QDROphile

Check the statute. My interpretation (and that of a number of court decisions) of the provision to the effect that the AP may be treated as a surviving spouse to the extent provided in the QDRO is that in a DB plan with a QPSA, the AP must be expressly awarded some interest in the survivor annuity or the AP will get nothing if the AP does not start benefits (the 50% portion of the pension benefit described in the post) before the participant dies. One way to look at it is that the death benefit is a different benefit that the regular benefit. If the AP is not awarded some of the death benefit, the AP gets none. While the proposition is untested, I think that the plan can adopt QDRO procedures that have a default to cover the failure to include a provision addressing death benefits (which is legal malpractice). For example, the QDRO Procedures can provide that, absent terms in the contrary in the QDRO, the result of failure to specify the AP's interest in the QPSA will be as suggested by Calavera: the AP will get the death benefit associated with the portion of the regular benefit awarded to the AP. I do not recommend such a provision on the QDRO procedures. What can be argued on behalf of the AP is that the AP should be compensated for receiving nothing from the plan by the malpractice insurance carrier of the AP's lawyer who failed to assure that the AP did not get stiffed (pun intended) by the pre-retirement death of the participant, to the delight and benefit of the subsequent spouse.

Ranting is appropriate, certainly for this subject. You have license to rant and it does not need renewal..

A government plan is not subject to ERISA. No comment on whether or not the county can maintain a 403(b) plan. Generally governments cannot, except for education institutions. Perhaps there is a historical reason that allows the plan.

"makes no sense" is an extreme conclusion. You may say that it seems incongruous with the apparent principles underlying rules that apply to qualified plans. All of the tax rules are arbitrary at some level. We try to make sense of them by discerning patterns and paying attention of statements of intent by those who make the rules.

You should be looking deeper into whether or not the plan may refund amounts withheld for childcare rather than looking into how to refund. This is a difficult case to make for a refund. Based on the very few facts provided, I would not refund amounts withheld or discontinue the withholding. More facts might persuade me otherwise. The IRS informally has said that changing or reversing an election is permissible, but the bar is very high.

Recuse yourself, CuseFan.

"Is there any type of tax deduction/writeoff on the personal federal tax return for the withholding and contributions?" For conventional deferred compensation, no.

Mr. Ruegg: Please don't feel personally attacked because of the animosity that ERISA professionals have toward the California joinder law and procedures. The Department of Labor shares that animosity and unsuccessfully attempted to have it invalidated as preempted by ERISA (biting my tongue on the behavior of the courts of the sovereign nation of California*). I would appreciate it if you would explain how it is that the law only applies to government plans and those plans that embrace it. The forms and the statute (at my last reading years ago) do not suggest that limitation and I do not think the DOL would have taken such extraordinary action if the limitation truly applies as you stated. ERISA does not apply to governmental plans and the DOL objects to pre-empted laws only because the attempt to make plan do what plans are not otherwise required by ERISA to do (e.g. those laws that try to dictate who the appropriate beneficiary is despite plan terms and procedures). If a plan chose to go wacko and submit to local courts and follow the mandates of the law, I do not think the DOL would bother with that exercise of bad judgment. In fact, the substance and purpose of the joinder law (preservation of the benefit until the judicial proceeding can resolve the interests of the parties) can be reconciled with ERISA if a little creativity is applied, but the plans should not have to contort themselves and go through a stupid paper chase to accommodate somebody's uninformed notion of a nifty procedure that facilitates practice of law by filling in forms. *Ironically, the Ninth Circuit has produced some of the most credible rulings on interesting QDRO issues.

Hooray for efforts to improve anything relating to joinders, but the only reasonable thing to do with the travesty of that California Law is to get rid of the whole concept altogether, as suggested by the previous comments. But then the California divorce bar would have to learn how to use the federal law effectively. I apologize for not reading the materials to provide constructive comments, but I do not care about the color of the lipstick on the pig.

Your post lacks important details, but it sounds like you are dealing with a defined benefit pension plan and your former spouse is a participant who died after the entry of a divorce decree but before a domestic relations order was submitted to the plan. The post does not say if a draft domestic relations order was submitted or you are operating based on comments from the plan. Unfortunately your circumstances are legally very complex. Because the Department of Labor did not do its job to issue clarifying regulations, there is much uncertainty about what can be done to assign benefits to you at this stage (both under state law and federal law). The complication involves the death of the participant and features found in most defined benefit benefit plans to limit post death payments to whatever the plan provides for a death benefit, and only if some portion of the death benefit is expressly awarded to the alternate payee. Unfortunately, you not only need someone who understands QDROs, you need someone who is better than the average bear in these matters, especially because the plan is like to be confused or resistant.

A cautious person would check the plan document to determine if the document provides for one or two plans. The prevailing practice is to treat the ESOP as part of a profit sharing plan, as allowed by a regulation under IRC section 4975, but that is not required. One clue, assuming matters are handled properly, is the filing of Form 5500. A single plan will file one. If the document covers two plans, two forms must be filed.

