QDROphile

No trumping. Not a limint on timing of deferrals. Other threads cover this false issue exhaustively.

Not everyone agrees with Mr. Reish on all points, and despite his claims that the DOL agrees with him, that is uncertain.

The nature of the transaction is important. Loans are treated differently than sales. If you want more specific help, you will have to describe the PT and the correction in greater detail. Form 5330 is of some help.

Whether it is a Roth contribution or an elective deferral, the plan should have some documentation of what it applies a percentage election against, and it needs to communicate that to participants so they can make the intended election. The plan document will usually define compensation rather broadly, but most plans do not apply the percentage aginst all sources. For example, there are elements of W-2 pay that are often missed when it comes to reduciing pay, such as auto allowances. At the end of the day, the deferral amount won't be the same percentage of W-2 pay. Employees usually think of regular gross pay when they make elections.

If a plan wishes to provide benefits through an insurance policy, there is no point arguing about what a plan could/should/must provide. The terms of the policy will determine the mimimum benefits (the plan can provide for more than the insured benefits, but not less). Mary C is questioning insurance policy terms and wants to find the source in state law that compels the insurance company to include certain benefits in the policy.

Can you provide an example of court decision that disputes the ability of a state to determine terms of an insurance policy issued in the state? I would expect the case to involve ERISA section 514(b)(2). There are cases that question whether or not a law regulates insurance. But terms of insurance policies are set under laws that regulate insurance. I think you will find that plans may not be regulated, but policies are. So If you want to provide plan benefits through an insurance policy, you are stuck with the terms of the policy, which is within the authority of the states. If you are self-insured, then you can exercise control over the plan benefits without regard to state mandates.

While you may disagree with what should be mandated, federal law allows the states to regulate insurance. So if you want third party insurance coverage, you are stuck with what the state requires in the policies, according to their own state mandates. If you want to be self insured, you can limit coverage to what the feds require. I think it is wrong to impugn state regulators for "disdain" of federal standards when federal law expressly allows states to set different standards. You can impugn them for all sort of other reasons and I won't quarrel.

An S corp ESOP does not have to distribute employer securities. That is what I was getting at with the comment about the participant's right eventually to get the dividends distributed in the form of employer securities. Public company KSOPs usually allow the participant to move the entire balance into the stock fund before distribution, thereby assuring that all amounts are distributable in company stock if the participant wants the stock.

Noncompliance is not a problem if you don't get caught. It's not like the law of gravity. That is probably the prevailing approach, since most service providers don't seem to provide that service. I personally don't like to live that way. You may be able to determine if you comply by looking at plan design and some demographic information. Actual number crunching is not always necessary.

What do you think of Treas. Reg. 1.401(k)-1(e)(6)?

Please explain why your lawyer was no use to you. You wrote that your lawyer argued your position and the result was was what you wanted.

If you want to ask a different question that may moot your questions (i) go to the Securities Law forum on this board and check out the question about registration requirements for multiple employer plans and (ii) ask if the plan sponsor is aware of the issue and how to comply with the law. A public company can probably comply with the law without too much trouble. Beware. You can't tell if you will be a hero or a goat for bringing it up.

You might take some comfort from the letter rulings that are the basis for so many public companies turning the company stock investment fund option within their 401(k) plans into ESOPs. The ESOP portion of the plan is defined as the fund with company stock, to the extent of the company stock. The ESOP waxes and wanes according to the investment elections of the participants. The new 401(k) regulations facilitate operations under this point of view by changing the rules on aggregating ESOPs for ADP testing. I think the whole idea is intellectually bankrupt, but it is now quite well established. Other threads on the board have discussions about the phenomenon. The point for you is that you can make the ESOP whatever you want as long as the artificial basket you put it in is primarily invested in company stock. If you define the ESOP as whatever part of the plan happens to be company stock, you can't fail. If you were not dealing with an S corporation I might wonder about whether the participant has a right to take a distribution of the dividends in the form of company stock. But I might wonder about such niceties because I still don't believe an ESOP can be defined simply by how assets are invested from moment to moment.

An employer can determine an amount that will be available under an FSA. The matter of amounts elected by employees is a separate matter. FSAs are not limited to cafeterial plans. The employer can design the plan to provide certain benefits and not others. Limitation of benefits is a good idea because of the difficulty of deciding the eligibility of some types of benefits. A typical way to influence choice of providers is to reimburse at a different rates for preferred providers. Providers can be limited. For example, it is possible to exclude entirely certain types of treatment such as accupuncture.

Maybe the plan is designed not to get into complexities by not allowing coverage of children of domestic partners, hence no way to identify or designate them. Your 2003 proposed reg is obsolete. The applicable stautes have changed since.

