QDROphile

Well, pi is irrational and transcendental; that fits the Old Testament portrayal of God in some circles.

And unfortunately, the day another great physics figure died.

The timing and complexity of Larry Star's posts cause me to retract my reference to them. I still think CJ Allen's post about what data the plan should have to provide deserves a lot of consideration, but I agree with Larry Starr that the plan has no obligation to perform extraordinary data manipulation and calculation to determine an alternate payee's benefit in accordance with a formula in the order. The plan should perform simple math on data the plan has or should have in accordance with the order. Example: The plan should compute 50 percent of the December 31, 2015 participant balance if instructed by the order, but does not have to compute 50 percent of the balance as of November 3, 2014 and the earnings thereon through January 15, 2018.

A plan will probably get away with Larry Starr's position, but I think CJ Allen's position deserves a lot of consideration. However, any petition to the drafter to come up with a practical workaround the formal requirement should be informal.

Why can't a state court ever order the holder of a non-ERISA account/annuity to give up funds? A creditor can get a court to order a judgment debtor's bank to turn over funds in the bank account.

By the way, you have to take the position that available data or the ability to compute as required by terms of the order IS part of the legal criteria because only legal criteria allow disqualification of the order and the legal basis is that an order is not qualified if it requires the plan to do something that the plan is not designed to do (subsection of section 414(p) paraphrased).

If the plan has a record date cut-off or some standard that limits what the plan will accept (à la ESOP Guy's points), then it behooves the plan to have appropriate provisions in the written QDRO Procedures to set forth those standards. We all know that drafters of the orders first review the QDRO Procedures to understand the bounds so they can draft good orders. But really, it makes disqualifying the orders more comfortable when the orders do not follow what is stated in the Procedures.

What is the contract regarding record retention and production after the termination of regular services?? It is unlikely that the record keeper is a fiduciary, so its contract defines its duties. If the plan is stuck with inadequate records before a certain date, it needs to be advised about its duties with respect to domestic relations orders that have terms that "require" data or calculations that are beyond the resources or capability of the plan. Depending on what the plan's responsibilities are, the fiduciary may need advice about its liability for not adequately administering the plan in a manner that allows the plan to discharge its duties.

As much as it makes me gag to contemplate California joinders in any capacity, if the position (questionable as it may be) is that the plan is not subject to ERISA, then the joinder approach is effective. Of course, the state law has to provide for the joinder of the plan, otherwise it is not apparent how the court would have jurisdiction over the plan or whatever the provider's product is (account, annuity?). The court could stick it to the participant and order the participant to bring about the result contemplated by the order, and then the participant could hire Peter Gulia to deal with the provider or defend the participant with respect to the contempt order.

Interesting confluence of: 1. DOL does not understand QDROs, and 2. DOL is disingenuous about ability to maintain 403(b) plan outside of ERISA.

Well, Peter, employers have all sorts of reasons to have intelligent plan design, but fewer and fewer are willing to pay for the "free" plan they get based mostly on LRMs and questionable advice about what boxes to check.

May have problems with claims for payment/reimbursement of expenses under health plan or medical flexible spending account.

However, I don't get the "additional legislation" stuff and the whole marketing approach stinks.

How has the the sham divorce QDRO been shot down? Last I saw, the courts have said that the plan does not have to (and may not) look behind a state law proceeding as to the bona fides of the intent of the parties. Facts in cases included admitted remarriage after distribution from the plan. This is what plans would want, except for the airline DB plan that had unfortunate distribution alternatives that allowed the scam to seriously game the plan from an actuarial perspective.

The story about the former spouse stripping the retirement account after the disclosure of assets and before the presentation of the domestic relations order to the plan makes this a state law domestic relations matter and not a QDRO matter. The relevant question has been asked: How much would you have received but for the improper behavior? That has to be answered in the context of state domestic relations law, too. Specifically, what would a court award as a remedy for correcting the misbehavior the frustrated the order of the court? Would it be only the amount that should have been transferred absent the trick, or would it include more because of the expense of the follow-up efforts to enforce the intended order (e.g. the lawyer's fees)? The collectibility of whatever is awarded must also be considered -- the plan is out of the picture now. You need legal counsel to help you evaluate your prospects as well as pursue your rights under the divorce order.

