QDROphile

Depends on how you designed the plan/plans. If you have a plan that is an "umbrella" or "wrapper" for the other plans, you could have a single plan for ERISA purposes. The number of pages or staples is not what determines.

As long as you have only one employee, you might be able to make a SIMPLE work if the employee wishes to defer forever at least the amount of the employer's two percent contribution. The two percent would be covered by a pay cut, but watch out for other undesired consequences of a pay cut. For example, most people view the reduced FICA wages as a good thing (and the tax savings can help mitgate the pay cut), but if you believe in Social Security, reduced contributions might be viewed as bad. One might argue that the deal would be an impermissble CODA. You decide.

I have serious doubts that such an exclusion would pass the "reasonably equivalent basis" requirement.

There are so many elements of plan administration that are affected because of circumstances signaled by absence of contributions that it is hard to imagine a TPA not asking about the signal as part of handling administration properly. Maybe scope of the TPA's duties were very limited.

Wow, a lot of activity while I was editing to provide a direct response to KRS401(k).

K2retire: Just off-hand I would offer that it is implied by (i) the rules for vesting upon complete cessation of contributions, which do not say that the plan terminates, and (ii) Treas. Reg. section 1.411(d)(11)(e). You raise a good point and implications are not a great foundation. In any event, it would be some time, almost certainly more than one year, before the rule would have effect. I have heard different rules of thumb. KRS401(k): I am shocked that a TPA would wait so long to ask for an explanation from the plan sponsor or fiduciary about what happened to contributions and the implications. I can understand coming to the message boards to get comments about the explanation of the phenomena and any compliance aspects of the circumstances and the proposals for maintenance or disposition of the plan. Curiosity is good, but it is strange to come to the message boards with both curiosity and complete speculation when some of the curiosity should have played out with prior inquiry. One answer that fits is that the plan has a determination letter request pending and a plan liquidation or merger has been put off until receipt. But if you don't ask ... .

What is D telling you about D's plan? Or to be more accurate, what is the fiduciary of D's plan telling you about D's plan? It sounds like D's plan is frozen. It will operate normally except it will have no contributions. Participants have the ability to get distributions as usual, e.g. termination of employment, but no special rights except maybe accounts became vested. I am a bit shocked by your question.

ESOP review is caught up in some controversy. Be glad you are not getting comments now because the IRS is taking some positions that are contrary to accepted understandings, including accepted understandings that are not wrong. There are a lot of accepted understadings about ESOPs that are wrong and I am hoping that the IRS steps on a few of those.

A one-time election feature fundamentally changes the plan design unless the election is narrowly circumscribed. Even then, it could lead to discrimination problems depending on the choices. Also, substituting current compensation for contributions might increase employment taxes, but I could be recalling the rules about 403(b) contributions incorrectly. I did not check and there is a specific rule.

403(b) plans can be designed to allow one-time irrevocable elections, but it sounds too late to accommodate this employee, and such a design change would probably be unaccepatble to the employer. I am inferring a lot about the employer contribution because the description is sketchy.

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.