QDROphile

Never mind what the DOL says. Fidelity has set us a better example. Its administraitve system does not provide for compliance with legitimate terms of QDROs and it will not make exceptions if directed or asked. So if Fidelity thumbs it nose at compliance, why should anyone else bother?

Does it matter that cafeteria plans are not subject to ERISA? Are you suggesting that the CBA provides supplemetal terms to the health plan, and it is a matter of eligibility and participation terms that are violated? Seems like you still have to connect a few dots before you get to the money part..

That is not the correct accounting. If you commingle, you will not be able to determine the QDRO amount for various purposes, including distributions and 401(a) (9). Maybe that will be irrelevant as things play out, but what will you do if the alternate payee (still employed and age 50) requests a distribution in a few years? No 1099 for establishing an account for the QDRO proceeds.

Depends on what you mean by "entitled." Is she "entitled" under the wording of the court documents and how the words will be interpreted under your retirement plan -- you have to ask your lawyer, who may or may not know, unfortunately. Is it "right" for her to have survivior benefits? Many would argue that she is entitled to survivor benefits in order to protect her share of the retirement benefits awarded to her in the event of your untimely demise. Under various retirement arrangements, a plan will not pay the regular benefit awarded to the former spouse if the participant dies before benefits start. The former spouse could get nothing unless the former spouse is awarded some portion of survivor benefits (the only benefits that the plan will pay after the participant's death), in the same way that the former spouse was awarded some portion of the regular accrued benefit. Looking at it another way, should the former spouse get the survivior benefits (or some portion) that accued during the marriage and the new spouse get only what is accrued after the marriage? Your retirement benefits, and how the arrangement provides for dividing them, may not present this issue.

Pensions in Paradise is correct. Under the divorce decree you go back in time, divide the account, and the later withdrawal will charged to your portion of the former account. However, subject to state law, you and your former spouse can agree to share the withdrawal by adjusting the accounts or changing the award. A fair adjustment and how to express the result will take some thought and understanding of the plan. The QDRO should instruct the plan how to divide the account in a way that gives effect to the adjustment and the QDRO will supersede the divorce decree. The plan need not even see the divorce decree. Pensions in Paradise is also correct that you should get competent legal advice.

The employer can require proof of payment before reimbursing the employee or the employer can pay the provider directly.

Sorry, I stand my ground. I am very sympathetic to a person who has a question and posts it. I also support recognizing possible ignorance and trying to to get a correct answer. But I won't condone an organization that is not compentent to handle a matter but acts on it anyway or gives the appearance that it is providing an answer. If the organization is only providing limited services, it should have the integrity to recognize stay within in its limited scope and limited knowledge and abilities. In other words, they need to say that they cannot handle what they cannot or should not handle rather than create an impression that they are acting on authority. If employers can only afford limited scope services, that is the way of the world, but they should not be snowed into believing that they are getting greater service or expertise than they in fact hired. I was mostly set off by reference to the "legal department, " like that was supposed to mean something. It is arrogance to create an impression of greater knowledge or authority than is really the case. The response to the client and the presentation of the question should have had a very different tone. "We are record keepers who make available a prototype document and we are not engaged or equipped to advise about such matters. We are good at what we do, but his is beyond what we do. We try to help our clients, but they have to keep in mind the limitations on what we provide to them." That was not the presentation. And the legal department should have had the same self awareness and honesty if in fact it is not prepared to do competent work. If the organization is a one-trick pony, it should not act like it is a circus and take advantage of P.T. Barnum's observation about suckers being born every minute. If the organization is not able to help properly, it should at least no do harm by distracting the client with bad information.

GBurns: Under a health FSA, the employer provides health benefits to an employee rather than cash compensation. An employer provides health benefits when the employer directly pays amounts to the provider of the goods or services. An employer also provides health benefits when it reimburses the person who paid the provider of the goods or services. I believe that the employer is entitled to make sure that the employer is directly or indirectly paying for the goods or services rather than simply delivering cash to an employee without regard for the use of that cash for provision of health benefits. Now that I have given a serious response to your inane question, I invite you to give me thoughtful support for the position you take with Joe D and leevena, which I happen to believe is incorrect. To be more specific, I do not think that the language in the regulation concerning substantiation that qualifying expenses were incurred compels an employer to deliver funds to an employee. Incurring the expense is a necessary prior condition to payment of the expense (or reimbusement of payment of the expense), but has nothing to do with the method of payment of the expense.

Is someone in the "legal department" going to be taken to task for incompetence? If the legal department missed this one so completely, it has no credibility. The answer is in the book, where one would expect to find it, even if the matter has not come up as a matter of experience. Also, your client gave you the answer and you couldn't work your way to it. This is pretty basic 401(k) stuff at the provider and administrator level. At a minimum, someone should have looked into the plan terms in detail to determine the plan limits. Shame on your organization. Also, shame on your client for letting you get in the way. The client should have simply told you what to do when it became apparent that you were not up to the task of helping your client achieve a reasonalbe and legal goal. Hooray for this forum to help people with questions. There is nothing wrong with innocent ignorance. Next time, just ask the question rather than make such a blatant display of incompentence or even arrogance. I am disgusted with organizations that allow their clients to think that they are being served competently or are adamamant about the "Rules" when the organization are confined by the very small universe of the prototype that they happen to sell.

