QDROphile

I assume that the payment arrangement is provided for under the plan and the borrower has been complying with it correctly. In other words, the only mistake is that the funds were not delivered to the trust.

Are you asking about a provision that allows the participants to elect a distribution or a provision that requires the amounts to be distributed?

All the more reason that the borrower is not in default.

I did not check, but think the Department of Labor recently asserted that loan payments are plan assets in the same way that elective deferrals are plan assets. That is good news for the participant because the loan is not in default, or at least you did not say the amounts held by the employer were insufficient to cover paymentsas they becuame due. I don't think that the failure of the trust to receive the assets would, by itself be a default. Some agency or trust theory could be used to conclude that the loan has been covered That is bad news for the employer, who has to deal with a prohibited transaction and possibly an operational error. But the employer was at fault, so the employer should expect some unpleasant consequences.

Until we have some authority that protects plan fiduciaries who disclose, I am willing to flout the DOL infomal position. If the DOL has the courage of its convictions, it can issue a regulation rather than legislate by pamphlet. The DOL has a few queer and unconsiderd notions about QDROs, probably born out of a skewed sample space. I think the DOL mostly sees alternate payees (via complaint and request for assistance) and sees them in the context of plans that are misbehaving. That creates a bias and some blind spots. State law provides ample opportunity for an alternate payee to compel the participant to consent to the disclosure or to otherwise compel the plan to disclose. All it takes is a simple subpoena and the plan administrator is off the hook.

I was only thinking about the usual mistaken, but welcome, advice that everyone gets to set up their own SEPs and contribute as much as they want for themselves without regard for others. If there will be a legitimate plan, all the participating entities need to adopt it. Because of the SEP coverage rules, probably all of the entities with employees will need to adopt it, the sooner the better. Use of one adoption document is convenient and efficient.

The suggestion of separate SEPs for incorporated members of a partnership or LLC is almost always misguided. The affiliated service group rules usually make all of the separate legal entities into a single employer.

When are people going to get that the 401(a)(17) limit is a dollar limit and not a timing rule? We have been through this so many times on this Board that I am amazed to see intelligent and informed persons still trifling with the notion.

I don't understand your question. The regulation you cite is the SPD requirment concerning the claims procedures, whether for pension plans or welfare plans. Guidance for the substance of claims procedures is at ERISA reg section 2560.503-1. There is some uncertainty about whether the SPD regulations require the full articulation of the claims procedures be set forth in the SPD or in a document delivered with the SPD, or simply summarized (compare QDRO procedures, and see 2560.503-1(b)(2)). The safer course is be forthcoming with the entire written procedues in or with the SPD. The regulations do not actually say the all of the claims procedure must be in writing (again, compare QDRO procedures).

I think you best addressed the more imporatant big picture question. What is it about those accounts that motivates efforts to get rid of them? And what about the effects on morale?

I think you are concerned about an issue that is a false issue relating to the timing of compensation rather than the amount of compensation. However, you may be asking a more sophisticated question and not giving enough facts about plan design with respect to limits on deferrals. Read other messages on this subject on these Message Boards and if they don't address your concerns, ask your question again with the relevant plan information. You will know what is relevant once you understand the basics of the false issue from the other messages.

asire2002: How do you read Treas. Reg. section 1.411(a)-(11)(e) to allow what you propose?

If you keep the 401(k) plan, you can't force participants to take the account funds until retirement age. See Treas Reg section 1.411(a)-11(e).

Make sure you understand the rules for imputed cafeteria plans and how they affect terms in the employer's retirment plan.

Thanks for the observation. But what does that mean? At the extreme, that would make the employer responsible for keeping essentially all of the plan records because almost any fact could have a bearing on a participant's benefits. Among the data would be investment returns, testing and actuarial calculations. A few things could be excluded, such as records of proxy voting. And what about beneficiary designations? A beneficiary designation does not determine benefits to an "employee." Or does it mean that the employer has to keep only employment related information such as dates of hire and termination, data from which hours of service can be calculated, pay and pay deduction elections?

