QDROphile

The account could be held in a separate trust that is qualified under section 501(a) as a trust for assets of the plan. But I doubt that there would be any advantage to such an arrangement if done and maintained properly. Otherwise, the only way to get funds out of the plan's trust (where they are now) would be via distribution, if the participant is eligible, or a spin off of a portion of the plan. If what is proposed is simply a change of identity of the account beneficiary, no. You are correct that it would be an impermissible transfer of ownership.

State law, collective bargaining agreements, salary deferral rules, public scrutiny.

I discourage plans from providing model or sample orders. Good written QDRO procedures can be helpful to everyone.

There are other ways to skin the cat, but I applaud you for following Dirty Harry's advice and recognizing your own limitations. Rejecting the terms is the right course. But what is the plan administrator's policy about what is said in connection with advising that the terms of the draft order do not satisfy formal requirements? Will this lead to another failed attempt if the proponent is not given a clue? I am not at all suggesting that the plan should be helping with the terms of the order, but the plan could be wasting a lot of time if it plays tennis with someone who does not have an understanding of his/her own limitations.

Advice #1: Amend the plan and complain (or worse) to the person responsible for having plan terms that put the employer in such a predictable predicament. Advice #2: Have the plan fiduciary interpret the plan to achieve the practical result that only the available amounts after the applicable priority reductions are recognized for deferral. The plan terms give the ficduciary the authoruty to interpret, right? Advice #3: Don't rely on the advice of strangers.

Maybe this works: There is no requirement under section 403(b) to subject any amount to vesting.

It is OK if you like paying taxes. Not permitted if you want to comply with the rules. A further deferral requires a minimum five year postponement and the change has to be made a year in advance of the the original trigger.

Some plan fiduciary is responsible for QDRO administration, and may be the culprit unless FIdleity is refusing to follow instructions of the fiduciary. I think Fidleity has a service option that allows total outsourcing of QDRO administration, and that outsourcing should include appointment of a special fiduciary -- I don't know the relationship of the fiduciary to Fidelity. Masteff is correct that you need to get to the fiduciary who is responsible, otherwise Fidelity just hides behind its mechanical policies. No matter what the Fidelity policies, the appropriate fiduciary can instruct Fidelity to call off account restrictions. the plan sponsor is not necessarily the fiduciary, but it can identify the fiduciary.

Any plan provisions or policies that interfered should have been amended in connection with the transaction. It may not be too late to amend. Also, the fiduciary may have discretion over timing of default and contractual consequences of default and may be able to accommodate a prompt rollover.

mrstexas: Because you are dealing with Fidelity and typically Fidelity does not know the law and does not care to follow the law, I am not going to offer a detailed suggestion. If you cannot get state court orders to say exactly what the 900 pound goriila wants, you may have to resort to forcing the 18 month period to run on a requirement for disposition following a decision on qualification of an order. Unfortunately, the way to make the 18 months run is to trigger a distribution, but most people don't understand that. Once you tirgger a distribution, I don't know if you can stop it. But maybe you can bull your way to forcing Fidelity to release restrictions based on the 18 month rule and the determination that the orginal order was not qualified. You should also see if you can enlist support from the Department of Labor. Unfortunately, the DOL has its own problems with understanding the law and has some blinding biases that are not favorable to your quest.

The fiduciary can do what the fiduciary decides is comfortable. This fiduciary has had experiences that suggest that greater precaution is warranted. A fiduciary should take into account experience in making judgments, but I am not arguing that the fiduciary is required to arrange direct payment. What do you do about purchase of residence? It is better to pay the escrow agent. If the deal does not close, the fiduciary has no questions about receipt of the refund. It is about good plan administration, not paternalism.

You can do it, but it is sensitive and the plan needs to turn some square corners because of the anti-assignment rules.

The part that bothers me about the linked message is the hype, as if this is some new revolutionary change with tricks and traps. The proposed regulations brought some refinements, but nothing much has changed. We got some help with testing questions. Whether plans were compliant in the first place is another matter, but they probably did not go out of compliance with the terms of the proposed regulations. My favorite is up front. They make is sound like having a plan document is something new, big and surprising.

"Corrections are also typically outside of plan document terms."

The IRS starts with the request for documents from the beginning of time or the last determination letter. I have not yet been forced to see what happens if that cannot be done.

Would you be willing to respond to questions about what certain document terms mean, other than the correct response that the fiduciary is reponsible for interpreting the document? Putting your name on it means greater ownership. You probably get those questions anyway. Showing your brand is generally regarded as a good.

