Message Boards Digest

September 9, 2022

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

Peter Gulia created a topic in Retirement Plans in General

Is It Common for a Plan to Require a Beneficiary Designation in Whole Percentages?

"A recent court decision treated as proper an individual-account retirement plan's provision, which stated (on the plan's beneficiary designation form), that: 'The Allocation % [between or among a class of beneficiaries] must be whole percentages.' The participant submitted a form that asked for '33 1/3%' for each of her three siblings [in an effort to replace the earlier designation of her now-ex husband as the sole beneficiary]. The court found that -- even if the plan's administrator might have had discretion to accept the not-in-good-order designation (Honeywell argued it did not) -- rejecting the participant's attempted designation [and permitting the plan to pay the entire $600,000 to the ex-husband] was not a breach because a fiduciary administers a plan 'in accordance with the documents and instruments governing the plan[.]' Gelschus v. Hogen, No. 21-3453, 2022 WL 3712312 (8th Cir. Aug. 29, 2022)

How common is this whole-percentages provision? Do plans require a whole-percentages beneficiary designation because the plan's sponsor or administrator seeks to fit within a recordkeeper's or other service provider's software and systems? If a participant specifies 33%, 33%, 33%, does an administrator reject the form as not adding up to 100% Or does an administrator accept a form that adds up to only 99% (or 96% for six beneficiaries)? If an administrator accepts a less-than-100% designation, does the plan or a plan-administration procedure provide an adjustment rule so the beneficiaries' shares exhaust the whole of the participant's account?

BenefitsLink neighbors, how does this work in the real world?"

6 replies so far   |    Click Here to Add a Reply

Chipwood 24 created a topic in 401(k) Plans

Solo 401(k) Mess -- Was a Plan Established for 2020 or Not?

"A self-employed person ('Owner') with no employees uses a payroll company to handle payroll. Owner has no employees and no other business. Owner intended to set up a Solo(k), and the payroll company took $20,500 as a pre-tax deferral for $20,500. Owner never drafted documents to get a plan set up. The $20,500 is setting in a business savings account commingled with other monies. Owner has already filed 2021 taxes. How would you handle?

Would you draft a document and move the $20,500 (plus earnings) into an investment account? If so, would you also calculate lost earnings due to the late deferral?

Or just tell them not set up a plan at all for 2021 instead start with a plan for 2022?

Ugh, these Solo(k)'s can get so messy. Probably needs to be some more regulations around these so people don't continuously mess these up, IMO."

1 reply so far   |    Click Here to Add a Reply

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