QDROphile

A 401(a) plan offering is not limited to a matching plan. The school could have any kind of 401(a), unless the school is governmental. Then it could not offer a 401(k) plan unless it had a grandfathered 401(k) plan available (see other threads).

Yes, if the governmental employer could do it whether or not it had 501©(3) status. Layering on the 501© (3) status can get you a 403(B) plan, but not a 401(k) plan.

The answer depends mostly on how the plan defines compensation.

Odd as it may seem, if one has other coverage at the time, one can still elect and maintain COBRA continuation. If one does not have other coverage and elects COBRA continuation, getting other coverage later will allow the COBRA coverage to be terminated (unless the pre-existing condition limit exception applies).

The plan document should have rules for distributions after death. In these circumstances, you may not even reach the 401(a) (9) rules because of limitations in the terms of the plan. If you do reach the 401(a) (9) rules you need to handle the situation under what is decided for plan terms that comply with 401(a)(9). An inferior plan document may throw you into these questions without providing answers or at least guidance.

All can say is that I personally think they are being too stiff. I am ignorant of the state law and procedures that apply, so I cannot evaluate how close to eviction you are.

I realize that in ESOP land that it is allowable to have a provision that is applied circumstantially. But even though it may be legal (for policy reasons that are questionable), that doesn't make it a good idea. First, it puts additional responsibility on the adminstrator to make sure it is applied correctly. Second, I think it is a bad idea to tell participants, "Maybe you can, maybe you can't, and we can't tell you in advance if the feature is available." Generally I am uncomfortable with all the the special vague rules under ESOP lore. I prefer more solid authority than anecdotal evidence that someone in the IRS didn't take issue.

Let me offer a refinement on RLL's comment. The liquidity problem goes to the wisdom of having a hardship distribution provision in the plan. If it has one, the plan must distribute and the company must honor the put option. In that sense, the liquidity problem is the company's problem, not a limit on the plan's ability to distribute. Perhaps one could design a hardship distribution feature to be limited to times when the plan had adequate cash to make the distribution in cash. I would not try such a provision.

1. First, understand that the stuff about early retirement subsidy is based on legislative history, and is therefore questionable. Second, you have to put everything in context, follow the plan's written QDRO procedures and read what the order says. Third, read what the QDRO procedures and the order say. Fourth, read what the order says. Repeat 3 and 4. Generally, if the alternate payee starts a benefit before the participant starts, the alternate payee will get a portion of the early retirement subsidy only if (a) the participant starts at a time when the participant's benefit is subsidized (e.g. nothing happens if the participant starts at normal retirment because ther is no subsidy), and (B) the order awards the alternate payee a portion of the subsidy. The alternate payee will then get a payment enhancement based on the portion of the subsidy awarded to the alternate payee. If the alternate payee starts when the participant starts, the order probably does not have to say anything expressly about early retirement subsidy. It still depends on what the order says. If the order says to split the benefit when the participant starts, the order will split the subsidized benefit. If the order effectively requires the alternate payee's payments to be determined when the plan is paying a subsidized benefit to the participant, the alternate payee's benefit is based on the subsidized benefit. The reason for the rule about mentioning the subsidized benefit is that when an alternate payee's benefit is determined before the participant starts, the plan does not know if it will be paying a subsidy, so the alternate payee does not get any subsidy then. If the plan starts paying a subsidized benefit later, the alternate payee gets to share the subsidy, but the sharing is not presumed. The order has to say that the alternate payee is supposed to pick up a portion of the subsidy after the start of the alternate payee's payments. If the alternate payee does not start payments until the participant starts, the plan knows that it is paying a subsidized benefit and can split the benefit between the alternate payee and the participant once and forever according to the formula in the QDRO. 2. As you describe the situation, I would expect the alternate payee to get a share of the unreduced (subsidized) benefit according to the formula in the QDRO. But the outcome depends on what the order says and the outcome may be affected by the QDRO procedures. It is also possible that the disability subsidy is not treated by the plan as a normal retirement benefit; it may be a specially designated subsidy. If the QDRO awards the alternate payee a benefit based only on a normal retirment, it may fail to pick up the special subsidy. You have to read all the documents and sort out what they cover. The alternate payee does not get anything "by law." The alternate payee gets what the order provides. But it is not presumed that the alternate payee does not get a part of the subsidized benefit if the alternate payee's payments are determined when the subsidy is in effect.

