QDROphile

The loan is a contract. The plan cannot unilaterally change the terms of the contract to create a new event of default unless the terms of the contract give the plan this extraordinary power.

Thoughts: How could you agree with me on something something I did not say? If a contribution was required and not made, then a proper correction is required. Nothing can be determined about contributions or corrections from the information that has been posted.

A refinement to Tom Poje's response. Participants elect to defer. The plan document can put a limit on deferrals and that limit does not have to be the 402(g) limit. There are many ways to express deferral elections and the limits on them, including a separate election above the basic 402(g) limit. It appears that you have a plan document interpretation issue and you have a communication of election issue. The analysis of the issues depends on close reading of all the documentation involved, something that cannot be easily done in this forum. In any event, if the participant was entitled to defer $14,000 and properly elected the deferrral, the participant is not "owed" $2000 if the employer improperly reduced pay by only $12,000. The participant already has $2000 (less taxes) too much. Perhaps your question is whether or not the participant should be credited with additional amounts of contribution. Or perhaps you are asking if the participant has a claim for some amount of damages for insufficient contributions.

The paln administrator will have some tough decisions about how to handle the default. Will the plan try to collect by other means? If the plan does not intned to enforce loan obligations, are the loans prohibited transactions? It IS like a bank deciding what to do about an unsecured debt in many respects.

Put another way, the plan has to act as a commerically reasonable lender. If it just winks at defaults, it is not meeting the terms of the exeception when it makes the loan.

And you will still look to him for any advice or services of any kind after that incident? Ignorance is one thing. Irresponsibility is another. The broker was irresponsible.

Until you can come up with a plausible explanation why it is not a prohibited transaction, why look further? Among other things you have to explain away Flaherty's Arden Bowl, Inc. v Commissioner. "The owner of the rollover money will also be the owner of the business ... ." The trust will be the owner of the rollover money. I assume that you mean that the beneficiary of the trust account that holds the equity interest in the business will manage the business (e.g. be a director, officer, employee).

So you think the hurricane is evicting the homeowners?

No letter agreements. Terms are either in the order, determined by the terms of the plan or written QDRO procedures as a default, or determined by interpretation of the responsible fiduciary. If eyes get opened by the interpretation and the parties don't like the interpretation they can get an amended order. Otherwise I agree generally with the description. If the plan tracks investment earnings to assets, then the loan interest is earnings on the loan and is credited to the participant. Many systems (e.g Fidelity) do not allow alternate payees to have an interest in a loan. A QDRO can give an alternate payee an interst in a loan, but it is more complicated than it first appears if done correctly.

I think it is agressive to use 414(p)(3) to justify a rule for QDROs that is different from the "regular" rules of the plan, especially when used to trump Treas. Reg. 1.411-11©(6). For example, it is fine to use 414(p)(3) to disallow distribution to an alternate payee at a time when the amount is not distributable to the participant, subject 414(p)(4). A QDRO cannot upset the general administration of the plan. But if you believe that the plan can create a separate scheme of more restrictive administration for QDROs, you have to wonder where the limits are. I do not agree with several of the DOL's postions on QDROs, but you have to take them into account when deciding how to proceed. Q3-8 of the DOL QDRO book takes into account 414(p)(3) and still states: " ... a QDRO may ... give the the alternate payee the right that the participant would have had under the plan to elect the form of benefit payment." Could you justify a plan provision under 414(p)(3) that says alternate payees can receive only a lump sum distribution when there are other options for participants? The DOL seems to say no. Timing is different from form, but the distinctions get very fine. If a plan is going to force out alternate payees, some serious thinking had better go into the decision and great attention must be given to plan terms and review of the orders.

