QDROphile

It depends on what you are trying to accomplish. 403(b) plans are ususally favored because of simplicity (which also affects cost), but you may want some more complex features and you may want more flexibility with investments -- but probably not when you balance it all out.

q8r: Could you explain more about the additional 91 days?

How about a brand new point? We don't care if someone thinks loans are taxed twice. Loans are not usually a very good idea anyway, and if mistaken notions of taxation discourage loans, so be it. Plan loans can have a cost that is diffcult to understand and predict. So whay bother engaging anyone on the subject?

pax: I agree that no domestic relations order may require a plan to reform a J&S annuity that has been put in place. The statute says that an order will not be qualified if it would require the plan to provide a benefit that the plan is not otherwise designed to provide. Once an annuity is elected or provided because of plan terms it is irrevocable, or least I have never seen a revocable one. Also, a plan can't be made to pay more than if the order did not exist. But look at the exceptions for QDROs that pepper the regulation, and then consider that the redirection of payments that the plan would make anyway under the terms of the orignal annuity does not increase the cost to the plan and would not change the form of benefit. I don't think the plan can effectively say that an order can make no changes. To get back to the original question, most of the discussion about Hopkins/AT&T is academic under the circumstances described. I can't imagine that a state court would award any of the former spouse's survivor interest to a post-retirement new spouse in a contested matter. But the parties might want to use the retirement assets in an agreed settlement of property rights. mbozek: The words of the statute are not about benefits payable to an employee. They are about "benefits payable with respect to a participant." All benefits payable under a plan are "with respect to" the participant, including benefits payable to a beneficiary. A beneficiary is entitled to nothing unless the beneficiary has some relationship with the participant. The beneficiary's rights are completely derived through the rights accrued by the participant. The Hopkins/ATT court made up the concept of post-retirement "vesting" in the surviving spouse. I don't find any such "vesting" of a spouse or any other beneficiary in any applicable statute. Vesting applies to how much of the participant's nominal accrued benefit is payable to a participant (or beneficiary "in respect of the participant"). If you rely on the J&S rules as the required form of benefit for married participants, how do you reconcile the statutory provision that says that an alternate payee can be treated as the surviving spouse? Seems to me that if there is a J&S annuity and the QDRO treats the former spouse as the surviving spouse, the alternate payee can get paid under the "survivor spouse" benefit, because "S" in J&S is the surviving spouse benefit.

I guess we have different sample spaces. Maybe I attract problem plans.

There is a difference between (a) rerforming an annuity to pay different persons or in a different form and (b) spitting payments from the original annuity scheme. For example, I am against recalculating the annuity to change a 50% J&S to a 100% J&S or changing the identity of the contingent annuitant (which would cause all payments to change becuase of different ages). But suppose the participant remarries and retires with a 50% J&S with the second spouse. With the appropriate QDRO Procedures, I would accept an order that gave Spouse #1 50% of the actual prospective payments to the participant (splitting the check) during the participant's life and the 100% (or choose some other %) of the survivor payments to spouse #1 during the life of spouse #2, subject to cancellation of the payments to spouse #1 and returning to the original scheme upon death of spouse #1. The split the check approach is different from reforming the annuity to substitute spounse #1 in the J&S annuity and recalculating the payments to fit the different actuarial factors. To go back to what pax wrote, I agree that the plan should not allow the QDRO to cancel the annuity, but I would allow scheduled payments to be redirected in some fashion. The split the check approach is a function of plan design and QDRO Procedures, not what the law requires, but the plan does have to accomodate post retirement QDROs in some way. The plan could be designed to allow reformation of annuity payments to fit some new scheme described in the QDRO, but I think split the check is the best compromise in a situation that does not have a perfect solution. The Hopkins/AT&T decision would prevent both reformation of the annuity and redirecting any of the spouse #2 survivor annuity payments to spouse #1, which I believe is incorrect.

You cannot treat pre-1987 after tax amounts under the pre-1987 "separate contract" rules unless the plan document correctly provides for the special treatment. Very few plans were written correctly to get this result.

The answer depends on if you are based in a Circuit that has judges who can read and interpret the law correctly. The AT&T/Hopkins decision said that a QDRO in a post retirement divorce could not invade the the annuity rights of the former spouse that "vested" at the time the annuity option was selected at retirement. The decision is wrong and has been roundly and justly criticized, has been rejected in some other Circuits, but has been adopted in at least one other Circuit. You don't say why you are concerned with the prospect. If you are looking out for the plan, your concern at this point should not be what is going to happen with respect to this participant. It is premature to speculate what will happen, and state law has its say first. The outcome will depend on circumstances that have yet to be determined, so you won't get a simple answer. You should be concerned with what the plan's written QDRO procedures say about dividing post retirement benefits in general. From that base you would then look at the issue of what happens if an order attempts to change the post retireent annuity interest of the designated contingent annuitant. The procedures can limit what the order can require to an assignment to an alternate payee of some or all of the actual payments that would otherwise be paid to the contingent annuitant (former spouse). I don't think it is a good idea to allow the annuity to be reformed because of the possibility of adverse selection and the extra work to recalculate. If you are in a jusridiction that takes the AT&T/Hopkins view, you can either write it into the QDRO procedures or determine that the law trumps the QDRO procedures when you evaluate and interpret the proposed order.

