QDROphile

The regulations specify the exclusive methods for dealing with ADP excess.

Most of what you describe sounds like playing with fire. Start by hiring that competent independent advisor. If you don't want the to spend the money up front to get a better sense of the proposition, you don't have enough money for the investment activities that you are proposing. A bad arrangement will do worse than nullify all of your investment success.

Effen is making sense, but I will up the ante and confirm that it IS legally wrong. A plan fiduciary is obligated to keep participant personal information confidential. The TPA is an agent of the fiduciary (or perhaps is a fiduciary itself, despite its claims to the contrary). As the agent of the fiduciary, the TPA is bound by the same restrictions; it has no separate right or authority to breach confidences, especially not to further its own interests. It may be possible wiithin the scheme of administratration for the fiduciary to arrange for an eligible participant to be provided with certain information about options for disposition of distributions from the plan, but a TPA has no business acting except in strict conformance with the directions from the fiduciary. And the fiduciary had better know exactly what is going on under its authority.

Lori: I think you meant to post the following message: No Name: It is true that elective deferrals must be fully vested, but this discussion relates to the special provisions of Reg. Sec. 1.411(a)-4(b)(6). If a benefit is payable but the participant/beneficiary can't be located, the benefit may be forfeited. The forfeiture gets reinstated if the individual later makes a claim. The discussion of forfeitures and the regulation have nothing to do with the regular vesting rules. The regulation provides for forfeiture of all fully vested amounts, including elective deferrals.

No Name: Why are they any less forfeitable than vested matching or discretionary contributions?

Seems to me that the plan has an operational error. Look at Rev. Proc. 2003-44, which provides information that answers your questions directly, perhaps with the exception of the 1099 questions. Making the plan whole is part of the exercise, but not all of it.

Curious: You misunderstood my statement. You don't get to continue the roll (assuming you could do it in the first place - which is doubtful). When the restriction lapses according to the schedule in effect in 2004, the amount is taxable. Or maybe before. No problems does not mean no taxes. No problems means that the outcome is rather clear. Confusion (which drew you to the board) is a problem. Thinking that such a scheme was workable in the first place is a problem. Now you have no problems.

The Department of Labor informally says to provide the information, but the Department of Labor has not clearly thought about all of the issues. When it comes to QDROs the Department of Labor is imbalanced. I believe that the plan needs either legal compulsion (which may be more expansive than a court order -- agencies may have authority to compel disclosure) or participant consent. If the plan is going to produce under complusion, the plan should notify the particpant in advance so the participant can attempt to quash the order, which will be futile.

There are no problems. If the amount is not already taxable, it will become taxable at the time scheduled for the risk to lapse.

Go to www.tagdata.com, click on About Us and then click on Fees. You are toward the end.

As a legal matter, this is a limit applied for the year. This pont has been discussed in several other threads. I think it is a sign of incompetence, but a plan can be designed to apply the limit in some way over periods within the year, with the result that the annual maximum permitted match is not received. Then you have a disclosure issue. A stop like you describe should work to keep the match amount within the legal limit, but won't necessarily assure you the correct match, depending on how the periodic match works. The match could still be be too low. Unfortunately, a lot of systems apply a similar stop when the pay-to-date amount reaches the limit, regardless of the accumulated match amount.

You are correct that the match must be limited by use of the legal maximum rather than the higher actual compensation. Kick ass on the record keeper.

Hey Blinky, you are mentioned on the tagdata website! Go check it out!

Payment options, if any, for beneficiaries are governed by plan terms.

grafals: I think your statement misrepresents the position of the IRS. The IRS will not strain to cobble together a plan document from stray pieces or infer formal adoption from vague actions that are consistent with having a plan. I also don't think the DOL gets into the picture because section 125 plans are not ERISA plans, although the medical FSA component is subject to ERISA. You are correct that the courts have been more flexible and forgiving, especially with respect to corporate governance, as noted by mbozek. I also think "don't worry" is a bad general message. Retroactive actions are more acceptable in the retirement area because of the rules on retroactive effective dates. There are no similar rules under section 125 and people tend to get into bad habits based on retirement plan rules. Employers should respect the applicable rules. When you play defense, you play with what you have. It is an interesting dilemma when compliance with the formalities shortly follows initiation of operations. Do you hope for the best on defense, or do you call off the first month or two and put yourself on solid ground?

Those facts aren't so good.

The plan must be adopted before it can become effective, but section 125 does not say how the employer must adopt. While action by the Board is conclusive, it is a matter of corporate governance, which involves agency principles. If the officer was indeed authorized, that should suffice. But if the officer was authorized, why did the Board "formally" adopt later? What do you mean by "authorized"?

When are people going to learn to ask rumor mongers to provide the information to support their propositions? How would you like to go on a snipe hunt?

Does the combined amount of the two checks exceed loan limits? If not, are you willing to treat the two checks as disbursement of proceeds of one loan (twice as big as initially requested, but evidently a size that the particpant wants)?

This response assumes that the salary reduction refund was effective. In other words the $500 refund "worked" under the cafeteria plan rules. I am not sure if the attempt worked. There are two $500 amounts. One $500 amount was a payroll refund. That means the employee had salary reduced by $4500. The $500 "refund" is taxable pay -- salary was not reduced by the original $5000. Of the orginal $5000, the employee includes $500 in income and $4500 is not included because of section 125. The other $500 is the amount of childcare assistance that the employer provided to its employee. That $500 is not taxable to the employee if it is provided under the employer's childcare assistance program that qualifies under section 129. You can argue either way, but I would argue that the $500 was not provided under the program because the terms of the program say that the employer would provide the $4500 elected by the employee. Therefore section 129 does not protect the employee from taxation. The employer provided $500 that is deductible as compensation and the employee got $500 of childcare benefits taxable as compensation. And all of this appears to have occurred in the same taxable year of the employee.

Plan terms often follow the rules of section 72 and a bad loan is a prohibited transaction. You could end up with disqualification because of failure to administer the plan in accordance with its terms.

Unless the employer is a government, the plan is unfunded, so there are no contributions in the same sense as a qualified plan. If the employer is a government, contributions can be made to the trust after the end of the year, subject plan terms, state law and Treasury Regulation section 1.457-8(a)(2).

Why do you care?

Thank you for providing the opportunity to claify my intemperate remarks. I was thinking mostly of 457(f) arrangements that do rely on noncompete for the substantial risk of forfeiture. I don't have an opinon about your question in other contexts. It would be interesting to hear arguments about whether or not the risk is or was intended to be a substantial risk. Will people change tune?

Most plans will not change the form of benefit or the beneficiaries once payment starts, no matter what. If the only concern is the survivor annuity, it should be OK without special action such as a QDRO. But it depends on the plan terms. It is remotely possible that a subsequent spouse and a subsequent QDRO could invade the survivior annuity, but that would require a surprising and probably incorrect ruling from a state court and a surprising and probably incorrect ruling from a federal court to sustain such a travesty.