QDROphile

For example, if the SPD (or other communication) says that each year each partner will determine the partner's profit sharing contribution for the year, that would be of concern unless the IRS has abdicated, which it pretty much has. The decision about contributions has to at least have the appearance of being made at the entity level, not at the individual level.

So that is what is meant when plan terms use "prime" without any other modifier or explanation?

Please identify the definition of "Prime"

A plan can be designed to do this. Although the client is probably not acting rationally or intelligently, is it your job to change the "desired" design? A thread in the last week revealed all of the authority on the subject, including preamble to the section 415 regulations and an article from the IRS Employee benefits news.

Indica of ownership in U.S. requirement?

Some professionals are bound by ethical code or other requirements for confidentiality about what is learned in an interview with the prospect of engagement. If you have no duty of confidentiality, you might be interested in a whistleblower award. A Google search will take you to the information on the IRS website.

The argument by the lawyer that the answer based on the specified dollar deferral does not dispose of the issue shows that the lawyer is not only not knowledgeable, the lawyer is a weak thinker. Criticism of the lawyer's ethics is a possibility, depending on the circumstances.

As for not getting caught, what about the employer's reporting requirement? Fraud is a very nasty prospect and does not have a three-year statute.

How can something that is impossible taint the IRA just because some incorrect words appeared in the paperwork? A paperwork correction to reflect what happened, and the only thing that could have happened, is not a problem. The IRA might have a problem if it were somehow actually operated (meaning distributions, mainly) in a way that would have been improper for an IRA of the husband.

You might get some traction on a cut off under VCP, but SCP guidance does not support a cut off. SCP guidance is not the final answer under SCP, but we don't have much information about how tolerant the IRS is about deviation from the SCP guidance

ERISA and the tax code wouldn't like it and I don't think the circumstances fit the IRS concept of mistake of fact, which is a suggestion you will get. For income tax purposes I do not think the payees can walk away from the income -- this goes beyond constructive receipt to actual receipt. If the owners want to plow their pay back into the Company, they can do it, but on an after tax basis. They can give themselves a pay cut prospectively, but beware the rules under section 409A if they think they are deferring the pay to better times. I don't think any competent ERISA fiduciary who knows the facts as you tell them will part with the contribution money.

Mike Preston: True if (a) the company has no directors or executives that are not expected to function as fiduciaries and all directors and executives are aware that they have full fiduciary responsibility and attend to it, or (b) there are never assertions of substandard fiduciary performance. I suspect that a lot of (b) is responsible for your position. And to quibble with your wording, I agree that the plans do not suffer. The potential victims are the directors or executives who do not understand that they are fiduciaries with potential personal liability and fail to pay attention to the responsibilities that they fail to understand that they have. The corporate entity will not shield them from personal liability.

The total contribution is the responsibility of the Board. The allocation is the responsibility of the plan document. The Board can effectively determine the allocation by its control over plan terms (e.g. amendment), but otherwise should not get involved with the actual allocation of the contribution. It should limit its express action to the contribution. This thinking is driven in large part by the presumption that the company is not so stupid or ill-advised as to have the company be plan administrator. If you are looking for a legal reason, specific determination of allocation is an administrative/fiduciary function. Determination of the discretionary contribution is not a fiduciary function. The board should not want to be a fiduciary. If the board dabbles in fiduciary matters, the board will be a fiduciary and will not know how far the responsibility and potential liability goes once the fiduciary status is unconsciously established.

My 2 cents are the same as My 2 Cents. It pays to have a document with provisions that are understandable and comply with the law.

The domestic relations order can proceed and the outcome will be determined by the timing of delivery of the order to the plan and the timing of the events in the plan termination. The termination itself does not prevent the division of the benefit, but the termination may affect how the division is done and the options available. If the plan is liquidated before the order is delivered, the order may be thwarted. The participant may encounter some trouble in the state court if that happens.

