QDROphile

Who are you to involve the DOL and why?

Those words are typically understood to refer to the taxes on the income that results from the hardship distribution based on the hardship standards of the document, such as medical expenses, etc. For example, if a participant qualified for a hardship distribution for $10,000 of medical expenses and was in a 20% tax bracket, the plan could distribute $10,000 (medical expenses) plus $2000 (20% for taxes) plus $1000 (10% penalty tax). My numbers are not fine-tuned for iterative computations. The language does not mean the plan will allow a hardship distribution for a stand alone income tax obligation. A hardship distribution for a stand alone income tax obligation would have to be justified by some other plan terms.

Does EPCRS still require the notice to the former participant that the excess amount is not rollable and that penalties attach if the excess is not withdrawn from the IRA?

If the plan is a 401(k) plan and the plan is not registered, no employer securities.

Assuming no state law problems, nothing requires the numbers to be translated from the original award. The original award cannot be implemented as originally provided. The checks to the participant could be split on some basis, possibly taking into account the lack of diligence by the former spouse. One consequence of the delay is the election of a J&S annuity with a new spouse, which makes the current checks smaller than life annuity checks. So one would not expect the former spouse to be getting numbers resembling those that would have attained to a timely QDRO.

Not having seen an answer, I renew the question.

Assuming no issue with state law, what prevents the former spouse from getting a share of payments to the participant during the participant's life?

So what is the compliance issue?

If it is a fixed formula, the contribution is not in accordance with plan terms, plus you are up against a very strong principle that contributions for a year have to be allocated for the year.

Maybe disqualification.

No option on year-to-year basis for nonelective contribution. Where the line is drawn on what constitutes a cash or deferred election is uncertain, but year-to-year is on the wrong side of it. Partner C can be excluded from nonelective contributions, subject to discrimination limits if Partner C is not an HCE.

Are you treating the plans as multiple employer plans?

Are you bound (and protected) by professional standards that prevent you from sacrificing the client by reporting them to an appropriate regulatory agency and then using the victim as an example for others? It would be more satisfying to get the real culprits, but the IRS probably won't go after the broker just for giving the bad infomation. After all, the plan is not required to break the law. Or just get used to it. In the area of nonqualified deferred compensation, the consultants routinely gave abusive advice and then castigated the lawyers for being too conservative. Result (with som help from Enron): 409A.

It was an advisory opinion. No cite off the top of my head, but it should be easy enough to find on the EBSA website collection, if not in one of your services.

That is because timing of distributions cannot be at the discretion of the plan adminstrator -- a basic principle of qualified retirement plans. The provisions about "may distribute" are poorly worded and must be interpreted in a compliant way.

Yes, there is an acceleration. The money that the employee elected to have paid some later year comes into the employee's hands in the year of the freeze. The particpant's opportunity to defer income ended December 31 of the year before the freeze. "Participant's control" is a concept that 409A expressly trumps.

Why should the plan limit everyone to prevent someone from exceeding the limit becuase of particpation in another plan? The responsibility for observing the limit should be left to the individual. The others should not have to leave money on the table just to prevent the possibility that a limited number of people might be asleep.

Would this be an example of internet Cerfing?

What about 401(a) (17) limit proration of compensation for calculation of the match? Section 1.401-k(3)(g)(1) says that the ADP test must be satisfied for the entire plan year, and section 1.401-m(3)(h) says that the ACP test must be satisfied for the entire year, but neither says the plan may use compensation for the entire plan year for calculation of the match. And what about compensation for testing of the match, which is in effect for less than 12 months? This is not a typical entry date issue that is expressly covered by the regulations.

If the plan provided for an irrevocable trust, you would have a breach of contract unless the participants consent to the amendment. Other than reversing the amendment, one wonders what the practical remedy is for the breach.

Looks like an operational failure to me, and probably a violation state wage withholding law.

Tax Code section 401(a) (13) and ERISA section 206(d), the anti-assignment provisions of the Code and ERISA. To save you the trouble of observing the the QDRO rules are an exception to those anti-assignment rules, I think the exception applies to the assignment from the participant to the alternate payee. The alternate payee then enjoys the protection of the rules with repect to creditors of the alternate payee. The related regulations and court cases are also informative.

I tend to be very careful with the anti-assignment provisions of the Code and ERISA, and that means not delivering a payment for a beneficiary to someone else without a very clear understanding of the circumstances and assurance of propriety. I suspect that all of the funds will not end up in the hands of the alternate payee. That may be an appropriate result, but not at the hands of the plan. Anyway, that is not your issue, except that recognizing the ability of an alternate payee to designate a representative presents an opportunity to interpret that plan is a way that would allow the payment to be made as the plan did rather than as the QDRO said.

Nothing in your clarification is contrary to my message and nothing changes the thought. If you like the thought, you have to arrive at the characterizations by interpretation of the order. The order does not express a designation by the AP as a representative. You have to infer that. I think the order actually just improperly provided for delivery of payment to the agency and the plan did not pay attention to the apparent impropriety and get the issue cleaned up at the determination stage. With respect to Texas, I will exercise unusual discretion for me and simply relay one fact among many that I could relay. Some years ago, some Texas bar association, in an apparent attempt to to assist its members who may have been incompetent to draft QDROs, published a model domestic relations order. Were it comprehensible, I would have declared it grossly misguided at best. But since it was incomprehensible, orders submitted with its assistance were summarily rejected. The proponents of the unfortunate orders themselves did not know what it meant, so they could not justify the terms or made appropriate modifications to make the terms work according to intent (in case anybody really had any intent). I am not competent to comment even infomally on Texas law. But I expect that the agency thinks it is owed at least some of the money because it had been supporting the child to some degree and wants to recoup under the QDRO. I doubt that the agency thinks it is merely a conduit to get the child support funds to the former spouse from the participant. That expectation and doubt explains what I think the QDRO really meant and therefore has to be recharacterized.

Nothing in your clarification is contrary to my message and nothing changes the thought. If you like the thought, you have to arrive at the characterizations by interpretation of the order. The order does not express a designation by the AP as a representative. You have to infer that. I think the order actually just improperly provided for delivery of payment to the agency and the plan did not pay attention to the apparent impropriety and get the issue cleaned up at the determination stage. With respect to Texas, I will exercise unusual discretion for me and simply relay one fact among many that I could relay. Some years ago, some Texas bar association, in an apparent attempt to to assist its members who may have been incompetent to draft QDROs, published a model domestic relations order. Were it comprehensible, I would have declared it grossly misguided at best. But since it was incomprehensible, orders submitted with its assistance were summarily rejected. The proponents of the unfortunate orders themselves did not know what it meant, so they could not justify the terms or made appropriate modifications to make the terms work according to intent (in case anybody really had any intent). I am not competent to comment even infomally on Texas law. But I expect that the agency thinks it is owed at least some of the money because it had been supporting the child to some degree and wants to recoup under the QDRO. I doubt that the agency thinks it is merely a conduit to get the child support funds to the former spouse from the participant. That expectation and doubt explains what I think the QDRO really meant and therefore has to be recharacterized.