QDROphile

If you are doing this sort of deal, it is crawling with high priced experts who know the facts and should have considered various options. They would be the best resource for open ended questions. If you don't have high priced experts crawling all over the transaction, you should not be trying to evaluate the transaction or options with the assistance of this forum. Despite participation of some very good experts, it is an inadequate resource for the complex task.

So what is deferred?

Yes.

The only sure way for an altrnate payee to invoke protections is to submit a domestic relations order. It does not have to be an order that one expects to qualify, but then the AP has to stay in communication with the plan to let the plan know that the AP intneds to cure any defects within a reasonable time. A plan could afford protection earlier or without receipt of an order, but that depands on plan design, policy and procedures. Just in case you fall into a common misconception, the 18 months does not start to run upon the submission of a domestc relations order.

Let me put it bluntly. Anyone who writes a plan to provide for contributions to be stopped at the time during the year the employee has reached pay of $200,000 or anyone responsible for administering a plan that stops contributions at the time the 200,000th dollar is earned should be fired. There is just no excuse for this fallacy to be floating around any more. You SHOULD have unhappy employees if they have been victimized by this incompetence, unconsciousness, indifference, pure stupidity, or whatever else is at the source of being screwed by such faulty plan design or administration.

401 Chaos: If you have matching contributions in your plan, you should analyze very carefully how your vendor deals with the match and the testing. Under the regulations, catch up contributions are simply elective contributions until they exceed a limit, even if you call them catch up contributions from the outset. The difference between how the law treats the contributions and how your vendor names them can cause a bit of a mess unless people understand what they are doing and recharacterize the contributions as necessary.

Courts have been very forgiving in this regard. I agree with Harwood. Unless there is ambiguity about what plan is covered, don't be a stickler. But the notice of determination should state the full and correct name of the plan and that the order applies to it.

Plan records probably show a spouse of record. In order to change that, what would the fiduciaciry like to see? Keep in mind that the fiduciary owes a duty to beneficiaries and the law requires consent to name one other than the spouse. Now for the interesting part. You say the participant is not subject to a domestic relations order that afects the plan, but how do you know? If the plan receives a copy of the divorce decree, that is a domestic relations order. According to the plan's written QDRO procedures, upon receipt of a domestic relations order, the plan must notify the parties of receipt and make a determination of qualification. Your first impression may be that this is stupid because you don't expect the decree to be a QDRO, but in fact it is brilliant. When the plan notifies the participant and former spouse of the determination, the notice will assert that the former spouse has no interest under the plan. The former spouse will have a reasonable time to correct any misconception on that subject, as provided in the QDRO procedures. Meanwhile, the plan will restrict distributions, as provided in the QDRO procedures. Don't have QDRO procedures that cover those points? Get them. The law requires what I just described anyway, and you have an opportunity to establish procedures and timeframes to handle what the law requires but leaves vague (such as, what is a reasonable time?).

You have to consider if the purchase of stock of your employer is a prohibited transaction. The determination is subject to facts and circumstances. Some would advise never to to do such a thing and some would advise that it is almost never a problem, especially if you are simply a rank and file employee. No comment on the economic wisdom of buying employer securities, public or nonpublic.

You answered part of you own question. If you can't make the loan fit with plan terms, the plan cannot make the loan. Loans from a plan to participants are permissible even if the participants are not employees or they are on leave, but plans are not usually designed this way because of the administrative difficulties. Don't forget that a loan should not be made without a reasonable expectation of payment. That is a tougher call when you don't have the assurance that payments will made by automatic payroll deduction. Interest rates on loans during military service are subject to special rules.

Go to the topic on this board entitlted "Convert 401(k) to ESOP to get 404(k) Deduction." Look in reverse order to concentrate on your issue because it develops late in the comments. As they ask on TV, now how much would you pay? The best policy is to have the plan document explain exactly how it will conduct the ADP test and get a determination letter.

You don't take hints? Try searching for another thread on this topic. For such spohisticated information you either have to work for it or pay for it.

Wait until the proposed 401(k) regulations are effective so you don't have to disaggregate. Here's a hint for an elegant solution that works until the regulations remove the question. Ask yourself what an ESOP really is instead of believing what the IRS has been snowed into believing. A real real ESOP will have contributions. A real ESOP is not an investment choice. That is not the position you are taking for purposes of gettig those lovely dividend deductions, so the principled reality the may be a bit hard to see.

If the employer has any sense, the employer would refuse to do business with the scoundrel salesman and his companies, so no money would go into the individual plan (the employer has control over where it sends the money). Then the salesman might be able to start a stink among enough employees so that they start agitating for the superior products to replace or supplement what they have now. The employer may be bound by contract not to allow other companies into the realm, and other threads have discussed some of those arrangmenents, and some are based on some legitimate economic concerns. Some arrangements are wide open and allow any individual to be conned by any salesperson that they fall prey to. The employer just sends the money to the insurance company or mutual fund as instructed. Some are closed at the front end, but allow a participant to transfer from one annuity provider to another after the contributions are made to the provider who has the relationship with the employer.

