Mandatory Distribution at NRA

Sorry, I just need for my own edification, a definitive answer, as I can't seem to find on ERISAPedia...

You can, according to regs, distribute a balance of >$5,000 to someone of NRA without consent.

My example would be ex-partner in a law firm, with a balance of $2m+, in which case you could fully liquidate the positions and roll over to an IRA without consent assuming all regulatory requirements have been met?

This seems like the definition of an administrative nightmare. 

Thoughts?

Leaving aside questions about whether the involuntary distribution is proper, why do you feel it would involve difficult administration?

14 hours ago, Jake Wright said:

Sorry, I just need for my own edification, a definitive answer, as I can't seem to find on ERISAPedia...

You can, according to regs, distribute a balance of >$5,000 to someone of NRA without consent.

My example would be ex-partner in a law firm, with a balance of $2m+, in which case you could fully liquidate the positions and roll over to an IRA without consent assuming all regulatory requirements have been met?

This seems like the definition of an administrative nightmare. 

Thoughts?

Some assumptions are being made here; for example, my plans all have J&S provision to avoid disinheriting children from a prior marriage.  That said, what exactly is the administrative nightmare?  Assuming the participant has been properly notified and distribution forms provided, if he/she doesn't respond, he/she is told what will happen, and then it happens. How is this an administrative nightmare?  What do you see as complicating the situation, other than the possible unhappiness of the ex-partner, but that is not an administrative issue.

On ‎4‎/‎15‎/‎2020 at 12:38 AM, Jake Wright said:

Sorry, I just need for my own edification, a definitive answer, as I can't seem to find on ERISAPedia...

You can, according to regs, distribute a balance of >$5,000 to someone of NRA without consent.

My example would be ex-partner in a law firm, with a balance of $2m+, in which case you could fully liquidate the positions and roll over to an IRA without consent assuming all regulatory requirements have been met?

This seems like the definition of an administrative nightmare. 

Thoughts?

You don't need spousal consent at any age in a DC plan that does not have J&S, although of course you do need a distributable event, which will vary. And yeah, it has happened at at least one law firm I know of. Wife (soon thereafter a widow; not by her own hand), was not happy.

What I think you are highlighting, Jake Wright, is that in what may otherwise seem a comprehensive system for protecting spousal rights to benefits, the ability of a participant to obtain a loan or distribution from most DC plans without spousal consent is a gap, which may or may not be justified by the administrative inconvenience that would otherwise occur.

On ‎4‎/‎15‎/‎2020 at 3:32 PM, Larry Starr said:

my plans all have J&S provision to avoid disinheriting children from a prior marriage.

Larry, you mean so that you have a 50% QPSA and the participant can name beneficiaries for the other half without spousal consent if dies before annuity starting date? But if participant dies after ASD and spouse insisted on QJSA, kids of prior marriage still disinherited, right? But still works for many fact patterns.

18 hours ago, Luke Bailey said:

Larry, you mean so that you have a 50% QPSA and the participant can name beneficiaries for the other half without spousal consent if dies before annuity starting date? But if participant dies after ASD and spouse insisted on QJSA, kids of prior marriage still disinherited, right? But still works for many fact patterns.

 

Luke, I just don't see this dying after ASD as an issue.  Do you mean AFTER a J&S annuity payout has actually started? 

Well, I can tell you that while we have J&S as the default, effectively, no one has EVER taken an annuity (we have had two annuities purchased by participants in almost 37 years).  When a participant dies, if they have a beneficiary designation that says 1/2 goes to my kids, then they will still get their 1/2 and the widow can take her 1/2 as a lump sum (or buy an annuity with it).  Does that clarify?

2 hours ago, Larry Starr said:

Luke, I just don't see this dying after ASD as an issue.  Do you mean AFTER a J&S annuity payout has actually started? 

Yes, that is what I mean. Just pointing out that the preclusion of "disinheritance," as it were, of children of prior marriage only protects up to the point that the benefit might be taken in form of QJSA. But sure, very few spouses ever force that, even when they would not consent to having someone else named for portion of pre-retirement death benefit.