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Message Boards Digest

October 15, 2021

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

MeTooToo created a topic in Estate Planning Aspects of IRAs and Retirement Plans

Strange Maryland Trust; Successor Trustee Rules

"Is anybody familiar with Maryland trust rules? This falls into the category of doing a friend a favor, so TIA for any insight.

Client set up a living trust and then dies a few years later. There are 2 beneficiaries of the trust (two of the client's three children). Upon the death of the client the Trust named the youngest of the three children, who is not a beneficiary of the trust, as Trustee. All goes well for a few years. The now trustee (and youngest of the three children) develops some health issues which focuses the attention of the beneficiaries on the successor Trustee provisions of the Trust.

The Trust names one of the other children (who is 1 of the 2 beneficiaries) as Trustee if the youngest of the three siblings dies or is unwilling to continue in her role as Trustee. Nothing further is specified in the Trust as far as Trustee succession goes.

Assume that (1) the youngest of the three children dies; and, (2) the named successor Trustee acts as Trustee for a few years; and, (3) the named successor Trustee dies.

The Trust doesn't contemplate this sequence of events. There doesn't appear to be any provision in the Trust that grants the remaining beneficiary Trustee authority.

The trust holds two assets: an investment account at a national brokerage and an annuity issued by a large insurance company. Both the brokerage firm and the insurance company have a copy of the Trust itself.

Assuming the above, is there something that the named successor Trustee should do (after the youngest sibling dies but obviously before her own death) so that the brokerage firm and insurance company understand that, upon her death, they should listen to the remaining beneficiary for all things they would otherwise look to the Trustee for?

Does Maryland trust law have a provision that says if a trust becomes trustee-less that trustee powers automatically vest in the remaining beneficiary?"

No replies yet   |    Click Here to Add a Reply
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Ananda created a topic in Distributions and Loans, Other than QDROs

Mandatory Distributions Under $5,000

"My understanding is that if a retiree has an account balance over $5.000, participant consent is required before a distribution can be made. However, if the balance is between $1,000 and $5,000 then per 401(a)(31) the plan has to notify the participant that they can direct a rollover to a named bank or take a lump sum, but if there is no response from the participant then the plan must do a direct rollover to an IRA selected by the plan.

Thus my interpretation is that if the balance is under $1,000, no such rollover notice is required and the plan can write a check to the participant and W/H 20%. However, if the balance is less than $200, mandatory 20% W/H is not required. Is that right?

Finally, what about spousal consent? Does the plan document have to specifically state that distributions of balances less than $5,000 does not require spousal consent. What if the plan states that balances over $5000 require spousal consent. Is that sufficient?"

5 replies so far   |    Click Here to Add a Reply

TPApril created a topic in Cafeteria Plans

FSA Start Date -- Always Allow at Same Date as Medical Plan Eligibility?

"Every company I'm aware of allows employees to participate in their Health FSA at the same time they become eligible for their medical plan. Apparently, there is a company that only allows participation in the FSA effective at the start of the enrollment period after being hired, ie anyone hired in current plan year can enter the Medical plan (if eligible) but their FSA start date is 1/1 of next year. Is there any reason this is not allowed?"

1 reply so far   |    Click Here to Add a Reply

HCE created a topic in Nonqualified Deferred Compensation

Can We Divide a NQDC Plan and Transfer a Portion to an Unrelated Company?

"Company A sponsors a NQDC Plan. It later split into Company A and Company B. Several years ago, Company B was sold (no longer related to Company A), but the sale did not trigger payments under the NQDC Plan due to the 'same desk' rule. However, now we have a problem where Company A is sponsoring a plan that still contains Company B employees. Company A has to rely on Company B for things like informing when one of the Company B participants has a separation from service.

Company A would like to divide the plan and send the Company B portion to Company B. At that point, Company A doesn't care what happens to the Company B portion -- Company B can administer the plan itself, or it can terminate it.

Obviously this should have been done at the time Company B was sold, but it wasn't. So, is there any problem with doing this? Since Company B is the true service recipient here, it seems legit. But I can also see the potential for abuse here -- giving a NQDC to a different company to terminate so other plans aren't aggregated with it and don't also have to be terminated. Has anyone run into this issue before or have any advice?"

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Basically Green created a topic in 401(k) Plans

OK for Single Member Plan to Have Participant Loan as Only Asset?

"An individual intended to start a business (and did), and opened a 401(k) plan. She rolled into the plan $200,000+ worth of IRA and pension money from her previous employer. She took a $50,000 loan and was making quarterly payments. COVID hit and her business went nowhere. She ended up rolling her IRA and previous employer plan money out and into an IRA (she felt it was safer). She ended up stopping her loan payments as well, so all that's in the plan now is the loan balance. I told her that if she wanted to close the plan her loan would be a deemed distribution. She does not want that to happen. Can the plan just ride along with only the loan as an asset?"

2 replies so far   |    Click Here to Add a Reply

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