1 & 2 Yes, but make sure the merger documentation provides for and describes the arrangements. Trustee B will hold Plan A assets (former Plan B assets) in trust under Trust A. Interesting question is whether or not to make this transparent to Trustee B and hope that Trustee B facilitates rather than obstructs.

To rephrase: the employer can authorize anyone to sign on behalf of the employer, and the plan administrator can authorize anyone to sign of behalf of the plan administrator, subject to any limits on the authority of the plan administrator to delegate or to appoint an agent or another fiduciary. Also, applicable authorization procedures must be followed. Service professionals usually do not sign as an agent because tax return documents are signed by the taxpayer under penalty of perjury.

Treating the "profit sharing" as a bonus subject to a special deferral election is the correct way to look at it.

I would be persuaded if 7.12.1.10 said it applied only to pension plans or did not apply to profit sharing plans. But expecting the IRS to draft well, especially in documents that may not be relied upon, is too much. I also am not impressed with any court decision in which the IRS tossed in the kitchen sink unless the decision reaches a specific ruling on the particular point and the court did not validate the IRS contention about the recurring contributions at all despite hitting on other reasons. I did not participate in setting up any 0% MPP plans. Maybe I just did not get the joke. I don't feel like any research on the subject. I will keep your concerns in mind the next time the issue is relevant.

Thank you for the reminder about the "qualified change" provisions that came out of the PPA. While refreshing my memory, I came across a lot of early discussions (circa 2007) about concerns about fiduciary liability with mapping under the "qualified change" standards. I guess I just filed the subject under "not preferred" and closed my mind on the subject until it was no longer a retrievable memory. The PPA provided the protections as you describe. For what it is worth, I still do not prefer it, but I think all the initial fuss was more an exercise in demonstration of the commentator's technical and analytic chops than a realistic assessment of any material risk of liability to a fiduciary that proceeded in good faith under the standards. Section 404(c ) has not provided a fertile ground for successful claims of fiduciary liability and I do not think that intelligent mapping is a material risk.

A participant makes an election with respect to a particular investment, such as a mutual fund, for which there is disclosures available. A participant does not make an election for a class of assets, a category of mutual funds, or "something like" the actual investment that the participant has chosen after careful research and review of the available disclosure materials. If the money is moved from an investment that the participant has chosen into something else that the participant has not chosen, then the investment is not directed by the participant. You can argue that the participant chose by negative implication -- not making an election after being informed what the outcome would be of the transaction, but I do not think that argument is a winner. However, that does not meant the fiduciary has liability; the core 404© protection is simply lost. That is what all the misplaced excitement over QDIAs is all about -- situations in which the participant does not make an affirmative choice of a specific investment and ends up in a fund, or another fund, not chosen except by default or design. As for a citation, it is all in the 404© and related regulations (now that the 404(a) regulations have absorbed a lot of 404© regulations). I should be challenging you to cite authority that the regulation about participant directed investments is satisfied when there is a move to some other investment that someone else has chosen and thinks is similar.

You are correct about the numbering. It is 7.12.1.x with x=9, 10, and 11. I think this comes out as a failure to have recurring contributions effectively causes a partial termination, with the most significant consequence being vesting for all at the point of the partial termination, whenever that is. It would certainly be if the plan were amended to provide for no more contributions. The plan could be maintained with a wasting trust, but the plan would be disqualified if the sponsor failed to maintain the document in compliance with formal requirements (e.g. amending to reflect changes in law) or applicable operational compliance. There would be few operational requirements other than to follow plan terms, including required distributions. The cessation of contributions, by itself, would not cause disqualification, and the freeze could be forever, subject to the required distribution rules.

Fair enough. How about a profit-sharing plan with no future contributions that has not been formally terminated, with a wasting trust, colloquially referred to as a frozen plan in Internal Revenue Manual, sections 17.12.1.9, 17.12.1.10, and 17.12.1.11?

An election does not carry over when investment options are removed or replaced in a plan.

First step of analysis: mapping drops the section 404© shield because the participant did not make the investment choice.