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unique/questionable distribution from 401(k)


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Lori - heck, why even have the ex-husband repay the money. I mean, if you are gonna fudge the 5500, why not go all the way and just let him keep the money?

Sorry, but this is a PT plain and simple. It's supposed to raise a red flag.

PiP's right...Show it as a PT. Hopefully, it will force him to address the issue in the correct manner; including making sure that participant is found and paid. Besides the audit would be the result of his own misconduct. Better that then have it found on random audit and it be noted that you failed to produce accurate filings for him. Why allow your hand to be in the cookie jar with him....

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"[T]he check was cut to the plan's money market/checking acct, which was then cut to the husband/trustee. we have no fiduciary relationship to this plan. also, i am a bit apprehensive about reflecting this as a prohibited transaction on the 5500 as that could be a nice big red flag for an audit.

Where was the check first cut from (when it was cut to the money market/checking account) and who cut that check? I assume the plan's investments in other funds were liquidated into cash and then the directed trustee cut that check into the mm/checking account. Who was the trustee that did that?

Then, who cut the check from the mm/checking account to the husband? Was that a different trustee?

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On second thought, don't answer my questions.

The point is, somebody was the directed trustee who had the authority to cut those checks as the plan's directed trustee. That directed trustee is subject to ERISA's fiduciary rules. The extent and scope of a directed trustee's fiduciary duties in any particular situation is an open question, but a directed trustee is an ERISA fiduciary. I think a court would be hard pressed to find that somebody who has the authority to cut a check from the trust is not a fiduciary. Where the court may go from there is a different question.

If that directed trustee knew what was happening, or if it found out later what was happening, I think it should be a little concerned. IMHO, it should contact the DOL or an ERISA lawyer or both.

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It appears you have some discretion as to how to complete and file the 5500. That role is the role of the administrator, as defined in ERISA. If you have discretion or authority over the administrator, then it would would appear you may have some type of a fiduciary status.

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