QDROphile

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?

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.