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Message Boards Digest

December 23, 2019

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

Qwerty created a topic in Qualified Domestic Relations Orders (QDROs)

Plan Administrator Didn't Follow Terms of QDRO

"Had QDRO from judge. We both signed and QDRO states I'm alternate payee if he dies. Plan received QDRO 2011. When ex signed benefit paper in 2013, he checked no benefits. Plan never notified me or courts. No changes were to be made of QDRO. Plan hid this until he died years later. I called to file alt surv. Benefits. They said sorry, he took no death benefits ... even though I'm ex wife, I am surviving spouse spouse on QDRO, plan was put on notice in 2011. They hid changes for 5 yrs, never sent me any plan documents or anything. I did receive my 50 percent share in 2013, while he was alive. The plan manager and ex both knew there was a QDRO and he was to check the joint surv. Box. Plan told me it's ex's fault, not theirs, and that they couldn't force him to check right box. Your thoughts? My thought is QDRO overrides what ex checked, and plan admin should have followed QDRO."

Number of replies posted  3 replies      Number of times viewed  57 views      Add Reply
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egrodan created a topic in Defined Benefit Plans, Including Cash Balance

How to Correct Significantly Overfunded DB Plan With One Employee

"Client (age 74) is a sole proprietor in a business that does music publishing and talent management. He is the only current employee and participant of his DB plan. Through good stock investments, he overfunded his DB plan. Prior actuary sold business and didn't alert him to the overfunding issue. New actuary informed that due to the overfunding he cannot make a tax-deductible contribution this year. Plan is now valued at $4.4M. Client is still earning approximately $400k a year in royalties and management fees. I am trying to formulate a plan for the client and would appreciate your help/guidance because this is a case of first impression for me. Here is what I have come up with thus far:

  • Immediately make Required Minimum Distribution for 2019
  • Increase plan benefits to the maximum allowable amounts under Section 415 of the Internal Revenue Code. What are some ways this can be done?
  • Freeze DB plan growth by selling stocks within the plan and investing in short and medium duration Commercial Paper.
  • Immediately transfer via a direct rollover the maximum lump sum amount allowable (how much is this?) to an IRA
  • Consider employing wife and/or daughters because, as participants, they will accrue plan benefits under the plan, reducing the overfunding. Follow all compliance rules and be aware of traps for the unwary, such as wife already doing some work for the business. She just doesn't get compensated yet.
  • Other ideas?"
Number of replies posted  2 replies      Number of times viewed  74 views      Add Reply
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