QDROphile

I disagree with your conclusion that the spouse has a "vested" benefit. The spouse has only a derivative of the participant's benefit. That is what the Fifth Circuit got wrong. But I agreee that there are some very thorny issues that may cause the state court not to proceed. What if the spouse still has some item in the garage that the state court awarded to the former spouse, or the proceeeds of that item? I think the state court would be willing to allow enforcement of its award notwithstanding that the spouse might resist.

Defined benefit plans are different. Although there is the remote possibility of an unconventional design in another plan, this plan is paying benefits in the form of a joint and survivor annuity. When you get to the survivior, no further designations are allowed. The survivor's life defines the benefits. My answer mixes two concepts, and one could argue about that. Because the benefit is in pay status, I would not allow a life benefit for the alternate payee. The alternate payee can only get some portion of the stream of payments, not a life benefit based on the life of the alternate payee. Then I switch concepts and assert that if either there had been no divorce or if the benefit had been divided before payments started, the wife/alternate payee could not pass anything to a beneficiary. The form of benefit, by design, limits the benefit to the wife/alternate payee, not some futher sucession of persons. In other words the joint and survivor annuity is designed to take care of the participant and the participant's wife, and no one else. Some plans will allow a contingent beneficiary in place of a wife, but they do not allow a succession when the benefit is a life benefit (life and term certain is another matter -- a series of beneficiaries is possible to exhaust the term certain, but most of the plans look to the estate of the designated beneficiary rather than a beneficiary designated by a beneficiary designated by a beneficiary). The alternate payee should not be allowed to extend the benefit beyond the alternate payee's life because the form of benefit is not designed for that purpose -- it is not an estate planning vehicle; it is a spouse support vehicle. You could argue that once we are lookintg at a stream of payments, it is more like a defined contribution plan. While there is a life factor, it is not the life of the alternate payee that determines the potential aggregate payments. Therefore, the alternate payee should be able to be awarded the alternate payee's "share" of the the payments and that share should not be defeated by the alternate payee's death. Either the alternate payee's beneficiary or the alternate payee's estate should get the alternate payee's full due. The subsequent spouse should not get more than the subsequent spouse share of the benefits, as expressed in the survivor annuity after taking away the alternate payee's portion. ERISA says that alternate payees are treated as beneficiaries. So unless the plan allows beneficiaries to designate beneficiaries, the alternate payee has no inherent right to do so. Once the survivor annuity is locked I cannot imagine that the plan has been designed to allow any sort of reformation or has specific provisions from which one could reasonably infer an ability to inject strange beneficiaries. This whole discussion jumps over the important question of how a court state court will decide what is to be awared to the alternate payee. It is tempting to adopt the rules of the Fourth and Fifth Circuits to preclude the difficulties at the expense of the alternate payee who created the mess by waiting too long to notify the plan. I don't know how the state court will proceed, but it will depend in part on on the original division of the retirement benefit. Will the original award be carried through simply by mathematical adjustment to take into account the current situation? Or is the original decision compromised too much by the passing of time and concern for the ability of the adverse subsequent spouse to be heard?

Search using the terms "hardship" and "loan" and you will find some relevant discussions.

This dilemma was addressed in the ENRON case. I believe that the court ruled that the restrictions imposed by the securities laws did not excuse a fiduiciary from taking appropriate action, and discussed options for appropriate action.

You could send a message through the message function of the board, but I probably would not respond and I probably cannot help you with actuarial fine points anyway. To paraphrase what Warren Beatty said about Madonna, if I can't pontificate in public, what would be the point?

AP cannot designate a beneficiary, whether or not the beneficiary could be an AP. The order could designate another alternate payee, but who would that be? It may be possible that under state domestic relations law the the plan participant could be ordered to pay support to another person (e.g. a disabled adult child), but I would not expect that to happen. In certain jurisdictions the federal courts have ruled (incorrectly) that the first spouse cannot get anything from the surviving spouses's payments.

The decree can't make the plan do what the plan is not designed to do. It is almost unheard of that a DB plan would allow a change in the form of benefit after the start date. Any order to the contrary is not qualified and is ineffective. See section 414(p)(3) of the Internal Revenue Code. They may be asking you to come up with a value for the purpose of deciding what portion of each payment the former spouse should get, but I think they are fooling themselves about the ability to get a "right" answer. I suppose you can't just tell them they are fooling themselves, look at the payment stream and be done with it.

I am glad you mentioned you are in Iowa, because the rule is different there. Normally, when one is amending the plan, one is amending the plan document. The SPD is a summary of the plan. The SPD reacts to changes in the plan as the plan is amended. One vehicle for the reaction is a summary of material modifications (SMM), but a restated SPD may be warranted if the changes are extensive. The SPD should identify the date as of which it describes the plan and any SMM should identify the date of the change it describes. Some folks try to have the SPD serve as the plan document. In that case, a plan amendment automatically changes the SPD as well. The change must still be published according to the SPD/SMM rules.

The plan or the written QDRO procedures should dictate how benefits in pay status can be divided. The usual approach is to limit the division to splitting the payments, not dividing the value of the benefit. The usual approach has many virtues.

Nothing prevents the loan from being secured by a mortgage except plan design or policy. No comment on maximum term.

