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Message Boards Digest

July 20, 2020

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

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

Force Participant to Sign Release as to Accuracy of Benefit Calculation?

"Is it permissible to request a participant to sign a release that he accepts the calculation of his benefit from an ERISA pension benefit plan? Long history short -- the participant terminated employment over 15 years ago and disappeared with a vested balance remaining in the Profit Sharing Plan. The employer could not locate the participant, and so after 5 breaks in service the employer decided to forfeit the entire account balance including the vested amount, with the understanding that the vested amount and earnings would need to be restored if this participant were found. This forfeited amount was used to reduce the employer contribution for the year it was forfeited, in accordance with the Plan provisions. Fast-forward to last week. The employer was contacted by this missing participant. We (third-party administration firm) have calculated the investment earnings on this benefit. I have suggested that the benefit statement show the amount of earnings by year, so that the participant understands how his final benefit amount has been determined. After all, the participant would have received a benefit statement each year had the employer been able to locate him. The amount involved is under $10,000. I'm not sure the employer wants to condition payment of this benefit on a release by the participant. The employer does not require other participants to sign such a release. But I'm not sure what they are concerned about. Have you faced this situation?"

7 replies   |    80 views   |    Add Reply

mattmc82 created a topic in 401(k) Plans

5500 and Document Question Due to Spinoff of New Plan from Existing Plan

"Plan X (Plan Number 001) was effective 1/1/2012 and was sponsored by two entities (A and B), which are in a controlled group. During 2020, Company B is sold to unrelated buyer. We will spinoff and restate as of 12/31/2020, as Plan Y. Will the plan number for Plan Y need to be 002, or would 001 be OK? Original effective date is 1/1/12, so for the 'new' spun-off plan, this would not be considered a 'first return/report,' correct? Would Line 4 of the 5500-SF be completed with the info of Plan X on Plan Y's 2020 return?"

4 replies   |    49 views   |    Add Reply

BG5150 created a topic in 401(k) Plans

Bank Is Pushing Back on Opening an Account for Plan

"Plan is terminating and has liquidated all its assets, whch were held at a national carrier earlier this year. Funds were disbursed properly, per participant instructions. They did this before we could calculate the 2019 Safe Harbor contribution for them. The national carrier, as expected, is reluctant to re-open the plan.

Our solution was to just have the client open up a bank account using the TIN obtained for the trust. The bank cannot seem to understand the nature of this transaction and is saying they need to 'register' the name as a new entity through their CPA. And they said 'Alternatively, you can have business documents registered (articles of incorporation or short form) to the name [you] are looking open the account under.' [sic]

Any talking points to get these guys off the ledge? I've never had such trouble (or, rather had a client get so much push back) trying to open one of these accounts. This is a big, international bank, so I'm mystified as to why they cannot understand the process."

2 replies   |    61 views   |    Add Reply

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

What Happens If Attorney Never Drafted a Court-Authorized QDRO?

"Several years ago a Mississippi Chancery Court judge ordered in a divorce decree a QDRO, as a separate interest stating, 'Counsel for the defendant is directed to draft the QDRO in compliance with federal requirements. The parties shall cooperate in the drafting of the QDRO and in its approval process by the plan administrator in a timely fashion.'

Points of note: [1] The counsel for the defendant has to date (5 years later) not drafted the QDRO as directed. [2] The separate interest concerns interest in the plaintiff's Mississippi PERS account. He has not yet retired. PERS membership handbook states, 'Your right to your benefit is exempt from levy, sale, garnishment, and attachment; and is not assignable. Furthermore, PERS has no authority for recognizing, implementing, administering, or enforcing the provisions of any domestic relations order or other actions decreed by a court in a divorce settlement.'

So a couple of questions arise: [1] If counsel for the defendant does not draft a QRDO prior to the plaintiff retiring can that be done after he retires or is the door closed? [2] Because the MS PERS states they will not recognize or enforce and thus not qualify the DRO, is the plaintiff still responsible getting to the defendant their 'separate interest' when there is no QDRO? This is assuming that another court would find that the judge in the decree ordered something that is not legally possible thus the counsel for the defendant cannot be held at fault for there not being a QDRO but as the judge did find that the defendant does have a special interest in the PERS as a marital asset the amount is still owed. Any thoughts from anyone?"

