QDROphile

The issue about FSAs is relevant if the employee wants to reduce the orignal FSA election because insurance will now pick up some dental costs that that the employee expected to pay out of pocket (and then be reimbused). Or now that the employee has insurance, the employee might be able to afford having dental work that the employee would have skipped, but has to pay an affordable deductible or co-pay. The employee would like to increase the FSA election to cover the out of pocket amount.

I am unfamiliar with decisions that say federal law prevents assignment of ancillary disability benefits. I am aware that some decisons say that a "QDRO" can assign welfare benefits, although such decisions are questionable because they do not relate to terms of the statutes (which apply to retirement plans), and commentators and other decisions observe that they are unnecessary becuase the benefits can be assigned without a qualified order. Subject to my ignorance about case law authority to the contrary, it seems to me that the disability benefits can be assigned under one theory or the other if state law allows and the order is properly drafted. The terms of the plan, and its QDRO procedures, and the terms of the order, are of primary importance. If the terms are not all in line, the former spouse does not get any part of the benefit. Most orders are inadequately written to provide an interest in disability benefits that are not , in the view of the plan, retirement benefits. It might be interesting if the plan provides that the ancillary disability benefits simply cannot be assigned and the plan terms do not compromise the ability of an alternate payee to receive "true" retirement benefits whether or not the particpant receives disability benefits. Making sure that the right to receive retirement benefits is not compromised requires a lot of thought.

mjb and I respectfully disagree about the effect of P's retirement on W#1's ability under federal law to obtain a portion of the participant's retirement benefits. Start of P's retirment benefits will affect what W#1 can get, but will not preclude an interest in the payments. Certain courts have ruled along the lines of mjb's position when the order was first presented after the participant's death. Your situation is different in several respects and I think those decisons were wrong. We agree that the plan cannot advise anyone about what course of action to take. We agree that competent legal counsel should be consulted.

You are asking the right questions and are making sense of the issues. The most important question is the nature of the disability benefit in relationship to the retirement benefit. You make it sound like they are essentially two different benefits. The plan should design its QDRO procedures accordingly. At first blush, I would treat the disability benefits as a stream of payments and require a separate award with respect to the stream if any of the disability payments are to be awarded to the alternate payee. The separate award with respect to the retirement benefits could be a "separate interest" although that term is misleading because a truly separate interest is unlikely and usually not advisable (as well as legally impossible with respect to some technical matters). Unless there is a support issue, I suspect that the alternate payee would not be awarded any of the disability payments. There are other ways to design the QDRO procedures, and you need to make the most of the statutory provision that prevents orders from providnig for benefits that the plan is not designed to provide. By the way, the plan does not "request" or "ask for" anything.

Mind the dfference between rollover and transfer and your gut reaction is correct. Then mind the need for the appropriate infrastructure.

So if the form has been a safe harbor amendment, what would the plan sponsor have done to adopt the amendment properly? For example, if the plan sponsor were a corporation, the proper procedure may have been for the Board of Directors to adopt or approve the amendments, independent of the act of putting a signature on the page. The documentation of the action taken to adopt the amendment, or to authorize the signing of the amendment document, may itself be sufficient to pass the requirement for the formality of amendment even if the signed "amendment" document was not the correct document. I am being somewhat facetious. It looks like your plan sponsor operates at such a low level of consciousness that it would not even wonder what adoption procedure was required to precede the signing.

Assignment of wages avoids the payroll deduction question, but most plans consider it too much trouble, if they ever thought about it in the first place.

You need advice about correction procedures and options from someone with enough knowledge and experience to apply the guidance to particular facts and circumstances. While some corrections are strictly prescribed, the IRS procedures provide flexibility. I think the most you can expect from this board is a pointer to the guidance you found already. You may pay more for help in supporting your affection for fairness than it would cost to follow established convention. There are various other posts related to your subject, with various positions about what ought to be the result.

