QDROphile

HRA Advisor: The advice you got from your ERISA counsel is so outrageously incompetent that you should fire the person unless you get both some sort of explanation and a profuse apology. Even then, I don't see how you can trust any future advice. I am very curious about how you are going to respond to this situation.

The plan will be disqualified if benefits are assigned and paid other than in accordance with the terms of a qualified domestic relations order. In this rather ticklish situation, professional help would be a good idea. You may have several ways to skin the cat.

You are mixing COBRA with section 125. A person eligible for COBRA is not necessarily eligible to have compensation reduced to pay the COBRA premium.

Not quite on point, but you might enjoy reading Dahlgren v. U.S. West Direct, 12 EBC 2275 (D Or 1990). According to the lawyers for the plan administrator, the matter settled, so we don't know if the administrator would have had any responsibility for a lawyer overlooking an unexpected death consequence. My advice is that plan administrators should not try to help or explain and should confine themsleves to what the law requires -- is the order qualified or not? I think the adminstrator can and should state the interpretation of the order when the order is not clear or complete, and that explanation might make use of illustrations of consequences. The explanation will give the parties a timely opportunity to revisit the interpretation or the determination when it makes sense, not years later when the latent issue becomes the unpleasant surprise and remedial options may be unavailable.

Please explain the statment about the plan containing certain language and the effect either way.

If a db plan provides for a truly separate interest, then someone should should be on the carpet for not providing complete and comprehensive documentation about all of the possible events and outcomes realteing to domestic relations orders. More likely the plan does not allow a separate interest award and the order can't make it so. Generally, death of the AP before starting benefits causes a lapse of the interest and the participant's benefit is restored. The plan administrator has some explaining to do about determining the order to be qualified without at least some conditions and interpretations relating to those terms.

Did you think through the prohibited transaction issues?

Premiums for health insurance are not eligible expenses of an FSA.

If you are deciding how much "to invest," you hope it is a 457(b) plan. The informal postion of the IRS is disbelief that anyone would subject good money to a substantial risk of forfeiture. Exposure to creditors of the employer is an entirely different matter and is not considered to be a substantial risk of forfeiture. That, in turn, is not a comment on your risk of employer bankruptcy.

How do you get a discount? The market won't give it to you. The issuer is likely to have some thoughts about new issue at a discount, and think about whether or not the spread would be a disguised contribution.

No argument about the need for well drafted documents.

Please share why you advise against it.

If the employer is not a government or a church, it has a prescribed procedure for addressing claims, and a claim about eligibility should be subject to the procedure. The procedure must be formally invoked, which may take a written claim, delivered to the fiduciary of the plan that has responsibility for claims adjudication. If the claim is denied, an explanation is required and the claimant is entititled to see anything that was considered in making the decison. It sounds like information about credits would be included in the information considered in denying the claim. You need to follow the formalities of the claims procedure, including appeal of a denial. The plan is required to explain the claims procedures. Ask for a copy or a summary. If you do not follow the procedures, including time limits, you will not be able to sue if your claim is ultimately denied under the procedures.

Government plan are not exempt from the various discrimination rules that apply to cafeteria plans and the benefits that are funded by the cafeteria plans. Governments do not have owners, so certain aspects of certain tests will not apply and testing involves other wrinkles.

Do the valutions take into account the transactions? What do they say about the transactions? If the valuations do not address the transactions, the fiduciary is not adequately reviewing the valuations for purposes of establishing the value of the shares.

I am not aware of any authority that would excuse Seller (defined as the company that is acquired) from running the SIMPLE out for the remainder of the year.

The first question is whether it is an equity or asset acquisition.

You can't answer the question without seeing plan terms. The most you can say is it involves interpretation of the plan terms. In fact, it would not be surprising to find that a small balance cashout is an exception to the general rules that are more restrictive.

You might look at the section 415 regulations.

Many ESOPs hold only shares and no cash. If "funds" means cash, it is not surprising that there is none. Many ESOPs provide for distribution of shares to participants, and then the recipient sells the shares to the company or the ESOP to get cash in the end. The answer about funds also might have to do with timing. If the ESOP will distribute cash, it may do it on a particular schedule and will have cash only immediately before the distribution. Finally, the company may be broke, so no matter how the ESOP is designed, there is no cash by any means to pay ESOP participants. You should read the summamry plan description for the plan to try to get an understanding of where the money comnes from and when.

You need to take into account the new section 415 regulations and whether or not the plan terms take into account the the section 415 regulations.

Makes no difference if it was set up as a multiple employer plan. The securities law problem arises because multiple employer plans do not enjoy the exemption from registration that single employer plans have, whether or not the plan expressly recognizes the multiple employer status.

If the particpating employers are not all in a controlled group you need to call a securities lawyer.

It would probably be reasonable for the plan administrator to interpret the plan to provide for match based on all of the elective deferrals for the year, but a careful reading of all of the relevant terms is necessary.

The DB plans may be providing benefits under section 401(h) of the tax code. A 401(k) plan cannot provide benefits under 401(h), but a money purchase pension plan could.