I seem to be missing something. I understand that the regulations require that a qualifying expense be incurred in the coverage period before it can be paid by the employer, but that does not require the plan to deliver funds to the individual. Please explain why the plan cannot be designed only to reimburse amounts actually paid or pay the provider directly upon substantiation of the qualifying expense.

For a brokerage account, how do you comply with section 2550.404c-1(b)(2)(i)(B)(1)(v)?

You are correct that some expenses of plan termination are obligations of the plan sponsor; other expenses are plan expenses. I cannot speak to the propriety of requiring the plan to pay all expenses ina bankruptcy situation, but I note that, by definition, the company is is not covering all of its obligations and choices have to be made about which of the creditors bears the burden.

Employers are not necessairly fiduciaries and only the misinformed employers are fiduciaries. ERISA is the relevant law, and it primarily regulates fiduciaries, not employers. Plan assets are not the property of the plan participants and they do not have any right to determine how the assets are to be invested. One or more fiduciaries are responsible for investing plan assets in accordance with the standards of ERISA, which includes a requirement that assets be managed prudently. To the extent that participants are allowed to direct investnments, that privilege is subject to the authority of the fiduciary to control the investments and the investment options of the participants. The fiduciaries decide what options are available and when to change. Change may be driven by many considerations, some of them having nothing to do with investment considerations. You may wish to explore Part 4 of Title I of ERISA.

Operation and termination of a retirement plan involves expenses. Expenses of a plan must be paid either from plan assets or by the employer. Evidently, the bankruptcy court determined that assets of the employer would not be available for plan expenses, which is not surprising. I am surprised that the lawyer that is performing services for the plan termination agreed to be the plan administrator. That could be interpreted as an extraordinary move for the benefit of the participants because the lawyer will be subject to the rules governing fiduciaries. Among other things, those rules prevent a fiduciary from being paid more than a fair amount for services, so the lawyer will be subject to more direct scrutiny and exposed to greater risk of challenge. I expect that the circumstances are disappointing and frustrating for the employees and plan particpants in many ways and that participants will suffer some loss of benefits compared to what would have happened if the employer had not gone bankrupt. But I would not presume that the arrangements are designed to milk the plan. If the plan is not properly operated and terminated, the substantial tax benefits of the plan could be jeopardized. If you have reason to think otherwise, the participants should monitor the accountings and object if expenses charged to the plan are inappropriate.

The employer may make benefits available by requiring that the employee choose either cash compensation or benefits (what is known as "pre-tax'). Nothing requires an employer to make benefits available for purchase (what is known as "after-tax").

zora: Please expand upon the comment about tipping "per the DOL opinion" and identify the opinion.

Whatever the plan fiduciary responsible for investments decides. There are plenty of balanced mutual funds out there. The fiduciary is responsible for the investment. Choose wisely.

You might get somewhere by considering whether the distribution was a deemed distribution or an offset distribution -- which is an actual distribution. I suspect it was an offset distribution that ocurred in 2005 and the paperwork simply was not done properly at the time. You still have Form 1099 questions, but probably not a Form 5500 problem. Someone may have to think about whether or not the distribution was rollable and if the plan complied with applicable rules relating to the distribution. If anyone cares.

The plan administrator does not have to worry about state law. The state court is reponsible for fairness and dealing with any skullduggery. The plan is not an enforcer for the government, either. As long as the plan receives what is reasonably believed to be a domestic relations order, the plan deals only with the terms of the order. Get a certified copy. I agree with rejecting the order because it provides for an improper amount. I would not go so far as to reject an order that was proper, such as awarding the AP all of the future benefit payments.

Not if the plan does not want to allow it. If the plan wants to allow it, the provisions in the plan or the QDRO Procedures (better the plan) should be carefully drawn. Until there are special provisions to allow it, I doubt that the plan terms support the arrangement, so one wonders if the plan would be paying benefits not in accordance with its terms.

I have a vague recollection of the IRS saying informally that the refinancing loan is not a loan to acquire a residence. The residence has already been acquired.

You did not ask, but if you are going to form a multiple employer 401(k) plan, you need some competent securities law advice.

I second Bird and also suggest that it is a breach of fiduciary duty to hang up a distribution because of an inappropriate notion of what is required for distribution.

Assuming he could produce documentation of the divorce (which your question suggests), what makes you think the participant has to do anything more to get a distribution at any time in any form permitted by the plan for an unmarried person?

The main benefit is the commission that is paid to the person who sold the policy.