The plan administrator has discretion in the determination about whether or not you are close enough to eviction to qualify for a hardship distribution. Overdue rent , by itself, is not enough. In my personal view, the letter is enough for a plan administrator to justify the distribution unless the plan administrator knows of something that undercuts the threat (such as state law or procedures that delay evictions for a material amount of time -- which is suggested by the administrator's comments). You might ask what the plan administrator expects before approval (maybe you have that now) or why the administrator does not think eviction is imminent so you can address the specific concerns. The failure to use the word "eviction" is not fatal in light of the "regain possession of the premises" statement, assuming that we are all speaking English. You may have to educate the administrator if the administrator is mistaken about eviction proceedings and documents. There may be reasons apart for the eviction that are in the way, such as whether or not you have other resources. Ask for all reasons for the denial.

I did not suggest that that the regulation required one thing or another in your situation. I identified it as the source of plan language that you have seen on the subject, as you requested. The regulation and its principles need to be considered in evaluating what is appropriate in any particular circumstances. The plan language must be considered also, whether or not the plan language is more restrictive than the law allows.

ERISA regulation section 2550.408c-2

I just had a vague recollection that a benefit that was legally required (such as annuity in a money purchase plan) could not be eliminated. I don't think a merger or nonelective plan to plan transfer changes the rule.

Convince me that you can eliminate the annuity option if it was imported from a money purchase pension plan. I don't think the regulations go that far.

There are enough court decisions that a one person arrangement is an ERISA plan that you should be concerned. Often the workable solution is to follow the top hat plan rules. You should get competent advice to help you decide.

If you read the statute literally, it is business as usual until a domestic relations order is received (not a draft, an order). And so says the Schoonmaker decision, 987 F2d 410 (7th Cir. 1993). But read Schoonmaker very carefully. It suggestst that the written QDRO Procedures are very important. My experience with the DOL is that the DOL wants the would-be alternate payee to be "protected" as soon as there is information that suggests a domestic relations order may be coming. But that is a very problematic standard, and Schoomaker says not to do it unless maybe the QDRO Procedures provide for the earlier protection. Maybe. And then be careful about what constitutes a domestic relations order (not necessarily a qualified one) and the protection it offers an alternate payee. See the Tise decision, 234 F3d 415 (9th Cir 2000). So the real answer is beef up those QDRO Procedures and follow them. And everything we know is wrong in the sovereign nation of California.

It is a lovely regulation that needs to be applied to the specific facts at hand -- all the facts. One plays with fire if a full time employee of the employer gets compensation from the plan. Among other things, an employee who has significant administrative duties may be a fiduciary.

Consider ERISA Regulation section 2550.408c-2.

If you are willing to live with the consequences of being your own lawyer and operating on benefits that you don't understand, you might get enough rope to hang yourself by asking the 401(k) plan administrator if the administrator has a model domestic relations order or model QDRO. If you get one, it will probably come with disclaimers about how the plan is not suggesting how to divide your benefits or draft an order. Disregard those disclaimers because nothing about your situation could possibly involve any considerations or complexities that would require thinking or knowledge about any issues that are not resolved plainly, fairly and properly for you in the model. Write your own order using the model as a guide. Send your document in draft form to the plan administrator for review. Modify as necessary to make the form acceptable. Don't worry about any suggested changes because the plan administrator is looking out equally for both of you and will make sure to ask any relevant questions about personal issues that affect the property division to make sure you both get exactly what you intended. You can also count on the plan administrator to be concerned about your personal tax consequences and respective economic circumstances. And the plan administrator will make unsolicited suggestions about things you can get the plan to do for your benefit, even if the suggested action will increase the plan's administrative burdens. Finally, the plan adminstrator will tell you exactly what words to use if any changes are necessary. Now comes the fun part. The order is an order that must be issued by a court. You need to make the order look like the form of your divorce judgement or decree at the beginning part of the order (names of parties, name of court, docket number). If you don't have a model pleading from your own proceeding, go to the clerk of the court and ask for help with the refinements of the form and instructions about how to file it with the court and how the court will enter the order. When the order is entered, get a certified copy and send it to the plan administrator, along with an inquiry from your former spouse about procedures for getting the money. If you live in California, the drill is much easier. The California courts know that the plan administrator knows exactly what you want and are entitled to under California law. So just find a way to get some sort of indication that your divorce has in some way entered the court system, give any old document to the plan administrator that says somebody wants something from the plan. The plan administrator is supposed to do everything else, even without information. Other resources: The Department of Labor published "The Division of Pensions Through Qualified Domestic Relations Orders," available at the Depatment of Labor website. Look for the Pension Welfare Benefits Administration location within the site and use the internal search engine. The publication includes a copy of IRS Notice 97-11, which has sample QDRO language, but is quite cumbersome if you aren't already familiar with QDROs. Private publications about QDROs abound, and should be available at your local law library. If you are having trouble separating useful information from nasty sarcasm, it may be an example about how helpful advice about cutting corners is a bit of a contradiction.

