QDROphile

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.

With respect to prohibited transactions, see section 408(e) of ERISA. An independent appraisal is effectively required.

Treas. Reg section 1.401(k)-1(d)(3).

Discussion and debate at an old thread that started on November 12, 2001. Search the ESOP topic for "scam."

This is a sham ESOP design. You are right to question it because it is bogus. However, the IRS buys the idea that the stock fund is the ESOP, so the ESOP is always 100% invested in employer securities. The concept passes the road test and many companies use it. Why not? It is a way to get essentially free deductions if you already have an employer stock fund.

Put your finger on the word"and" in the passage. The exception applies to regulated trust companies or insurance companies.

Try www.yourlifeonasilverplatterforfree.com

A couple of options: 1. As an adminstrative matter the plan will apply the election only against a defined limited portion of the compensation, such as amounts that would otherwise run through a paycheck in the regular pay system. This may not be possible if you have a restrictive and rigid plan document. Intelligent plan documents are vastly underrated. 2. The elected amount reduces other contemporaneous cash compensation. This can be very difficult to catch because the payroll system is often unaware of the other compensation. Even with knowledge, the individual sporadic adjustments to the regular deductions may be too difficult. Also, if the extraordinary compensation is significant, the paycheck can be decimated just in time for the rent or mortgage payment, sort of like a negative bonus. Under both approaches, the procedures should be described in the summary plan description and in the election form. When participants eelct, they should understand what the election means so they can plan accordingly.

Information is correct. For this year, amounts are includable in compensation that you did not expect. You should seek advice about what to do for past years. You should ask for an explanation from whoever sold you the 125 plan.

You have got to be kidding if you are suggesting that the credit risk was a substantial risk of forfeiture for section 457(f) purposes. If you are not kidding, you have nothing to worry about for section 409A compliance because all of the accrued amounts are already taxable.

Have you thought about rehabilitating the plan? What does "was never qualified" mean?

I also can't spell or type very well.

Do you know the defintion of cafeteria plan?

Negative.

What part of "irrevocable" is causing questions?

Before December 31, 2007, in accordance with transition rule. Do you care if grandfathered amounts remain grandfathered?

Was the opt out based on the one-time irrevocable election provisions under the 401(k) plan regulations?

No.

The IRS publications are availabe on line at http://www.irs.ustreas.gov/formspubs/lists...d=97819,00.html. The publications address your questions.

The IRS position on the issue is that the cost of coverage does not matter. The value of employer provided coverage is taxable even if there is no marginal increase in premium for the coverage. Unless the employee covers the value with an after-tax premium payment, the employee wil have taxable income.