QDROphile

You should probably also consider that the 403(B) plan is subject to ERISA because of its pairing with the 401(a) plan. Sounds to me like that may have been overlooked or misunderstood.

Why is this deadbeat different from any other deadbeat as far as a court is concerned?

Please explain how you get after-tax contributions into a 457 plan.

I have never encountered what you describe; pardon my ignorant assumptions. I don't understand why a participant gets a certificate, so I am missing something here. I assume the participant is in pay status. It seems to me that if the plan continues to hold the contract, the contract is simply a funding vehicle and is a plan asset. The plan is making the annuity distributions and is is no different position than a plan that makes annuity payments and takes the investment risk (defined contribution plans can't take investment risk on aanuity payments). The plan administrator has responsibility for determining the qualification of domestic relations orders and administration of them. The annuity company is nowhere in the process. I assume that the annuity contract simply pays in accordance with its terms and the payments are set once the participant starts benefits. If the plan andministrator makes a decision that causes payment form the plan to diverge from the stream of paments under the contract, so be it. The contract is simply a plan asset and may not necessarily match the plan payment. It seems unlikely that a plan administrator would be in such a position if the annuity contract were designed to fit the benefit in the first place. The plan adminstrator would need appropriate QDRO procedures to make sure that the benefit could not be divided in a way that caused problems. For example, the only way to divide benefits in pay status would be to divide payments. The plan could not allow the value of the benefit to be divided and give each recipient an annuity based on the recipient's life. If the particpant is not in pay status, I hope the annuity contract anticipates that the benefit can be split. The plan administrator is still responsible.

"Read all the documents" is good advice. So is "get advice on all the documents before they become a problem." I did not see any suggestion that the annuity provider had contracted for the plan administrator to be responsible for property division issues. Woe to the plan administrator who agrees to such a contract. After the distribution form the plan, the issues multiply and state law is more of a factor, if not completely controlling. What about annuity contracts issued on plan termination? What plan administrator retains responsibility? I am afraid that I don't see the contempt issue if the domestic relations order applies after the plan has distributed the benefit. Perhaps the annuity company advises the court that it would love to follow the order, but the plan administrator is breaching the contract to instruct the annuity company how/whether to comply with the order? The court holds a contract party in contempt for its breach of contract with the annuity company?

If I were a plan administrator that had distributed an annuity contract, I would not consider any subsequent request by anyone to take any position on how to divide the annuity. Proper distribution of the benefit ends the plan's responsibilities, whether or not some judge thinks a QDRO is the means for the division. Separate point: If section 414(p) of the Internal Revenue Code applies, the better view is that the S in a J&S benefit does not have a "vested" right if one means by "vested" that the survivor benefit cannot be invaded by an alternate payee's interest awarded under a QDRO.

Unless you have state law that addresses the subject (which is unlikely), tell the life insurance salesperson lurking somewhere behind this ridiculous proposition the same thing that Glinda the good witch said to the wicked witch: "Be gone. You have no power here."

Medical spending accounts cannot be used for payment of premiums for health insurance.

How about "it is mandatory"?

Here are answers to questions you did not ask (except indirectly). A 457(B) plan for a nonprofit, nongovernmental entity is still subject to ERISA, which limits its use to a select group of management or highly compensated employees. That will be a very small group in the average "smaller non-profit." Also, the plan must be unfunded, so any amounts set aside would be lost to creditors in a bankruptcy. If the non-profit has uncertainty about its funding or finances, would someone want to bet a portion of a paycheck? You also need to worry about securities law compliance, although exemptions from registration are probably available under state and federal law.

Perhaps you could discuss reimbursement in year 2 of an amount paid in year 1 when the services are not received until year 2. Seems like there would be timing issues. Or perhaps I misread your message. Do you require that the payment and the services be in the same year, even though it is OK for the services to be later than the payment?

EBIA rules.

Section 72(m) (10)

None other than the ones applicable to all other defined contribution plans.

Apart from the draft domestic relations order and where that might go, the injuction is most likely a domestic relations order. The plan needs to send a notice of receipt promptly. The plan needs to determine qualification within a reasonable time. What amounts to a reasonable time depends on the circumstances. I suggest that under these circumstances a reasonable time might be a while, especially if the participant does not actualy request a distribution. Meanwhile, the plan adminstrator needs competent legal advice about what to do and when to do it. The plan is in a difficult position and needs very sophisticated help to navigate. As the plan navigates, the circumstances can change and the changes will require appropriate response. This is an interesting situation and there is lots to say about it and various court cases that have a bearing on it. But don't waste any more time with the thought that you can deal with this without direct expert help.

Does 125(g)(4) answer your question?

A loan payment is not a contribution. A plan that does not permit after-tax contributions does not prevent loan payments after default and deemed distibution. I wouldn't want to be the fiduciary that turns away loan payments (did the fiduciary make a reasonable determination about not enforcing the loan in the first place?). The basis is recoverable upon distribution. I venture, without great confidence, that the "contract" is the defaulted loan balance and the earnings would be calculated on that amount, starting with the post-default loan payments.

Why do you care how many loans are outstanding?

The new proposed regulations speak to this issue.

That is the point.

Maybe you want to look at this as though the physicians are providing insurance -- pay a premium, get health care. Viewed this way, do think FSAs can pay premiums?

You might check to see what a year (or two year) of service requirement for initial eligibility would do for you. You did not say if you had rapid turnover in the population.

You are getting more expansive in you thinking. The big problem is that anything that is done for you is done for you alone, so it sticks out and automatically brings up the issue. If the employer contribution applied to more than one person and were not individually negotiated, you would have a much better chance of being outside the issue. You may want to do something like this rather than nothing, despite the risks. I think you need competent professional advice. You can reduce risks if you could control the process and reduce the signals, as you have been trying to do. You also have to consider what the employer may think about being involved in the arrangement. As for the question you asked, you have no problem with an employer funded contribution under discrimination rules if the employer is a government. The reason you may have heard otherwise is that governmental 403(B) plans have to offer elective deferrals to everyone. Now for a new idea. If your employer is a government and does not have a 457 plan, consider increasing your tax deferred savings that way. $12,000 is availble to you at no legal risk, assuming state law allows the employer to have or participate in a 457 plan. Some states have the plan at the state level and other governments can participate.

It is all a matter of interpretation. But the issue is always there, especially if you are the only one involved. You have a number of compensation dollars that they will pay you. Some of those compensation dollars are health benefits. Some are take home pay. Some may be deferred compensation. For practical purposes, it is a zero sum game. You may be able to negotiate the total up some, of course, but the current dollars and the deferred dollars are fungible. What kind of negotiation do you envision? If you have a total $100,000 compensation amount, they won't go for $90,000 current plus $20,000 deferred (unless you throw in some vesting requirement). And they won't care if you split the $100,000 in any way between current and deferred because it is all the same to them. So what is the difference between that and a written election to reduce current pay and have the reduction contributed to the plan instead? Answer: One is more difficult to detect than the other.

It is a disguised one-time election. At a minimum, he needs advice about this and the risk that it will be seen for what it is.