The plan terms are the sole source for determining benefit payment options unless you are open to the idea of amending the plan. If you are, start with section 401(a) (9) of the Internal Revenue Code and related regulations.

One thing can be said without qualification: HSAs are a very good thing for wealthy people, so much the better if they are also healthy.

Do the circumstances give the fiduciary cause to question whether or not the loan will be repaid?

I don't use this forum for marketing. I am two-faced, like everyone else. I have a totally diferent image under a different name.

I get a higher quality of plans because we draft them, and we have very little by the way of professional corporation plans. I can't answer your question off hand. I would start from the proposition that the plan had to follow its terms. However, I have been getting an education from out estate planning group about state law on disclaimers, and related tax coordination, so I would not act only on my knee jerk ERISA reaction. Fortunately, I have not had to deal with as many issues because our plan documents help avoid them. Since the documents do a lot subtle heavy lifting, sometimes I forget all the reasons and authority behind our standard terms. That is why I am notorious for claiming that other documents suck. They often do.

What does the plan say? Section 401(a) (9) and related regulations set a standard, but the plan can be designed to be more restrictive.

Have you thought about looking at overtime in terms of an amount in excess of regular pay rather than as some special kind of hour? If I work an hour, I get paid a rate, assume $10. If the hour is an overtime hour, I get paid a rate, assume $15. Now look at overtime pay as $5 on top of $10 regular pay for the hour. If I work 2000 hours in a year, my regular pay is the same for those hours, no matter how many hours are overtime. If the plan excludes overtime, it is not disregarding my hours, it is simply disregarding the additional pay for those hours that is overtime pay ($5 per hour). That won't solve the complaint that not all pay is counted for benefits.

You don't need a separate plan and all of its trappings to provide different benefits (e.g. match terms) to different groups.

You have to have someone stupid and wealthy enough to litigate the issue before you get a reported case. No matter what outcome you want, there are cheaper alternatives.

Good plans have terms that allow a beneficiary to disclaim the benefit.

I observed that the regulations did not follow through on the preamble statements about matching, or not matching, catch up contributions. I do not disagree with the statement that no binding authority compels matching of catch up contributions. I cannot identify a disagreement between mjb's statements and mine. He made the valid point that this forum can provide only limited assistance with interpretation of plan terms. You made the valid point that limited assistance can be helpful.

It is still potentially a plan interpretation question because the plan may not define catch up in the way that the law defines catch up. The plan could define catch up as the "extra" $5000 without regard for how the limits really play out. If the plan does not try to distinguish the extra $5000 from other deferrals (except that it is available only to the elders), I would be inclined to agree that you have no basis for not matching the catch up; the catch up is a deferral like any other deferral.

What do you mean "no longer"? See Q&A 4 of Treas. Reg. section 1.402©-2, in effect for a number of years now.

What is being waived?

The identity of the alternate payee determines whether or not a distribution is an eligible rollover distribution, not the purpose of the award. If the agency drafts/issues an order for an amount to be distributed, and the agency does not figure correctly on withhholding (could that possibly happen?), then the amount delivered will not be the amount the agency wanted. The agency then has to get another order for the shortfall. That was my point. I was musing about real world questions, not what should be. Or perhaps I was asking if the agency "should be" bound by the legal consequences of its actions and not get a second bite from the retirement plan. But that is not a QDRO question.

Since you asked for opinions, here is mine. I think you ought to try to understand the reasons for the advice you give. Then when you encounter a particular situation, you can decide if the advice applies to that situation. If my opinion is mistaken, then I offer the observation that most NQDC plans are not subject to most ERISA provisions and do not operate under tax statutues that relate to employment status, such as 105(e) and 401(a).

The preamble to the catchup regulations indicates the the IRS views catch up amounts the same as other elective deferrals and actually suggests that it is not proper to provide that catch up amounts will not be matched, as opposed to saying what will be matched (which allows you to get to the same place, so it is not a substantive rule, as demonstrated by its absence from the regulations themselves). I have found that it does not make any difference under most matching formulas whether catch up is matched or not.