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You can pay an AP immediately if the terms of the plan allow (e.g., an option in the FTW VSP is ability to QDRO in lump sum in any amount at any time - i.e., no limitations, unless you have 436 or top-25 HCE restrictions). IMHO, if the QDRO says AP gets X% of account balance then AP gets X% regardless of the assets and independent of any benefit/account balance the AP has accrued under the plan as a participant. AP may or may not be able to get this distributed immediately, depending on terms of the plan and funded status. AP as participant cannot get her individual account balance/accrued benefit unless employment terminated or otherwise eligible.

The Section 125 cafeteria plan's purpose is to act as a safe harbor from the doctrine of constructive receipt. It's a payment mechanism to permit employees to make a choice between taxable cash income and nontaxable cafeteria plan benefits, including to make a salary reduction election to pay for health and welfare benefits on a pre-tax basis, and not be subject to taxable income on the cash the employee could have received. None of that is going to apply in the retiree context. In other words, the cafeteria plan is not relevant for individuals who are not making an election between taxable cash and non-taxable benefits. There are currently no nondiscrimination rules in effect for fully insured health plans. The ACA provides that insured group health plans will be subject to rules “similar to” the nondiscrimination requirements that have long applied to self-insured plans under Internal Revenue Code §105(h). The insured plan rules technically were originally to apply at the same time as the first wave of the ACA market reforms (the first plan year beginning on or after September 23, 2010). However, the IRS issued Notice 2011-1 at the end of 2010, which provided that employers are not required to comply with the new nondiscrimination rules for insured plans until the Departments issue regulations or other administrative guidance. The DOL and HHS indicated their agreement with the IRS to delay enforcement. The Notice further states that any such guidance will not apply until plan years beginning a specified period after issuance (e.g., it may not apply until the first plan year beginning on or after six months following the regulatory issuance date). Note that you will want to be absolutely certain that the insurance carrier(s) approve adding retiree coverage.

Be careful with that. Although they may not initially look back, they've explicitly stated a formal position that ACA penalties have no statute of limitations, so they may surprise the client later on. I know you said there isn't an issue that the penalty wasn't calculated correctly, but it's still worth reviewing whether anything can be done to reduce the penalty...the variable hour rules sometimes provide a lot of relief. The IRS, to its credit, recognizes that their information gathering is imperfect, and agents I have worked with have been very reasonable in recalculating the penalty.

Just to add 2 cents, I find myself dealing with this question quite often. I believe that the position stated by CuseFan makes a great deal of sense. Since an asset sale has participants making elections to take or rollover balances, while a stock purchase does not allow for that mechanism, there is clearly an important difference between the two classifications. As I understand, with an asset purchase, the "old firm B" is said to continue to exist, but without the employees, clients and assets it previously had. Employee actual terminate service from that firm and work for the acquiring firm. Conversely, a stock purchase has the entire firm transferred to new ownership, and in effect, there is no service termination or dissolution of "old firm B". Just a transfer of ownership. This is analogous to a simple shift in ownership between the previous owners. Using this logic, an asset sale represents participants going to work for a new employer, therefore, ownership of the old firm B is not relevant. Conversely, the stock acquisition has old firm B still in effect, so ownership of that firm would be used for determinations. Anyway, that's my 2 cents.

I look at this way - if A acquired B in a stock sale, then I view as if B was part of A all along and would consider 2017 ownership and pay under B as same under A. If an asset sale, then I tend to view as new employees of A and ignore 2017 ownership and pay under B. I fully agree with Tom on any reasonable manner, this is how I define reasonableness.

See my responses in bold type. I work on a plan that is an owner/spouse CB plan. I am having a problem with your non-standard use of language. In ERISA qualified plans you will have a Participant, an Alternate Payee, a Plan Sponsor, and a Plan Administrator. I don't understand what you mean when you say "CB" unless, as one of our members suggested below, you are talking about a "cash balance" plan. I understand that you are acting as the actuary for the Plan, but I don't understand your role and how you got involved.The couple got divorced, and the QDRO says the AP gets X% of the owner's account balance as of a certain date. Here is the DOL explanation of how cash balance plans work. https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/fact-sheets/cash-balance-pension-plans It is common in allocating defined contribution plans to direct that the Alternate Payee will receive a certain dollar amount as of a Valuation Date, or a certain percentage of the vested benefit as of the valuation date. In addition, most of the QDROs I see provide that the amount payable to the Alternate Payee will be adjusted for gains, losses and investment experience from the Valuation Date until: (i) the date the Alternate Payee's share is transferred via tax free rollover to the Alternate Payee's IRA or other qualified account, or (ii) until the date the Alternate Payee's share is distributed directly (taxable but no 10% penalty), or, (iii) until the date the Alternate Payees share is segregated for the Alternate Payee's benefit. These three events are often called the "Liquidation Date" or "Assignment Date". With respect to the issue of whether or not the "gains and losses" language is implicit even if not set forth in the Marital Settlement Agreement or the Judgment of Absolute Divorce, see the attached Memo. I have prepared many QDROs for the cash portion of cash balance plans that are stated in the same way. Gary Shulman's treatise, "Qualified Domestic Relations Order Handbook", provides two model QDRO at Chapter 36, one for a fixed amount and one for a percentage. The parties involved apparently all agreed to a dollar amount based on X% of plan assets. How were plan assets defined? In a defined contribution plan it would be a percentage of the vested account balance (including or excluding loan balances). In a cash balance it would be a percentage of amount of the cash balance which bears no true relationship to the defined benefit plan to which it is attached, nor does it reflect any realistic present value of the expected stream of future annuity payments. However, when I look at the actual benefits as of that date, What are you looking at? An actuarial calculation? Present value? A percent of what? the AP should have received tens of thousands of dollars extra, if I take X% of the Participant's CB benefit as of that given date. When I initially received the QDRO and reconciled the plan assets and determined more money was due, the attorney who drafted the QDRO came back and said there is nothing more due, because both parties received what they had agreed on. This may or may not be true. If the parties made a mistake of fact about how much was in the account to be divided, then the court may have to power to reform the agreement to reflect the actual intent of the parties. Or one of the parties needs to call his/her malpractice carrier. I'm curious if anyone has opinions on this. I'm thinking it's a case of a poorly worded QDRO and/or a misunderstood attorney, but I suppose I let it go if everyone's happy? Are there legal ramifications to be wary of here? Or maybe the QDRO is perfectly fine, and the way they have handled everything is okay? Thanks in advance. If you notify the parties of your uncertainty about how much is to be transferred, then you know what will hit the fan. If you make that decision yourself while being uncertain of whether you are right or wrong, you may put the Plan assets in jeopardy. I think you need to bring it to the intention of the parties. Gains, Losses, Ownership Interest and Constructive Trusts 7-16-2020.pdf