plan permitted to make a distribution to an Inherited IRA (via direct transfer) to a non-designated beneficiary? If yes or maybe, does it matter who the non-designated beneficiary is? We have the following true scenarios to deal with: Terminated Participant A (died age 64 before NRA) has a surviving Spouse, and the distribution amount is over $5000. Also, the plan is terminating. Active Participant B (died age 32) only has one minor child, and the distribution amount is under $1000. The plan is ongoing. Active Participant C (died age 56) only has surviving parents (both older than age 72), and the distribution amount for each parent is between $1000 - $5000. The plan is ongoing. Terminated Participant D (died age 64 before NRA) has no Spouse, no children, nor any surviving parents, so his estate will receive the distribution; and the distribution amount is between $1000-$5000. Also, the plan is terminating. All participants were 100% vested at termination or at death. NRA = Normal Retirement Age as defined by the plan. In addition, these participants were also in 401(k) plans sponsored by the same Plan Sponsors as the defined benefit plans. Does your answer to any scenario change depending on the plan type? I think the answer for all four scenarios for both plan types is: No, none of these non-designated beneficiaries can elect to direct transfer their distributions to an Inherited IRA. If I'm reading the Inherited IRA rules and plan document correctly, the reason none of these scenarios can result in a direct transfer to an Inherited IRA is because none of the beneficiaries were designated as beneficiaries by the Participants. However, I rarely need to handle distributions due to death, so I am seeking input from more knowledgeable retirement plan practitioners. Thank you for your help.
  5. Good afternoon everyone, We recently had a client express interest in qualified disaster distributions (QDD's) as they are allowable under the Consolidated Appropriations Act 2021 and prior law. I realize that these cannot be used if COVID is the only major disaster declared in the area. However, this client is in an area that experiences frequent and intense hurricanes, so I think they are good on the first prong below. A "qualified individual" is an individual: whose principal place of abode at any time during the incident period of any qualified disaster is located in the qualified disaster area with respect to such qualified disaster; and who has sustained an economic loss by reason of such qualified disaster. My question is surrounding what we, the TPA, would need to include on the form we provide to this client specific to proof. In certain distributions, we've required a showing of proof that the individual meets the requirements. I'm not sure if this can be treated like COVID distributions (CRD's) where they self certify, or if we need to include some other showing of proof that participants would be required to include in their submission for such a distribution. Wondering if anyone has thoughts on what type of proof a participant would need to submit for this type of distribution? Thanks in advance!
  6. Hello all, I have an interesting problem that doesn't seem to quite fit into some others that I've found here while searching. Here's the situation: We are a RK vendor for part of a non-ERISA 403(b). A participant died naming her spouse as her primary 100% beneficiary and her parents as 50/50 contingent beneficiaries. Her spouse died 2 days later. Initially, we believed that he passed without having made a designation himself. Per the plan document, the default is spouse, then estate. This would mean his assets now belong to his estate, who wants us to roll it over into an IRA the estate seems to have setup (I know this isn't correct, but it's a topic for another post). It has since been discovered that the spouse was a former participant of the plan on his own and he did have a beneficiary designation dated in 2009. His form named his spouse as 100% primary and his brother as 100% contingent. He took a full distribution of his account in 2016. The TPA firm, and to an extent the client, is trying to say since he took a full distribution years ago, his beneficiary form is basically null and void as the account was 'closed'. The beneficiary form doesn't have any language that would nullify it except upon receipt of a new beneficiary form. My opinion is that his beneficiary form is still valid and in force regardless if he cashed out previously or not. It'd be no different than if someone left service, took a full distribution, and then ended up with a non-elective contribution 8 months later but died in the interim. I've tried digging through IRC and even the EOB trying to find any guidance and have not come up with anything concrete enough to prove my point. Has anyone seen anything like this or have any other places to try looking?
