QDROphile

This is serious, complex stuff, including the possible application of federal and state securities law. The employer needs to engage competent legal advisers.

The plan document matters. It is a contract. If the contract says that some amount will be put in some account by some date, then it is a breach of contract not to do so. This would most likely be an issue if the participant directs the investment of an account, as a practical matter, and not as a legal right in an unfunded (for tax purposes) plan. If the accrual is only a bookkeeping accrual, with a bookkeeping investment rate, then the plan usually will not speak about contributions. Instead, it will speak about accrual credits. The timing of a legal right to an accrued benefit (or an incremental accrual) is then a significant factor in timing of tax liability and and movement of actual funds is not relevant.

While (a) your question might be zeroing in on the answer: Whenever the plan documents say contributions must be delivered; (b) your question suggests a misunderstanding about unfunded and funded 457(b) plans for nonprofits and the tax consequences. Apologies if I have misapprehended.

Your questions all relate to state/local law and procedures and require evaluation by someone, probably a lawyer, knowledgeable about Delaware domestic relations law and court procedures. The federal law that is relevant to the retirement plan(s) requires that the order be an order under state domestic relations law. The federal law does not address matters such as signatures of the parties to the domestic relations proceeding. What is required for the order to be issued under state law depends entirely on state law.

Fairness is a relevant topic, especially in areas touched by tax policy, where subsidies create economic distortions. Distortions can be viewed as unfair to an individual or group or viewed as beneficial to the larger society, based on some notion of values of the political winners. The unfortunate history of subsidizing employer-provided health benefits is an issue that is a deeper level in the same mine shaft as this topic of employer subsidies of marriage and children. There are more overt examples of subsidy or penalty of marriage and children. The institutions and culture created by tax subsidy for employer-provided healthcare are now a big factors in the political arena in the debate about how best to make health care available and affordable. It is a shame that the elements are not recognized for what they are so they can be objectively evaluated in instead of manipulated by emotional appeals. The fight did not start with jpod's observations.

And, as my favorite priest once said, “People in Hell want ice water, too.”

Pay attention to applicable HSA contribution limits. No comment on the essential compliance question.

From a federal QDRO law perspective (also the retirement plan's perspective), it is possible depending on the nature of the plan, the attitude and sophistication of the plan administrator, and the actual terms of the divorce judgment. There is a lot to be done behind the claim to get it in proper position, probably including getting a domestic relations order that satisfies the QDRO requirements, which will be determined by state law. Generally no action will be taken by state courts with respect to a concluded divorce proceeding after the death of one of the parties, but never say never. The domestic relations order is merely in aid of carrying out the terms of the divorce judgment, which is one reason why those exact terms are critical. The plan administrator may have views about the original terms as well for purposes of accepting and effecting a domestic relations order. The divorce judgment is also a domestic relations order, but I use the term in this case to refer to another domestic relations order directed specifically at the retirement plan and benefits. I have also assumed that the divorce judgment would not satisfy the QDRO requirements.

Sorry to be unable to read between the lines, but did the plan treat the distribution of the $100K as a taxable distribution to the participant? I infer the negative. Voluntarily directing delivery of a distribution to a specified payee is not a problem, although it is a courtesy not required of the plan. Failure to account for a distribution properly on Form 1099-R is a problem. My first thought is to issue a corrected Form 1099-R. The participant will have to amend the 2018 tax return if it has been filed based on a Form 1099-R showing a distribution of $60K instead of $160K.

Benefits issue. Railroad retirement benefits are unusual, so general knowledge about ERISA QDROs might not serve well. Ask the question of the RRB to start. Divorce/State Law. You will not get any of former spouse’s RR benefits without a domestic relations order that modifies or supplements your divorce property awards. State law varies. Generally, revisiting divorce settlements/dispositions is proscribed or disfavored, especially after death. Exceptions apply. You will need competent advice about applicable state law concerning the circumstances.

In addition to Doc Ument's comments, I would embellish the following one: "That is why the attorneys who structured this deal should have read the document before proceeding with the transaction." Even if the document did not provide for what was to happen under the circumstances, the plan document could have been amended before closing to provide for the desired outcome (and forced the parties to think in advance about what the desired outcome should be). Corporate transactional lawyers and advisers have a very bad habit of not including someone with ERISA expertise in the structuring and execution of a sale/reorganization, or at least not doing so in a timely manner before all that can be done is either hold your nose or pick up the pieces as well as possible. Also, the mentality of not thinking beyond pre-approved documents contributes to the problem. A pre-approved document is almost certain to fail to serve the needs of complex corporate organizations and transactions. They are designed based on LRMs and IRS approval rather than the tax-qualification needs of the employer. Even the exercise of filling out the adoption agreement of pre-approved documents is usually a missed opportunity to think deeply about what the employer(s) is/are all about and what they are trying to accomplish both by way of benefits and by way of administration. Adopting a benefit plan has become an exercise in buying a mass-produced commodity, designed as a loss-leader for the business of selling investment management services. It is not surprising the a lot gets lost in the process of both design and implementation. Cheaper, yes. But sometimes there is a painful lesson about getting what you pay for.

