QDROphile

Depending on how literal you are, the words you mention do not say that an in-service distribution is allowed after age 59 1/2, so it does not contradict a plan that (i) has no provision for distributions after age 59 1/2, and (ii) probably has a general proscription on in-service distribution. You can substitute any age in the sentence and get the same result, consistent with the plan terms. One may speculate that the SPD was created from a form. While the editing got the basics right, that fine detail did not get the proper attention for conformity. You should ask what the plan sponsor would like. If the plan sponsor wants age 59 1/2 distributions, amend the plan and the SPD.

What happens if the alternate payee elects a direct rollover? Just thinking. It does not matter to the plan, but I wonder how much credit the participant will get for the distribution, the amount distributed or the amount delivered net of withholding? Were it not so sad, it would be funny how little the agencies understand what they are doing compared to how adamant they are about it.

A cafeteria plan does not need to file Form 5500. The cafeteria plan is merely a funding mechanism. The health benefit plan (including a health FSA) or other ERISA plan funded through the cafeteria plan is subject to the reporting requirements of ERISA. If you use the cafeteria plan to wrap you ERISA plans it will look like the cafeterial plan is is filing the Form 5500.

You can accomplish what you wish by taking a distribution of your old 401(k) balance, but rolling over only a portion to the new plan. The portion you don't roll over will be taxable. You may use that taxable money (net of taxes, effectively) to pay the loan. If you don't like that idea, at least you now have a clue about why the rollover amount cannot be used to pay the loan.

Yes.

I disagree with papogi. The employer can give everyone a $500 FSA credit for the year (whether or not they can really use it), but I don't see how participant can be given an election to take any portion in cash instead of FSA credit. It would be the same as the employer giving everyone a $500 raise and allowing employees to elect how much of the $500 would go to FSA credit. That cannot be done mid-year.

Generally, rollovers do not bring any taint with them if the receiving plan is not aware of any taint; if there is an actual problem but the receving plan was unaware, the solution is distribution and plan qualfication is not a concern. Check the regulations for the standards for due diligence. But since the distributing plan is not a stranger, the receiving plan may be less able to be ignorant and innocent. Please understand the a rollover occurs only if there is a distribution. If the participant does not take a distribution, the transfer under Treas. Reg. 1.411-1(e) is not a rollover and any taint is imported.

Treas. Reg. section 1.411-1(e)

Treas. Reg. section 1.411(a)-11(e).

What happened to the trust agreement in place before replacement of the former trustee? Removal of a trustee and appointment of a new trustee does not evaporate the trust instrument. The document may need amendment to reflect the change. Or did you really mean that the former arrangement was an annuity contract?

Plans must be operated in accordance with their terms. The plan has failed if it did not properly follow deferral instructions. The failure disqualifies the plan. The plan can be corrected to remedy the failure. The remedy depends on the circumstances, but generaly involves putting the plan into the position it would have been in if the mistake had not occurred. The personal tax consequences may not be the same under the correction. Your employer is ignorant, unimaginative, and insensitive to compliance. Pointing out a qualification issue may get attention. The mistake should be fixed, whether or not you want to have it fixed.

If your account balance is more than $5000 (or maybe less), you can maintain your account under the old plan. New contributions will go into your new plan. You may have both. Your account may get charged maintenance fees under the old plan that were not charged before. None of my business, but 40% investment in a single company stock does not seem like a good idea for a retirement fund.

Does not fit the deferral limits of 457(b) and does not fit the risk of forfeiture required for 457(f). Section 457 is the only opportunity other than qualified plans, section 403, and the IRA family. I am sure you can get an insurance sales agent to try to convince you that some insurance product will do the trick.

It will be very difficult to pin any liability on the new employer or the fiduciaries of the new employer's plan unless you were implored to rollover the funds and you can show the the new employer or fiduciary undertook the responsibility to advise you about all aspects. Mere offering of explanations about the transactions and encouragement will not be enough. The new employer is not obligated to tell you about the old plan if the new employer is unrelated to the former employer or plan and it is unlikely that the new employer undertook that responsibility. You may have recourse against the fiduciaries of the LF plan for failure to disclose a material feature of the investments and consequences of an election to take a distribution, but the going won't be easy. You should check the summary plan description of the plan and all materials that were provided and available concerning investment of plan assets, and all materials provided or referred to in connection with the transition before you put any money on the line in pursuit of your claim. All sorts of facts and circumstances will be relevant, including ones you may not recognize currently. You will need to follow the plan's formal claims procedures for any claim relating to benefits, including amount of benefits; woe (and whoa!) to you if you disregard the procedures. You will have less chance of success in any event if you go at it alone. You should consider collecting all similarly situated particpants. You may seek help from the Department of Labor. The Department has offices in major cities. The Department has a website: www.dol.gov/ebsa.

That is exactly my point and that is why the decision is wrong. The way the court incorrectly viewed the "separate interest" as disposing of the question, the court glossed over the separate death benefit issue. Having said that, we don't know much about the actual plan design, so I am assuming usual DB plan design. Even if the plan was designed in a way that justified the result, the failure of the court to point out the design feature (if any) means that its incorrect view of "separate interest" is going to plague us.

