QDROphile

On what basis do the shareholders maintain "individual" plans? Does the corporation in which they are shareholders sponsor 5 plans, with each assigned to a different plan, or do they each have other unrelated employment besides the corporation and sponsor the plans for the other employment?

I have seen this before. I disregard the "no rollover" provision, but I expressly say so in the notice of qualification. If they don't like the interpretation, they can appeal, at which time the administrator will rule that order fails to qualify. Rollover rights are stautory (or at least the plan's qualification hinges on them); an order can't take them away. A court can order the AP not to roll, but that is not a matter for the plan administrator to enforce. the AP gets the option as provided in the plan and the law.

See Code section 125(f). "Qualified benefit" for a cafeteria plan does "not include any product which is advertised, marketed, or offered as long-term care insurance." See Code section 106©. Long-term care services are included in gross income if provided through a flexible spending arrangement.

A fiduciary should be very concerned about insisting that the SSN be in the order. As noted above, the SSN is not required for qualification, and the fiduciary could have liability for adverse consequences of insisting. By the way, domestic relations orders generally are public documents and several states and courts have adopted rules to avoid revealing SSNs in those documents.

Employer coverage of the deductible is an employer provided health benefit, not taxable to the employee as long as the arrangement is not discriminatory, see section 105(h) of the Internal Revenue Code. The arrangement is or is part of a group health plan, subject to ERISA, COBRA, HIPAA and all other requirementa applicable to group health plans. Among other things, the terms need to be set forth in a written plan document and disclosure (SPD) must be provided to participants. One should also consider that the premium paid under the cafeteria plan for the core health coverage also buys the deductible coverage.

An employer that asks the question that way should re-examine whether or not it is proper to pay only "via 1099" because if the employer proceeds to exclude all the payees from the retirement plan, the stakes get much higher. The combined use of "employer" and "1099" should give pause. Or, to be simplistic, paying a W-2 employee as though the employee were an independent contractor (via 1099), will cause nothing but trouble when it comes to compliance with retirement plan rules.

Staying within the private employer arena, you don't find many nonqualified plans that don't purport to be top hat plans because the ERISA trust requirement eliminates most of the tax benefits of deferral and securities law compliance can be a significant issue. An example of a nonqualified plan that is not a top hat plan is one that fails to comply with section 401(a) -- therefore not qualifed -- and participation is not limited to a selct group of management employees -- therefore not a top hat plan. ERISA requires the plan to have a "secular" trust. Contributions to the trust are treated as ordinary income to the participants. I am aware of some top hat plans that have secular trusts. I am not privy to the reasons for the arrangements.

"Testing concerns aside" makes your question trivial. If you don't have to comply with the law, anything can be adminstered as a matter of book keeping.

A nonqualified plan that is not a "top hat" plan is subject to the ERISA trust requirements and TIN rules would apply. A rabbi trust would not satisfy the ERISA trust requirements.

What do you mean by "decline the coverage"? A person can be covered but simply not submit claims. However, if they have other coverage, the coordination of benefits may force involvement of the coverage and creditors may eventually foorce th individual to submit claims for unpaid coveredmedical expenses. Is the next step after declining coverage a demand for higher pay in lieu of the employer-paid premium? That causes problems. If the insurance is provided through a group insurance policy, failing to cover all persons does not present problems under ERISA or the tax code unless section 125 is involved, but the terms of the policy may present problems, as noted in the answer above.

You may have a compensation arrangement that is not being treated properly, so what you may be missing is an ability to get at the real problem.

You just confirmed facts that lead to the conclusion that there were prohibited transactions. The same events can be operational defects and prohibited transactions and each problem needs appropriate attention. You don't get a twofer when you address one problem.

Are either the owner or the financial advisor fiduciaries? The financial advisor appears to be one. Did the financial advisor benefit in any way from the event? Be expansive in your imagination, and include intangible benefits. I suspect that the financial advisor had something to gain from the (mis)use of plan assets, perhaps only indirectly. For example, pleasing the owner for the sake of future business might be enough under 4975©(1)(E) or (F).

See section 408(a)(2) of the Internal Revenue Code and Treas. Reg. section 1.408-2(d) and -2(e). Good luck.

See section 125(f). Are the EAP benefits described there?

Please explain why a charity cannot be a designated beneficiary.

Since there is no such thing as a truly "separate interest" QDRO, there is no sure fire way to have ready answers to all of the relevant questions. The answers are determined by the terms of the order, the terms of the plan, the terms of the written QDRO procedures and the law. The law is not settled on various points.

Please clarify what you mean by a non-ERISA plan. Is it is a plan that is not qualified and exempt from most ERISA requirements as a top-hat plan or is it something else? If so, you are left to plan terms and policies adopted by the plan to determine how to process the retirement payments while matters are worked out in the marital settlement and thereafter. If the plan does not have them, now is the time for designing and adopting them. The plan may choose to follow some principles that govern qualified plans, and there are some good reasons to do so. But there are some differences, including tax consequences, that need different treatment.

Consider that a general partner may have unlimited liability. Sounds inappropriate.

Since 105(h) was consciously designed to prevent the result you want, it is unlikely that you have options. The usual solution is to buy a policy for the individual.

Are you referring section 105(h) as the "discrimination rules"? It is hard to tell if you need details about 105(h) or if you know all about 105(h) and are asking for ways around it.

This area of the law is a mess. Some aspects of the issues are discussed in other posts, but you need a competent ERISA lawyer and might as well not even look at the discussions, except to give yourself a headache.

Given that for purposes of section 415 and 401(a)(9), the benefit divided by a QDRO is essentially treated as a single benefit (which is why there no such thing a a true "separate interest," especially in DB plans), I think it is reasonable, and perhaps even necessary, for the plan to take the position that the alternate payee's share of the benefit is not independent for purposes of the restriction. As a plan fiduciary, I would rather be proven wrong in an action by the alternate payee than give away the store without some authority.

While I agree that domestication has a cost, I don't see how charging the plan account as anything to do with it. The plan is not involved in the domestication. I don't think the cost of processing a foreign order coupled with the domestication order should be different from processing a domestic order. Of course, any order could be a mess that increases the processing cost.

I disagree with pax. I am notorius for being overly critical of plan documents, but if actual SSA determination is required, the plan should say so and I have seen plenty that do. The issue is whether the fiduciary determines disability or if the fiduciary simply looks to a third party's determination. Among other things, the difference affects claims procedures as well as the outcome of the claim. As a general rule the fiduciary has primary duty for all determinations under the plan. I think the fiduciary is responsible for determining disability because the plan does not say someone else does. The plan defines disability by incorporating the SSA standard by reference. The fiduciary has to apply SSA standards in its determination. Perhaps the fiduciary could rely on the SSA determination disability if the SSA has actually determined disabilty -- who is better to know and apply the SSA standard than the SSA? I don't think absence of SSA determination lets the fiduciary off the hook. Here is the best part. The fiduciary first has to interpret what the plan says about who determines disability and how. Fiduciaries have discretion in interpretation and it may be OK for the fiduciary to interpret according to pax. But I don't think fiduciaries get points for punting.