QDROphile

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?

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?