"These" $10,000 have to be replaced with some "real" dollars, which is the economic equivalent of paying the loan before the distribution. If the question includes the proposition that the debt be maintained in the recipient arrangement, the answer is different.

The QDRO procedures should cover the circumstances expressly and give you the answer. I would advise that the QDRO procedures of a plan that only has a death benefit for a spouse (a QPSA) should provide that for a "separate interest" QDRO (for those who presume to use that term, correctly or not), the pre-distribution death of the alternate payee extinguishes the interest and the participant's former interest (what was assigned to the AP) is not restored. If the QDRO procedures are incompetent and fail to address, I would advise the same result by interpretation and by application of the statutory language (more on that below). If the plan provides for a death benefit that is not restricted to a spouse of the participant, then the answer is not so clear, and neither is the law. It is even more important for the QDRO procedures to cover the circumstances and for the fiduciary not to approve a sorely ambiguous QDRO (as the post describes -that "separate interest" language is trouble). One can argue that the accepted (shame on the fiduciary) language means that the AP's interest included the related death benefit, so the AP's beneficiary (and who is that?) gets the related death benefit. Personally, I see in the statute lots of language about the need for express award of death benefits in order for an effective assignment of death benefits, as though there is a presumption against the implicit award of death benefits under any circumstance.

With respect to the prohibited transaction issue, the timing requirements relate to separation from the employer's assets and delivery to the trust. Credit to individual accounts is not involved. I will let others speak to the plan disqualification and contract issues (not administering the plan in accordance with its terms).

You may be conflating tax concepts with corporate concepts. Stock ownership is stock ownership; ownership is changed by acquisition/sale of the stock. A tax election does not change ownership, but it may change the tax consequences of ownership. Tacking is an ownership concept that treats changes in form (e.g. ownership of an option changed to ownership of a share by exercise of the option) or title as continuity of ownership (e.g. beneficial ownership changed to legal ownership by distribution of stock from a trust to a beneficiary of the trust).

No problem if there is only an error to correct in the reporting. If in fact the the total deferral is greater than the limit (because the W-2 is correct in its description of what happened in payroll), then there is a protocol for correction. Depart from it at your peril.

Are you seeking information about the applicable rules that make such arrangements unusual (because of limited value or viability) in plans, or are you expecting a blueprint for implementation? I suggest you get an understanding of the former before wasting your time on the latter. Sorry, but "I have read online" is an invitation to skepticism.

"How does the Plan Administrator control what the person does with the money after it leaves the plan?" If the plan has conditions for the loan, then the proceeds should be distributed in the same way as for hardships. The payee of the check should be the person to be satisfied. In this case, the check should have been made payable to the tax authority. The plan administrator stopped short of making sure the plan terms were carried out faithfully

How could the proceeds of the first distribution not have been used for the intended purpose? Sounds like bad administrative practices at best. Now the plan administrator is required to interpret and evaluate the circumstances. A conclusion would require a lot more than reading these posts, but one conclusion could be that the distribution was issued for those expenses, so those expenses cannot serve to justify another distribution. And the distribution practices need attention to comport better with the plan provisions.

The premium payment can reduce taxable income outside of a section 125 arrangement, but such arrangements are unusual. It the employer has an unusual arrangement, the employer should be able to tell you, but employers are often clueless, especially a few years after adoption. GMK's suggestion to check the W-2 presentation probably would resolve the questions.

Clarification about the health premium is required because the 25 percent could be a mandatory payment that is a compensation reduction rather than a payroll deduction. It is more likely an after-tax deduction as GMK describes because health coverage choices are usually offered under a section 125 arrangement. The employer may also be mistaken about the appropriate tax treatment of the deduction, so the arrangement may have to be evaluated independently based on the facts rather than from the employer's conclusory statement.

Partial answer: Under 457(f), the amount vests and is taxable on the date that the risk of fofeiture lapses, which is August 31. The IRS recently came out with guidance about extending the date for risk of forfeiture. Track that down. You may find that it is too late to elect an extension, even under the new guidance.

Whatever the plan and related policies say. The matter is strictly contractual, assuming that the plan is subject to ERISA ("not subject to DOL ERISA rules" does not mean suject to ERISA) or not a government plan. A government plan would be subject to state law.

A domestic relations order can qualify if it limits the AP's choices of form of benefit. An order will not qualify if it provides for a form of benefit that is not offered by the plan. A defined benefit plan offers a J&S annuity with respect to the spouse of the payee (generally, the participant). The statute cited by Mr. Rugby is a special rule that allows a DB plan to disallow a J&S annuity to an AP despite the statutory requirement to offer a QJSA form of benefit for reasons alluded to by Mr. Rigby. If a DB plan offers a J&S annuity beyond the statutory requirement, the order can still limit the form of benefit to the AP. A lot of orders are thoughtlessly drafted with the statutory language regurgitated by the incompetent drafter, usually the AP's lawyer. So be it; that is the AP's problem and the plan would prefer to pay the AP in a form other than a J&S annuity in any event.

See what the plan document of the non-W-2 employer says about leased employees. The W-2 employer has some plan reading to do as well.