QDROphile

A cafeteria plan is relevant only for an employee choice between cash (or taxable benefit) and a qualified benefit, such as health insurance. You describe a choice between two different kinds of health insurance, both of which appear to be nontaxable employer health coverage. No meat for a cafeteria plan.

I have not seen anything that would cause the plan to be administered pending mazss distribution in a way that is different from how the plan has always been administered, except the plan should be amended to eliminate the requirement for a loan before hardship. I think the concerns about the determination letter are misplaced with respect to distributions in the regular course pending the mass distribution on account of termination. If some error were discovered, those distributions would have to be corrected whether or not there is a termination. Having a viable plan sponsor makes a lot of difference. But all this must be decided in the larger context of what the employer is going to do about a retirement plan for its employees. Some better thinking ought to be applied to that issue first.

For those who are too lazy or unsure to draft in English.

Why did the plan terminate? Are all participants eligible for distribution, but for the plam termination (e.g. termination of employment). Was the plan amended to restrict distributions pending receipt of a determination letter? Seems like someone should give a hard look at what the plan terms say about distribution.

The plan administrator has an interpretation issue. The interpretation advanced by Janet M is plausible and reasonable, but it would only be an interpretation, not a rock solid certain conclusion. It would be helpful if the plan's written QDRO procedures spoke to certain interpretation presumptions on common matters such as these, but the QDRO procedures of most plans suck so Jodi S. will get no help from the QDRO procedures. The basis for the interpretation offered by Janet M is that the plan administrator presumes recognition of time value of money, absent express provisions in the order to disregard time value of money, and that the plan's procedure for recognizing time value of money is to recognize both postive and negative actual investment results with respect to the amount awarded. Since the interpretation is uncertain, the plan should use its usual procedure of notifying the parties and explaining its interpretation (whether the Janet M interpretation or the unadjusted amount interpretation), but not implementing the interpretation without a reasonable time for objection and correction. That is the usual procedure, as provided in the written QDRO procedures, right? The other option is to reject the order based on ambiguity.

Agency fees are eligible expenses if they are a necessary part of obtaining the services and linked to the services. Expenses are not eligible unless incurred during the period of coverage. The stipend is eligible to the extent that it is paid for eligible dependent care. A TIN or an acceptable alternative is required for exclusion from taxes. I don't recall if a TIN is part of required substantiation for reimbursement.

Assuming the statement in question begins with "However" I can understand the idea, but I disagree except in one circumstance and a lot more detail is necessary to describe that circumstance. A starting point for disagreement is that the plan has to state what method is used. Plan terms must be followed. If the payroll period method is used, you can't just decide to true-up based on the year. If you make a mistake within the payroll period method, you have to correct the mistake according to appropriate correction methods.

If it is OK to have a multiple employer plan, and the terms of the plan are not violated, yes. But you mentioned deferrals. Multiple employer plans with elective deferrals have securities law problems. Still, for a few weeks, I doubt that anyone will be taken to task. The end game will have fewer options because of the post acquisition participation in contributions.

You should read the provisions of Notice 88-56 that cover amounts that are subject to diversification, but are not required to be diversified under section 401(a)(28). They have implications for record keeping and other administration, depending on how the plan implements diversification.

What does the plan say about timing of payment and termination of coverage relative to failure of pay reduction? If the terms are not pretty clear about the timing of coverage termination, the coverage should not be considered terminated until the period following the period of failure.

EPCRS anticipates all sorts of errors, even ones you can't think of. That is why it provides the general guidance that you have used to formulate a correction. Your second thought for correction does not appear to me to be appropriate. If you do not have the specific circumstances for a specific correction method, don't try to force a correction that does not fit. If you can't tolerate any uncertainty, you will have to go with VCP. I looks like you are on track to use principles to formulate a reasonable correction. I suspect that some others would urge avoidance of distributions, but I don't think that is such a strong argument with elective deferrals.

The plan should not allow the proposed distribution. The plan should not allow acquistion of an undivided interest, especially if the participant will own an interest in the same property, so the plan should not find itself in the same place on the back end. You are correct that there are legal issues, but the administrative issues alone are so troublesome, and the participant's expectations are so out of line, that the idea should be dismissed out of hand. The plan would be in for too much trouble, even if you could resolve the legal issues. And if you still want to try, you had better make sure that the participant or the participant's account will be charged for the effort with or without ultimate sucess, and make sure the particpant knows about the charges up front. The participant is going to be a separate source of trouble.

A provision that a loan is due and payable upon an event does not mean that adverse consequences occur at that point. The consequences of failure to pay when due is a different matter, which gets you into your grace period question.

If you want to take it personally, go ahead. It was intended as a general statement of affairs, not a barb. This issue was a nonissue from the beginning, and after years of resolution of the nonissue without any credible counterpoint, I can't believe that it still comes up. I can understand why there is no better official statement from the IRS on the subject -- the IRS does not bother to tell us to look for the sun in the east in the morining, either.

See the preamble to the section 415 regulations and any number of threads on the subject on the message boards. A recent thread on the subject gives more specific focus on the preamble language. I can't believe that anyone is still asking these questions.

Three strikes. #2 is possible for nonelective contributions. #3 is possible, but the make up contributions will not be deductible for the missed year, the deduction will count against the applicable limit for the year of contribution, and the contributions cannot be allocated based on employment in the missed year.

The old plan document could work with an amendment to cover the points identified above, but it would be good discipline to use a new plan document so everything gets reviewed to make sure it still fits. If you amend the old plan, people will be lazy about whether or not all the old plan terms still apply in the same way.

Elective deferrals are included in FICA wages.

A plan cannot refuse to qualify the order because of no SSNs or DOBs and it is foolish even to suggest or encourage inclusion of SSNs or DOBs.

You might have trouble if a recipient used some or all of the distribution for the benefit of the other person.

"If the plan requires involuntary cashouts, then the plan sponsor is required to send out the paperwork and is then required to force the payment. It is not a plan provision that can sometimes be followed, that would be an operational error (albeit a minor one)." Plan sponsors do not handle distributions. Plan administratores handle distributions.

Recored keepers can be asses and they need to be directed by fiduciaries who have enough knowledge and spine not to be cowed by the asses. The proeblem is that many clients of the record keepers look to the record keepers to be fiduciaries and lawyers and the record keepers are dumb or desperate enough to fill those roles without admitting it and without competence.

Some tidbits for you to put together: 414(p)(3)(A), and no fair claiming you can draft the plan to provide no other benefits to alternate payees. 414(p)(4)(A)(iii) 414(p)(5) ERISA 206(d)(3)(J); the tax regulations go both ways, more often speaking about alternate payees as distinct from beneficiaries. If nothing else, you can conclude that a plan that is subject to the annuity rules cannot provide that an alternate payee will receive only a lump sum no matter what.

The Department of Labor would say that a "don't vote" provision is not consistent with ERISA. It goes farther than that. Also consider the DOL position on proxy voting.

The question about what the plan document says is an answer to your question about whether the trustee will vote in its discretion or in accordance with other votes. The trustee will do what the plan document says unless the terms are contrary to ERISA, so the amendment should provide for what is desired.