QDROphile

Why is this windfall any different from any other mistaken distribution windfall?

Since you asked for "any help," I suggest that Company X should make an informed decision about whether or not it wishes to risk violation of securities laws by participating in a multiple employer 401(k) plan. Several other threads discuss this issue.

Perhaps the fiduciary of the plan would be breaching its duty if it failed to accept payment from another source. I cannot imagine tha ERISA would allow the fiduciary to turn away money to cover amounts owed to the plan even if the plan were drafted as you say. I would not want to be that fiduciary. We sometimes forget that participant loans are loans by the plan and the fiduciary has the obligation to prevent the harm of loan default by taking reasonable actions. Fiduciaries are required to disregard plan terms that are contrary to ERISA. ERISA may not require the fiduciary to take enforcement action (it depends), but when the money is proferred, how can the fiduciary refuse?

The plan had better have some default rules to deal with not enough funds to cover all the specified allocations. Either that, or someone with above average skills will have to review each designation to be sure that the designation itself avoids interpretation problems. In any event, make sure the plan terms are compatible with specification of a dollar amount.

When it comes to labor relations, mendacity, ignorance and foolishness are rampant.

The collective bargaining agreement is separate from the plan. If the plan does not say that a match should be made then the plan has no problems under its regulatory scheme. The employer may have a problem under the labor agreement. Even if the plan calls for a match, failure to contribute could disqualify the plan, but would not be a prohibited transaction. The ERISA regulations specify when elective amounts become plan assets, but there is no similar regulation that applies to nonelective employer contributions. The story about the match seems flawed, which makes your entire post sound like it comes from an assignment or an exam. Why don't you try to answer the questions yourself and then seek comments on your answers, assuming that is within the rules?

Please explain "It seems to me that they can decide to defer 12 months prior to the scheduled payment for 5 years." I can't make out what you are saying. Are you saying that they can elect 12 months before year 5 to take 20% in cash? Or do they elect the 20% 12 months before the initial award that starts the 5-year clock? You have also said nothing about when the election is made to take the phantom stock instead of the cash bonus.

Definitely fiduciariy issues and possibly securities law issues, especially if the converted amount included elective deferrals.

I think #3 is a little weak. The participant cannot adjudicate qualification of medical expenses. The plan administrator will have to decide whether or not the airhead claims for Airborne will be reimbursed. As for #2, it involves making sure that the expense is incurred within the coverage period.

The plan does not have to allow the employee to make changes even if the law allows, so the issue can be avoided if the employer chooses, or managed according to what the employer wants to accomplish. If you are asking about what to do at this moment, follow the plan terms.

Why over NRA? Why not after age 70 1/2?

I did not respond directly to the question of prohibited transactions. I am not doing so now either. If the plan owns the majority of the LLC interests, and the LLC is treated as a partnership, would not the real property owned by the LLC be treated as a plan asset under the ERISA plan asset rules? If the real property is a plan asset, the lease of the property to the plan sponsor would be a transaction between the plan and a disqualfied person. You might not even get by the purchase of LLC interests by the plan, but I have not trudged through the analysis.

A participant is a fiduciary for purposes of section 4975 when the participant directs 401(k) account even though not a fiduciary under ERISA. Flaherty's Arden Bowl, Inc. v. Commissioner, 115 T.C. 269 (2000).

No employee is being excluded. The employee can choose coverage. What is happening is that if the employee wants domestic partner coverage, the employee has to choose to get coverage by means other than through the cafeteria plan (after tax). There is is no discrimination with respect to eligibility.

Maybe no 410(b) failure if new hires are the right mix of HCEs and non HCEs.

I don't see the word "stock" anywhere in section 4975©(1), so I don't see how you can conclude that if stock is not involved, there can be no prohibited transaction. You have to go through the exercise. Start with whether or not the nonprofit is a disqualified person. If not, the more interesting questions probably come from 4975 ©(1)(E) and (F). Those provisions depend very heavily on the specific circumstances. You can't get any help unless you provide a lot more information. The only thing that we can know for sure is the the IRA owner is a fiduciary for purposes of the statute. The nonprofit has its own restrictions on transactions with related parties.

Cafeteria plans are subject to a utilization test, section 125(b)(2), but you would have to have a small company or extreme selection to fail. I don't see how you can fail eligibility requirements. Every employee can have the same pre-tax benefits. There is room for agument about what it takes to "benefit" under the plan, but I don't think the eligibility test is actually a utilization test. If you can identify the third test, maybe someone will comment on it. The fourth test is not a cafeteria plan test. The fourth test is a professional responsibility test. If your client is expecting you to advise on this issue, what are you going to do to provide adequate advice? What if you got four responses and all said it was OK because they do it? Would you put your client on the line on that basis? Or would you act only on a negative stopper?

If the plan was a qualified retirement plan, the surviving spouse is the beneficiary by law unless the spouse consents to designation of a different beneficiary. It does not matter what the actual designation was before or after the marriage. If the spouse does not consent to naming someone else, the spouse gets the benefits upon the participant's death. Once the benefits pass to the spouse, they would not revert to the participant's line unless the spouse arranged for it and the plan allowed it. I don't see much prospect for a different result, but you should not rely on any comments you get from a forum like this one. One more thought. You should have received something more informative than a rabid response when you contacted the plan administrator, if it appeared that the inquiry was from heirs or designated beneficiaries. Ignorant lawyers do not necessarily make the best inquiries.

If your HSA contribution was through a cafeteria plan, you did not make the contribution. You elected to reduce you pay in exchange for your employer's contribution. Your W-2 pay was reduced by the amount you elected, that is why you do not pay tax on the amount -- it is not income to you. You never got it. The employer's contribution is not added to your income. Whether or not you pay taxes eventually depends on the HSA rules about qualifying expenses. The information and disclosure about these types of plans often refer to employee contributions because that is the easiest way for employees to look at their reductions from gross pay. But that is not the reality from the tax perspective. Reality is relative in this case.

OK, now I would like to see some reference to Harry Beker's comments in a prior post in this thread. If you are going to take an unconventional position, please do a better job of presenting it. Or perhaps I have such a blind spot I cannot even see words on the page.

What you want to see first are the terms that provide for past service to be recognized. The regulations under section 401(a)(4) of the tax code address imputed sevice credit.

JSimmons: I did not see any prior explanation that supports propriety of collecting amounts for the portion of the year after termination of employement and coverage. I saw an unsupported assertion to that effect and I saw more arguments against, with citation to authority against. Perhaps you could explain and clarify what you claim is possible and compliant.

Maybe I overrreacted, but I am sick of administrative service providers who are not responsible for compliance requiring an employer or a plan to "prove" that some action is acceptable. Why should Company A have to provide you with anything about Company B's plan? Did anyone ask you to advise about a particular issue? It looked to me like uwarranted interference and needless make-work. But perhaps I read too much into the words of the inquiry.

Yes. Butt out.

There are coverage and discrimination rules; some are similar and some are not. They vary by benefit.