A plan can be designed to limit the source of loans or in-service withdrawls. Participants do not have rights to loans or in-service withdrawals unless an improper cut back is involved. Be careful with terms that resemble terms of art, such as "rolled." If you misuse the term, you may get on the wrong track. The implications of money moving as a rollover are different from the implications of money moving by transfer. I am not suggesting that you misused the term.

In addition to the dangers of influencing employees to invest elective deferrals in company stock, I think it is offensive to both the principles and the law of ESOPs to define an ESOP with respect to how each participant decides to invest plan funds rather than by criteria such as employer contributions and employment culture. Company stock as an investment option is one thing, but making that the defining characteristic for having an ESOP seems like a mockery. Somehow I have the naive notion that there should be a provision in the plan document that specifies that a contribution be made to the ESOP. Also, odd questions arise because of special exceptions and rules (such as disaggregation) that distinguish ESOPs from other retirement plans. So how do you apply those rules when on Monday a dollar is in the ESOP and on Tuesday it is not because the participant has changed an investment choice? What is left of the policies behind those rules when application depends on how a participant chooses to invest? Or is this just further revealing the artificiality (or hypocrisy?) of putting ESOPs under section 401 in the first place?

Anyone care to comment on the current scam (blessed by the IRS in numerous letter rulings) of defining the ESOP as the portion of the plan invested in company stock? The IRS has ruled that even a stock fund that is subject to participant direction can be the ESOP portion. Nice giveaway to publicly traded companies that have company stock in the plan anyway, especially after 2001.

pax: It is not only possible, it is required. All domestic relations orders get responses and determination of qualification.

Harry O: 1(a) Physical separation of the actors by function will help the actors appreciate what function they are exercising so they can exercise properly. The distinction is often confusing. The different hats help remind people that they are subject to different standards and concerns when exercising different functions. Also, why put yourself through the exercise of untangling a web of actions to characterize them later? Among other things, you may have blown attorney client privilege by not respecting separate functionsin the moment. I won't get further afield in a dialogue about attorney client privilege. It is too complex, murky and circumstantial for this forum. 1(B) You still have the question about who should be focused on plan administration (see 2 below). Naming the employer as the plan adminstrator is not specific. Your suggestion of more specific delegation would address the vagueness problem. How many employer/administrators have formal and specific delegations that are kept up to date? 2 I don't think that a Board of Directors has the same interest in oversight of plan administration that would be appropriate for a fiduciary that has delegated some or all of its fiduciary responsibility, and I think the directors in many companies are too far removed to properly monitor even if they theoretically wanted to. Oversight appropriate for the Board is achieved by officer reporting to the Board. Steve72: I wouldn't bet on the corporate veil for protection against an ERISA fiduciary claim. I would worry more about the ERISA shotgun.

It is a bad idea to have the plan sponsor be the plan administrator for several reasons. One is that you want the settlor actions to be distinct from fiduciary actions. If you make the sponsor (settlor) a fiduciary, you blend or confuse the functions and actions. Settlors can do things that fiduciaries either can't or would agonize about. If the settlor is a fiduciary, it hampers the settlor's abilities. Another reason is that if the sponsor is a fiduciary, what live being is really responsible as a fiduciary? In a corporation, you put all the directors and officers at risk of fiduciary liability because corporations act by and through directors and officers. Do you want all your directors and officers to be named defendants in an ERISA lawsuit? It is better to identify exactly the persons who have fiduciary responsibility. Those persons know they are on the job and have to act accordingly and everyone else is then off the hook. A better alternative is to name an Administrtive Committee as the plan administrator. Put persons on the Commitee who really have the job of plan administration.