QDROphile

I side with the AP.

Joel: Please reconcile your statements with Treasury Regulation section 1.457-4( c)(v).

You have two layers of government regulation. Federal regulation is under the tax code. ERISA does not apply to governmental entities. The tax code allows discrimination in governmental plans, with limited exceptions. Without antidiscrimination rules, the employer can give benefits to some and not others and can give different levels of benefits to different employees. Other federal law must be considered to the extent it applies, so I suppose you could run afoul of federal antidiscrimination laws if you were an idiot or a knave. Because ERISA does not apply to preempt state law, you also have to comply with state law. At the state level, you usually start from the proposition that a government entity cannot do anything unless the law authorizes it. For example, local governments may not be able to maintain their own retirement programs; they may be limited to participation in a state system. Once you get into the game, state law may have any number of requirements applicable to a retirement plan, including antidiscrimination requirements. You also have collective bargaining contracts to consider and political concerns that may influence plan design. Are you getting paid for this?

State law will apply to a government 457(b) plan. Just like Forrest Gump's chocolates, you never know what you will get by way of restrictions or requirements under state law. I suspect that most states do not try to deal with substance and the the tax rules will be the only concern for plan design. However, you cannot count on a government entity to have authority under state law to have a 457(b) plan at all. You need to find authorization and the authorization might not expressly mention 457. State law research and interpretation can be difficult. I invite you to engage someone with appropriate professional experience.

You may wish to explore in greater detail what "mistake of fact" means to the IRS. It is a limited concept.

Why are you looking for some outside source of authority to prevent being abused by a vendor? The vendor should tell you everything you want to know, especially about fees, expenses, and the direct and indirect compensation of the vendor. Vendors are supposed to serve. You don't need a book to tell you to quit doing business with vendors who ignore your pertinent questions. What are you going to have to prove to the vendor next?

Whether or not the plan representatives or advisors are savvy, they have to give an answer to the proposal to increase deferrals. Get the answer, then consider a challenge if you don't like the answer. Meanwhile, see section 457(b) (3) and be prepared for disappointment.

You look at severance from the perspective of the entire controlled group, as a single employer. Movement from one corporation to another within the group is not a severance. Plan terms are very important as eligibility and contributions shift with the transitions, and it would be a good idea for the plan terms to confim.

The plan fiduciary then needs to hire competent counsel. The fiduciary will have to interpret the document. ERISA will not provide and answer by itself. If ERISA provided and answer by itself, my guess would be that #2 wins. ERISA says do what the plan documents say (unless the pan documents are contrary to ERISA) and the beneficiary designation is a plan document. ERISA does not care if someone forgets to change a beneficiary designation and does not presume that failure to change is unintentional. Someone may point you to some federal decisions from Texas that try to incorporate state law into federal common law to get around the apparant injustice, but those cases are questionable in light of a Supreme Court decision about state law that tried to affect benficiaries of an ERISA plan.

If you are talking about an individual, the practical answer is negative. You may get a post that goes in to one time election rules that offer certain opportunities, but the arrangements are impractical, as well as unavailalbe to current employees under the proposed regulations. If you are talking about converting amounts for all employees from current compensation to deferred compensation, that can be done, but does everyone want to have those compensation items go into the 403(b) plan? Nonelective contributions are not included in FICA wages.

You have to see what the plan says. While it is true that spouses have certain rights, it is also true that plan procedures prevail, and if the plan provides for payment to a beneficiary, the plan will pay the beneficiary unless spouse rights trump the beneficiary designation. Plan procedures will also also determine if the designation of #2 will weather the interim rights of #3 to become effective again after #3's rights lapse.

This may not apply to you personally, so don't take it personally. It looks like the ESOP setup was not understood or thought out in the first place and it is likely that the testing prior to 2006 was bungled. Your plan document probably suffers the same disabilities and will be of no help, but the plan document could have made all of this very clear and prevented problems both before and after 2006. You need help from someone who understands basic concepts and can see through the ESOP clouds. For example, a contribution is a contribution is a contribution, and a contribution is not an investment. Your comment about "pick the method" is curious, bordering on scary. Take solace in the fact that everyone, including the IRS, has bought into the floating ESOP scam, mostly without thinking through the consequences and issues, so it will be difficult to hold your plan to task for the common shortcomings. That is no excuse for noncompliance now, especially with the relief provided by the new 401(k) regulations.

A fiduciary is generally excused from concerns relating to state law, such as procedural rules. If if the ordered was issued by the court, the fiduciary does not look behind the issuance. The fiduciary takes it at face value.

"What are the options?" is a test of imagination under section 125 because there is no formal guidance for correction. You don't really want a list of options. I suggest that the employer leave the chips as they fell with salary reductions and pay the full amount of benefit elected by the employee to the extent the employee submits timely claims for qualified expenses.

What do investments have to do with ADP testing?

Plans are required to be operated in accordance with their terms. Follow the terms or change them.

The IRS has a bounty program. I have never checked into what it covers.

Since when is the TPA the boss? The employer can design the plan as it chooses. If the employer gets comfortable with compliance under a different approach to orthodotia expenses, the employer can change the terms of the plan as a last resort in a power struggle with the TPA. The employer might have to find another way to administer the plan if the dispute goes far enough to cause the TPA to resign over the issue.

If what qualifies as a plan asset? The regulation applies to determine if the plan is treated as owning only the LLC interest or if the plan is treated as owning an undivided interest in each of the assets of the LLC. If the latter, then one of the consequences is that the person that manages the assets of the LLC also manages assets of the plan.

Depends on the application of the plan asset rules, ERISA Reg. section 2510.3-101. The offering memorandum for the fund should discuss the issue.

So many interesitng statements, but could you tell us more about a hardship distribution for "some work" on your home? That would not be a typical use for a hardship distribution.

The IRS will treat this as a prohibited transaction even if the DOL does not. If this person is the fiduciary with investment control over plan assets other than those in the person's own account, the fiduciary with responsibility for apponting the person as a fiduciary should reconsider whether or not the person is fit to be a fiduciary. The suggestion of the transaction shows that the person's instincts are all wrong. I retract my statement if the person proposed the transaction by saying, "it seems like this would not be allowed, but I wonder...."

Sounds like the employer effectively decreased an employee's share of the cost of health coverage. Depending on how and when the amount is paid, some employees who do not participate the entire year may get a windfall if the the intent was to reduce the effective cost for the year. While the cost may have affected the decisons of some employees to enroll or not, I am curious about why a change of cost would require open enrollment. Please elucidate.

If options are granted to you, after the exercise of the option the stock will be owned by you. You cannot sell stock to your Roth IRA. See section 4975 of the Internal Revenue Code.

Are the employees terminating or continuing employment?