When the employer covers the entire premium, the term "pre-tax" as commonly understood in the industry is not the correct description. The health benefits are provided tax free. No cost to the employee and no taxable income associated with the benefit. Pre-tax means something else. If the employee wants the benefit and is willing to pay with after tax dollars, that can be done, subject to eligibility terms of the group health coverage. The employee cannot choose pay for the coverage pre-tax unless the employer has a cafeteria plan. Under the plan, the employee can choose to have the coverage and the employe's pay would be reduced by the premium amount. Since pay would be reduced, the premium amount would not be included in the employee's taxable income (or FICA wages), and that is what is called "pre-tax." It would be edgy in several respects, but the employer could cut the employee's pay by the amount of the premium and then provide the coverage for "free" like everyone else, but the employee could not choose to start or stop the arrangement. It would have to be a permanent feature of the employee's compensation. That would amount to pre-tax payment.

It would help if you clarify the intended insurance coverage. Would the employee obtain coverage under the group policy that covers the others, or an individual policy? Also, you changed the proposition for tax consequences. An employer does not need a cafeteria plan to allow an employee to pay premiums for group health coverage with after tax dollars. If one is buying an individual policy with after tax dollars, the employer does not need to get involved unless the employer has some buying capacity that is advantageous, such as a lower premium cost.

The 401(k) timing regulations are not relevant. This is not a contribution arrangement, it is a correction of an unrelated operational error. Corrections are also typically outside of plan document terms. I would not even use the term forfeit. The participant never had an interest in the mistaken contribution. One must have an interest before one can forfeit it. Aside from fine points of terminology, I subscribe to BSG150's position.

Are you under a misimpression about what is an employee contribution? An employee contribution is after-tax.

I don't think you can make Rev. Rul 61-146 work under the circumstances implied by the question. And if you could, it would not be pre-tax payment. An arrangement under the ruling provides for the employer to fund the cost of coverage, not a tax-advantaged purchase price for the employee.

Two issues: 1. Health plan eligibility terms, as noted in the second post. 2. Cafeteria plan. You did not say how the health benefits are "offered" to other employees, but the descirption implies that no one else "buys" the insurance. An employee can only purchase coverage on a pre-tax basis if participating in a cafeteria plan of the employer, which requires a written plan document.

You asked for more details about a plan spin off. You start from the idea that both companies maintain the plan. If the companies are not effctively independent in covering costs of their respective employees, you will have some complications when you spin off, but that can be covered as part of the terms of the spin off and may involve transfer of funds from one company to another. To keep the picture simpler, assume that each company effectively covers costs for its employees. The plan itself is mostly blind to actual funding. As company 2 departs the controlled group, company 2 keeps its part of the plan and the plan has exactly the same terms as before except the coverage definition changes to focus only on company 2 employees and perhaps also company 2 former employees. The "new" plan is a continuation of the original plan and would not have a short plan year with respect to the employees -- nothing would change for the employees except they might submit claims to a new administrator. For purposes of certain other formalities, the new plan starts life as of the effective date of the spin off, so if there is a medical spending account, the first 5500 would be filed for the year of the effective date. Consequently, there is some ambiguity about the "date" of the plan if the effective date is mid-year in a calendar year plan, but the duality should not cause much trouble and you might take the position the the effective date is the first day of the plan year despite a later apparent effective split. Part of the resolution may depend on how liabilities are apportioned between company 1 and company 2. I assumed away most of the complexity by having each company effectively be liable for its employees even before the spin off. Post-spin off amendments are probably needed, such as the refitting of eligibility terms, even if the eligibility and coverage issues were addressed in separate spin off documentation. The welfare plans funded through the cafeteria plan apart from the spending accounts have to be coordinated. For example, will company 2 be able to maintain a group health insurance policy with the same terms and premiums after the corporate spin off? Adjustments to the underlying plans may be events that allow participants to change elections.

I don't think the "new" rollover requirements change the old fiduciary duty to try to contact the participant for distributions. If the participant appears to be lost rather than simply unresponsive, then the lost participant standards apply, and would require reasonable efforts, including use of a government forwarding program, to contact the participant. You might be able to distribute to an IRA in the interim (subject to institutional squeamishness about having an unknown customer), but contact efforts need to be pursued if only to notify the lost participant where the distribution went.

There is no employee money under the plan. The two companies can make whatever arrangements they desire with respect to their assets and liabilities, including transfer of funds to balance assets and liabilities. The transactions should be taken into account in the larger scope of the spin off of the second company. Supplement to response: It probably would have been best for the portion of the cafetria plan with the second company employees to have been spun off. Then you would have continuity and no initial enrollment or election questions; you might have some questions if anyone wants to justify a mid-year change in election based on the events. It may still be possible to treat the seocnd company plan as a spun off plan, but both companies will need to be engaged in the formalities.