You need to zero in on whether or not the child is within the definition of "dependent" of the employee, and be wary of looking at combined support from the employee and the domestic partner. Then you need to distinguish between the premium paid for the taxability of amounts paid for the premium for health coverage (section 125 issue) and the taxability of the health benefits provided to the child (sections 105 and 106). Sorry, not a quick answer. Quick answers usually require definite and complete facts and applicable stttled law. The law is the easy part here.

See section 72(t)(3)(A). The exemption under section 72(t)(2)© from the 10% penalty applicable to QDROs does not apply to IRAs. You can shift the obligation to pay the expense to the former spouse along with the additional money in the new IRA for the former spouse that will be sufficient to make the payment, but the former spouse will have to pay the 10% penalty. Nothing is gained with respect to the penalty tax on the amount equal to the expense unless the former spouse has attained age 59 1/2. There may be other tax consequences of the agreement to have the former spouse pay an expense of the IRA owner.

The employer does not have to do anything. The employer can leave the plan at risk of disqualification. The fiduciary should consider its obligations. Usually the fiduciary does not have an obligation to make sure contributions are made, but it may have an obligation to report to the recipient if the amount of distribution is not what the plan says it should be. You know, utmost duty of loyalty, highest standard recognized by law and all that. Whoever signs the Form 5500 should carefully consider if all the information on the Form 5500 is correct in light of the known shortfall of contributions and distributions.

You are correct. Rev. Proc. does not specifically identify your particular circumstances and walk you through the correction step by step. It does that with a few common errors. However, it provides general guidance about corrections and examples about matters such as earnings adjustments when the participant got too little contribution or too much contribution. In your case, you have two participants who received too little contibution. The overall guiding principle is that the participants and the plan should be restored to their positions as if the mistake had not ocurred. It looks like the employer may have to kick in some dollars unless the participants agree to elect contributions for the remainder of the year to get where they are supposed to be. Then there are those pesky earnings to account for. The question about the effect of the participant's fault in the matter is an interesting one and there are some other threads on this board that discuss the issue. Don't expect the situations to match yours exactly, or to provide an answer. I doubt that the failure of the participants to observe the problem for some reasonable time would not make a difference to the IRS. The employer will be responsible for the correction. An update of Rev. Proce 2003-44 is expected. It may provide some guidance that is more on point for you.

The problem with the arrangement is that it violates the fundamental requirement under section 125 that an employee must elect before the beginning of the plan year to reduce pay for the coming year by a specified amount in order to get the benefit for the year. That is the whole point of section 125. If the administration firm is "offering" this arrangement, it is either totally incompetent or a scoundrel. This is not a subtle or technical issue where the matter is debatable or a mistake is understandable. It is at the heart of section 125. What your employees really have is after-tax payroll deduction to cover their out-of-pocket medical expenses. Since it is an after tax deduction, the payments don't even have to be for qualified medical expenses, so the adminstration firm's review for eligibility of expenses is pointless. You will need to include all the reimbusements this year in compensation and report them on From W-2. Start working on the correction soon so you can ease the sting of withholding on the amounts that the employees thought were pre-tax reimbursement amounts. If the employer has been participating in this snow job in past years, the emplyer has failed to report compensation properly and to withhold properly. Corrective action is advisable. You should hire competent help to assist with fixing this mess.

What happens after the administrator books the claim in the FSA account? How does the claim get paid (where does the money come from)? What effect does payment of the claim have on the employee's pay? The elements that you have described look like an arrangement that does not comply with section 125 requirements, but I do not wish to explain why it does not work based on speculation about some of the missing elements. Please supplement your description with the information requested.

It is a qualification problem. The plan says that contributions will be made in accordance with participant elections. You have contributions for two participants that are not what they elected. The plan did not operate in accordance with its terms. Rev. Proc 2003-44 provides guidance on how to fix mistaken excesses and shortfalls of contributions.

As long as we are being vague, don't forget prudence.

Kevin Wiggins is asking the right question. If the order tells the AP not to elect a rollover, that has nothing to do with the plan and will not affect qualfication of the order. The plan administrator disregards it as irrelevant and offers the rollover as required by the plan. The AP elects a rollover at risk of contempt of court, but the plan will honor the election. If the order says the plan cannot allow a rollover at the election of the AP, the order does not qualify. Orders require interpretation and similar statements can have completely different legal effect. It may be difficult to decide exactly what the order is saying by way of restriction. So my solution is to interpret the order as not intended to disqualify itself -- the learned counsel and learned judge would not be so foolish. The plan administrator will say that the plan administrator will disregard the provision. That does not mean that the AP may disregard the provision.

If the ESOP has registered securities (plan interests, employer securities or both), it probably is required to file an 11-K. How is it that the Bank has an 11-K requirement for itself? The nature of your questions suggests that you are not the one who should be providing answers to them. I don't mean to be mean, but the questions require a combination of expertise and knowledge of the facts rather than having someone provide a citation to you.