QDROphile

If you really want to FEEL old, try BPH.

That may not be a bad thing. It was sometimes tricky dealing with participants (professional partnership members) to make them understand their Keoghs were not somehow magically excepted from the 401(k) rules.

Lower and middle management HCEs = Select group?

Unless a plan's written QDRO procedures provide otherwise (which many do*, although they should not unless they like trouble), the plan conducts business as usual unless the plan (including an agent of the plan) receives a domestic relations order -- not hears about one, smells one, or infers one. If a terminated participant is entitled to a distribution, then a distribution should be processed in accordance with usual plan procedures. If the Standing Order has been delivered to the plan, then the plan should follow its procedures for processing a domestic relations order (we know it does not meet the requirements). This is the same approach as can be taken with the travesty California Joinder Orders. The plan has a reasonable time to determine whether or not the standing Order is qualified, and will not make a distribution pending its decision. Who knows what a reasonable time is, exactly? With any luck, a "real" domestic relations order that want to be a QDRO will be received within a reasonable time and then things are back to normal. If not, then the QDRO fiduciary (probably PA) will have to take appropriate action on the Standing Order, which will involve allowing a reasonable time for that action to be appealed by the aggrieved person and no distribution will be made pending the decision on appeal. The circumstances are complicated because a plan fiduciary is a party to the divorce and presumably has knowledge or receipt of the Standing Order?. Is that receipt by the plan? I would prefer not to argue that it is not receipt by the plan. Forget about the rollover, analytically. Rollover is merely something that can happen to certain distributions. It is only a distraction in this matter. I agree with Larry Starr that this should be overseen by the plan administrator, even if the plan administrator is clueless and reliant on the TPA for everything (which is why TPAs get out of their lane too often). Be careful who you choose as advisers. *Misguided by incorrect informal Department of Labor guidance about the law.

There is a lot going on that I would inquire about if presented with this matter and nothing is revealed about the terms of engagement of the TPA, but I will accept your conclusions, overlook the omissions, and limit my response to your very focused question with a very focused observation: Forwarding a distribution request to the Plan Administrator/Trustee (presumably one person wearing two fiduciary hats, but that detail is uncertain) seems like a ministerial act. The refusal to carry out a purely ministerial act seems to be based on the exercise of of interpretation and judgment. Exercise of discretion (choosing to act or not act, or how to act) and judgment are hallmarks of a fiduciary. One can be a fiduciary by acting like a fiduciary, whether or not one is formally designated as a fiduciary. Nothing further should be inferred from the observation, especially not anything related to consequences or anything related to what the expected or appropriate action by the Plan Administrator/Trustee would be.

My first thought response to the post was much the same as Larry Starr's, and I agree with that response. But my second thought is that you (through your lawyer) should be asking the PLAN what you should be asking the judge. Post-death QDROs relating to defined benefit plans are tricky because of IRC sections 414(p)(3) (A) and (B) and the potential for something like adverse selection (although the problem is not exactly adverse selection. The issues are complicated and the guidance issued by the Department of Labor at the instruction of Congress (because matters of post-death QDROs were so misunderstood and sometimes difficult) WAS ABSOLUTELY USELESS. SHAME, SHAME SHAME ON THE DOL . But what do you expect of an agency that doe not understand the law it is supposed to administer? The DOL QDRO Book has at least two material errors, so maybe useless guidance on post-death QDROS is an improvement. Back to the point. Because the DOL failed to do its job, defined benefit pension plans were left with unanswered questions about how to deal with a post-death domestic relations order. Well advised ones, of which there are very few when it comes to QDROs, created their own rules that try to be fair about allowing post-death QDROs, but also protecting plan assets against "adverse selection." Such rules should be set forth in the written QDRO procedures that ERISA requires of plans. So check with the plan to see if it has any guidance or limits relating to post-death QDROs to inform you (your lawyer) about what to ask for in anticipation of submitting the domestic relations order to the plan and setting expectations about whether you will have more or less trouble with the plan in the determination of qualification of the order.

A significant part of answering your questions depends on the actual specific terms of your divorce settlement/judgment and on state (Pennsylvania) domestic relations law rather than federal “QDRO” law. Also, a few statements are confusing, such as you are retired but cannot start your pension. Your lawyer’s statement does sound unexpected but the lawyer should explain it to you - and that explanation should refer to the terms in your original divorce papers. The participants on this board cannot affirm or criticize without a complete review of documents and history. And then there is that pesky state law that few or none of us are familiar with.

