QDROphile

Is this a plan language interpretation question? If it is, and the TPA is not a fiduciary, the TPA's conclusion is not the controlling conclusion. The plan should say who interprets plan terms.

The plan is not limited to the safe harbor events under the regulations unless the plan terms limit distributions to the safe harbor events. If you get outside of the safe harbor, there is really no reliable guidance but there are circumstances that qualify, depneding on the standards set by the plan terms and how thos standards are applied by the fiduciary. For example, the plan could list some additional events, such as overdue federal income tax liability that is subject to collection actions -- but no one is going to assure you that such circumstances qualify despite personal beliefs to that effect. That uncomfortable situation is why most plans stick to the safe harbor criteria.

Anecdotal evidence suggests that the IRS might assert that an excessive rate is a disguised contribution. Most at risk are individual or small professional plans.

Belgarth is probably right, but you should at least call and see if the IRS will entertain the idea. I have had success under VCP with the clerical error theory. Everything but the plan document remained in line with the former plan term, sot eh plan term change was an obvious error. I think you are dead if the SPD reflects the change.

Depending on what the employer does about the bad acts and the nature of noncompliance, the reimbursements would be taxable compensation.

Additional question: If all your questions can't be answered with acceptable answers, is it a breach of fiduciary duty to have such investments? Even if ERISA does not apply, there are fiduciary duties, although enforcement and penalties in that cases I am familiar with are essentially nonexistent.

409A is concerned mostly with timing, not amounts, so a change in benefit amount is not necessarily a problem. You have to be careful that the change is not a late deferral and that the change is not some sort of scheme to exchange or replace compensation with the effect of improperly accelerating or further deferring deferred compensation. For example, if you reduce an amount of deferred compensation payable in five years, but also provide a bonus to the employee, have you just accelerated payment of some of the deferred compensation by paying it currently and calling it a bonus? It gets very sticky, depending on all facts and circumstances.

John: I saw the question and could not figure out what the issue was, so I did not respond. You were either bolder in speculation or more able to read between the lines about what was going on. The question still does not makes sense to me, even with the clarification. There is no overpayment in the picture. A domestic relations order that comes to a benefit in pay status has to deal with the benefit at the time the order is delivered. I think in this case, the answer to my reformation of the question is that the order cannot touch the payments made before the the order was delivered (there was no overpayment). If the order wants to make up a share of the prior payments, it must do it out of future payments. There is no amount to recover and therefore no interest question. This answer is from the point of view of the plan. As between the participant and alternate payee, the economics may be different, but the resolution has to be expressed differently.

Nice answer, John. What was the question?

Puerto Rico has its own tax code and now has a section 125 equivalent. I think you can have dual qualified 401(k) plans, but I don't think you can have dual qualified cafeteria plans. I think the Puerto Rican employees would need a separate plan, but this is not my best subject.

I don't see how someone could exchange a cowboy contract for a contract with an approved vendor.

What does 31 days have to do with whether or not a MCSO qualifies? There is nothing date sensitive about the timing of the orders, so how can the plan impose some time requirement? The plan can choose give effect to the order prospectively, so delay between the date the order is issued and the date of receipt by the plan can affect the timing of coverage, but not the application of the order.

Let me try to be a little more helpful. What is your basis for the statement that, without more, "if other participants want loans they can exchange contracts for a contract with an approved vendor"?

I am missing provisions in the regulations that cover an independent exchange from a cowboy contract to a contract with an approved vendor.

It is permissive, so the plan would have to be amended if the current plan terms do not allow the distributions. Some thought should be given to what the distributions provisions should be. Just because you can do it does not mean you should.

Yes, section 905.

Please don't tell us that someone had the bright idea to keep the unvested balance with the expectation of capturing forfeitures.

No. Normal retirement age or later for the money purchase money.

Except that it is too late in 2009 to elect catch-up contributions for 2008. Catch-up will work only to preserve deferrals that were timely elected in 2008.

Try this: If a service provider refuses to follow to the instructions of the plan administrator, the provider is exercising contol over the plan assets and administration. That makes the provider a fiduciary. Most providers do not like that idea. After explaining the facts of life to the provider, demand proof of the ERISA fidelity bond that is required for fiduciaries. Next, go the DOL. The DOL is more interested in fiduciaries than service providers.

How many of your clients have followed your advice to fire a service provider that does not perform correctly? I think I am batting zero.

Since IRS reviewers are sometimes confused, one must try to get the reason for the resistance. For example, the agent may think the arrangement is a CODA, and the agent could be correct depending on the nature of the vacation pay terms. Or the agent may think the arranagement violates the requirement for allocation terms. Or the agent may simply be taking a negative view without understanding how the arrangement works because a lot of arrangements don't work. You may have to press to a higher level if it is important, and be prepared to show that you know what will work and the plan fits.

We all suffer from the duplicity of the Department of Labor.

Where is the substantial risk of forfeiture in the first place with respect to the lifetime payments? It would be very difficult to have a risk applicable once the benefits started and still be lifetime benefits.

No implied agreement or disagreement with the bigger issue, but where do we get the idea that two providers is enough?