The distribution without consent relates to an entirely different rule. There is nothing incompatible with requiring a notice and opportuity to rollover directly even if a participant is forced out, and it happens to be the law that notice and direct rollover is required. I think the new (but as yet ineffective) rule about distributions between $1000 and $5000 supports the position that you don't omit small distributions from the rollover rules.

Reviewers have told me that they have certain prescribed statements that may be included in a determination letter, and cannot customize. I have had them refuse to put in statements that confirm specific points of interest even when they were focused on them. I have not asked to speak to a superior about the positions.

You should not be advising him about bankruptcy issues. He should ask his lawyer.

The plan document should specify who determines the amount of a discretionary profit sharing contribution. If the document is dumb enough to refer only to the "company" or "employer," it is risky to to have anyone but the Board determine the contribution unless the Board has delegated the authority to that person or the corporate charter or bylaws gives appropriate authority to someone else.

Don't read too much into the comment that a 403(b) plan does not have to be administered in accordance with its terms. That may suffice to answer your direct question and for tax purposes generally, but if the plan is subject to ERISA, sections 402(a) and 404(a) require attention to plan terms.

The fiduciary has to consider suing to enforce the obligation and collecting from any source available, such as garnishment or levy on other assets. However, the fiduciary usually comes to the conclusion that the effort to collect means throwing good money after bad, so it is prudent not to go after the participant outside the plan.

Who cares what is a good idea? The TPA saved money by shoving an off-the-shelf product at the client. That allowed the TPA to bid low and win the work from a client who was shallow or unsophisicated about engaging the services.

The plan interests and the employer stock that will be used in the plan must be registered, even if the plan will only trade on the market for shares it needs for the company stock investment fund. A propspectus will be necessary. Start the inquiry and the process with a qualified lawyer. Operation of the plan must take into account securities laws other than registration. Also, if the company is a dividend payer, it should consider making the stock fund into an ESOP to get a dividend deduction. That is a farce, but the IRS has blessed it.

You might need a Form 5310-A if you have any suspense accounts, such as an account for unallocated forfeitures or a 415 suspense account. The insructions on the form are not perfectly clear and opinions vary about what is a suspense account that would trigger the requirement. It pays to be conservative and file when in doubt. Styles differ, but I like to have a document for the spin-off and merger. The document is a plan document for both plans (spin-off for A and merger for B) and it would state the nature of the spin-off (partial, and identify the part that is transferred), effective date and any other special aspects, such as grandfathering, special eligibility or vesting provisions, transition of investments. Watch for investment blackout, if applicable.

Can the employee switch classification from year to year? If the employee can effectively change from year to year, the argument that the employee has simply negotiated into a class of employees that are entitled to a different compensation package is pretty flimsy. If the employee is essentially stuck in the class, then the argument might fly, but there is still risk. You would also want the payroll system and other employment features and labels to be consistent with and support the class system, which might not be good for the culture.

What does the plan document say? If the plan makes only full lump sum distributions, then the entire balance should be distributed at the required distribution date. Rather than return the "minimum,' the plan should simply be distributing the remaining balance. Assuming no unusual plan features, the amount that is required to be distributed by 401(a) (9) for the year is not rollable, but the remainder of the distribution is rollable (keeping in mind the rules for minimum distribution for the next distribution year and rollovers).

Failure to follow terms of the plan is a qualification error. Look into EPCRS again.

The IRS has taken the position that commissions on stock transactions cannot be paid or reimbused by the employer. The payment of the commission by the employer would be treated as a contribution. However, you may have a different situation where the employer has changed plan design and the sale of stock was not really and investment transaction (which is administrative) as much as a settlor function because it was done soleley to to effect the plan design change.

The transactions involving the personal business of the real estate agent subsequent to the plan loan sound prohibited to me. I assume that the agent is a fiduciary of the plan. The transaction with the plan sets him up for personal business outside the plan. Therfore, the fiduciary would be using plan assets for the fiduciary's personal account.

Appleby: I was embellishing mbozek's comments about IRAs. If there were a QDRO, you would not have to talk about IRAs because the QDRO would provide for distribution to the AP and the AP could roll over to her IRA. My point was that you don't even get to talk about using IRAs in lieu of a QDRO unless the participant is eligible for a distribution so the participant can start the process with a distribution that is rolled to his IRA. Then you have to go to mbozek's comment about the requirements for transfers from one IRA to another. By the way, I have yet to see a plan that made a QDRO a distribution event for a participant. Although possible under unusual circumstances, it would make the unusual even more odd.

Would you have a determinable allocation formula if you left it up to year by year discretion? I agree that you can have an ordering priority that includes all the options.

Also, the husband can't roll anything over to his IRA for subsequent transfer to her IRA pursuant to court order unless the husband can get a rollable distribution from the plan.