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Message Boards Digest

October 17, 2019

Here are the most recently added topics on the BenefitsLink Message Boards:

401king created a topic in 401(k) Plans

Tax Withholding Requirements on Hardship Distributions

Is it true that the default federal income tax withholding is 10% of the hardship amount? The result is a check for 90% of the participant's requested hardship amount. If 10% is the default, is it required that the participant file a W4-P to either opt-out of tax withholding or elect an amount greater than 10%?

Number of replies posted  7 replies      Number of times viewed  99 views      Add Reply
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AdKu created a topic in Retirement Plans in General

Using Forfeitures Under a Target Benefit Plan

I have one client with a target benefit plan and I can't find specifics in the regulations as to whether forfeitures can be used. The plan document states, "Administrator may elect to use any portion of the Forfeiture Account to pay administrative expenses incurred by the Plan. The portion of the Forfeiture Account not used to pay expenses will be used first to restore previous Forfeitures resulting from rehired Participants, then to restore Forfeitures resulting from missing Participants or unclaimed benefits. Any remaining amount will be used to reduce Employer contributions."

Number of replies posted  2 replies      Number of times viewed  52 views      Add Reply

justanotheradmin created a topic in Distributions and Loans, Other than QDROs

Distribution Lawsuit! -- Estee Lauder Plan

Did folks see this? I find it so interesting and timely. What do people think? Anyone else intrigued? Hopefully more details will become available as the suit moves forward. Who approved the distributions? What was the process? Was it an online request? How come they haven't provided a copy of the plan documents? How did the money go into accounts that weren't in her name? Wouldn't someone catch that? Why haven't they settled? So many interesting things. Distribution fraud is booming and a very real problem.

https://benefitslink.com/news/index.cgi/view/20191014-153579 ("Retirement Plan Cybersecurity at Issue in New Lawsuit" -- includes link to the text of the complaint)

Number of replies posted  9 replies      Number of times viewed  118 views      Add Reply

Yesrod5 created a topic in 401(k) Plans

Fiduciary's Individual Investments Track Those of Plan as to Which He/She is a Fiduciary

A fairly sophisticated client, who is a fiduciary as to his company's 401(k) plan, has asked me this question: "I question whether this role [as a fiduciary] has implications for us as is customary for fiduciaries, such as limiting our ability to invest personally (outside of the 401(k)) in the funds offered in the 401(k)." Personally, I see no problem -- for the following reasons: (A) The relevant prohibited transaction provision of ERISA Section 406(b)(1) prohibits a fiduciary from: "deal[ing] with the assets of the plan in his own interest or for his own account." To me, the stated concern the client expressed is not snared by this prohibited transaction provision (and no other prohibited transaction provision appears to apply); and (B) the exclusive benefit rule of ERISA Section 404(a)(1) does not appear to prohibit the contemplated action. In short, I see no problem with a fiduciary using for his individual investment purposes knowledge gleaned from his experience as a plan fiduciary. Your thoughts?

Number of replies posted  2 replies      Number of times viewed  64 views      Add Reply

Saddaughter created a topic in IRAs and Roth IRAs

Does Surviving Spouse Have Legal Basis to Challenge Designation of a Non-Spouse as the Beneficiary of an IRA?

This is in NJ, so not a community property state. If a person names a non-spouse beneficiary on a rollover IRA, does the spouse have any legal basis to claim half or all of this account? No spousal consent form was signed. My dad left his traditional IRA (with Vanguard, a rollover from an employer sponsored 401k) to me when he passed away. My mother, to whom he was married but estranged from, has hired a lawyer and is challenging this beneficiary designation. The bank has frozen the account and we now have to "work it out" or go to court. There is not very much money in the account (~ $50k) so it's definitely not something worth going to court over if at all possible. I'm bewildered by this because everything I've read AND a lawyer I spoke to says she has no legal basis for the claim. I don't know why the bank is freezing the account if this is so clear cut. Does anyone have any insight into possible nuances to the law around this that we could be missing?

Number of replies posted  1 reply      Number of times viewed  60 views      Add Reply
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