They exist, but not in the traditional retail 401(k) menu-driven marketplace (including a "brokerage window" as one of the menu options). I agree with ESOP Guy that you are unlikely to have options available despite legality as a retirement plan investment. It has nothing to do with employer securities, as such.

Covered call options are permissible, but standard trust terms might not provide for them and the 401(k) investment product might not allow them, in part because they (the products) compensate the provider at a low margin and options are usually not “push the button” standard transactions. Ask the provider if the arrangement is within the brokerage window menu. Shame on the employer and the fiduciary if the employer can even find out what a participant chooses as investments.

The AP needs to file a claim for benefits in order to get benefits to which the AP is entitled. The information provided doe s not assure that there was a QDRO or that the AP was entitled to anything. It also does not allow an answer to the "Who is wrong?" question, although it appears, with only imagined doubt, that the participant is not involved.

We could start a new thread to recount stories about what happened when the specter of prohibited transactions was made apparent to unsuspecting partygoers. I have been dismissed from a transaction or two. I have also had others angrily walk out of the room. I have also testified before a federal grand jury. It turns out that what we ERISA practitioners know as certain prohibited transactions are also prohibited by the U.S. criminal code.

FICA issues are not the greatest misses in JamesK’s assertions. “gave back” compensation should be explored in light of the constructive receipt doctrine, as suggested by ESOP Guy.

What form of organization is the company?

Seconding jpod, he may have given back the salary, but he still had the income for income tax purposes, and a deferral for income tax purposes. Or there is more to “gave back” than stated. And if he gave back the salary, why would the reversal of the deferral go to him? The deferral is part of salary.

So what do you think of the value of the Dept. of Labor QDRO Handbook that you have attached to at least one post?

My sympathies for you situation and the losses you are experiencing. Your situation pension benefits situation is complicated by several factors, including (1) the pre-retirement disability (2) starting while married to spouse #1. But the most important factor for consideration in this forum is that the plan is a governmental plan, which means the the general national rules, applicable to private employers, that we are familiar with do not necessarily apply even though some concepts and principles may be similar. Only an understanding of the terms of that specific plan and applicable rules or regulations for that specific plan will be the basis for any answers with certainty about where you stand. It just will not work for you to provide a description here of circumstances within your purview and get a response that is specific and reliable. CuseFan responded within the context of the law in the private sector and warned that government plans may be different. That is about as good as it gets. You have asserted your claim based on your marriage and the attempt to designate you as beneficiary. That is what you had to do. Usually there is an appeal process, but not necessarily. Whether or not you got a correct or complete ruling/response can't be determined here. As to whether or not you can get anything by being a nuisance to spouse#1 is likewise beyond this forum.

“questioning the documentation” Is the concern about a plan administrator recognizing that the participant is not married, and therefore not subject to whatever spouse consent or J&S annuity benefit that might otherwise apply, especially since original records may indicate marriage? CuseFan is essentially correct about QDROs, but sometimes plan administrators are not well-informed and QDRO is (incorrectly) the only concept or language available to them in unusual circumstances. There are discussions on this Board about use of a technically incorrect “QDRO” to assure that a former spouse has no interest under the plan.

I am recalling the rules under section 125 relating to eligibility relating to dependents and complications arising out of divorce and the rules about which parent is considered as providing the support that is relevant to dependency. Those rules can be reflected in plan terms. I do not have a specific recollection relating to HSAs. The yellow light went on with discussion of double dipping. When a tax deal for regular folk sounds too good, caution is advisable.

I think that some tax and plan definitions of “dependent” may have been given short shrift in a conclusion that both parents may have coverage for the child.under separate plans of separate employers. Maybe not.

Why do you ask? A blackout period generally relates to some phenomenon that causes participants to be unable to give effective investment directions with respect to their accounts. This presumes that participants have the right/power to direct investments. Changing investment providers or changing investment fund menus are probably the most common phenomena that cause blackouts. While the change is occurring, there is enough going on so the service providers are unable to deal with the further distraction of accommodating investment instructions until after the changes are completed and the new arrangements are up and running. Depending on what you mean by "recordkeeper," a plan can have the same record keeper but still change investment providers or investment menus. Your reference to "advisors" suggests that the investment arrangements are changing, such as the investment menu will be a different family of funds (e.g. changing from Vanguard to T. Rowe Price), or the investment options are remaining within the same family or platform, but one or more designated investment funds is changing. Also, "staying at the same recordkeeper" is not adequately informative. If the only change is that now adviser Joan will be paid a fee by the plan instead of adviser Jim, then a blackout is not implicated.

Profit sharing and a qualified retirement plan profit sharing contribution are not even close to the same thing. You need to know more about the contract. Or, as you suggest, consult a professional who understands government contracts.