QDROphile

And this is not a trivial question, because IRC 414(p) (1) says that a QDRO can assign an interest in a participant's account. One position to take is that an alternate payee's account is a subaccount of a participant's account, so the QDRO addressing the AP's account applies to the participant's account.

I am fascinated by the statement that an alternate payee is treated as a participant. Is this mandated and supported by legal authority, or is it just a practical administrative stance taken by plan administrators? ERISA says an alternate payee is treated as a beneficiary.

Plan terms may cover the circumstances with respect to that plan’s treatment of deferral excess arising out of deferrals to two plans, so don’t overlook them.

Yes, but not what most people think.

I am confused by "one investment choice". If there is one investment fund, there is no choice. If that is a claim against a plan (fiduciary, actually), it loses. The question is not what the participant would have done, but whether or not the fiduciary acted prudently. Are you suggesting that the claim was along the lines of "the fiduciary acted imprudently with respect to this participant because the fiduciary did not take into account (in the fiduciary's decision with respect to investing the plan assets) the individual's circumstances'? That is the nut. But I assert that is not an element of the standard the fiduciary would be held to. ERISA was not designed for the current norm in 401(k) plans. ERISA was more inclined toward pension plans. With respect to defined contribution plans, ERISA envisioned a similar model for investing assets -- in a single fund. 404(c) was not the base, it is the exception.

When the 404(c) regulations finally came out long ago, Fred Reish came out and warned that, notwithstanding 404(c), he saw risk of liability in throwing unsophisticated participants to the dogs. Fred loved being out on the forefront, and being a contrarian assured attention, but I am totally with him in spirit -- it is irresponsible to force unsophisiticated persons into a responsibility that ERISA requires of (essentially) a professional, with respect to one of the greatest sources of wealth they will ever have. Employers have an interest in good performance so their employees have enough money to retire, rather than hang on too long (yes, a career is an antiquated notion). After the regs came all the handwringing and complexity and Illusion of providing adequate investment information (but not required education) to deal with the realization that many participants did not want, or even feared, the responsibility of managing money, and were paralyzed. Skip forward more years and know we have target-date funds and lifestyle funds and all sorts of things that essentially come back full circle with products that a participant effectively just chooses a money manager for them, and with very uncertain understanding of what they are doing. And add features, if you will, that provides investment advice (either mechanically or personally) to participants, that is not free. Experience has shown the weakness of the 404(c) approach. Can you point to any evidence that shows a fiduciary who acts responsibly and in good faith (stealing is no fair) has anything to worry about? Yeah, yeah, the young bucks will always complain about the old man's plan. I am immune to that while conceding it is a valid point, but not as sharp as the young bucks think.

There can be issues with the health insurance providers that set their rates based on anticipated participation. This would be especially true with a single provider. If the participation criteria change (e.g. option to opt out) so that the number of participants in the health plan decline, the actuarial expectations, and therefore the pricing of the coverage, may be frustrated. The contract may have restrictions on changing coverage criteria mid-year, for example. If it does not, the change is likely to be taken into account in the next year's calculation of premiums. In a three provider environment, this may not be an issue because the providers are competing and less able to predict the number of employees that will choose the provider. However, changes that reduce, or may reduce, the total participant pool may affect how the providers approach pricing. And it will not be in a favorable direction.

Your analysis is intelligent and not inconsistent with any authority known to me. As with some other Roth phenomena, the "fairness" in any particular situation is questionable, explained only by some practical considerations. One of those considerations is the ease and clarity of accounting. It is very simple to have a rule that a Roth IRA clock is set at the opening of the Roth account (requiring a deposit), without regard for the character of incoming funds, such as the aging in a Roth 401(k). To look at the incoming funds would be more complicated. A Roth IRA transfer incident to divorce, at least when the transferee does not already have a Roth IRA, requires a new Roth IRA in the name of the transferee, requiring the 5-year clock to start on the new IRA. Another way to approach it (apparently not taken by the law), would be to "split" the IRA and maintain the character of the funds (already matured 5 years) in the "spun-off" account. The IRA owner would still have to qualify by age for tax free distribution. Under the circumstances, this would seem more appropriate (especially when both parties are older than 59 1/2 and the divided Roth IRA is older than 5 years). But a general rule that examines the maturity of the incoming funds rather than the age of the recipient account wold be much more complex and require more record keeping. Thank you for your efforts to determine the mandated outcome and share.

A hardship withdrawal relates to the plan and not the employer. That said, plans vary in visibility to the employer of plan activity. Employers are not legally allowed to take adverse action toward an employee because of exercise of the exercise of rights under the plan, such s taking a hardship distribution. That is an abstract legal proposition that may not be true in practice. You were informed how to interact with the plan and your account. It may be that you directly contact a service provider, such as an insurance company or an investment company (e.g. Fidelity, Vanguard, T.Rowe Price) or another type of administrative services plan, or someone at the employer, typically in HR. If you are clueless, then ask some HR representative how you can connect with your account. You may be referred to information materials that explain it to you, or you may be given a direct answer, such as a name and phone number or a website. You will be asked about the reason for the withdrawal and the amount needed to assure compliance with the hardship withdrawal rules. As mentioned above, your employer may be privy to the information, or not. I am offering no comment on your thinking about loan vs. hardship. You should rethink, preferably with the aid of a plan representative, if that is available. Generally, hardship withdrawal is a last resort (at least in the view of professionals n the industry) and you may not understand the effects of a loan, even facing the prospect of losing your job, and defaulting on the loan. It is probably no worse than the consequences of a hardship distribution. Some plans do not allow hardship withdrawals if a loan is available to cover the need.

