QDROphile

If the account loaned money to General Motors, would it be a fiduciary breach if the fiduciary decided not to enforce the loan against Genreal Motors? We sometimes forget that participant loans loan are investments and plan assets, and the manangement of the plan for the benefit of participants does not look to the participant's immmediate personal needs or convenience. It is a retirement plan, not a payday lender, and that is why we have prohibited trnasaction rules, with only limited exceptions for plan loans.

The the loan was made on the assumption that it would be repaid. It could be a breach of fiduciary duty to allow the loan to fail to be repaid when repayment is otherwise provided for. Also, fail to enforce terms of the loan, which includes the repayment facility, could be an improper in-sevice distribution.

Tell me more about why the fiduciary should be suggesting that the participants might take some action when the participants got exactly what they bargained for and expected and were not harmed by the technical failure to register. I don't think a fiduciary has a duty to provide a windfall to participants. Also, the rescission is likely to be an administrative burden to the plan. It is also stupid to have the employer in a fiduciary position. Sorry, can't resist that gratuitous comment, but the fiduciary issue might not be confusing things if better planning had been done in the first place.

A common practice in this dilemma is to run for luck through the one-year statute of limitations period. But you really should engage competent counsel to advise about the choices and consequences.

20% withholding is taken from the distribution before it gets to you unless you roll over the funds directly to an IRA or other eligible retirement plan. If it is matter of tax planning, you should delay distribution or roll over to an IRA and take the distribution, or part of it, from the IRA according to your timing strategy. The 20% withholding rule applies to the IRA, too. States also have withholding rules that might apply. Withholding is not the same as taxes. The withholding is credited against whatever tax liability you may have for the year of distribution, and you might get a refund of some of it, or you might have to pay more taxes relating to the distribution amount.

You may be able to match by pay period, but you would have to true up the match for the year's compensation and deferrals. Best not to slice anything without plan terms to support the action.

The ESOP Association and the National Center for Employee Ownership web sites have education materials available to help you understand how leveraged ESOPs work.

From your description, it appears that the two arrangements are independent of each other, except to the exent of a participant's potential compensation. The rule is concerned only with contingent arrangements, such as participation in the NQDC plan is allowed only if the indvidual defers or does not defer under the 401(k) plan. The Regulations also provide exceptions for certain arrangements that make NQDC benefits contingent on 401(k) elections. Treas. Reg. section 1.401(k)-1(e)(6)

Is this a zero sum arrangement? If it is, what is the purpose?

I thought I had consumed all of the available myopia in this thread.

Sorry. The new loan is small enough that it passes when all of the loans are treated as outstanding as provided in the regulation. You set that out in the original post. I would not have backed into the numbers the way you did, but the ultimate conclusion is the same for the amount of the new loan.

#2 and #4 loan amounts will not be paid by the original latest maturity dates. The new loan could not comply unless it has step down payment schedule to provide for higher payments early in the term to correspond to the original maturities. The payment relief you want from the refinancing is achieved by stretching the orignal payment over a longer period to provide for a smaller periodic payment on the remaining principal amount. That violates the regulation and probably also the amortization requirements.

The elective deferral feature provides the recurring contributions. What is misleading about a discretionary contribution unless you say you intend to make a contribution and don't? The question about saying nothing when there is no intent to make any contribution is worth consideration.

Violates the regulation.

What is the maturity of the new loan?

Depends on what the status is under applicable domestic relations law. It could be a domestic relations order. A stipulated property settlement agreement, incorporated in a judgement, decree or order, or otherwise officially contemplated by applicable law and procedure and approved, is a common form of domestic relations order. If you had a judge rather than a Standing Master, you probably would not have a question. It is possible that a Standing Master has the appropriate authority under applicable domestic relations law to make it into an order. But beware Sitting Masters, Running Masters, and Masters with Bad Posture.

Disagree. Treas. Reg. section 1.72(p)-1, Q&A 20.

Please tell us more about "these circles."

General conceptual answers: It appears that the alternate payee is awarded a portion, less than 100 percent, of your benefits, including survivor benefits. The remainder is yours and would be the basis for any survivor beneifts for your surviving spouse, no matter when you die. When you die will determine which survivor benefit applies. I am skeptical of your use of the term "shared interest" unless there are more relevant terms than you have reported. Most plans provide that if the alternate payee dies before starting benefits, the participant's benefit is restored as if no QDRO. The answers specific to your situation depend on tems of the plan, the plan's QDRO procedures, the order, and any interpretation of the order by the plan administrator in connection with the determination of qualification. Also, the plan administrator should be able to answer your specific questions. Someone should have considered the questions and advised you when the order was drafted so your agreement to the terms would be adequately informed.

Maybe I am just too discriminating, but I see a fallback method of collection when payroll deduction fails as very different from instituting an arrangement that is tailored for the owner and does not even anticipate payroll deduction that is required of others. Perhaps I would feel better if the work force indeed had volatile compensation so the arrangement could be justified with a straight face.

I dunno. When I do the Venn diagrams, the intersection is very limited and the owner figures very prominently. What other participant will be able to borrow without payroll deduction? Otherwise, you get the same result as suggested by EricWings, so I don't see what goes further about your formulation.

So you would allow loans to participants who are no longer employed by the plan sponsor? Permissible. Uncommon. Raises questions about expectation that the loan will be repaid and the appropriate interest rate on a loan that does not have a lock on pay.

I think you need to look at the service and controlled group rules. I did not review, but generally any service with in a group counts and controlled groups are not limited to domestic entities. It is possible to design the plan to have special exclusions, subject to discrimination limitations, that treat the person in an unusual way with respect to eligibility, but probably not for vesting.

You start by looking at the plan document because the plan can require distributions in amounts greater than required by law. You also need to make sure you comply with the timing specified by the plan.

Look at Rev Rul 2004-55 for a basic outline of considerations. It will not answer your question directly.