  7. In November 2018, while still employed full-time, I received an early distribution from my Prudential retirement plan that my (former) employer now claims was not available under the terms of the plan. Subsequently, Prudential Retirement informed me that I "received an overpayment in the amount of $8614.18 that was not eligible for a rollover." Prudential is requesting that I pay back this amount in full. I conacted Prudential to explain that this 2018 early withdrawaI was NOT a rollover to an IRA nor to any other retirement plan. At the time of my initial withdrawal request in 2018, I explained to Prudential that I needed the money to pay down miscellanous household, credit card, and medical care expenses. This early distribution was processed without delay, and was ultimately reported on an 1099-R for tax year 2018. I retired in July 2019, and am now receiving monthly payments from that same Prudential retirement plan. However, I'm extremely dismayed over this recent issue, and Prudential has been vague about my options or rights. Bottom line: I am unable to pay back this overpayment amount. I believe I'm the victim of an egregious clawback. What must I do? What can I do?
  8. I apologize, I'm sure this question has been asked and answered - so if someone could point me to the correct thread, I'm happy to read up on it. I also wasn't sure if this question was better suited for the distribution message board or this on. I don't deal with PBGC covered plans often - so my apologies in advance if I am using the wrong terminology or asking the wrong type of question. PBGC covered plan - terminated and closed. There were a about a dozen participants whose benefit was sent to the PBGC per the lost participant rules. We are now preparing 1099-Rs for the plan. The participants who elected something ( lump sum cash, rollover, etc) I have no problem preparing the 1099-Rs. But I don't know how to report those whose benefit was transferred to the PBGC. Do they get 1099-Rs? I'm thinking yes - but I've been wrong before If they get a 1099-R what code goes on the form? I'm sure there is a publication or guide that deals with this - I'm just not sure where to look. I called the PBGC for an answer and was told I would get a call back - but I haven't heard yet so thought I would ask all you smart folks here.
  9. Much has been said and written about missing or unlocated participants. But much less has been discussed about what some describe as recalcitrant participants—those who decline to deposit or negotiate the check that pays a distribution. Imagine this situation. A profit-sharing plan (with no 401(k) arrangement) permits a distribution after a participant has severed from employment and attained age 60. The plan requires a distribution after a participant has severed from employment and attained normal retirement age. After the participant severed from employment, about 40 mailings—including disclosure notices, revised summary plan descriptions, summary annual reports, and benefit statements—were sent to the participant’s address, and nothing came back as undelivered. After this participant’s normal retirement age, the plan’s administrator mailed the participant a check for her required distribution. The participant is not missing; rather, the administrator has solid proof that the distributee accepted delivery of the plan’s mailing. After eight months, the payee has not deposited or negotiated the check. What steps should the plan’s administrator take next? What are the big recordkeepers doing with problems of this kind?
  10. Hi to All, My most thought provoking client called a few days ago asking whether we keep records back into the 1990s and of course, we don't. He had a phone call from a former employee who received one of those infamous letters from the Social Security Administration saying that he "might" be due a benefit from my client's retirement plan. My client did happen to have proof of some sort in his office showing that this man was indeed paid out in 1998 and no further benefits are due. However, my client wants to know what would have happened if he didn't have or couldn't find this information. We have his plan's activity in our computer software back to 2005, and we have paper copies of everything for the last 7 years, but nothing as far back as the 90s. Whenever this has come up before in the various places I have worked, the position has been taken that if the plan does not have a balance for a certain participant today, then he must have been paid out in the past. So far no participants that I dealt with have ever insisted that I "prove" that he or she was paid out. How are other firms handling these inquiries? Have any of you had a participant who wouldn't take "no" for an answer and insisted on proof that he or she had been paid out in the past? Thanks as always!
  11. Good morning to all, A client has posed an interesting question that I do not see addressed in our version of the Distribution Answer Book nor Sal's encyclopedia. John will turn 70.5 on July 7, 2019. Although he could delay until April 1, 2020, he wants to take his first RMD in 2019. His question: Does he literally have to be 70.5, thus taking his first RMD after July 7, 2019, or is any date in 2019 okay (like tomorrow for instance)? My first instinct is to think that any day in 2019 should be fine, but I don't know that for a fact. Thank you in advance!
