QDROphile

The direct rollover is still a rollover and not a transfer. Even though the direct rollover looks like a transfer and may in fact not involve having the participant "touch" the assets, it must still follow a distribution. The direct rollover rules are merely an artifice related to withholding. If a loan is distributed, the participant recieves or controls the loan. The direct rollover is not a transaction between the sending plan and the receiving plan, unlike when your mortgage lender sells the loan to another mortgage lender. When a debtor receives the debtor's loan or effectively controls it, the loan is extinguished. The rules on plan loans as applied to particpant loans from their own accounts are an interesting combination of fabrication with lip service to principle. If there is anything left of principle to loans or rollovers, the loan cannot be rolled over directly or indirectly. The IRS has adopted a practical position based on fabrication and ignored principle. It is not the first time.

Agreed. The distribution or rollover provisions have to allow the distribution or rollover of the loan, either expressly or within some specified asset class other than cash. Also, the plan terms cannot preclude a rollover of the loan.

Sorry, I missed the asset aquisition fact. The Company B plan can accept direct rollover of loans from another qualified plan if the plan document provides for it. At least that is what the IRS says. The IRS is wrong, but no one cares. The Company A plan should provide for in-kind distributions, and many plans provide only for cash distributions.

Why can Company A plan participants roll over to Company B plan?

AndyH: The regulations prescribe the options and the number of hours per period. Neither 2080 hours per year nor a prorated portion of 2080 per period is on the list. In fact, all of the precribed numbers are greater than you would use if you used 2080 per year, so the standard mistaken convention understates the hours. That makes the standard mistake dangerous. I agree with Boilerburm that it will rarely make a difference to a participant. But if the plan is asked to demonstrate compliance because of an audit, a claim, or in due diligence for a merger or acquisition, it becomes a challenge.

As a general matter, your approach looks reasonable, but different circumstances may require different reactions. If it fits, section 414(p)(7) says you can pay the participant amounts that would not be paid to the alternate payee if the order were qualfied.

Thank you for using "cite" and "site" properly.

The ERISA regulations specify response times under claims procedures. Section 2560.503-1.

There have been several cases in the last few years. I don't remember details, but none of them give a complete picture. One at hand is Smith v Smith and Dupont, (D. NJ 2003) Civil Action No. 99-5973. I got my copy form the Rutgers law library: http://lawlibrary.rutgers.edu/fed/html/ca99-5973-1.html . Also look at Hogan v Raytheon (ND Iowa 2001) No. C00-0026. That decision may have been appealed. I got my copy from the court's website: www.iand.uscourts.gov. Neither of those cases have a subsequent spouse.

1. If the property settlement document is a domestic relations order, the plan had an obligation to acknowledge receipt and determine qualification within a reasonable time. If it did not, the plan is probably on the hook for the consequences of failure of timely response (disappearance of the would-be alternate poayee) and probably has the duty to find the AP. Because of this complication, the time frame for dealing with the situation is not as simple as literal compliance with the 18 month rule (and be careful, there is a lot of confusion about how that rule works). The AP must be given a reasonable time to cure qualification defects. Because of the passage of time, "reasonable" may be quite a while. If the property settlement agreement is not a domestic relations order, the outcome depends on the plan's procedures for dealing with notice of potential interest of a former spouse. It would be nice if the written QDRO procedures said that receipt of anything but a domestic relations order has no effect. The plan would still be at odds with the DOL, but the DOL is at odds with the law. However, I assume that plan had inadequate procedures for the situation, so you are left with uncertainty about the effect of receipt of the property settlement. In either event, the plan ought to engage competent legal counsel for this one if it does not want to pay both the participant and former spouse. 2. If the plan timely followed it notice and determination obligations, the plan does not have to worry about AWOL alternate payees. If the qualification defect is not cured within a reasonable period, the order is disqualified and the alternate payee has no interest. If the alternate payee gets religion after the distribution, the common law rule of "tough" applies. The AP will have to be consoled with a malpractice action aginst the lawyer. However, if the plan did not have exemplary response behavior, see number 1. Get competent legal counsel anyway.

Let's put it in more dramatic terms. It is either stupid or arrogant to design or administer a plan to have the participant choose the form of death benefit except in connection with the benefit that is payble to the participant. I suspect the administrator is misinterpreting the plan.

No, you need to either find a way to count actual hours or you need to amend the plan document to provide for counting hours of the salaried employees by one of the allowable equivalency methods. See ERISA reg. section 2530-200b-3(a) and ©. Note that the standard payroll practice of crediting 2080 hours per year (pro-rated) is not acceptable. Most employers with prototype documents and salried employess violate the hours counting rules.

