Qualification Letter - what is it, how to get one

[justanotheradmin]

Several times recently, distributions have been requested where the receiving retirement plan or IRA has requested a "qualification letter" from the sending plan. 
Sometimes the receiving plan is appeased with a copy of the IRS opinion letter, other times there is pushback. There is one right now where Fidelity is insisting the Opinion Letter is not what they want (the sending plan is not audit sized, so there is no audit statement, and while the assets are held with a custodian that does recordkeeping, not all plans pay extra for a certified trust statement either). 

What do they mean when they say they want a qualification letter? The receiving plan provider can't seem to articulate it, and it is holding up distributions. I don't think the sponsor (who is the named Plan Administrator) minds writing a letter saying they believe the plan to be qualified. They would be happy to. But is that what they want? At one point a receiving plan was saying the letter had to cover the qualification of the plan for this year (they didn't like the date on the opinion letter I guess, among other things). 

Anyone have a good resource or article or something that can help me understand? 

[Bill Presson]

They're being silly. Good stuff here: https://www.irs.gov/retirement-plans/verifying-rollover-contributions-to-plans#:~:text=It's not necessary for the,a rollover contribution is valid.

[justanotheradmin]

9 minutes ago, Bill Presson said:

They're being silly. Good stuff here: https://www.irs.gov/retirement-plans/verifying-rollover-contributions-to-plans#:~:text=It's not necessary for the,a rollover contribution is valid.

oh, I completely agree. but I don't see how arguing with an entry level customer service at Fidelity or anywhere else is productive. And since it seems to be coming up more frequently lately if there was some insight someone would have to help me appease the checklist that the receiving plan provider is using, I'm happy to try to do it. If they want a hand-drawn picture of a unicorn from a kindergartener and that's the only thing that would do, I would start volunteering at a local school to see who can draw a unicorn  lol

[Lou S.]

It's been a while since I've seen this one but we used to get it occasionally and often enough to added it to a form letter as one of the check the box entries. I don't recall ever getting any push back from the accepting institution.

q  The distribution due the participant named above is from a Plan intended to qualify under Internal Revenue Code §401(a).

[justanotheradmin]

Thanks Lou. I'll see if a letter with that language (and the plan name and participant name etc) appeases the gods of the distribution services center

[Peter Gulia]

If a would-be receiving plan persists in a refusal (and without any view about what is or is not prudent or reasonable for a receiving plan’s administrator or its agent to demand before the plan accepts a rollover contribution):

A paying plan’s administrator might consider which persons are affected (and how) by a plan’s refusal to accept a rollover contribution.

A would-be receiving plan takes on neither the to-be-rolled asset nor the related obligation.

A distributee might be deprived of her first (and, perhaps, second) choice about which eligible retirement plan receives a rollover contribution.

A paying plan might be burdened by a would-be receiving plan’s refusal if the would-be distribution is one that requires the distributee’s consent and the distributee withdraws her consent.

[Bird]

Yada yada yada. No need to be so thoughtful about this; if the receiving plan won't accept the assets because of their own ignorance, so be it. I'd be happy to explain to the disgruntled participant that they have created their own barrier that need not exist.

[Pam Shoup]

We have form letters that we wrote for both incoming and outgoing assets.  We are gettlng lots of requests from fund holders for a qualification letter before they will issue rollover distributions or accept rollover distributions.  We insert the plan name, participant name and the last four of the SSN into the qualification letter.  For the incoming asset letter, we specify if the plan takes pre-tax money only or pre-tax + Roth deferrals.  (Probably going to need to edit that part once we start seeing Roth employer money.)  The letters are signed by the PA. We have not seen any pushback with the content of the letters, other than sometimes they complain that the letter says John Doe, versus John J. Doe.

For our purposes, when we get an incoming rollover check, we look for a 5500 and check the feature codes to see if the plan intends to be a qualified plan.

[Nate S]

A receiving Plan might fail to follow their document and create an operation failure by not accepting a "rollover" contribution.  Sure, qualified ROTH assets create a receiver issue, but the initial obligation has always been on the paying Plan to ensure that the receiving Plan is itself qualified!  That form used to be part of our distribution package, a certification by the receiving Plan Administrator that their Plan is itself qualified.  @justanotheradmin try flipping the script on them and ask that they provide a reciprocal "qualification letter", then you know what form and content must be acceptable to them!!

[fmsinc]

Dealing with Fidelity is no walk in the park.  How about picking another recipient plan to receive the rollover.   

Or following the IRS protocol - https://www.irs.gov/retirement-plans/determination-letters-need-a-copy-or-a-correction

for obtaining a determination letter.  

For the past 36 years I have prepared literally thousands of QDROs and never once had a recipient plan ask for a determination letter, or vice versa.  When did this become a thing? 

David   

[Roycal]

I've been retired from the business for 12 years.  Keep that in mind.  First, by a qualification letter they most likely mean a "determination letter."  It's not unreasonable to ask for one, but also reasonable not to.  Second, you'd think a big player like Fidelity would have it's act together on this sort of thing by now (2023), but if so you'd be wrong.  Don't think Fidelity; think of the low-paid, inexperienced and untrained people they have working for them.  That will explain a lot.