  12. Have a "splitting hairs" question. Plan document reads: (6) Return to employment. A Participant may not receive a distribution based on Separation from Service, or continue any Installment distribution based on a prior Separation from Service, if, prior to the time the Trustee actually makes the distribution, the Participant returns to employment with the Employer. At issue is the meaning of the phrase "Participant returns to employment" in the last sentence. I contend that the employee has returned on the date he or she begins working. I base this on the fact that his/her re-hire date is the date he/she begins working, not the date called. Another party interprets that the employee has "returned to employment" if he or she has been notified they are being called back to work. A distribution was in process to the terminated employee. Before the funds were paid out, both parties were notified that the employee had been re-hired with an effective date three weeks in the future. I contend we should not stop the distribution. The more conservative party (who by the way is very highly regarded and I have the utmost respect for) states that because we know he will be rehired, he has "returned to employment" and we should stop the distribution. I've made my decision but am curious to run this by other experts out there. Thanks much!
  13. I have a 401k account that was setup thru a divorce QDRO order. I have been making periodic minor partial withdraws from this account for close to 4 years. However the latest request for partial distribution was denied. The plan provider is now claiming that the plan does not allow for partial distributions and they claim that the previous withdraws over the last few years have been an "oversight" on their part. They stated that this "plan rule" can be found in the Summary Plan Description ( which I promptly download from them ) and it DOES NOT spell out any rules regarding partial withdraws for plan participants. I was polite and I asked them to point out exactly where the rule was...but they could not. They then claimed that it is forbidden according to the adoption agreement with the plan administrator and they are legally bound to abide by it. My question is do I have any recourse action I can take ?
  14. PSP terminated April 2018. PSP assets were directly rolled over to a Individual 401k created April 2018. I401k Summary Plan Description states: "Can I withdraw money from the Plan while I am still employed? You will be able to take certain distributions from the Plan while you are still working for your Employer, as indicated below. In-Service Distributions You may request a distribution of your rollover and transfer contributions at any time." Can I do a direct rollover of a portion of the assets in the I401k to my SEP IRA? Will this trigger the 10% tax penalty? Anything I should be aware of? Thanks for your help.
  15. Good morning, All! When a plan has automatic cashout provisions, and checks are being issued for under $200, it is my understanding that there is no withholding, and participants do not have to fill out forms. The plan's trust issues the checks and mails them to the last known address. My question is this: Does the participant have to receive anything besides a check? A notice, letter of explanation, etc.? As a courtesy we will draw up something or another, I am sure, but I wanted to know if there is a particular requirement or format or something we are supposed to follow. Thanks in advance for your ideas.
  16. Some 401(k) plans have many different types of distributions besides lump sum on termination of employment, e.g. hardship, non-hardship in-service after attainment of age 59-1/2, in-service at any age from rollover account, partial distributions after separation from employment, and RMDs. If the plan also has Roth elective deferrals and an in-plan Roth rollover feature, an employee's accounts for elective deferrals, nonelective, matching, and rollover may all contain both Roth and non-Roth accumulations. So when a distribution of less than 100% of any account is made, you have to determine the portion that is Roth, and the portion that is not Roth. The 401(k) LRMs allow a plan to provide that distributions of excess contributions after failure of ADP test are made first from non-Roth amounts, but aside from that, I can find no guidance from IRS regarding what it thinks is permissible and have come to conclusion that it is up to the plan and that the plan can also let the participant decide in his/her distribution request form. E.g., plan document could permit a participant who qualifies for an age 59-1/2 non-hardship in-service distribution, who wants to receive $50k as distribution, and who has $100k of Roth and $100k of non-Roth spread over elective deferral, matching, and nonelective accounts to elect to take the entire $50k from the non-Roth. Also, plan could provide that RMDs always came first from non-Roth until non-Roth exhausted. Anyone else given this some thought or found guidance on the question that I am unaware of? One major vendor has a distribution form that seems to permit what I describe in prior paragraph (i.e., employee choice), but I did not find a supporting provision in its volume submitter.
