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You are not going to change the views of the critics of your analysis that this amounts to double taxation, so don't bother with the distraction to your inquiry. You either get it or you don't and you will either get a good economic evaluation of your options or you won't. References to double taxation will onlly confuse and distort the discussion.

A question would be whether the ex wife is getting the $43K because a) she's entitled to 1/2 of the marital portion of his retirement account or b) they're using it as available funds to finance a division of property (for example, he's keeping the house so she's getting money). If the intention is a), then, in my opinion,it's 100% correct that she should be the one who has to pay the taxes (now or in the future) on her portion of the retirement account. She wants 1/2 of a tax-deferred asset without owing the deferred tax. If the intention is b), then the question is whether they allowed for the income tax effect in determining the $43K in the first place. For example, if she was supposed to get $35K but they added $8K for taxes, it would be double dipping if she makes him pay the tax now.

Well, I think the actual definition is "It is an optional feature that increases commissions..." The ones I am familiar with, and I get the vague sense that is what is being described here, are for variable annuities, and guarantee an income based on a guaranteed interest rate, no matter what happens to the underlying value in the contract. So it would seem that if they are buying an annuity, they are using it as any other asset in a trust. Anyway, I wouldn't think it could be included in a DB funding vehicle. You'd effectively be using plan assets (it's an internal expense) to provide some benefit that is other than that called for in the document.

This is non-plussing stuff ! Sounds like the kind of rider that would be attached to a life insurance rather than annuity contract. Uncle and sorry I couldn't help.

I have to give them credit - the DOL person who gave this answer called my co-worker back yesterday, and said that after thinking about it she had given an incorrect answer. So this DOL person does agree that you wouldn't count them in this situation.

A loan might be the best economic option, but I wonder about the ability to evaluate the economics if some of the advice refers to double taxation when referring to loans. Try an analysis with a lender other than the plan.