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If you are willing to argue that one days notice is reasonable, sure. It might, it might not depending of facts and circumstances. The higher the percentage of NHCs that actually start deferring on that fist payroll in October would probably be in your favor for reasonableness if the IRS questions it. If most folks don't start til much latter and the owner drops in the 402(g) limit from his bonus in December that probably wouldn't be in your favor for a reasonable notice period.

Peter--I was involved as an expert witness in a regional case that achieved some notoriety several years ago that involved not only NQDC plans, but qualified plans as well. Since then, we have been adding "bad boy" clauses to all of our 457(b) documents, and our Annual Incentive participant agreements also--- Turns out in the early 90s two different DC office clients' former employees had the chutzpah to steal from their employer, be fired , and then sue for the bonus they felt they earned for the previous year. It's obviously hindsight here, but protection is the best measure.

Not sure any of this will be helpful, but I did come across a few cases where the parties tried to avoid criminal restitution by having a QDRO entered in order to transfer the retirement assets of the criminal defendant to his spouse. See the attached Memo. See also attached DoL ESBA 1999 Advisory Opinion 13A. David Advisory Opinion 1999-13A _ U.S. Department of Labor.pdf Restitution.pdf

I wrote my Wednesday and Thursday posts when I had only someone’s oral description of assumed facts, not yet the courts’ records. The State’s criminal prosecution is scheduled for a trial. The Federal criminal prosecution resulted in a plea agreement. That agreement recognizes restitution, debts, and other obligations the United States might collect under 18 U.S.C. §§ 3316, 3556, 3663, 3663A, including the Mandatory Victims Restitution Act of 1996; the Internal Revenue Code of 1986; and 28 U.S.C. §§ 3001-3308 (Federal Debt Collection Procedures Act of 1990). As Lois Baker, blguest, and Luke Bailey point to, the IRS’s and some courts’ interpretations treat an involuntary transfer to meet those debts to the United States as for the participant’s benefit. This situation is unlikely to reach the question of whether restitution ordered only under State law gets a similar tolerance in interpreting and applying the exclusive-benefit provision. (The participant’s debts under the Federal court’s order vastly exceed his § 457(b) balance.) Luke Bailey, thank you for the NAPPA article.

Amen to that!!

From everything I'm hearing from others Belgarath's noticing of the (stupid) split was accurate. We've been telling people as we went through the C3 restatement that another amendment would be needed by the end of the year. I may get overruled, but I would rather just go ahead and get it all done. We have a handful of clients that were put on C3 before our move to our current document provider. I was going to use this opportunity to just restate them as well so everything is on the same system. I also don't want to maintain "operational" decisions any longer than necessary. Finally, to Peter's question, the RKs that bugged me the most were the ones that said "we're doing X unless you tell us no" when they weren't the document providers and it was different than the defaults we were using for clients.

Peter, I've done a fair amount of research into exclusive benefit for governmental plans, although not in the area of garnishment. I don't think the IRS has opined a lot on the issue generally. The regs seem clear enough and don't come at the issue so much from the point of view of "you have to do everything you can to support the participant," but more from the technical angle that you simply can't spend plan assets on anything other than benefits and administration. I think that helps because arguably paying a debt of the participant is paying a benefit. In the case of garnishment there's an interesting twist because 401(a)(13) does not apply to governmental plans so they are not required to have an anti-alienation provision, although some do and presumably those that do should be interpreted under state law. So your participant here is grasping at exclusive benefit where if he or she were in a private plan they would be pointing to anti-alienation. As demonstrated by the PLR cited by Lois Baker, the IRS and courts have seemed to give broad leeway to MVRA where a federal crime is implicated. All the cases I recall have allowed the garnishment on the basis that MVRA is a federal law and shows a strong public policy for victims' restitution. The last article in this issue of the NAPPA newsletter may help: https://www.reinhartlaw.com/wp-content/uploads/2019/05/Johnson_NAPPAReport_April-2019.pdf

Peter is the plan organized for a federal entity, or is the defendant charged under federal law? If so, would 18 USC 3613(c) help?

I'm not sure what you are getting at. If you can't use the forfeiture to off set reasonable administrative expenses (assuming the document allows) then you need to allocate them in accordance with the terms of the plan document in a non-discriminatory manner. You don't an IRS "free pass" to do it however you like because the plan is terminating or the forfeitures are small. I get the client doesn't want to pay you to do the reallocation but don't make their problem your problem by doing it wrong. Is there a large enough forfeiture account balance to pay your fees to do the reallocation correctly and allocate the remainder to participants according to the Plan document? That might make everyone reasonable happy depending on your point of view.

From 1.401(m)-2. This is the big issue! (iii) Matching contributions. A matching contribution is taken into account in determining the ACR for an eligible employee for a plan year or applicable year only if each of the following requirements is satisfied— (A) The matching contribution is allocated to the employee's account under the terms of the plan as of a date within that year; (B) The matching contribution is made on account of (or the matching contribution is allocated on the basis of) the employee's elective deferrals or employee contributions for that year; and (C) The matching contribution is actually paid to the trust no later than the end of the 12-month period immediately following the year that contains that date.