QDROphile

Section 409A is a concern if someone who has a right to payment in a year receives payment in a subsequent year. That is not to say that the situation you describe violates 409A.

A second filing is common because it is not that much trouble and removes any doubt about interpretation or policy.

What about the requirement that salary reduction can be effected only prospectively, never mind when the qualifying event occurs?

Is the son compensated?

In comments at the ABA at annual section meetings, the IRS said it was OK. Those materials are published, but I cannot remember the year. The IRS comments are not official guidance.

Without further thought about the conflict between the plan terms and the annuities and the adverse implications, you should consider a disclaimer by the son. It would be nice if the son were not a minor at the time of the disclaimer.

Can an individual be an accrual basis taxpayer?

Sorry for the distraction. I have no idea why I read so much into the original post. Maybe I was wishing to see a completely novel question.

I thought the question was whether or not the employees of the government unit could participate in the 403(b), even though the government unit is not eligible to sponsor a 403(b) plan. Are you saying that if the 501©(3) entity is an instrumentality, then that opens the door for the parent's employees?

It is also possible to roll over a loan directly (not really, but the IRS says it is OK), so you could roll your entire balance to the plan of your new employer, if both plans allow.

If the plan has a medical FSA feature, the elections for the FSA often depend on the core medical coverage and cost, so it is best to have FSA elections when the core medical benefits are known.

If they took deductions for amounts not contributed, you might consider tax fraud, too.

The 404© regulations require a plan fiduciary who intend to comply with 404© regulations to state that intent in materials given to the participant. The statement need not be in any particular materials, but is often in the SPD or the investment information materials.

The regulations do not require a six month suspension. If you don't like the conflict, amend the 401(k) plan.

Usually the HCEs are the ones who get the better out of the true-up because they front load more. If so, it not a good candidate.

But is nothing sacred?

Who has authority to appoint and remove the trustee?

The document doesn't suck, but evidently the use of the document by this employer sucks, so that means the advice or assistance to the employer about adopting the document sucked. I am assuming that the document is a protoytpe, and all prototypes suck to some degree. Truly matching by pay period is an idea that sucks, even though payroll people may like it. That does not mean that payroll people suck, but payroll people are sometimes an impediment to optimal plan administration. Optimal plan adminstration is not the mission of payroll people, so the impediment is not the result of character flaw. So if the document is a prototype and it provides for a true pay period match, I guess it sucks, but election by the employer of the match feature with this employer is the worst part.

If the plan were not operating in accordance with its terms, the only way to fix the error by retroactive amendment is through a VCP filing and the error you describe would not be a good candidate. But don't be so sure the operation was faulty. Match calculated by pay period does not necessarily require contribution by pay period. A careful reading of plan terms is necessary.

I would be wary about working with anyone who sells fear, but only you can evaluate the pitch.

The fiduciary has to weigh consequences and benefits. I think the situation is likely to have some adverse consequences for the plan (the participants in general). The fiduciary's knowledge of some benefit for some participants does not lead to an automatic conclusion to publicize a securities law violation or push for rescission offers. I did not advocate a particular conclusion, but you have to be careful about a knee-jerk reaction.

But you cannot escape Mike Preston's conclusion that a QDRO cannot deliver what the individual wants. Distributions pursuant to a QDRO have pre-established tax consequences.

More bad news. Expenses incurred before you were covered by the plan are not eligible expenses, even if the expenses were incurred while employed by the sponsor of the plan. So say the relatively new proposed regulations under section 125. The proposed regulations probably only state more clearly what was already the law. You could have been covered by the plan before the pay period in which pay reduction started, but it is unlikely. If your plan has a grace period and you are careful about your election for 2009, you will not "lose" any of "your" money. Navigating to this result is complex (note the odd use of quotation marks), but your plan contacts may be able to help you. Also, you childcare costs may yet be greater than you expect for this year.

There is much more to a full analysis, but the short answer is that you cannot run expenses through this employer's plan for expenses incurred before you were an employee of this employer. The denial of reimbusement is proper. You may be able to convince the employer to change your election based on mistake, and adjust amounts prospectively so that you do not have your pay reduced in the end more than what your 10 months of child care expense will be. However, "correction" is a very sensitive proposition because of the tax risks and I would not expect much enthusiasm from your employer. You may have some consolation in the childcare tax credit.

Why do you care if it is to be treated as a QNEC?