QDROphile

The amendment should specify how it applies. That is part of the effective date terms.

Mr. Starr, please elaborate on "I am drafting QDROs for (for my client plans) ... ." Are you drafting orders that will be applicable to the plans that are your clients, plans that you represent? Who is your client when you draft an order?

If you represent the plan, the plan should not be looking for a way to accommodate.

Yes, learn the rules for QDROs, at IRC 414(p). The rules state what a plan must do when a domestic relation order is received. "Domestic relations order" is also defined, and I doubt that your "sample QDRO" fits the definition, but I am speculating because "sample QDRO" has no universal meaning and your post has no description of the procedural status. Unless the plan is ill-advised enough to have QDRO procedures with unnecessarily-added rules about what to do when it receives evidence that a domestic relations order may received, the plan should do business as usual until a domestic relations order is received. If the business includes termination and liquidation, then that should proceed without regard for the "sample QDRO."

The status of the order is still confusing. Are you reporting the the order has not been issued by the court? Your comment that the judge will not sign unless your ex signs suggests that the order was presented to the court as a "stipulated" or agreed order or settlement, and the judge is waiting for your ex to express agreement by signing before issuing the order. This is a matter of local law and procedure. The plan will not do anything with respect to the terms of the order until it is issued by the court, although the plan seems to recognize you and acknowledge that a domestic relations order in in the works. What the plan is actually doing as a result of being on notice is uncertain and you cannot rely on the plan protecting your interests. You may have to change the approach to a contested matter and force the judge to adjudicate rights and issue the order whether or not your ex agrees or cooperates. Again, this seems to be a hang-up in your divorce proceeding and is not a matter for the plan administrator. I am speculating because your explanation lacks sufficient information for an assessment.

The plan administrator is not going to make the second loan (and why bother?) so soon after a voluntary default.

It is possible that a special opportunity for rollover from the terminating cash balance to the 401(k) plan was afforded to cash balance plan participants. That may have involved an amendment of the 401(k) that does not show up in the obvious 401(k) plan “document”.

Please clarify. Are you asking if the taxable pay for some or all of the COBRA premium can be reduced and applied to the COBRA coverage? That would be a question for the employer's section 125 plan and negative if the employer does not have a section 125 plan or the plan does not expressly permit it. If you are asking if funds from the last paycheck can be used to prepay the COBRA premiums, the answer is (1) money is fungible, (2) it depends on the health plan administrator's policy about timing of payment of COBRA premiums, and (3) it depends on the payroll administrator's policies about cutting multiple checks. I illustrate my interpretation of this question by envisioning two final paychecks (net of applicable withholding): one in the amount of the premium and the other for the balance of the pay. The check in the amount of premium would be endorsed and delivered to the health plan. Or just cash the check and write a new one to the health plan, depending on (2). Your focus on the paycheck implies a question about something other than funds movement, as addressed in the first paragraph.

Leveraged repurchase by the plan?

ETA's response directs you to state law. Does relevant state law say anything about about contributions to a 403(b) plan or any other type of retirement plan (especially as defined to encompass a 403(b) plan) authorized by state law? Unless state law enables it, a government (school/school district in the case of a 403(b) plan) cannot maintain a retirement plan. To the extent enabled by state law, any kind of contribution to a 403(b) plan is OK as long as complaint with section 403(b), and you know 403(b) plans do not preclude matching contributions.

This is exactly the problem situation (or variation) that comes up regularly. If the IRS ever got into this, it would look abusive and scammy. Why push it? The whole tax-deferred savings aspect of the tax code is a huge benefit. The accrual is the big benefit, that is done, and the intended legitimate purpose has been achieved. Don't be a pig for purposes of estate planning or whatever greedy factor is at play .

Unique, indeed.

Owners (such as partners in a law firm) present particularly sensitive circumstances. One aspect to consider is whether or not: 1) the post full-time work is performed at the request/demand of the employer/firm or is fully discretionary with the individual. If the performance of services is not regular and substantial and is at the discretion of the individual, it should be given a hard look. Hobby employment should not be treated as a block to required distributions. The IRS would be faced with the other side of the coin: What is meaningful employment for the benefit of the employer/firm? Law firms and other professional service firms often give nonproductive partners various privileges that allow them to dabble, mostly for social reasons, in a way that yields token compensation. I think that amounts to retirement in many instances with respect to section 401(a) (9). Other clues can help, such as start of nonqualified deferred compensation and unavailability of certain other pre-"retirement" perquisites. I would go easier on a rank and file employees because an employer would be more likely to take a no-nonsense approach. If such an employee is keep on at a low or irregular level of work/compensation, then the employer is probably engaging the person for benefit of the employer. Yet we have all seen sham employment for various purposes convenient to the employer, whether the employer likes it or not.

