QDROphile

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)

So here is your opportunity. First, make sure that you know exactly what the plan provides. Although Carol Calhoun is wonderful, neither she nor anyone else on a message board can give you a definitive answer. Assuming that the plan allows only transfers among the designated vendors (which is a common design), politely ask for the plan to be amended to allow other transfers based on past practice of the plan in other cases (or make a big stink, depending on your personal style). There may be enough embarrassment about the oversight that you will get what you want. However, there is a very good chance that you will fail and the person who was benfitting from the oversight will be shut off. Consider the potential benefits and consequences. What are you really trying to get from a vendor? Plans have many good reasons for limiting transfers, not the least of which is that individuals are vulnerable to sales pitches from vendors who really offer nothing much but commissions to the sales agents. If you are unhappy about the vendor options in the plan, do your homework and try to get a better vendor added to the list by convincing the sponsor of the merits. The dark side is that the sponsor probably is getting some nice back scratches from the current system or is simply paralyzed by inertia.

I think it is great that you are asking fundamental questions. We tend to take too many things for granted. I hope someone can respond for the benefit of all of us. I have never had occasion to get to the level of your question.

I don't really understand what you mean by the valid contract/custodial account rules. An arrangement is valid if it meets applicable requirements. The requirements are different for governmental plans compared to private employer plans. You can find other threads that discuss whether or not a governmental plan document should include ERISA features or references. You can also find a thread about whether or not a 403(B) plan has to offer annuity options -- answer: it depends. For a 403(B) plan, you start with the requirements of 403(B). Also, a plan can have features beyond what is required as long as it does not provide what is forbidden. Unless an employer wants a totally custom arrangement, the employer will be limited to what someone else has designed for sale. In these products, you tend to have some common elements, dictated by marketing rather than perfect fit with the buyer. Some products can be made to fit better than others. As for state law, I am not aware of a list. I would not expect to find one. I am aware of at least one state that has a special statute on domestic relations orders applicable to certain governmental plans. But the same state has its rules for domestic relations orders on a major government plan incorporated into the statute that constitutes the plan. This sort of variability makes analysis and organization of rules very difficult.

Medusa: Ask the lawyer for a list of his clients with plans under his design. If he is as good at ethics rules as benefit plan rules, he will give you the list. Then you can report the clients to the IRS, and maybe get a bounty. Alas, the IRS does not enforce much of anything, so rogues abound.

Start by examining your premises. A valid 403(B) arrangement does not have to comply with ERISA if it is a governmental plan and governmental plans are exempt from section 401(a) (13 ) of the Internal Revenue Code. Section 414 (p) has special provisions for governmental plans. Domestic relations orders could get really interesting under governmental plans, but probably most plans and state laws roughly approximate the federal scheme for QDROs.

I agree that mirroring hardship withdrawal standards for loans has nothing to do with compliance with loan requirements, so we are still looking for some way in which limitations on loans help with some safe harbor. I am not aware of any.

Please explain how limitation on loans would be helpful to a safe harbor.

The company would be able to deduct your costs of graduate school. The costs would be treated as income to you (and reported on your Form W-2) and the company would have a deduction for compensation to you.

QDROs can be amended, rescinded, and superseded. First, it will be a matter of state law, and sometimes state courts are reluctant to reopen a settlement or property division. The amended or new order might not work if it is incompatible with what has happened under the plan since the original QDRO. For example, if the benefit has gone into pay status since the QDRO was entered, the new order may not be able to make the same kind of changes that would be OK if the distributions had not yet started. A QDRO may provide that an alternate payee can start benefits at the"earliest retirement age" whether or not the participant starts. The "earliest retirement age" depends on plan terms, but almost certainly is on or before the participant's age 65. Perhaps the person who improvidently drafted the first order might be inclined to fix the oversight if the opportunity were properly presented.