  17. Quick question: Can a SIMPLE IRA balance be rolled into a 401(k) balance?
  18. Spouse and I agreed to divide all assets and holdings prior to non contested divorce. I gave up everything on my side within the first 90 days. The other side dragged their feet and it took a year, The last remaining piece we were negotiating was their ESOP. I had agreed to equalize everything on my side so as to be entitles to 50% of their account balance. I tried to get the QDRO drafted and approved, with the correct language, prior to the Decree but was given the run around on the actual language of the "plan" multiple times. Spouse was able to get a "default decree" signed by the Judge without my knowledge. I was served papers and didn't have a valid QDRO in place. I was able to contest on the ground of misrepresentation, but only allowed to file a QDRO post Decree, The Plan administrator finally accepted the QDRO after a year of attempts and is giving me some harsh feedback on my ability to get any information as to distribution of any kind. What are my rights? They are setting up a sequestered account at the trustee bank. I have only the amount of shares I am entitled under the ESOP. With shares value under the equalization, it is supposed to be over 245K. No other papers have been sent to me as of Dec 24 2016. Any help would be greatly appreciated. I am 30k into legal fees and exhausted.
  19. In a plan that we have recently took over, we have discovered a participant (born in 1937) died in 2005 and was not paid out by the 5th year (2010) and still has an account balance. In addition there is no beneficiary on file. Any suggestions on how to correct this? Can someone point me in the right direction? Thank you!
  20. Can IRA owner rollover error be repaired during current tax year cycle? In February, 60 year old IRA owner takes $8,000 distribution. In March, replaces funds as a “Rollover Contribution”. In December, changes IRA custodians, UNFORTUNATELY, Original custodian sends check made out to IRA owner’s name (e.g. a rollover) instead of new Custodian’s name (e.g. a custodian-to-custodian transfer). IRA owner deposits check in new IRA with Custodian B. Since IRA owner has not completed tax forms for the year, can he remedy through re-characterization? For example: Re-characterize $6,500 of the $8,000 March Rollover Contribution as a Regular Contribution, Withdraw the extra $1,500 as an excess contribution, Deposit the extra $1,500 as a regular contribution to spouse IRA to mitigate the income tax? Or are other remedies available, given that this is within the current tax year cycle?
  21. A 401k participant, who happens to also be a fiduciary, requested an in-service distribution after he turned 59 1/2. The plan administrator allowed the distribution, which the participant then rolled over to an IRA. The terms of the plan only allow in-service distributions upon turning 62 years of age. Transaction occurred in 2014 and discovered in 2015. Amount was approximately $500,000, which represents about 25% of plan assets. The operational failure seems easy enough to correct, but is this not also a prohibited transaction? Any suggestions for addressing the prohibited transaction? Apply for individual exemption? Would a retroactive plan amendment allowing the distribution be feasible? If the distribution was allowed under the terms of the plan, a statutory exemption appears to apply.
  22. I have a cash balance plan with only a husband and wife (they have no employees). Since there are no NHCEs, does that plan still have to be 100% funded in order for one of them to take a distribution?
  23. Participant withdrew $18,000 from individual account in profit sharing plan in November 2012. The participant started making loan repayments in January 2013 however the participant did not sign the loan documents until February 2013. Can this still be considered a loan or is a taxable distribution? If it's a taxable distribution, what do I do about the repayments that have been made to date?
  24. If an employee becomes disabled but has not separated from service, is this a distributable event? In other words, does the "disabled" employee have to be terminated in order to receive a distribution from the plan? Other info: The employee is an owner/partner and has not severed his partnership with the plan sponsor. The plan is a 401k plan. The participant is already 100% vested. The participant does not meet the plan's in-service age requirement and already has an outstanding loan. The plan does not allow hardship withdrawals.
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