Grey divorce (both over 59 1/2 ), Roth IRA has aged 5 years, Roth IRA balance is divided incident to divorce and spouse's "new" Roth IRA is the transferee of the Roth distribution. Does the spouse's Roth IRA start the 5-year clock anew or does it benefit from the 5-year maturity of the source Roth IRA? I am not surprised the the regulations under IRC 408 and IRS publications do not address this, but I do not find much secondary material venturing an answer. One that does appears to go with the spouse Roth having the benefit of the age of the original Roth, drawing from the rules relating to dividing basis in an IRA transfer.

Because the participants are cynical about throwing themselves at the ineptitude (or worse) of the church governance? You might be surprised at the ignorance of the concept of "fiduciary responsibility" in churches. ERISA at least provides a framework for reference.

Please clarify “a selection of a broad range of investment alternatives is a fiduciary requirement.” Investment of plan assets is a fiduciary responsibility. That means that the fiduciary chooses how plan assets are to be invested. Having a selection of investment alternatives is not a requirement, although it is nearly universal to hide behind ERISA 404(c).

This expressed opinion is my own, and will not be well-received, especially by those who have been conditioned by misunderstanding and lax attention and enforcement: The entire concept of a discretionary match is intellectually questionable (my real opinion is "bankrupt") and the IRS is remiss by letting the idea get out of hand to the point it is now normalized and difficult to recapture and restore to the original purpose. If you want to make an ad hominem criticism, I will admit that I could never figure out how discretionary matches were legal, let alone sensible. I suffer from sumpsimus in a mumpsimus world.

Also, a QDRO mentioned in divorce papers or property settlement documents and correspondence does not mean that a QDRO has been entered by the court or accepted by the plan(s). It is too common that the party (usually the spouse of the plan participant -- or the spouse's lawyer, typically) does not follow up after the divorce judgment and prepare and submit the domestic relations order and get it qualified to be a QDRO. If you do not remember this being done, you should RUN to your lawyer to see if in fact there is really a QDRO that provides you with benefits.

The distribution would not be a required distribution, so do not get distracted by aspects of those rules, including amount. Check all distribution provisions. Some plans have some relic distribution provisions relating to age 70 1/2 from when a change was made to the law many years ago.

This is a piece of a corporate law question that must be evaluated in the full context of all of the ownership, agency, and operations relationships.

All ERISA plans have written procedures for filing a claim for benefits. That is the formal mechanism for determining and receiving your benefits. A copy of the claims procedures are available to you without charge. However, I agree with C.B. Zeller that your first stop is an informal inquiry to the person at the employer who is responsible for plan matters.

"Unfortunately, Rev. Rul. 2004-21 begs the question to come to the result:" Holy Shoot (check the George Carlin translation)! Did someone really use "begs the question" correctly? I am delighted, encouraged, gratified, amazed, and reassured about humanity. I am too lazy to check Rev. Rul. 2004-21 to confirm, but it appears that Dalai Pookah nailed it, or at least put the phrase in a context that looks correct. No comment on substance, but the rhetoric is soooo refreshing.

Clarification based on Calavera’s correct observation: A post-QDRO event, including death of the participant, almost never causes any part of the benefit awarded to the alternate payee under the QDRO to become available for the benefit of someone else, such as the new spouse. A new spouse may have a benefit in her/his own right under the plan. The plan should always be approached after the death of a participant to determined what benefits are payable to a potentially interested person, such a spouse. Don’t expect to be capturing anything awarded to the former spouse under the QDRO.

If a QDRO was accepted by the plan, it will be executed in accordance with its terms. Some payments may have already been completed. Some terms of the QDRO may be triggered by the participant's death, but the benefit to the former spouse is set by the QDRO and it would be almost unheard of if a later event, such as death of the participant, would give rise to anything of benefit to a new spouse.

What similar situation? A plan administrator that incorrectly applies the QDRO rules? It happens all the time. If your circumstances are somewhere near correctly described, they are out of the ordinary. “Spun off” is a term of art that is suspicious in your description.

Wow. Your second paragraph contains the answer to your first question. So does the Summary Plan Description, if the SPD is properly drafted. The short, short answer to #1 is "no" and the fuller explanation is in the SPD.

If the plan is a private employer plan and has not received a domestic relations order (or sometimes some kind of notice of a pending domestic relations order), the plan should proceed as usual with start of benefits. However, you personally might be violating a court order or procedure by starting your benefits pending resolution in the court of division of your benefit. Public employers sometimes follow different rules.

Is the investment real estate or a limited partnership that invests in real estate? Either way the lender cannot get a security interest in the investment that the lender can look to (instead of the borrower) to cover the debt in event of default. The lender can only get a security interest in part of the investment (if at all) and would not be able to foreclose to satisfy the obligation. That is not classic nonrecourse debt. A tested model is a plan buys a building with nonrecourse debt, and the lender has a mortgage on the building. In the event of default, the lender gets the building in foreclosure (any liquidation surplus goes to the plan as legal owner). No comment on UBIT.

Outside of real estate, where the financed property serves as the security, a non recourse loan is unusual, and an unsecured non recourse loan is so strange that is raises the question about ancillary benefit (intangible though it may be) that may violate the prohibited transaction rules. It depends on how deep you want to go and how seriously you believe the DOL position and how far the DOL would really go. A lot of people find it hard to believe that the DOL would take it as far as the DOL says. How do you evaluate the commercial reasonableness (e.g. interest rate) of the strange loan? It would be worse with a family member than friend.