There is no bright-line definition. I agree that the plan administrator has to figure it out based on all the circumstances. However, I suggest that a self-employment situation, including (or especially) a law firm, is full of opportunities to abuse, so the plan administrator should be looking for a hook for start of required distributions. In particular, any change in any perquisites should be examined. I have been through it, and it is not easy because the arrangements can be nebulous and not consciously abusive. What constitutes "retirement" of a venerable law partner is an issue for law firms beyond 401(a)(9). Remember the purpose of the law.

Exactly. One has to look at the definition of hardship. Availability of credit is a financial resource. That is why we have recurring discussions about exhausting availability of plan loans before hitting hardship withdrawal.

Please elaborate. You lost me. If medical expenses have been paid, even with borrowed money, how are they eligible for a hardship distribution?

Please clarify if the employee can choose to pay for medical premiums by salary reduction (looks like payroll deduction, but it is not) or if the payment of the premium by payroll deduction is required. This is to determine if the arrangement is really covered by section 125 of the tax code. If the arrangement is covered by section 125, a written plan document is required and I cannot believe that two pages suffice for what should be stated in a section 125 plan document. Also, participants do not sign a plan document. It is possible that the 2-page document is the salary reduction agreement document for an employee to choose "pre-tax" payment of medical plan premiums. Why are you not asking questions of whoever it is that told you to set up "a POP Section 125 Plan" and furnished the two pages?

I approach your question from a different perspective. First, a digression. A child support agency can get an order to have child support payments made to the agency by the participant's plan. There are several threads on the subject that discuss the law and its relationship to ERISA. One of the consistent contributors on the subject besides me (so you can search) was MBozek or Mike Bozek. If collection of child support arrears is what is really going on, then it should be addressed directly by the proper procedure. The distribution should be taxable to the participant. Unfortunately, competence of agencies is uneven, so there is often a backdoor attempt through use of a QDRO. And it is certainly possible to use a QDRO, but usually that is mucked up as well because the same incompetence of the agency spills over into pulling off a legitimate QDRO. I think you are faced with such a situation. Taking the plan's perspective, if the QDRO is styled as applicable to an alternate payee who is a spouse or former spouse of the participant, then the plan must distribute to the alternate payee and must not distribute to the alternate payee's lawyer (there are threads about that), or an agency, or any other designated payee. That is the end of the story for the plan, and the plan issues the Form 1099 to the AP (former spouse), who pays the taxes or rolls over the distribution. If the plan is styled as a QDRO with children of the participant as APs, then the plan can pay an agency representing the interests of the children, which is the same as paying some other legal representative of the minor(s). How the plan is to be convinced that the agency is the proper representative is another question, but plans should be entitled to rely on representations of government bodies concerning the state law applicable to the body and its functions and actions. If the distribution is to the agency as agent of the children APs, then the participant is the taxpayer. My comments about the plan paying only the former spouse AP under a QDRO applicable to the former spouse is based on applicable federal law, so no state authority can direct or advise the plan to pay the agency, rather than the spouse AP, based on state law.

Larry Starr has exceedingly high standards (or lack of imagination) for use of precise language in interpretation of posts, especially when jpod is posting. If removing the QDRO means issuing an order that effectively cancels the QDRO so you can substitute some other arrangement, yes, the Master probably can do that, subject to state law. And that is what needs to be done to clear the decks for any alternative, such as the IRA route.

Controlled groups know no international boundaries. Back in the 80s when we thought the Japanese were going to own us, some Japanese companies got into trouble because they did not recognize the controlled group relationships relating to US subsidiaries, which were in different businesses and in different parts of the country, and had no domestic relationships with each other. However, that high level response is not the only consideration for your question relation to U.S. foreign affiliates and employment of U.S. citizens.

Appears to me that the Board approved a written document -- that one. What did I miss? Does "signed/adopted" not include adopted? Is "that document" a hologram, not reduced to writing?

ESOP Guy is correct for practical purposes. If paid, some of "the attorneys on this forum" might have some interesting things to say about adopting the plan vs. signing the plan document.

A general recommendation is to file a tax return any time you have any income whether or not you would have any tax liability. The 401(k) plan will report the distribution, all the more reason to file a return. The IRS computers will be looking to match reported income with a tax return. Also, if the withdrawal is an eligible rollover distribution, which it probably is, the plan will withhold and you cannot waive the withholding. If you have no tax liability, you will have to file a return to get the refund of the amount withheld. If you have ever filed a tax return, some would say keep filing even if there is no income. At least until the year after the year you die. Somebody might explain avoidance of the mandatory withholding by use of rollover to an IRA, but not I.

The mortgage interest is materially different from the undivided interest both legally and economically. For example, acquiring the spouse’s interest results in the purchaser acquiring the entire property interest that the purchaser does not already own himself and divesting the spouse completely. Also, the spouse’s interest is a fee interest, the mortgage interest is not, so it is not accurate to describe a mortgage payment as [re]purchasing that part of the house. The analogy is not meaningful so the purchase rule informs nothing about the mortgage payment rule.

I think this has been addressed on this board before, and with reference to informal IRS guidance. I do not think a DRO is necessarily “the way to go” even though it could be achieved that way.