QDROphile

mbozek: You are correct that a plan does not have to provide an annuity option to an alternate payee after the benefit starting date. The alternate payee may have to be consoled with receiving a portion of each payment that is made under the form of payment in effect. But a QDRO is still available to provide direct payments to the alternate payee. Entering the QDRO after the payment starting date reduces the options and eliminates some important protections, such as protection against the participant's death. There is a new case that says that a court can enter a QDRO after the death of the participant. Not the same circumstances that we are discussing. The validity and effect of that decision have yet to be worked out. You are also correct that state law may affect the options at this point. State law may also provide a remedy against the participant for starting benefits in a manner contrary to the intent of the decree (if any one had any intent or thought in the first place).

I think it is best to follow mbozek's approach. The coincidence of the beneficiary having an account should be disregarded and all the rules for distributions to beneficiaries should be observed. No shortcuts. If the rollover or transfer by the beneficiary (assuming eligibility for a rollover or transfer) wants to come back to the same plan, then the plan's rules should be observed for accepting the funds as well. For example, the funds should be accounted for as a rollover or transfer in the beneficiary's account under the plan.

1. It is not true that QDROs cannot be issued and effective after payments start. How they can apply is often different after payments start. State law is a concern. The court may not be able to issue an order or change a settlement after a procceding is closed. That will vary from state to state and circumstance to circumstance. 2. You have various sources for referral to lawyers who will prosecute a malpractice claim -- some are on the internet and I will vouch for none. It is very difficult to know if you are getting a good steer. Some state and local bar associations provide referrals and may provide other assistance through their lawyer discipline or client protection programs.

It may be possible that under the rules applicable to taxation of property division and payments in a divorce you would be the one to include the payments you receive in taxable income and your ex-spouse may be able to exclude the amounts. But you need expert advice on the subject. Even if true, it would probably be better to get a QDRO, because then the tax reporting would be much more simple and direct, plus you won't have to rely on your ex to forward the payment to you each month. That is worth something all by itself. If you go to another lawyer to help with this, you should also discuss whether or not to claim against your first lawyer for malpractice. A divorce decree that provides for division of retirement benefits needs appropriate follow-up to be effective. Your first lawyer might simply need a gentle reminder that the job is not yet done.

The participant does not contribute anything. The Company contributes. The participant merely makes investment decisions. There's the rub. Perhaps you could look at the issue as one in which the participant chooses in which which plan to participate. But you might get into even more trouble there.

You can't borrow against an IRA. You may be able to borrow from the 401(k) plan where the money is now, but I would not count on it. You would be able to borrow only half of the balance, at most. Borrowing has more subtle drawbacks. Search for discussions about borrowing from 401(k) plans in other threads on this site.

If you want the money, you pay the taxes, including the extra 10% if under age 59 1/2. You at least appreciate how much it costs to get this money now. The money is far more valuable if you allow it to grow tax deferred. Try to find some way to avoid use of the money.

Your reading is better if the company is not a public company. My reading makes sense only if the company stock is traded, allowing a company stock investment fund.

Mike Preston: I may have read between the lines incorrectly, but I think the problem is that the plan has a company stock fund that is a participant directed investment option. The plan now says that anything invested in company stock is the ESOP. Some participants elect to have elective deferrals invested in company stock, some don't. So the question is, which elective deferrals are ESOP contirbutions and which are not? ESOP contributions are disaggreaged from the others for pruposes of the testing. Are all elective deferrals not ESOP contributions because they are made in cash and then later (but not much later) invested in company stock? Or are the contributions directed into company stock ESOP contributions (even though at the end of the year -- or even the next week -- they are transferred to another investment fund)?

If you have the ability to receive a lump sum -- which would be a bit unusual for a union pension fund -- one of the best options is to roll over the distribution directly to a traditional IRA. You may have other options that make sense. Among the things you should consider in making you decision are: (1) Do you intend to continue saving the money for retirement? (The best abstract answer is affirmative). (2) Can you manage the investment of the money or do you need to have it managed? (3) Should you convert the traditional IRA to Roth IRA? The answers depend on your personal circumstances.

My only comment is not helpful. This is what we get for jumping on the bandwagon of an IRS mistake in allowing an investment designation to be treated as a plan.

There are various exceptions to the tax, but purchase of a residence is not among them.

Kirk Maldonado: Thank you for carefully characterizing my comment as "off base" rather than "wrong." You can't successfully steal unless you lead off.

With partners as smart as that, how can they afford a DB plan?

Insider trading is insider trading regardless of the medium employed for the illegal activity.

Whatever the answer to the question, the answer should have little or no bearing on the decision about which system to use for investment of plan assets.

Conflicts of interest if the fiduciary is not an independent person/institution.

No money goes back to the employer. The plan terms are not especially smart. Depending on when forfeitures are calculated and when matching contributions are made, it may be difficult or impossible to comply. Someone ought to rethink design and procedures.

Assuming the the plan has appropriate hardship distribution provisions and the facts fit them, the 5% ownership does not require special consideration. Sounds like an odd situation, though.

The IRS relief for plans that accept rollover money does not extend to accepting the rollover if the plan adminstrator knows it is bad or keeping it under a reasonable suspicion that it is bad, even if the suspicion arises after the money moves.

You can get one from UAL through the participant.

The terms of the plan do not exist in a vacuum. The plan probably should be interpreted to mean that it will accept amounts that are eligible for rollover, regardless of the exact words are. Otherwise, the plan would not qualify. The IRS has made it OK to be less than supervigilant about rollovers, but it does not change the rule that a plan cannot accept an ineligible amount and must find a remedy if it does. You should get advice about what to do, but if I got the money in a direct rollover, I would not distribute it to the participant if the sending plan advised that it sent too much. I think the sending plan is the better authority in that case, and it was the source of the money. Putting the money back to the source is a very attractive proposition. If you had doubts about the amount in the first place, you would have effectively placed the money back with the source by refusing to take it.

Yes, if the plan is properly designed and drafted.

Qualified plans borrow frequently. The whole ESOP industry is based on it. I think IRAs can borrow. However, even asking the question means that you should not do whatever you are thinking of doing.

You are correct. The rule on unrealized appreciation applies only to distrbutions from the employer's plan. 402(e)(4)