Nothwithstanding popular (and DOL) misconceptions, the statute and its counterpart in section 414(p) of the Internal Revenue Code is very narrow and is an exception to the broader rule that alternate payees are entitled to receive any form of benefit that a participant can receive (see the last sentence in Q&A 3-8 of the DOL QDRO book) unless you think section 206(d)(3)(J) trumps other provisions. The DOL seems to have forgotten about (J) when it wrote Q&A 3-8. Read (E) carefully in its entirety. First, it is a provision that says only that a DRO shall not be treated as failing to qualify if it requires the plan to pay benefits at earliest retirement age (as defined) even if the participant is not entitled to a distribution yet. It is an exception to the general rule that a plan can't make a plan pay a benefit that it is otherwise not designed to pay. Now, realizing that we are in an exceptional situation, we find that if the order takes advantage of the exception (early retirment age payment), it must limit itself to forms of benefit available under the plan other than a j&s with the subsequent spouse of the AP as the "s." It does not say that the plan can't ALLOW the AP to have a j&s with a subsequent spouse or anyone else (the plan simply can't disqualify if the conditions are met -- including no j&s for AP and subsequent spouse). It also does NOT say that, in other situations outside the exception, the DRO cannot provide for the AP to have a j&s form of benefit with a subsequent spouse or anyone else. Note that under the old 401(a)(9) rules, the AP could not have a j&s with anyone else (except the participant), so 401(a)(9) effectively created a rule that eveyone mistakenly attributed to ERISA and section 414(p) of the Code. I don't know what the 401(a)(9) rules provide now. If you do, please explain for us all. To respeond to your specific question, I don't think the words are limited to a QJSA, but the whole idea appears in an exceptional context that gives the DRO an unusual statutory right to violate plan distribution terms. It is also a statutory requirement that certain plans offer QJSA distributions, so the two may be related in concept. If so, the drafters did a bad job of getting the point across and I think you can read the statute in plan English/Actuary to conclude that it does not mean only QJSAs.

Ask the person that sold the ESOP to the company. As you say, it must be a common issue and therefore a responsible purveyor would have resolved the issue with the company before the company committed to the ESOP. I am sure that the tax deduction for the stock contribution was a selling point.

I missed the part of your question in the heading about payment ending to an alternate payee if the alternate payee remarries. That is a legitimate concern. The plan should have no responsibility to investigate or determine any facts or marital status concerning the alternate payee. I would disqualify the provision unless it is worded to be purely mechanical, e.g. the alternate payee loses her interest if the participant submits a copy of a marriage license that names the alternate payee and is dated after the date of the QDRO.

Sorry, I don't understand the problem. The order is merely stating that the alternate payee is not to be treated as the surviving spouse under provisions of law or the plan that give a surviving spouse some interest or benefit. The result would be the same if the order did not include that statement, unless the AP remains the spouse of the participant. The person who drafted the order put it in because it is possible to give a former spouse AP some of the rights or interest of a suviving spouse and the statement negates any implication. Are you concerned that they might remarry? What is it that troubles you?

Gee, Blinky, I was trying to be discreet and civilized for a change. But you are right.

Get a decent plan document. That will take care of the problem.

It is so terribly bothersome, expensive and messy to to comply with the law. Who even wants to hear about it?

I don't know the answer to your question. But more important, I don't know what difference it makes. A distribution from a traditional IRA is taxed at ordinary rates, so it does not matter what the basis is of the asset that is liquidated for distribution or distributed in kind. If the IRA has after tax amounts, the tax basis of a distribution is not determined by the cost of the assets that are liquidated for distribution or distributed in kind.

So you think it is better to dump investment responsibility on persons who are not capable of good investment decisions? The result is that the retirement benefits will be smaller than if the investments were managed properly. A company that has a retirment plan probably would like to see larger rather than smaller retirement benefits for its employees. Better that the plan take away participant direction altogether and have the fiduciaries be responsible for investing all the assets.

What does "cost value" mean and what effect does it have? If what you are talking about is basis (after tax amounts) in the qualified plan or the IRA, then I disagree with your premise that the market value of distributed securities has that direct connection with basis. Under certain circumstances there may be an indirect connection.

Everything about ESOPs is strange and artificial.

It can be done. The "increased benefits" relates to what the plan is willing to provide as a benefit. It has nothing to do with what part of it the AP gets.

Section 408(d)(6) of the Internal Revenue Code applies, not section 414(p) (QDROs). The divorce decree may be the document that is used to effect the assignment or it may be another. Same for QDROs.