QDROphile

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.

So what does this do to the broker's credibility on other matters?

Although the Department of Labor is incorrect, the Department believes that a plan should divulge otherwise confidential information that is sought for purposes of obtaining a QDRO. Perhaps the Department could be prevailed upon to informally unloose the information. Otherwise it will take take legal process. Another approach would simply be to get an order that required payment of all or some percentage of payment amounts (whatever they are) until a certain target is reached. The process of getting that sort of order is likely to bring the information out before the order is actually entered. If your CSE agency will not proceed, you will need a lawyer, both for the QDRO issues and the state law issues. A right has to be established under state domestic relations law before it can be satified through a QDRO. State law will determine limits. I can't say if you CSE agency is just wimpy or ignorant or if there is some other issue involved.

A controlled group has a single welfare benefits plan the covers multiple varieties of benefits, such as medical, dental, and life insurance and different versions of coverage for different companies in different states. For example, company A in Maine provides medical and dental insurance to its employees, and company B in Florida provides medical, dental and life insurance to its employees. The coverages and the insurance companies are different in Maine and Florida. From "Section: Line-by-Line Instructions for the 2006 Form 5500and Schedules" of the instructions to Form 5500: "A separate Form 5500, with box A(2) checked, must be filed by each employer participating in a plan or program of benefits in which funds attributable to to each employer are available to pay benefits only for that employer's employees, even if the plan is maintained by a controlled group. A 'controlled group' is generally considered one employer for Form 5500 reporting purposes. A 'controlled group' is a controlled group of corporations under Code section 414(b), a group of trades or businesses under common control under section 414©, or an affiliated service group uner section 414(m)." How does one reconcile these successive contradictory paragraphs? Does company A file a Form 5500 for its two coverage and company B file a Form 5500 for its three coverages? That squares with the first paragraph. But the second paragraph says that a controlled group is considered a a single employer for purposes of Form 5500, whcih suggests that one Form 5500 is sufficient. Later instructions say to check box A(2) if the Form 5500 is for a single employer plan, also defined as "an employee benefit plan maintained by one employer ***." So does one plan, the umbrella plan for the controlled group, maintaineed by one employer (a collection of controlled companies), file more than one Form 5500?

Discretionary match done that way defeats the ostensible purpose of the match. If the match is just a device to enhance owner benefits, it does not matter.

The company has no obligation to design or change a deferred compenstion plan to fit your desires.

I still think your interpretation of the regulation is aggressive and I don't see what spousal consent has to do with anything. I don't think you can get to 414(p)(3)(A) by a special provision that cuts back only on alternate payees. You have to have other authority. For example, if the plan allows in-kind distributions to participants, I don't think you can have a special rule in the plan for cash only distributions for APs. If the plan does not allow in-kind distributions, a domestic relations order would not qualify because of 414(p)(3)(A)if it specified an in-kind distribution.

mjb: My last paragraph says that plan can require the AP to take a distribution no later than when the participant receives a distribution. You believe that the plan can require the AP to take a distribution immediately and that a domestic relations order that requires consent may be rejected if the plan has such a requirement. I think that intepretation of the regulation is aggressive, but I have no other authority to offer on the subject. Because I do not subscribe to your interpretation, my last paragraph notes the exception to my interpreation -- a domestic relations order cannot require to the plan to postpone the AP's distribution to a date later than when the participant starts.

To clarify, if the terms of the QDRO do not cover timing of distribution, such as a provision that says that the alternate payee may elect when a distribution is made, the plan or QDRO procedures can provide that the alternate payee's benefit will start distribution whether or not the alternate payee wants to start. An alternate payee could be stuck with an incompetently drafted QDRO and forced out. A well drafted QDRO would protect the alternate payee, but aggressive plans don't pay attention. Also, if a distribution would be made to, or in respect of, the participant under plan terms, then the plan or QDRO procedures can require the alterante payee to start and provisions in the order are not proper if they try to trump.

Would you care to challenge being forced out of the plan now? Section 402(e) certainly suggests that an alternate payee's treatment is based on the participant's status, but I have not looked for any other authority that might support a different interpretation. If you really, really want to get capital gains treatment, then you will need to stay in the plan until the particpant would be eligibile. I don't think a plan can force out altnernate payees, but I know a lot of them try (and get away with it).