QDROphile

Unless the plan is subject to ERISA, and few DCAPs are, the employer could always keep the money. The proposed regulations add nothing new.

What about Treas. Reg. section 1.401(k)-1(d)(3)(iv)©(5)? The individual borrowed from a commercial source. Are the terms reasonable?

The best practice is to send the money to escrow, with instructions. Then if the deal fails, you don't have to wonder about whether or not the plan can take the money back

The employer can always give raises. Salary reduction elections can only be changed to the extent allowed by law and the plan document.

Plan terms relating to payment of expenses must fit.

The guilty employer can give the emplyee a bonus to make up for the employer's misdirection. But be careful. It is improper to refund the unused FSA amount to the employee, so the bonus should be sized and timed to avoid being characterized as a refund, and the actual excess must be treated properly under the plan terms and section 125 rules. This is not for the timid, the uniformed or the inexperienced and the circumstances may not be right for the move.

How about education and the big stick? The enrollment form and other communications such as the SPD should emphasize the importance of correct designation and consequences of incorrect designation, including recoupment, criminal charges and discipline (including termination of enployment). In the event of questions, someone should be availabe to assist employees with the correct determination. This is sometimes complicated, after all.

If you have started benefits in the form of a QJSA, You might like to know the the 9th Circuit has joined certain others and ruled that the survivor benefit has "vested" and cannot be compromised by a domestic relations order. Carmona v. Carmona. However, the decision was based on terrible facts and at least was more thoughtful than the decision in AT&T v. Hopkins. The 9th Circuit holds open the possibility of different results under different circumstances. One thing can be said for sure, alternate payees need to advance the domestic relations order promptly and diligently to avoid having their interests preempted. I have repeatedly criticized the AT&T v. Hopkins result. It looks like the trend is for QJSA to win over QDRO. I only hope that the insight of the 9th circuit has traction and the outcome will be different if the circumstances warrant. The circumstances did not so warrant in Carmona.

All the reasons why a new or revised order should not be issued should be presented to the state court, including the subsequent marriage. It may not make a difference, but you do not want to fail to make any argument at any stage. If the issue is not one properly considered at that stage, it will simply be disregarded. Unless you made a great effort to resolve qualification in the first place and your former spouse resisted or absolutely failed to cooperate or particpate, you don't really have much to complain about. The original division can be given proper effect unless you have started retirement benefits, or the plan is designed or administered by blockheads, or you have incompetent assistance in describing the your relative rights. Athough your former spouse should have been diligent about reaching a final resolution in a more timely manner, you should not feel entitlted to a windfall. You should make sure that the orignal interests are properly framed against the current backdrop. The state court may have a different view, but your retirement plan should not.

I am confused about why you mention options that involve the company paying for coverage when status changes. That seems contradictory to a caferteria plan or health plan design that provides for ineligibility when status changes.

If the particpant borrows from other sources to construct, the hardship money cannot take out the financing. Payment of the debt on a home is not a purchase of the home.

If you perform the correction properly and all you are doing is using left over excess funds as a credit against the next contribution, that is OK, and is usually preferred to retrieval of funds by the employer. Part of the proper correction involves the investment return. You cannot give a participant any credit for the early deposit, you have to calculate as though money was never in the account the account, not left in the acocunt.

EPCRS says you can't correct a mistake by another erroneous transaction.

There are other interpretations, including that the former spouse and the employee each have their own balances, which is a double dip on the employer. The area is uncertain.

What is the client going to do the next time it gets a similarly improper order? Can't turn that one down if you do this one. Plus, I would love to see the QDRO Procedures amendment that emerges from this.

Catch-up contributions are elective deferrals. The key difference is that they are not subject to upper limits on elective deferrals imposed by plan terms generally or by certain statutes. Are elective deferrals possible under the circumstances?

The order should not have been qualified. That sort of formulation should never be allowed under the circumstnaces and your dilemma shows why. Go back and nix the order.

The order was poorly written and the plan administrator did not interpret the order properly. The interpretation should have been the lesser of $23,500 or 100% of the account as of the specified date, adjusted to the time of payment. Now the plan administrator will have to make some unpleasant decisions about how much to pay.

Sorry. My response was geared only to the issues that arise if one desires to name children as alternate payees, contingent or otherwise. I agree with the other posts that the plan can be designed to allow an alternate payee to designate a beneficiary without concern for identity.

No one knows for sure, or if they do, they are either not in a postion of authority or have not chosen to say in an authoritative manner. I think the plan administrator can decide either way. If the limited is view is taken, it would look to the language in the statute about child support as the basis for the exception to the rule, and will conclude that only a minor or dependent can be an alternate payee. If the expansive view is taken, then the operative question is, "Who cares?" Either way, be careful about the special tax rules and the need to deal with different withholding rules. I recommend that the withholding be required to be specified in the order to avoid ambiguity about what the AP is really supposed to receive -- an amount that is net of withholding or not. The main source of trouble is that the participant can elect the withholding amount if not confined by the terms of the order.

The general principle under EPCRS is that earnings are taken into account until the correction is effected.

Why create extra infrastructure and administrative and fiduciary burden under the plan when better alternatives are available?

Step back further. You don't need to use specific terms unless EPCRS specifically addresses your circumstances.

Nobody said the rules make sense in all circumstances. The effect of the rules is that no one will elect the HRA group health plan benefit as a practical matter. But fail to comply with the COBRA formalities (e.g. notice) at your peril.

Look to EPCRS for correction.