What kind of business lets its clients unilaterally decide whether or not to pay fees for services rendered? Something seems wrong with the picture. The agreement could be a binding right to receive payments based on collections. It may be that there are no collections or irregular collections, but I would expect a least an implied term for reasonable good faith collection efforts. There could be other aspects of the arrangement that would make it either not covered by 409A or compliant with 409A. What is the compliance problem that concerns you?

I tend to follow the proposition that anyone who takes an unusual position has the burden of supporting it. The idea that deferrals are affected by a loan is unusual. It is not your job to find the provisions to support it. It is the employer's job to show you why your normal right (to defer and have money delievered to your account) is being compromised. Demand to see the support. If they can show you that the position is correct from the perspective plan terms, report back here to explain. It is unlikely that the position is allowed under 403(b)(12), so you may have to go to round 2.

State law controls and might have something to say on the matter.

Mortal sin if the fault is in the communication. The communication was not sufficient to allow the participants to get all the benefits that they could have received under the plan if adequately informed. Violates the SPD rules and is a breach of fiduciary duty. Also, if the employer is going to make the employees whole anyway because of the stupid behavior, don't be so fast to try to soft pedal whether or not there was an operational error in administering the plan in accordance with its terms. Admit to the error because that becomes the basis for the make-whole contributions. If you don't have an error, you may not be justified in making corrections within the plan.

Perhaps "SPD" is simply meant to mean an information or disclosure document. Most arrangements need them for some purpose, even if the arrangements are not subject to the formalities of ERISA.

Why woudl you prorate? The summer months are heavy childcare months for school age children.

See Treas. Reg. section 31.3121(v)(2)-1(e). You are on the right track.

How about suggesting to the appropriate fiduciary that the choice of investment provider should be reviewed to assure that the best interests of the participants are being served? Reseach some alternatives and show the fiduciary that you have an inferior arrangement. If the cost of administration is one of the shortcomings, go to the Department of Labor website. It has plenty of material to suggest that the fiduciary needs to be conscious of costs. Ask whose golfing buddy is involved.

You can't tell if the reduction is proper without knowing what the plan says and more facts. You can know that a limitation on benefits because of compliance is not a status change described in the regulations that would allow mid-year change under the plan of either person. So even though the reduction may have been proper, it may not be a change in election. The spouse does not, by reason of a change, necessarily have a change in the HCE spouse's plan that would allow a mid-year election under the other spouse's plan. Does the other spouse have another event that would allow a mid-year election? The IRS is very generous about what constitutes change in cost or coverage when it comes to childcare FSAs. See Example 5 of Treas. Reg. section 1.125-4(f)(6).

Why the reduction?

The answer is entirely within the standards of that program. "Pension" means what the program says it means; there is no generally ageed upon meaning of "pension." The program may look outside its own terms for a defintion, but the programs terms would provide for that. It is also possible the the program has not settled on all points of meaning. You will be extremely lucky if anyone who uses this board has familiarity with the program. If you can't get anyone in the program to answer your question, take the position that you do not have a pension, but any time you communicate or fill out any form, DISCLOSE, DISCLOSE, DISCLOSE that you have the IRAs. Disclose even when the communication or form does not ask about pensions. Draw stars at the disclosure. In your disclosure, include that you have asked program personnel about the IRAs, but no one would answer. Keep copies of the documents with the disclosure. Governments have a habit of trying to recoup overpayments in 20-20 hindsight, even when they had active blindness in the beginning.

What is the last sentence in your first post? You said the plan treats anyone employed as employed. That is a conventional plan design, conscious of the possibility that the person might not be in an eligible position. It is parallel to the legal requirement for vesting -- employment in an inelgible position is still counted as service If the plan intended to exclude, it should have said so. Generally, uncertain terms are interpreted in favor of the participant.

A conventional way to come close to your goal is to adopt a section 125 plan, also known as a cafeteria plan and sometmes known as a premium only plan if it is limited to premiums. Assume that the premium for individual coverage under your plan is $300 per month. Under the plan, each of the eligible employees would choose for the coming year between individual coverage and $300 per month. Elections can be changed mid-year only under certain circumstances. A person who chooses the coverage would not be treated as having any additional compensation. A person who choose the money would have $300 per month of additional compensation, so they would really take home less than $300 per month. Can you try to shape the $300 per month amount to fit the individual and the cost of the individual's alternative health coverage? Probably not. Also, unless you took extraordinary action, any of your employees could decide to forego coverage in favor of the $300 and you could end up with uncovered employees and higher employer FICA taxes. The extraordinary action involves some complications and may not be feasible in any case. If employees start opting out, it might affect your cost of coverage. Your premiums are affected in part by how many people are covered under the group health insurance policy. There are other possibilities that might get you closer to your expressed goal. You are likely to get other messages that describe at least one of them.

That is controversial. At least one court has ruled that the valuation is a "plan document" to which particpants are entitled. The circumstances may be important, and the plan or the employer may be able to obtain protective restrictions even if the information has to be produced.

A top hat plan filing is an ERISA matter and has nothing to do with 409A. No deferred comp plan files with the IRS. For that matter no qualified plan has to file with the IRS, except for Form 5500. Lack of filing with the IRS is not relevant to 409A. However, 409A is likely to apply to the deferred comp plan. Consider the DOL Delinquent Filer program , as suggested in prior posts. The DOL website has information to get you going. Deferred comp plans must be anlayzed for compliance with federal and state securities laws. Exemptions from registration are often available, but that cannot be taken for granted. As has often been stated by Kirk Maldonado, your source of ERISA and tax advice is often clueless about applicable secutities law.