QDROphile

No regulation refers to shared interest or separate interest and no regulation ever has. Those terms are artifical and sloppy, and have no effective meaning. They describe only a rough concept. They are useful for discussion purposes, but dangerous when trying to decide legal rights.

If you are not trying to have the reimbursements excluded from taxable compensation, you have no problem. You can pay employees whatever you want, subject to the excessive compensation rules. If you are thinking about nontaxable reimbursements, start with section 105(h) of the tax code.

Rather than fuss over the discrimination issue, why not go to the heart of the matter and ask why the plan has a combined FSA limit? If you find no good reason, then eliminate the source of the discrimination issue and possibly other legal issues. Since DCAPs are not subject to the uniform coverage requirement, a good reason for the combined cap escapes me. If what you are saying is that the employer provides $10,000 of benefit credit to apply to FSAs, the $10,000 credit does not have to be changed to provide a $10,000 health FSA limit and a $5000 DCAP limit. The difference can be covered by salary reduction. Since your arrangement is so unusual, I wonder if the FSA is reimbursing health insurance premiums.

The participants cannot choose investments. The employer can agree to credit the deferred compensation accounts according to the results of some specified measuring investments, and the participants can choose those measuring investments. The employer will usually actually invest its money in the the same investments as the measuring investments in order to match its contractual obligations with its assets. You can compress this fiction without much concern and allow the participant directions about the measuring investments to function as the direction of the actual investments. It is still a good idea to make it clear that the employer invests its assets as it sees fit and the participants have no enforceable rights in the assets, including the right to direct invesments.

The plan can postpone the determination of the retirement benefit for a reasonable period to resolve qualification issues. It is up to the fiduciary to decide whether to evaluate the domestic relations order based on pre-retirement circumstances or post- retirement circumstances. The decison should take into account the communications that have occurred, plan terms and policies and the writen QDRO procedures and the policies reflected in them. The fiduciary will probably have to read between some lines. As for policy considerations, adverse selection lurks generally in the background. My personal preference is to disregard draft domestic relations orders. They have no legal effect unless the plan gives them effect (e.g. under terms of the QDRO procedures). Under my approach, the domestic relations order would be evaluated based on the circumstances at the time of delivery. You make it sound as if the order will arrive after the benefit is in pay status. I don't see how the Fund could request changes in the first place. The Fund should limit itself to advising if the proposed form of the order meets qualification requirements. If the Fund engaged beyond its appropriate role, the Fund may have compromised itself and may have to act differently because of its prior actions.

I am not aware of any prohibited transaction exemption. The proponent of the transaction needs to convince the plan administrator that the transaction is exempt.

The employer cannot donate health FSA experience gains to charity even if the plan document provides that it can be done. Health FSAs are group health plans under ERISA and the employee salary reductions amounts are treated as employee contributions and plan assets. ERISA restricts use of plan assets to plan purposes. Donations to charity are not a legitimate plan purpose under ERISA. The tax code looks at the arrangements differently. The section 125 regulations to not reflect the ERISA requirements and restrictions.

Charitable donation does not work for disposition health FSA experience gain if you want to comply with ERISA. oriecat: ERISA sees the salary reduction as employee money, therfore the money becomes plan assets. The tax code sees salary reduction as salary reduction. The employer holds money that is not paid to employees because of the salary reduction. In a sense, the salary reduction is employer money, which is why the employer can do as it wishes with the money (including charitable donation), subject to the special rules about trying to give it to employees.

Marriage trumps. On the other side, the plan document should take control of what happens if the participant was married (without naming another beneficiarry with spouse consent) , but is umarried at death.

Fire the consultant. The new regulations are under the tax code. That has nothing to do with ERISA requirements, which still apply to ERISA plans. Therefore you have differernt standards applicable to health FSAs (ERISA plans) compared to dependent care FSAs (almost never ERISA plans). EBIA is correct. I am serious about firing the consultant. If you have questioned the advice and the consultant has persisted, the consultant is displaying fundamental incompetence, not just ignorance or misunderstanding about new regulations.

The person claiming to be married should provide the information that is reasonably necessary for the plan administrator to conclude that the person is legally married. The administrator can refuse to enroll until the administrator can conclude that plan standards have be met. The administrator may have to provide an explanation of what the plan means by legally married.

The plan's attorney shoud be able to give a cogent explanation for the conclusion, or be fired.

Assuming that the applicable documents give authority for distributions to the trustee. The plan administrator might have that authority and you stated that the sponsor is also the administrator. I don't know how the bankruptcy trustee actually acts; court or other approval may be needed. I doubt it is your job to worry about that.

Termination of a plan is a sponsor function, not a fiduciary function. Unless the sponsor has a contractual obligation to reckon with the trustee in connection with a termination, the trustee has no say about termination. All this stuff about who is the plan trustee is misguided. However, things that happen after the plan termination (le.g. liquidation and distribution) can be the responsibility of the trustee and would be governed by the trust agreement. Also, the plan sponsor usually has authority to remove the trustee and appoint a replacement, so the bankruptcy trustee, who ususally stands in the shoes of the sponsor, is in control. It appears that the control could be exercised, or at least explained, with more appropriate formality.

So how are the DC multiple employer plans with 401(k) features handling securities law registrations?

The employer has a cafeteria plan, or would have one if the employer complied with the applicable rules, such as having a written plan document. By not complying with such rules, the employer is creating taxable income for those who have medical benefits. I think that is the starting point for working through the questions you raise. And it sounds like getting some competent advice would be in order. If the noncompliant arrangement gets caught, it will be much more expensive than the cost of good advice.

The IRS issued the notice because not enough people were listening to statements that 409A overlays and applies to 457(f) situations. The intended audience was predisposed not to hear, so they brought out the hammer.

"Instead" is not a word to use when dealing with 457(f) and 409A.

According to the 409A regulations, refraining from sevice is not a risk.

This is really a bad day. I dropped part of the cite.

merlin: Sorry, I was looking through the wrong end of the telescope. The cite under the new regulations is 1.415(f)(2), but the rule has not changed.

Ask the proponent of the arrangement for explanation and justification. If the participants direct investments and the fund is an option, is does the disclosure warn that new money is helping to pay for a prior charge to the fund by suffering its share the amortization charges? If it is a wasting fund, how does the fund account for some people getting out earlier than others and not bearing their share of the amortization? How does the fiduciary justify the arrangement if there is any mismatch (time or amount) between the orginal investors (who got the benefit of postponement of the value adjustment hit) and those who bear the cost of amortization? When we were presented with this option recently, we nixed it. It is problematic all around, even it it can pass technical muster. I would love to see a decent comprehensive analysis that concludes that the arrangement is appropriate.

Nothing in your post indicates repayment. Or is repayment diguised by an artificial low rate of return?

I think you are missing the proper treatment of the 415 limit. Under the circumstances you describe, the qualified plan limit is unaffected by participation in the University 403(b) plan

Tell us who is the borrower and who is the lender. It looks more like a bribe to me.