QDROphile

I don't understand the question. The partners of A are B and C. Income of the partnership goes to B and C, not X or Y.

You still need to provide a bit more information, especially about the $400 per month amount. Is the $400 amount an employer credit that can be used to fund various benefits through the section 125 plan? Did the $400 amount fund a health flexible spending account? Is there a health fexible spending account, and what was the amount elected or provided for the year? Did the employer $400 fund some other benefit, such as some other health benefit? Did the employee elect to have pay reduced in order to get some benefit? What are the terms of eligibility for the benefit plan (separate from the section 125 plan, although the terms are usually the same). Does any plan provide COBRA rights, even though not required? Don't give up until you figure it out, but it looks like the employee changed to ineligible status as of the end of October and is not entitled to any benefits afterward. That means an expense incurred after October is not covered. Hovever, depending on the terms of the benefit plan, such as the health flexible spending account, expense incurred before November could be covered in amounts greater than $1600. If the employee was covered by a health flexible spending account and the amount for the year is $4800, then eligible expenses (those incurred before November) would be covered up to $4800. But there are other possible benefit designs that would cause health benefits to be limited to $1600. Under the ERISA standards, the denial of claims should have identified the plan terms that control the decision on benefits. It would be appropriate to ask for a step by step explanation if the denial does not adequately explain. or request review of the denial and submit an explantion of why the denial is wrong. The reponse on reivew should explain the decison and identify plan provisions.

First you need to sort out eligibility for benefits from eligibility for the cafeteria plan. They are two different things, although they may be coordinated. The most important source of guidance for answers to your questions are plan documents. You will not find much by way of law that will address the specific facts and questions of your situation. Eligibility is determined mostly by what the employer decided to put in the plan. The plan will probably not provide ready answers at the level of detail in your post, so some interpretation will be required. It is improper to take actions to prevent people from receiving benefits, but changes in employment terms are not necessarily improper, even if they have the effect of making someone ineligible. The timing of submissions of claims is usually not a factor, but the plan documents should specify the deadlines. Most plans allow claims to be submitted even after the end of the plan year. When the costs are incurred relative to when the employee is eligible is most important, which brings you back to eligibility. While the regulatory agencies can help (Deparment of Labor is usually better than IRS), this sort of individual hand holding is not going to be a priority and the DOL is probably not interested in the cafeterial plan at all. Best course of action is to get a lawyer who understands benefits --there are relatively few-- if the disputed amount is big enough to justify the expense. ERISA provides for the award of attorneys fees if the participant wins, but that does not mean fees will be awarded.

The first sentence of the post suggests that any distribution would not be an in-sevice distribution.

Top hat plans are not exempt from Part 5 of ERISA and section 514(b)(7) mentions QDROS and QMCSOs. I don't know what a rigorous analysis would conclude about this, but I am more comfortable when the order meets QDRO requirements and it is usually not much of a burden to achieve that.

Until the plan establishes that it has some rights in the matter, which is questionable at best, the plan had better not withhold or delay benefits or payments or give any "instruction" or threat to the particpant about action that the participant should or must take. The plan can get into big trouble if the plan meddles where it should not or compromises the rights or benefits of the participant when it has no right to do so. I am amazed at the helpful comments of the armchair lawyers out there.

If you choose not to go through the full formalities, would you withhold on the payments? Is someone personally liable for not withholding? What would you say about rollovers? These are items to ponder. I am not necessarily arguing for a full resurrection of the plan.

Were do you find mention of a hardship?

Good luck with state law. When you don't find anything helpful, go back to your plan terms and see what they say. You may be able to reconnect with federal standards for purposes of interpretation.

See IRS Notice 87-13. The exception under section 72(t) applies if the particpant terminates employment in the year the participant attains age 55.

Look at section 414(p)(7) of the tax code. The case law must be considered when applying the statute, but the effect should not be significant. Why isn't your legal department answering your question? Here's is another question for you and your legal department. When you ultimately pay the reserved amount to somebody, are you going to take into account the time value of the money? If so, how?

You might want to get a payroll deduction authorization in advance of the rollover so you can keep the payments on schedule. You want to be sure no loans are in default or that defaults will be cured before the applicable period for cure.

