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Belgarath

Non-profit supposedly has "non-ERISA" 403(b) Plan

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I posted a slightly different version of this a couple of years ago, and I'm wondering if there are any new responses/thoughts that anyone cares to share? I'm just wondering if there is any "typical" procedure followed by either the funding companies or the Plan Administrators.

Suppose you have a non-profit, who uses a salary-deferral only adoption agreement, and specifically elects to not have ERISA apply. But, the plan also allows loans, and has QDRO procedures.

The DOL "safe harbor" is rather unforgiving, in terms of any employer discretion. So, the employer can't make QDRO determinations, or determine eligibility for distributions, loans, QDRO's, withdrawals, etc...

What I'm wondering is this: it is all fine and wonderful for the employer to say, "I'm not going to make these determinations. That will be up to the vendor."

In real life, how many vendors actually do this? Won't most vendors send a form to the employer, saying "you need to authorize this distribution/QDRO/whatever" and this action on the part of the Administrator, if taken, makes you lose the non-ERISA status.

How do you see this handled in real life?

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I think the employer has to be sure not to reply to any inquiries about QDROs or loans. And when considering which vendors it will deal with, it should allow only those that agree to be responsible for these matters.

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Consider at least two further thoughts:

Before the employer relies on an insurer's or custodian's promise that it will decide every question, evaluate whether the promise is signed by a person who has actual authority to make the promise as the insurer's or bank's obligation and that the promise is not void or otherwise legally unenforceable for lack of one or more regulators' approvals.

Consider whether the employer really will keep its resolve to support its "hands-off" position. For example, imagine a situation in which a court finds the employer in contempt of court for declining to decide whether the court's order is a qualified domestic-relations order. Suppose that it might cost at least a few thousand dollars in unreimbursable attorneys' fees to win an undo of such an order. Will the employer maintain its resolve, and spend money from the charity's assets, to litigate its non-plan position?

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I have been out of the 403(b) market for quite some time but i cannot understand the position taken by Fiduciary Guidance Counsel and quite agree with Carol V. Calhoun.

Why would the QDRO be addressed to the employer? The employer has no ability to pay or order to be paid, the funds held under a 403(b) contract, as far as I recall.

Ideally, an employer should have a "hands-off" position. Other than facilitating the selection of vendors and payroll deductions, the employer should not be involved. Things could not have changed that much.

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