Second Distribution After Rehire

[Dennis Povloski]

The plan does not allow for any in service distributions. The plan is at John Hancock.

A participant terminated employment, and elected a lump sum distribution in December of 2010. The participant was rehired in September 2011, and 2 days afterwards the company made a contribution receivable for 2010. The terminated participant received an allocation of that contribution, and John Hancock paid out a second distribution using the instructions on file.

Of course, I find out about this after the distribution is paid. The second distribution was just over $200.

I'm thinking that she shouldn't have received the second distribution since she had become an active plan participant immediately upon rehire. Anyone have any thoughts they'd be willing to share?

[QDROphile]

Assuming no sham termination issues and assuming that plan terms do not speak to the situation, I would treat the second distribution as a tail to the lump sum distribution and not a separate distribution. The distribution occurred based on termination and is not an in-service distribution. The rehire is irrelevant. The distribution was set and locked before rehire. A good plan document will have provisions about tail distributions, but good plan doucments are obsolete. Sniff.

[K2retire]

Did Hancock re-notice her? December of 2010 to September of 2011 seems to me to exceed the 180 day period that the Special Tax Notice is valid.

[JanetM]

Hmm, seems to me if she was rehired in Sept 2011, and two days later she received allocation of contribution, the plan sponsor has the fastest reporting to TPA that I have ever seen. If the contribution posted 2 days after rehire, most TPA don't know about the rehire until AFTER they complete a payroll period and get reported. Hancocks system would most likely have show her status as terminated/paid out.

Not defending Hancock, but playing devil's advocate. If the senario was as written by OP then they would not have know she was rehired. Not going to touch the 180 rule to tax notice, they screwed up on that one.

[david rigby]

Hmm, seems to me if she was rehired in Sept 2011, and two days later she received allocation of contribution, the plan sponsor has the fastest reporting to TPA that I have ever seen. If the contribution posted 2 days after rehire, most TPA don't know about the rehire until AFTER they complete a payroll period and get reported. Hancocks system would most likely have show her status as terminated/paid out.

Re-reading the OP, it appears the contribution was made 2 days after rehire date, with reallocation to follow.

Big picture, the document should cover this, but most (probably) don't. Not sure I agree with QDRO's comment about "rehire is irrelevant", but it's probably wise to follow his advice. The sponsor should also consider whether the plan should be amended to clarify this situation because it will happen again.

[doombuggy]

Hancock should have sent you some kind of notice when the additional dollars hit her account stating that they were going to pay her out within 5 days if they got no reponse from you. I had a similar issue with a plan (except she wasn't rehired). Term'd in Dec 2010, took her acct balance in january 2011 and needed a 2nd distribution of ER money in August. Hancock sent me a notice - thru their message center which sends me an email everyday. nine times out of ten the messages are for a plan that belongs to someone else in the office, but this one popped up and I let them know that it was ok to pay her out again, after the client checked with the former employee (since the form was actually stale - but Hancock didn't seem to care about that too much).

In the OP's case, there probably was not enough time for Hancock to know that this person was back to being active unless they were told ahead or the day she was rehired. Chances are the deposit hit by the 9/15 deadline and the message was sent, not read and 2nd payment disbursed.