How about the SEP is one of the terms of the offer of employment, is accepted by accepting the offer of employment and the consideration is providing services to the employer? The breach of contract is not getting the SEP benefit when the contract terms say the employee is entitled to the deposit in the employee's account. The employer documents the the terms of offer by the preparing and signing the SEP document. I am making no comment on the proposition about statute of frauds or outcome under a contract theory. There are loots of fun things left to consider under contract law, such as communication, mistake and the effect of ERISA provisions. However, it is helpful to look at a benefit plan as a contract.

Look at the last sentence of section 125(f). See also section 106©.

b2kates: Please explain your answer. A cafeteria plan does not pay anything to anybody except an insurance company or another plan. If a QMCSO required the employee to cover the child under the health plan, then the premium for the child coverage could be paid through the cafeteria plan. If the divorce order made the employee responsible for childcare and otherwise met the requirements to allow the childcare to qualify (e.g. the employee would have to have custody so the childcare would be necessary to allow the employee to work), then the employee could use the childcare spending account to cover qualifying childcare expenses and the contributions to the childcare spending account could come through the cafetria plan. Same for the healthcare FSA. But only qualifying expenses (health or childcare) could be covered and the payments would be from a component plan, not the cafeteria plan.

The advice is so bad that if it is in fact intended by the TPA to be advice about what to do, then the TPA should be fired. However, I suspect that someone is misunderstanding something in the communications.

So what is the qualifying event that triggers the COBRA notice? When does it occur relative to termination of coverage? When is it known, relative to the qualifying event and the termination of coverage, that coverage will be terminated?

Although you can do it, it never made sense to me to dovetail the 401(k) plan with the cafeteria plan.

A 75 percent deferral limit is a safe harbor for assuring that particpants have adequate opportunity to make catch up contributions. See the catch up regulations and the preamble.

Even if the participant has a reason that is allowed under the regulations, a change will not be allowed if the plan document does not allow the change. The cafeteria plan is not required to be a flexible as the law. Among other reasons for this, the plan that provides the benefit might not allow the change. I would refer to the plan document rather than the SPD.

What does the law firm say?

I have no quarrel with Kirk Maldonado's approach or the reasons for it, and I have set up QDRO procedures along those lines for various clients. However, if a plan takes this approach it needs detailed QDRO procedures to set the standards, and timely and thoughtful attention to those details in execution. Both of those elements are missing from most plans. I offer one more thought in support of the more active approach. The plan does not need receive an order that looks like it could be a QDRO in order to push over into the clear light of the statute. It only needs a domestic relations order. Then it can sit back and take a reasonable time to determine qualification while complying with the statutory requirements for protection, keeping in mind that an alternate payee is given a reasonable time to cure defects. It should be easy to inspire or threaten the alternate payee to come up with some sort of domestic relations order that meets the minimal standard. Belgarth: I think small employers need to hire $50,000+ per year instituitional fiduciaries to administer their plans. ;-) While there is less reason to have a separate plan administrator when the economic interests of the employer and all the owners/officers are essentially identical, it is still a good mental discipline to have a formal separation to remind the persons involved that they are dealing with separate functions that are subject to different standards and that the interests of the employer can be different than the interests of the plan. It is helpful to have people remember to take the company hat off when dealing with plan administration. It can also be helpful when jousting with the DOL.

A committee of persons who are capable of understanding and doing the job. A typical configuration is the head of HR, the CFO and another person to have an odd number.

Yes.

Receipt of an order requires attention and action with respect to distributions thereafter. The statute says that, so you don't need to resort to legislative history for support, and consistent court decisions are no surprise. Other than Schoonmaker v. Employees Savings Plan of Amoco Corp., 987 F2d 410 (7th Cir. 1993), what court decisions speak to the issue of orders "coming in"? The legislative history quoted in the article says that the administrator "may" act on an anticipated order, not that the administrator must. The Schoonmaker decision makes it risky for a plan administrator to take elective action, especially if the QDRO procedures simply parrot the statute. If a plan adminstrator wants to go out on a limb in anticipation of receipt of an order, the QDRO procedures had better have provisions that permit it and set standards. The article does not say that a plan administrator is responsible for taking extraordinary action in anticipation of receipt of an order, and cautions about Schoonmaker. I am not aware of any solid authority that says a plan administrator has to take into account foreshadowing of possible future receipt of a domestic relations order unless the plan terms or the written QDRO procedures provide otherwise, and some do. Schoonmaker is solid authority that says the plan administrator has no duty before receipt of an order, absent a formal written policy to do otherwise.