To the extent that the Branco decison says anything that makes sense, I think you have to take it in context and strictly limit it to the facts. The opinion is very difficult to understand and appears not to state or make use of some very important facts. When that happens, it indicates that the judge did not understand. Reading behind the opinion, the question was whether Mr. Branco would get only a partial pension payment, to the gain of the plan, or would the plan have to pay the full pension. Seen that way, the outcome was correct and predictable, but the opinion is obtuse, either in the analysis or the explication. The key to the decision is that the AP died before the AP was entitled to payment. In most DB plans that terminates the AP's interest because of the design of the plan. The opinion took an overly convoluted and probaly incorrect route to that observation. And isn't it ironic to see once again the lengths that a union plan will go to in order to avoid paying benefits to the member!

You represent a person trying to get a QDRO and who has failed because the person was previously represented by incompetent lawyers. And you would be what? Not a lawyer? A lawyer who is basing advice on some rather general questions asked of persons unknown to you?

The plan administrator is responsible for delivering an SPD, not the employer or plan sponsor. The employer or plan sponsor could also be the plan administrator but that should be given serious consideration and usually avoided. The products from insurance companies that most plans use as SPDs (even those that have the ERISA rights language) typically fall short of the SPD requirements or are not accurate in some way. The pan administrator will probably have to wrap the product with addtional explanation in order to be compliant.

Good. To be more general, anyone who prepares a form of domestic relations order needs to understand how the plan functions, including how it computes and credits earnings. For any number of reasons it may not work if you simply specify earnings and losses from a date, especially a date some years ago, or you may get a result or methodology that is not at all what you had in mind, and you may not even know it.

I agree that those circumstances make it reasonable for a plan to refuse to calculate investment earnings from dates earlier than the current system can accommodate. What are you saying?

However you may interpret and apply the language, be sure to describe in the notice of qualification how you interpreted the provision and its effect, and do it in very simple terms, using number to extent possible. You need to give the parties an opportunity to see the effects of the provisions. I seriously doubt they took into account the accrual niceties when they envisioned the results.

Perhaps pax meant that determination of qualification is a fiduciary responsibility, and most TPAs claim not to be fiduciaries, and the same with lawyers. Any plan sponsor that is a fiduciary for purposes of QDROs has an idiot for an advisor. If the TPA determines qualification, either the TPA becomes a fiduciary for exercising a fiduciary function or the "real" fiduciary has commited a breach by not properly discharging its duty to determine qualification. The fiduciary can take into account advice of professionals, but must ultimately make the determination. Also, there is more to the story if the plan decides that it cannot reasonably calculate amounts before a certain date. I am sure that the experts at the conference explianed all the details correctly.

You might look at the difference between the definition of compenation (which tends to be comprehensive) and the designation of what sources of pay will be charged with deferrals (which may be more limited). It is very unlikey that this will help because most plan documents don't make that distinction. I suspect a lot of plans have items of compensation that are not actually charged with deferrals, but not usually with the magnitude of your problem. Some items of compensation are not cash and can't be charged directly.

Sorry Wendy. You fell into the trap of thinking that what the mediocre institutions sell to the masses is what is required by law. The suspension of deferrals after hardship that you find in the 401(k) regulations is a design option for persons who want to operate mechanically instead of using their heads for better purposes. It is not a legal requirement.

From what perspective are you asking the question? If you are the plan administrator the first issue is why do have the divorce decree and what did you do about it?

What makes you think distribution is available on account of hardship and what makes you think there is a 6 month suspension on deferrals? Neither is required by law, so the features must be because of plan design, although I am suspicious about the 6 month suspension. Your answers are found in the plan terms and the minds of the persons who interpret them. You need to go there.

Go to the EBSA website and look at Field Assistance Bulletin 2003-3. On the home page there is a link to the Field Assistance Bulletins.

The IRS maintains that Employers cannot pay commission charges for trades of the plan's assets. The payment would be treated as a contribution, but the use of the funds would not follow the plan's allocation terms.

It could go either way, but I envisioned that the outcome would be that the AP would get the entire amount from vested funds rather than share in the risk of future vesting. Depends on negotiations, state law and state judge.

Please explain why an FSA not under a cafeteria plan is not a group health plan.