3 replies   |    59 views   |    Add Reply

jmartinrps created a topic in 401(k) Plans

Proceeds from Sale of 'Goodwill' Counts as Compensation?

"There's company A and B. As of 12/31/19 all NHCE's of Company A 'terminated.' They were all hired on 1/1/20 by Company B. Two remaining HCE's (the two owners). They're not expected to have any ownership in Company B. The two entities are still hashing out what to do with Company A (do an asset sale? etc.). The two owners of Company A (who now are the only two employees) expect to have capital gains from at least the sale of goodwill in 2020. Question: Can one count that as plan compensation for 2020, and in so doing support plan contributions in 2020?"

3 replies   |    59 views   |    Add Reply

alexa created a topic in Other Kinds of Welfare Benefit Plans

Severance Plans and H&W Wrap Plan Documents

"Can a severance plan be included as part of a H&W wrap plan document? We currently have a separate severance plan document but we're restating our H&W plan as a wrap plan. We'd like to avoid the need to do a separate Final 5500 filing for the severance plan each year."

0 replies   |    19 views   |    Add Reply

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

Can't Get Plan to Pay Under QDRO Despite a Distributable Event

"Divorced in 2009. Stamped QDRO sent and accepted by ex's plan. Was told only one of three accounts could be spun off and the other 2 would when ex incurred a distributable event. Ex just had such an event. I called and received a letter telling me that my QDRO is too old now and must be redone. What?!? They're the ones that wouldn't spin them off in 2009 and now the QDRO needs to be redone? Has anyone faced a similar situation?"

4 replies   |    56 views   |    Add Reply

CMC created a topic in 409A Issues

409A - Is a Change in Installment Calculation Method Considered to Be a Change in Time or Form of Payment?

"When participants in a deferred comp plan elect to receive installments over 5, 10, 15 or 20 years, they've been permitted to choose whether those installments will be calculated using a 'Level Payment Method' or a 'Percentage of Retirement Account Method.' When a participant wants to change from one calculation method to the other without changing either the commencement date of the installments or the number of years over which the installments will be paid, do 409A's usual rules about changes in time and form of payment -- including the 5-year delay -- need to be observed?"

1 reply   |    17 views   |    Add Reply

tsrl01 created a topic in Health Plans (Including ACA, COBRA, HIPAA)

Nebraska Divorce -- COBRA Aspects

"We've received a divorce decree from a participant in Nebraska. Pursuant to the signed decree: 'For the purposes of continuation of health insurance coverage, the Decree shall become final and operative six months after the Decree is entered."

Question: Has anybody dealt with this before? I have seen mention of this situation on Benefitslink threads, but curious how it was resolved practically. Because the plan is self-funded, would ERISA preemption apply? Or because of the manner in which it is worded -- that for health insurance, the divorce isn't effective until six months -- perhaps the COBRA qualifying event doesn't happen until 6 moths? Nebraska Statue Below:

42-372.01. Decree; when final. (1) Except for purposes of appeal as prescribed in section 42-372, for purposes of remarriage as prescribed in subsection (2) of this section, and for purposes of continuation of health insurance coverage as prescribed in subsection (3) of this section, a decree dissolving a marriage becomes final and operative thirty days after the decree is entered or on the date of death of one of the parties to the dissolution, whichever occurs first. If the decree becomes final and operative upon the date of death of one of the parties to the dissolution, the decree shall be treated as if it became final and operative the date it was entered.

(2) For purposes of remarriage other than remarriage between the parties, a decree dissolving a marriage becomes final and operative six months after the decree is entered or on the date of death of one of the parties to the dissolution, whichever occurs first. If the decree becomes final and operative upon the date of death of one of the parties to the dissolution, the decree shall be treated as if it became final and operative the date it was entered.

(3) For purposes of continuation of health insurance coverage, a decree dissolving a marriage becomes final and operative six months after the decree is entered.

(4) A decree dissolving a marriage rendered prior to September 9, 1995, which is not final and operative becomes operative pursuant to the provisions of section 42-372 as such section existed immediately preceding September 9, 1995.

Source: Laws 1995, LB 544, § 2; Laws 1997, LB 434, § 1; Laws 2000, LB 921, § 34."

1 reply   |    21 views   |    Add Reply

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