QDROphile

It is absolutely necessary "to approach legal" if you expect to get any benefits or compensation for incompetent legal work.

You are wise not to turn money over to the TPA. You did not go into details about what you meant by "turn over," but that is potentially the type of set aside that can cause compliance problems.

The employer has the obligation to pay claims in accordance with the plan terms. How it manages particular dollars is not prescribed and prudent use of employer resources depends on the circumstances. In fact, too much set aside can cause compliance problems. I gave you that last sentence so you can continue your tirade on a new angle, if you like.

So share the joke with all of us. Looks like a perfectly good answer to me. An FSA can be funded through a trust, but usually is not.

No reversal. Yes Form 1099 on the entire distribution. The amount she pays back to restore the unvested portion is after tax. She does not escape the 10%, but that is none of the plan's business.

If you are going to charge anything to the account, are you going to allocate the charge between the participant and the alternate payee? It seems to me that if you are going to charge, you need to figure out when and how you are going to charge, have a published warning (e.g. SPD) that you are going to charge, and have the details available in writing in advance, such as in the written QDRO procedures.

Nothing has changed for federal tax puposes. The marriage is irrelevant. Federal law does not recognize the marriage. The same sex spouse might be a dependent. Code section 152 has been rewritten and that has made a few changes, but not on the fundamental questions about dependency of unrelated persons. At least the relationship won't violate local law!

I assume you have read Field Assistance Bulletin 2003-3. I think you need a good disclosure foundation for charging expeneses to accounts.

30% of zero is zero.

What is your perspective? In other words, why do you care? If you are the plan administrator, you need only determine if the order is qualified and that you can understand the terms to administer it properly. An order can be qualified if it provides for an alternate payee to have an interest in future contributions. It is unusual, and you have to be careful that it makes sense and covers everything properly. For example, when is the alternate payee supposed to get a distribution and how does that relate to contributions that may be made after the distribution? Does the plan allow multiple distributions or only a single lump sum? If multiple distributions are possible, are you able to determine if the distributions are eligible rollover distributions when you may not know if the distribution perion will be more than 10 years?

Regardless of intent or characterizations, he could have violated the contribution limits. Compare to contributing amounts at the contribution limit for the year and then using the contributions to pay for the improvements. Were the improvements more valuable than the amount of contribution could buy? If so, the effective contribution to the assets of the plan were beyond the contribution limit. Now refine the calculation. In addition to the improvements, the plan used its actual contributions for the year for something else, so you don't really compare the theoretical contribution limt. You compare the theoretical limit minus the actual contribution. At least you don't also have an allocation problem in a one particpant plan. Intent and knowledge of the rules don't really mean much when the rules are not followed. Start educating this person wfor the proposition that the plan assets are not his. If he does not get that point, then start preparing him for lots of remedial expenses and penalties over time.

Could be a disguised contribution.

Generally I agree with the outcome you describe, except I have nothing to say about what the individual can do to get relief from the income reported on Form 1099. Taxation of the particpant is not the plan's concern. Proper reporting of distributions is the plan's concern. Compliance with the bankruptcy order is the plan's concern. I still go back to the term "default." Because the debt obligation is reformed, as long as the particpant makes payments on the loan under the reformed schedule, the loan is not in default. Once the payments fail to comply with section 72(p), for example because they fail to pay the loan completely within five years, there is a distribution for tax purposes. The particpant can go on paying the loan and the plan cannot accelerate the obligation. Watch out for basis in the plan because of the later payments. I am surprised that the particpant has not already had a deemed distribution. Usually loan payments are stayed upon filing of the bankruptcy and the loan fails to comply with the quarterly payment requirements before the debt is reorganized.

The changes to the debt payment obligation that can be required under the bankruptcy code can cause the loan to be treated as a deemed or offset distribution for tax purposes. You will not find any authority that says that the bankruptcy reorganization is restrained by 72(p) and you will not find any authority that gives relief from 72(p) because of a bankruptcy reorganization. Both statutory schemes can operate. The tax consequence to the borrower is unfortunate, but that does not mean one scheme has to yield to another. The unfortunate consequence to the borrower is an argument to have the loan treated differently in bankruptcy, but the bankruptcy courts are almost never swayed.

72(p) is absolute. Bankruptcy may be able do whatever it wants with the economic obligation of the borrower to the lender, but tax consequences can't be changed. Perhaps the word "default" is causing confusion.

Failure to follow plan terms will disqualify the plan.

Other employers might consider the tax consequences of providing benefits to persons who may not be dependents of the employee and the related administrative issues. Part of that consideration would be a close look at section 152©(3)(A) and the requirement that child is not a qualifying child in the YEAR the child attains age 19 unless a student and a student is not a qualifying child in the YEAR that the student attains age 24. The child might continue to be a dependent by meeting the requirements of a qualifying relative.

Nothing has changed that would make what you describe less questionable. The employer is taking a risk with this practice but there is an argument that it is permissible.

The heading to section 105(h) of the Internal Revenue Code includes the term "Self-Insured Medical Expense Reimbursement Plan" and that term is defined in the text of section 105(h). The heading also includes the term "Discriminatory" but I think reference to a 105(h) plan generally does not presume that the plan is discriminatory, but instead that is is self insured and subject to 105(h).

I think I agree with you, but you did not identifya high deductible plan. I assume there is a high deductible plan, the 105(h) plan is in addition and the 105(h) plan will cover medical expenses of the high deductible plan participant that the high deductible plan will not because the deductible has not been reached. If that is what you are describing, it kills HSA eligibility by providing disqualifying coverage.

Either get legal advice on how to interpret or don't accept the designation. It can be written in English.

While the IRS allows that there is some room for year end straddling to accomodate payroll practices, generally income is income in the year in which it is paid. Deferrals attributed to income otherwise payable in 2005 will be treated as contributions for the 2005 plan year, assuming that the plan year is a calendar year. It does not matter if the bonus is "for" 2004 work. I suspect that straddling would not be well received it if related only to a bonus, but we have no bright line guidance. 30 days is over the line. I would get nervous at two weeks.

A summary plan description describes what the plan does. How can someone give you some language for the document if they don't know what the plan does? The article that you describe covers some ideas. Some of the ideas might be implemented after considerable thought and advice. I cannot imagine that the plan will have all of the options mentioned in the article. Once the plan fiduciary decides what the plan will do, a description is prepared, and will cover other matters, such as identity of the advisers, how fees are covered and how to make elections.

GBurns: Your answer only makes sense if you are talking about someone other than the plan fiduciary obtaining information from the provider and that should be proscribed by the contract with the provider, if not the provider's own policies. The plan fiduciary has responsibility for, and needs acess to, every piece of data collected by a services/record keeping provider, and no law restricts the fiduciary except ERISA. ERISA governs what the fiduciary can do with the data, which is to use it for plan administration. It is the plan fiduciary that hires the providers and this question looks to me like someone considering hiring Principal.

Start with Treas. Reg. section 1.409(a)(9)-8 Q&A-6.