I agree with Mojo, for what it is worth. Unless the plan, by its express terms, incorporates terms of the CBA, the plan stands alone and its terms control plan matters.

Joel: Almost every time I try to respond helpfully to your posts, I regret it. You know just enough to be dangerous and your attitude is always annoying, or worse. Read the responses carefully and then reframe your questions so they are not so insolent. You did not provide enough information to determine if the "after-tax plan" is a qualified plan. That point can be determined by you after inquiring elsewhere now that you have been provided with the question to ask. I think we can be relatively sure that it is not a Roth plan, as thoughtfully explained by Tom Poje, which is the basis of your first question. With respect to the rollover part of your question (and the off-putting presumptuous follow-up question), no one said that a distribution (if from a qualified plan) could not not be rolled over to a Roth IRA .

The disposition of a loan during the term is all about administration. The loan must be administered in accordance with its terms (including any permitted modification or replacement) and the terms of the plan, which includes the loan policy if the plan has a compliant written policy separate from plan terms).

Loves401(k) idea is a good one, and expand it to the general disclosure (SPD equivalent) of the after-tax plan. If you want to be more analytical, the first question would be whether or not the after-tax plan is a qualified plan. If not, no rollover. If so, then it is likely that the earnings on the contributions would be subject to taxation if rolled over to a Roth.

Are you saying that posting a single payment as multiple payments when due on respective future scheduled payment dates is proper or improper?

You have to look at the terms of the loan to determine the payment schedule (which must provide for at least quarterly payments), and, more important under the circumstances, the treatment of prepayments. Applying a prepayment to future amounts due as they become due is unusual, and perhaps improper for a 401(k) plan loan. I would not know what to do with the amounts not yet applied to the loan. More conventional is that the excess over the amount due reduces principal, which then shortens the payment schedule, but does not change the requirement to make a payment on the next scheduled payment date. If the loan terms treat a prepayment in the conventional way, the failure to make a payment on the next payment date (not more than a quarter after the January 2017 payment) is a default. Then check the terms concerning default. Allowing the loan to be "paid up" until April 2018 probably violated loan terms, no matter what the good intentions and apparent lack of harm or shortfall of payments. That is the likely problem, not a violation of the "at least quarterly" payment rule. That rule is for design of loan terms. The loan was probably designed properly.

I think the regulations relating to the transition in eligibility approaches speak to what happens to a person who has accrued service under the prior approach. I also recall the regulations are generous in the treatment of such persons. Be sure those regulations are understood and respected.

Mike Preston: One runs into this all the time. I think it is a questionable excuse. I advise clients to put the record keeper on notice that if the "inability" is successfully challenged the plan will look to the record keeper to be made whole.

You should be able to accommodate, but I understand that it may not be possible under whatever system you use. I recall that evil Fidelity will not accommodate, and Fidelity is not alone. If the system will not accommodate and you are bound by the system, then the plan administrator or other QDRO fiduciary should determine that the order is not qualified. Then the appropriate person (the QDRO fiduciary) should the QDRO Procedures (you did consult the QDRO Procedures, didn't you?) to deal with the phenomenon; there are several reasonable second-best options. The solution, other than the better solution of having a system that functions properly, is in the drafting of the domestic relations order, but most of the drafters out there are not sophisticated enough to achieve the result that is proposed in this case within the limits of the record keeping systems. I think it would be very interesting to pursue a claim that the plan is legally obligated to implement the terms that are vexing you, but the stakes are usually so low that such a pursuit is not economically feasible. The plan should be safe in determining the order is not qualified.

As long as it has not been executed. For example, if payment has been made or has started to the alternate payee pursuant to the QDRO the plan is unlikely to accept the new or modified order.