QDROphile

Does one type of mistake make you suspect another? Are you responsible for compliance, or is someone else responsible?

Look at Rev. Rul. 2002-27. I think there is some other IRS guidnace that is related.

Perhaps there is no formula or other instruction for determining the amount of the contribution but there is a formula for allocation of the amount once it is determined. How the amount of discretionary contribution is arrived at is a matter of plan terms, and if the plan is silent, then a matter of corporate governance.

UBTI

Sorry be so picky, but I can't venture a specific answer because there is not enough information. We don't know what the plan terms are. I did not even understand the original post to mean the 401(a)(17) limit was the "comp limit" so I did not understand the perceived problem. 401(a) (17) is an amount limit, not a timing limit. The plan design can be so stupid or ignorant that it makes the compensation limit effectively lower than the 401(a)(17) amount. In general, you look at the formula. If the formula refers to a percentage of compnesation, the percentage cannot be applied to a number larger than the 401(a) (17) amount for the year. In general, you can annualize for purposes of the limit even if the period for the match is less than an year and there is no true up for the year. You do not need to shut down when pay reaches the 401(a)(17) amount during the year, even though some inferior systems are designed that way. If the match is 33% of deferrals, disregarding a deferral amount in excess of 6% of compesation, then the maximum match for purposes of the 401(a)(17) limit is is 33% of 6% of $205,000 (2004) = $4059. The plan design and the timing of elective deferrals may cause the participant to fail to get the full match, but 401(a)(17) is not the limiting factor.

jquazza: You misinterpret how the 401(a)(17) limits are applied.

I think amounts become taxable in 2006 when the restriction lapses for purposes of 409A. I think Notice 2005-1 was intended to make it very clear that rolling risk of forfeiture is not permitted. The IRS has never bought into it as currently used (or abused) and took its opportunity in Notice 2005-1 to put and end to the arrangement. I think you misunderstand the IRS position on vesting. Look at the example in the Notice. The vesting is irrelevant because the established deferral period exceeded the vesting period. A change in the vesting did not affect the deferral. It may have changed whether or not the employee actuall got any compensation, but not when or in what form the compensation, if any, would be paid. The deferral was compliant with 409A. It does not work that way under 457(f) because there is no separate deferral under 457(f). 457(f) works on risk of forfeiture alone. 409A says you can't extend the period for risk of forfeiture, with an express exception. I heard the IRS comments about vesting and a lot of people came away confused, perhaps including me. I don't think they were saying anything different from what is in the Notice.

Which means the amount will become taxable at the time the risk lapses for 409A purposes. To me, that means that the arrangement is not compliant if you try to give effect to it the same as you would under the terms of the 457(f) arrangement, if you believe that rolling risk works under 457(f) in the first place.

A rolling risk of forfeiture, as it is known under 457(f) arrangements, is not compliant with 409A. See Notice 2005-1 Q&A 10: "*** any extension of a period during which compensation is subject to a substantial risk of foreiture is disregarded ***."

Yes. Discrimination rules apply if the benefits are not provided under group health insurance policies or are provided through a section 125 plan. Depending on circumstances, you could have issues with your health insurance provider.

The only one who is making sense is Kevin Wiggins. The issue depends on the facts and no one has bothered to discuss anything concrete.

Where does that come from?

See the first sentence in my first response. Your other concerns relate to the question about whether or not the contributions are mistaken. That is why one of my example questions was whether or not the commissions were compensation even if the customer cancelled. If the commissions were compensation, then the contributions relating to the compensation were not mistaken. Also, "forfeiture" is not the best term to decribe corrections generally, although some corrections may involve forfeiture.

A plan can always correct mistaken contributions and allocations. The optimal and acceptable corrections vary with the circumstances. Most of the circumstances you describe involve issues in addition to mistakes in the contribution and allocation amount. If you really have these circumstances to deal with, you need legal counsel. For example, in the first situation, is the commission earned? If the commission amount is not earned because somehow the commission is retrieved if the customer cancels in 30 days, why is it paid before 30 days? How is it retrieved? Is it offset against future commissions as though it were an advance? What is the commision agreement? Are there any state law mandates that affect treatment as compensation?

Someone is overestimating the difficulty of amending the plan and transferring assets to new arrangements and underestimating the negatives of plan terminations. Yes, it can be done, but be careful what you ask for.

So why should someone offer an explanation to you on this board when you could could ask the partner for an explanation and you don't provide enough information about the situation for anything but a speculative response? I have no trouble imagining how the partner is correct in any number of likely circumstances. With respect to your question about the 18 month rule, think about it from the perspective of the plan administrator.

Ideally, one would want to consider what the QDRO says the alternate payee should get in light of the need to distribute assets, then decide what to do. But it may not matter if the alternate payee will not cooperate and the plan decides it is not worth going after the distributed money. One possible approach is to distribute $1000 from the participant account and advise the alternate payee that the remainder is attributed to the alternate payee's distribution, and not eligible for rollover. I would go with the idea that the participant is the recipient of all of the taxable dollars but transferred $4000 of them to former spouse pursuant to the divorce.

The tax regulations are very clear that a plan cannot require payment for any period of coverage earlier than 45 days after the election to continue, so no payment deadline could expire before. The regulations say that once the election is made, you are on a 45 day clock. However, if the 45 day payment period or any 30 day payment period expires within the 60 day election period, I am not aware of any authority that adresses an argument that as long as the election period is open, the employee could elect coverage even though an earlier election was made and then either expressly or implicitly withdrawn withdrawn or coverage based on that election was discontiuned. There is a conflict between right for a full 60 days to elect coverage and the right to terminate coverage if the premium is not paid within 45 days. You could send the notice of loss of coverage and then see what happens. But if the former employee tenders appropriate payment before the 60 day election period is over, do you want to be the test case? The employee could have waited 59 days to elect and then paid the first premium 45 days after that. Does that ability evaporate when the employee steps up sooner with an election? Maybe. How important is it to you to cut off coverage? I have not tried to understand on what date the 60 day election period began. I have no comment on specific dates.

Don't screw with COBRA, it is simply not worth the risk. Interpret most favorably to the former employee, which means that earlier payments do not shorten any deadlines or create any new deadines that can cause eligibility or coverage to end sooner, compared to what the law allows in situations where there has been no election or payment.

Start with publication 4406, available on line at the IRS website, and then use the resources mentioned in the publication. Unfortunately, the publication itself does not explain that an individual's deferrals under 403(b) and 401(k) plans are aggregated for purposes of the deferral limit, but that deferrals under 457(b) plans are not aggregated with deferrals under 401(k) or 403(b) plans. That is what is meant by "no longer coordinated."

Fire everyone in your office who persists in arguing a position that they cannot support with credible authority. Mistakes to some degree are tolerable, but standing on ignorance is not, despite its pervasiveness in our country. By the way, the "reasonable time" is at least 30 days.

That does not mean there is no fiduciary status/duty. It only means the assets do not have to be held in a trust.

Disregard the reference and use the plan's usual actuarial factors.

The "local attorney" is too clever by half. The likely treatment is that the "reimbursement" of the premium is compensation to the recipient.

My sugggestion was to spend money on an independent advisor, not money to get wet in the arrangement.