QDROphile

The loan terms should cover prepayment. If they do not, the provider of loan documents is incompetent. It is common to allow prepayment, but only if the entire balance is prepaid. I think there is some limitation on absolute prevention of prepayment, but I am not sure it applies in plan loan context.

You could, and I would, argue that any reasonable method of calculation is permitted. I don't think it overstretches the proscription on asking the plan do what it is not designed to do to defend against the "perfect" approach unless the plan uses the perfect approach for some other functions of plan administration. If you add some sort of weighting adjustment, I think an earnings rate approach is OK. Maybe even if you don't add weighting. I would also defend a plan that would not retroactively try to adjust for earnings, as long as the plan would make all of the investment data available to someone who would provide a figure for earnings adjustment for the time prior to the implemenation of the division, so you may question my judgment.

Thoughts, no conclusions: 1. The fiduciary has a duty to review, understand, and agree with (at some level) the valuation. The fiduciary is ultimately responsible for the price that is determined. 2. The valuation process always involves discussion with management. Even though the valuation is typically a snapshot at a past date, the valuation includes forward looking elements. Discussion with management can lead to adjustments because misunderstandings can be corrected and new iformation can come out. Review of a draft valuation can be a useful tool for the discussion.

It is not destroyed. As you say, it is converted, and it can be converted back. So the bond can be converted to cash, if it has value. And the cash can convert to a bond, but somewhat more slowly than at the speed of light.

What makes you think you need specific authority to prevent you from disregarding value of an asset? I recall from physics that matter cannot be destroyed. Assets have a value, and there are accepted ways of determining value. It is possible, using acceptable methods, to determine that an asset has no value, but absence of a market does not mean the asset has no value. Your problem with the policies of the successor trustee cannot be solved by inappropriate actions or determinations of value.

I only said that the latches argument would usually be more appropriate for court consideration than plan administrator consideration. I did not say anything was wrong with the doctirne or it use nder ERISA. Do you think a plan administrator should choose not to try to correct an operational failure of overdistribution from a plan because of its own conclusion that laches applies?

Except in extreme cases, as plan administrator I would put the burden on the person who depends on the laches argument to be the one to go to court to assert it. I know we disagree on the law, so you will be unimpressed with my desire for the plan administrator to favor the statute in making decisions, and forcing those who do not like the outcome provided by the statute to bear the burden of bringing the lawsuit based on the exceptional circumstances. A laches argument is a bit too exotic in light of a statue that makes no express provision for time limits and no good regulatory guidance on the subject. The new regulation contemplates many months of delay in determining qualification, with no suggestion of outer limit. That is differrent from delay in reporting the domestic relations order to the plan administrator, but we have no sign of time sensitivity in the regulatory guidance.

Why are loans serviced through payroll deductions? Because the plan administrator, through some contract, will not lend the plan money unless the the payroll deduction arrangement is put in place. That creates a relationship among the employee, the employer and the plan. Since the plan is allowed to make loans only with the expectation that they are to be repaid, and since the payroll deduction is the repayment mechanism that has been chosen, the plan administrator should make sure that the arrangement (contract) serves it purpose properly to support the administrtor's duty to arrange for loans to be paid. Commercial lenders do not make loans with optional payment.

By contract, the same way the payroll deduction arrangement is implemented in the first place.

I think the doctrine of latches is alive under ERISA, so it could have effect. Do you think a plan administrator would be in a position to make the call?

We disagree about whether or not AT&T v. Hopkins in correct.

I think it is a breach of fiduciary duty to let a participant default when the fiduciary can reasonably prevent the default, such allowing the participant to cancel payroll deduction when the participant does not have an overriding right to do so. Then the fiduciary has to decide if the fiduciary must try to collect on the debt by other means even if the participant managed to arrange a default.

The investment company only has to comply with the terms of its agreements. It can agree to extraordinary matters on any terms that it likes.

I think the new regulations allow an order issued before death to be modified to correct qualification defects. I would not accept an order that originated after the death of the participant. A plan could be designed to accommodate such an order, but I would not design a DB plan to do so.

The payment of the property taxes would probably be treated as a contribution to the plan. That might cause problems. If the company had no income, the owner probably had no compensation. If you want to treat anything as a loan, you probably have a prohibited transaction. I don't know where you get the idea of tax basis out of a loan.

Participant direction of investment of accounts is the not a good idea; the asset should be managed by a fiduciary. The prevailing practice of participant direction is misguided.

Don't forget the securities law violations that occur in a mulitple employer 401(k) plan that is not registered.

I second Bird.

The 409A regulations define "employer" and generally use a controlled group approach. Check the regulations. A separate question is what happens if one or another controlled group members becomes insolvent. Can one protect the employee by putting the deferred compensation obligation with the stronger sister? What is the protection against creditors, considering that the benefit must be unfunded?

The account is the participant's account. What the record keeper calls it does not matter as long as it is administered correctly as the participant's account. Have some fun. Instead of naming accounts by participant name, give each account a nom d'account. Everyone will enjoy having dual idientity.

We don't have any facts about any retirement plans for any employees of any employer, prospective or otherwise.

That would be a different discussion. What to do to avoid issues and what to do after certain facts have set in are two different matters. I have no quarrel with your argument based on a literal reading of the statute and I think no second filing is required. But I advise a second filing, one of the few times I advise to run with the herd.

To be really sure you can eliminate employer securities, the plan needs to say that the right to distribution of employer securities is the right to distribution of employer securities in the account at the time of distribution. Then you can eliminate the employer securities as an investment option in the first step. Once the employer securities have been eliminated, the distribution option can be eliminated. I am uncertain about a plan that provides a blanket right to distribution in employer securities (i.e. the plan has to obtain employer securities for distribution no matter how the account is invested up to the time of distribution).

You have just spent more time in inquiry than it would have taken for a filing. If you had spent the time filing, you would have nothing to worry about except the loss of postage, whether or the DOL can read a statute (which it cannot sometimes).

No.