The plan has to do what is reasonable. What is reasonable depends on the circumstances. You might also consider how the new DOL position on charging for QDRO work might fit into the scheme. By the way, the "employer" does not do anything with plan records or data. The plan administrator or some other fiduciary has that function.

Does the plan fiduciary wish to rely on ERISA section 404© with respect to investment of the account?

No change in beneficiary without spouse consent. Until the effective date of the divorce, she has a spouse. After effective date, no spouse so change has no contraints except other plan terms. It would be an unusual QDRO that would have anything to do with this point. A QDRO could more or less override the effect of a beneficiary change.

You must first determine that the excess is eligible, which is not automatic even though most people seem to act that way. See Treas. Reg section 1.415-6(b)(6). Your plan document probably has similar terms about conditions for the excess to be eligible for the remedial options.

What limit is exceeded by the amount over $7000 and under $10,001? None that I can see if the 25% limit is in effect. I am of the school that respects administrative limits if properly provided for in the plan document and properly effected administratively. The IRS has hedged. In the last round of determination letters, some reviewers took issue with these provisons, most did not. The IRS had to take the position that adminstrative limits are OK because it approved the methodology set forth in the plans that had them (look at the waffle language in the preamble to the catch up regulations). It may be reconsidering its position about the methodology, but the plan is good for now if it has a determination letter. You know and I know that the plan provision was designed to help the plan administrator with compliance with the ADP test and avoidance of distributions of excesses. The catch up rules take quite a bit of pressure off the ADP test. So what if you set the HCE percentage to 17.5%? The entire $10,000 is OK because $7000 is the "regular" deferral and $3000 is the catch up for 2004. I suspect what you are after is a higher ADP limit because of other HCEs. You want only $7000 in the ADP test for the low paid HCE in order to keep the average down and create more room for dollars of the higher paid HCEs. Your low paid HCE doesn't care because she really wants only $10,000. I think the ploy works because I think the administrative limit is just as good as an amount stated in the plan document. But it gets a bit uncomfortable explaining how the limit is set at 17.5%, especially when that number doesn't make so much sense compared to the way we used to set the number for the ADP test, which was the basis for the plan provision with the administrative authority to set the limit. It probably helps a bit if the limit is established as early in the year as possible, or better yet, before the year starts.

The attorney is taking an agressive position about the timing of reimbursements. I would not support that approach, but I cannot say is it is prohibited. I cannot say it is OK either. To have a chance, the plan document and SPD must very clear that the participants are going to be strung out on the timing of reimbusements. It is not very good policy from a participant morale standpoint even if it is legal.

Legal separation is a formal status in most jurisdictions and that status is documented by court order. "Going through divorce" is not legal separation, and is not a basis for avoiding spouse consent, if otherwise required. In fact, it is all the more reason to require spouse consent.

I subscribe to Mike Preston's answer. I tend to like intrepid fiduciaries. The fiduciary should start the process through the claims procedure. If the facts turn out to be easy (e.g. the second "wife" is not forthcoming), then the decision is easy. The fiduciary will have the opportunity to gage what additional assistance and procedures are necessary as the facts are developed. I don't think that the fiduciary has to make an immediate determination of legality of any marriage. If it comes to that because of disputed facts or documents, I doubt that the fiduciary should make the determination at all. The matter will end up in court. I agree that somewhere in between the fiduciary may need legal counsel. The second issue, possible mispayment, can only be decided after the first. I like to jump to conclusions, so my first thought is that the fiduciary will need advice about collectibility if the fiduciary were to try to recover payments that were induced by fraud. The fiduciary has to be prudent. Prudence dictates that good money not be thrown after bad.

Is the plan fiduciary an ignorant wimp, an intrepid soul or something in between?

Ask the expert what would happen to the installment payments if the employee terminated during the year.