What was provided to the plan (via Fidelity or other agent) in connection with the divorce? I suspect that (1) unnecessary and incompetent communications were directed to the plan, and (2) you will have problems with Fidelity because Fidelity has little proper regard for the law. You may have to deal with the plan administrator to get around Fidelity. Fidelity might be the administrator for purposes of QDROs, or perhaps the actual plan administrator. I assume, skeptically, that that I correctly understand provided description of the property division in the divorce to mean that no interest in any retirement benefit was intended to be awarded to the former spouse and nothing was expressly awarded in any of the divorce documents.

As Larry Starr advised ... .

The proposition is that the employer wishes not to allow participants to be able to choose to default by simply invoking wage deduction law limitations. Plans are not required to allow loans. Plan loans can have adverse effects on retirement savings, especially premature distribution because of loan default. Most of the responses say that wage withholding laws are fatal to preventing elective default. You may consider the proposition to be overly paternalistic and the efforts not worthwhile and you are on firm ground for that position. The overwhelming prevalence of automatic administration products and cost sensitivity makes the the concept of adequate security into a nothing burger, with alternatives seeming bizarre, but it is not true that elective default is unavoidable.

It is not wage withholding. It is a creditor remedy more like garnishment.

The well-worded language would refer to the attendant wage assignment and security documents., which would have collection operate under the uniform commercial code instead of wage withholding statutes in the event of elective default. Those of us more affected by sumpsimus than mumpsimus might even argue that securing plan loans by wage assignments is required in an environment of potential elective default under wage withholding laws. It appears that the IRS and the DOL are not interested, so there is no practical concern. But there is practical ability to prevent elective default if one wants to go to the trouble.

Properly structured, a plan loan can avoid the proscriptions of state wage withholding laws and prevent the employee participant from electing to default. I am not going to bother with an explanation because neither the IRS nor DOL seem to care about their standards (including prohibited transaction rules) concerning loans or fiduciary compliance with loan origination standards, and plan sponsors and fiduciaries do not want to go to the trouble, and the big automated system providers will never do what it takes. But don’t say it can’t be done like justanotheradmin did.

Short answer is negative. I am sure some maven will give you a fuller explanation, which is not unique to ESOPs.

The essence of section 125 is a choice between a taxable benefit (cash compensation) and a nontaxable benefit (e.g. health coverage). If there are different coverage choices, they probably have different employee premium requirements. To the extent that a difference in the premium amounts may be reflected in the paycheck (taxable cash), there is some room for section 125 to operate, even in a mandatory coverage/payment arrangement, but you would not be looking at a traditional section 125 arrangement.

You might consult your therapist and spiritual advisers concerning doing the right thing and achieving peace of mind. Sometimes the options presented by lawyers do not come with recommendations weighted according to non-legal values. In other words, a course of action that is likely to give you an economic outcome that is better than you expected based on the original conceptual property division may not be the best for you in non-tangible aspects of your life. I agree with Larry Starr about the legal questions.

While I hate to suggest an increase to administrative burden and to create an additional opportunity for administrative error, after an election is first implemented, or would have been implemented if submitted by deadline, a confirming notice can be sent after the first affected paycheck (so the employee can cross check and so can the payroll administrator for that matter): “Your deferral election of ___ has been implemented ... .” Or apply it only to the zeros, including the failures to elect. I am not suggesting this is required.

Is the bonus discretionary or committed contractually?

Hence asking for the explanation. You don’t really think the inquiry would be framed by presumption of wrongdoing.

You you have the stomach for asking the CPA to explain why he/she should not be reported to an appropriate professional or regulatory authority and the take appropriate action based on what you hear?

Is that a dispositive answer or is someone unclear on how non qualified deferred compensation is reported?

Your plan document should say.

The PA screwed up, but not the way you think. The PA should have either determined that the order was not qualified or stated as part of the determination that the PA would not enforce the provision about the election, which should have resulted in amendment of the Order by the parties. PAs are required to follow plan terms and cannot interfere with participant elections provided by the plan. Someone will argue with this assertion, and I will not engage in the argument. The direction in the Order for the participant to elect a form benefit and designate a survivor is enforceable by the state court, through its powers of contempt, which is an inappropriate and usually ineffective approach to achieving desired division of the benefits. This points to a possible mistake of the drafter of the Order (someone’s lawyer?). One would need to know more about the plan, the terms of the Order, and the facts, but it may have been impossible at the crucial time for the alternate payee to have been named as survivor, which leads back to a possible mistake by the PA in determining qualification.

And what is in it for the “vendor” to espouse the position? Or what is the vendor hiding (consciously or not) to be espousing this position? For example, is the vendor limiting the scope of a search or a list of candidates based on the confining perspective? The vendor now has a huge burden to overcome — to convince you that the assertion is correct against a well-founded suspicion that the assertion is incorrect.

I have enjoyed and benefitted from your participation.