QDROphile

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.

My preference is for a default that gives each the same vesting percentage determined as of the date the AP's interest is defined. Wouldn't that provide the same result as determination as of the date of actual segregation? The order can provide that the AP's award is 100% vested, assuming enough vested dollars to cover. I hedge on whether the order can provide for disproportionate vesting. I can imagine allowing it under some conditions and circumstances and not others, depending on distribution provisions, among other things. The awards are seldom so exotic, so one can probably duck the issue and resort to section 414(p)(3)(A) in a pinch.. The procedures should deal with distributions, when they are allowed if the account is partially vested, and what happens to the unvested amount. The procedures have to fit with plan terms. For example, if the plan allows lump sum distributions only, I would not allow the AP to take a distribution of the vested portion and then get another distribution later when the remainder becomes vested. I agree that the procedures should not dictate vesting, but reasonable default terms can save time and trouble when dealing with thoughtless persons. The default and other terms have to fit the plan and the administrative goals and philosophies of the plan. It is difficult to state definitive "best practices" because the plan designs and administrative goals and philosophies vary.

I don't think you can do that, but those waters are untested. You are probably also doing a disservice to the employee.

You need either a better order or good written QDRO procedures to deal with it. Get yourself some good written QDRO procedures and some good advice to go along with it.

The nature of your question indicates that you need to understand 457(f) basics. The employer promises to pay an amount. The amount is determined by the terms of the plan. How the employer comes up with the payment is up to the employer. If the employer decides to hedge its promise or create a sinking fund for its promise, the employer may be limited by constraints on investments that apply to the employer. The ability of the employer to hedge may affect how the employer designs the plan to the extent the terms include an earnings component for the amount payable. The IRS has nothing to do with it, except indirectly. For example, a very large earnings rate could be a problem under 501©(3) rules if the employer is a 501©(3) organization.

Tell us more about the plan that has the loans. It will "terminated by way of the merger." What is merging? If plan A merges into plan B, loans in plan A are preserved in plan B.

I think there are few arrangements that would cause me to use a true separate interest approach under DB plans. That does not solve the problem of the wowser effect of actuarial reduction for a young AP. For that, one should listen one's parents, believe in the "equivalent" part of actuarial equivalent, or hire a better lawyer.

All of the above. The required distribution date is still based on the particpant. See Treas. Reg. 1.401(a)(9)-8. If the AP has to start when the participant starts, it is easier to assure compliance without unusual records and procedures.

Had the person not been rehired, the distribution would not have occurred until June. The person would have been entitled to a distrbution in June. Evidently the person did not take a distribution of other amounts before rehire. As of June the person was not entitled to a distribution. The person could not get a distribution of other assets in June. I don't see how one could get to an offset distribution in June or later or argue that a distribution occurred earlier than June. As always, plan terms should be considered, but you appear to have covered the terms and the established interpretations.

Perhaps it should be taken for granted, but nothing in the post says that the plan is terminating in connection with the transaction or that the plan will be amended to deal with the current express requirements under plan terms with respect to employer securities. If the plan is not terminating or being amended appropriately, you can't simply stop at exchanging the stock for cash. Acquisition of the company does not effectively kill the ESOP or allow the ESOP requirements to be disregarded.