The court does not understand how DB plans work. The "separate interest" as described by the court in fact does cause the plan to pay more than the average DB plan is designed to pay (the court does not tell us the plan design); a "separate interest" must take into account the death features of the plan and cannot thwart those features. The court disregards the statutory language to the effect that an alternate payee does not get a death benefit unless the order expressly provides for it. I agree with the court that a domestic relations order does not have to be presented to the plan before the participant's death, but no order can insulate the alternate payee from the consequences of the participant's death unless the plan is designed to allow it. The only way to justify the result is to conclude that the plan was somehow responsible for a delay in the altnernate payee's start of benefits that caused the benefits to start after the death. Finally, while the alternate payee can go back to the state court to clear up qualification defects after the particpant's death, the division of the benefit must specify the essential property rights before the death of the participant. If death benefits under the plan are not awarded before the participant's death, that property interest cannot be awarded after death. The circumstances are too suspicious even to allow "clarification" of that point after the particpant's death -- it is either blatant adverse selection or correction of an error that should stick. The case should have been left as a malpractice case. I am very concerned that the simplistic "separate interest" concept in the decision will allow bad orders to disregard plan design and the provisions of 414(p)(5).

And Files v Exxonmobil is wrong.

The IRS presumption is otherwise. To the IRS, the catch up is merely elective deferrals in excess of certain limits. You don't have catch up contributions except to the extent the deferrals exceed a limit, no matter what you call them. The preamble to the original regulations even suggests that you can't exclude catch up from the match, but the regulations did not follow through. The IRS tried to explain its position by saying that a plan should not define a match by what is not matched. So if the plan says to match elective deferrals and does not state some sort of limit on what elective deferrals are matched, the plan may well provide for matching catch up amounts.

You are not giving enough information to give an answer; details make a difference. This is a complex, technical matter that regulations by themselves will not answer; other published SEC guidance is important to the analysis. One could offer a guess based on your statements that registration is not required, therefore an 11-K is not required, but you should rely only on competent leagl advice.

That is not the usual reading of those provisions of the order. Although orders are typically poorly drafted, I distinguish between FORM of payment (e.g. lump sum, installments, annuity) and TIME of payment (e.g. any time, as soon as the plan allows, upon start of benefits to the participant, as soon as participant is able to start benefits). I think the TIME specified in the order is as soon as practicable (the plan has to identify the amount and set up for distribution, typically by creating a separate account or subaccount), although the alternate payee may elect a later time. The FORM of benefit is any form available to the particpant, whenever the participant is entitled to benefits, The order is poorly worded, as usual. But my suggestion is only an interpretation. As pax advised, the interpretation is determined by many things, primarily plan terms, terms of the plan's written QDRO procedures, all the other terms in the order. If a plan intends to be restrictive toward alternate payees, it shoudl be very clear about it and either the plan or QDRO procedures shoud have express restrictions or very clear provisions about how orders will be interpreted. If the plan terms are not restrictive, and most defined contribution plans are not, I don't see much point in trying to be unnecessarily restrictive about interpreting the order itself. The plan must follow the terms of the order, but does not have to be hypertechnical about interpretation of the order. Back to the order for an example of interpretation. I assume that the plan says that alternate payees may be paid even if the participant is not eligible for distribution, as is the case with most DC plans. If the plan allows participants who terminate after age 55 to elect a lump sum or installment payments, but allows only lump sum if the participant terminates before age 55, then the alternate payee could be paid only in a lump sum if the participant was not yet age 55. But the alternate payee could still choose to be paid even if the participant was still working and ineligible for distribution. That is how I would read the order, and I would wonder what purpose is served by reading it otherwise. If the order really intended to lock the alternate payee into the plan until the participant terminates emplyment, the order should do a better job of saying so, and it would be really easy to say so.

Whether or not IRA assets can be divided has absolutely no bearing on what the plan administrator should do. The plan administrator must consider the terms of the plan's written QDRO procedures. Some plans provide that reasonable notice that a domestic relations order will be forthcoming will cause the plan to restrict distribution pending further developments. That presents serious interpretation problems and is not advisable. But the Department of Labor informal position is that something like this is the appropriate standard, no matter what the QDRO procedures say. The Department of Labor is wrong unless the plan is stupid enough to adopt the standard for itself. Unless the plan hobbled itself, I agree with mjb.

I don't know who "we" is in your message, but if "we" is left with a multiple employer 401(k) plan when this transaction is completed, "we" needs to look at the April 28-29 2005 posts in the securities law forum.

What does the plan say? The plan terms must be followed.

My suggestion was to apply the fee to all acounts and "uncharge" the accounts of the employees to reflect that those fees are paid by the employer. I guess that does not work and I should have kept mum because I did not associate the suggestion with how Relius actually works.

Would it help to understand that the law allows fees to be charged to all accounts and the employer covers the charge for employees? The law does not allow fees to be charged only to participants who are not employees.