Be careful. A definiton of compensation can be used for various purposes and you need to use the correct definiton depending on the purpose. A comprehensive definiton of compensation does not mean that you will allow deferrals from every source of compensation dollars. You can have plan terms that limit my total deferrals to 15% of compensation, but that does not necessarily mean that I get to defer 15 cents of each dollar that I would otherwise recieve. As usual it would be nice if plan documents had better terms that met these questions head on. Some do. Some do it by implication and you have to struggle with interpretation. Make sure you read plan terms carefully.

I don't think we disagree in this uncertain area. What I am saying is that thoughtful plan documents and appropriate discipline in observing formal arrangements can make a big difference in liability exposure in most cases. But naming the employer as plan administrator or saying that the employer runs the plan wipes out most potential for effectively allocating risk and responsibility. I prefer not to surrender to chaos at the beginning of the process.

It may be the future or just bad facts making for bad decisions, but the recent ENRON decison is out of line with the law and the DOL's position is out of line with the law and other positions that the DOL has taken (although the DOL is prone to find everyone to be a fiduciary). We have to wait and see on ENRON. Failure to dismiss does not mean it won't work out right eventually. First, the company does not have to be the person who designates the fiduciary, so it does not have to be a fiduciary at all. Second, the fiduciary who designates the fiduciary is responsible only for that limited function. The designation of the fiduciary must be reasonable (it is not reasonable to designate ENRON scum to the post). The monitoring of the activities of the designated fiduciary is only for the purpose of assuring that the origianl designation continues to be a reasonable designation. It should not make the designator responsible for any particular thing the designated fiduciary does.

I don't think anyone was commenting directly on the nephew and your observations are correct about who is a party in interest. However, given the personal connection with the nephew, the circumstances could be such that the fiduciary is getting some personal benefit because of the transaction involving the nephew, whether tangible or intangible. That would make the transaction prohibited. The circumstances could be such that the nephew transaction is OK, but it is better not to get into quations about facts and circumstances in the first place. Family members always raise questions, even when they are outside of the defintion.

Shame on them if they set themselves up to be fiduciaries under the functional definiton. That can be avoided, though possibly not by a sole proprietor.

The plan sponsor has nothing to do with day to day administration of the plan and any plan that is designed to have the plan sponsor cover that function is seriously flawed. Sorry to be off point, but this problem and misconception is so widespread that it must be confronted wherever it shows itself. The plan administrator is almost certainly a fiduciary, and as fiduciary has the obligation to operate the plan in accordance with its terms. It does not matter that the plan could have been written without spouse consent to distributions. If the plan terms require consent and the fiduciary has reasonable suspicion that the consent of the spouse hase not been obtained, the fiduciary must take reasonable actions to assure compliance with plan terms. That may require extraordinary measures, such as requiring direct contact with the spouse or use of a notary. The adminstrator should document the issues and actions so the administrator has a full record of the basis for the extraordinary requirements that are being imposed on the participant.

So what do you want us to say? The DOL wants people to understand that demutualization proceeds are not necessarily found money for the plan sponsors, and the DOL is using audit authority as a means to get the idea across. I have found that the facts and issues can be difficult and the DOL does not have any good bright line guidance or even necessarily a consistent position. But I have been impressed with the practical and flexible approach that the auditors have taken once their teeth were in. One technique is for the DOL to get all the policy holder information from the insurance company and then to audit or threaten to audit all the former policy holders. I had good time advising the DOL that one of their audit targets was a government, so they had no jurisdicton. I don't know if they cast such a broad net in the Principal demutualization.

Absolutely a problem. Any time personal investing is mixed with plan investing (essentially joint venturing) you have an issue and almost always you have a prohibited transaction. The fiduciary is using plan assets for personal benefit. If the fiduciary does not have sufficient person assets to buy the property, the fiduciary cannot look to the plan to make up the difference. And I never believe the line that the fiduciary out of goodness just decided to cut the plan in on a really great deal that the fiduciary could have had all to itself or that the fiduciary covered the part of the investment personally that the plan could not afford in full.

If the terms of both plans allow and the PS plan meets the investment standards, you may transfer. If the ESOP has a money purchase plan element, the IRS says you have to resurrect the joint and survivior annuity. If you diversify by distribution and roll the proceeds of the distribution to the PS plan you could scrape of the money purchase baggage.

While what others are charging is a relevant inquiry, don't lose sight of the requirement that the what a plan charges must be based on the expense to the plan. So the first question is what is this process costing the plan? What others charge might be an indirect check on what is reasonable, but you won't necessarily know what the expenses are behind the charges, and expenses will vary from plan to plan and order to order.

Just be sure you aren't associated with the plan in any way before you advise people how to accomplish personal goals -- that is not a plan function. Then ask yourself whether you are adequately trained and licenced to help people with their legal or financial planning. The law is rough on overly helpful volunteers.