QDROphile

Fiduciaries get in trouble when they venture beyond established duties and plan terms to "help" participants.

For the once and future king?

The various benefits can be provided, subject to terms of insurance policies and other contracts, but the tax consequences are likely to be different and administration of benefits generally will be complicated by the addition. The organization must be particularly cautious about retirement-type benefits. There is some possibility of state insurance law concerns, depending on the benefit and how it is provided.

With respect to cafeteria plans, in which the stakes are higher because elections cover the entire year, the IRS has informally commented that a mistaken election can be corrected. That leads to a lot of discussion about how it is determined that an election is truly mistaken and the IRS assertion that a mistaken understanding of the tax effect of the election is not the kind of mistake that would be eligible for correction. Because of that assertion and the more limited scope of the "mistake" (only one pay period, then the election can be changed under normal procedures depending on plan terms), I would not get into the mess of looking behind the surface of the election paperwork and into the mind of the participant. The matter is not important enough for the plan to go out on a limb. I am unaware of any reliable authority that would allow recharacterization of the election or "refund" of the deferral.

This thread illustrates why it is not a good idea to have the corporate plan sponsor be the plan administrator. The Department of Labor can assert that every individual director and executive officer is a fiduciary personally based on the formal identification of the plan sponsor plan administrator, and it has done so. In the end, the argument that there is a very clear and well defined (by practice) limited number of persons who are the functional fiduciaries will probably control the personal liability questions, but it will be rather uncomfortable for those poor formal fiduciaries to suffer through the process with the liability cloud over their heads and the outcome is uncertain.

With respect to deposit of elective deferrals, the Department of labor view is the the plan administrator, or some other fiduciary, is responsible for receipt because the amounts become plan assets at some time and the fiduciary is responsible for the management of plan assets. To use what jpod posted, the fiduciary has a duty to make sure that the plan receives its assets. That does not mean liability for a late deposit unless the fiduciary breaches its duty either by not paying attention or by failing to take appropriate action if the deposits are not received timely (including an appropriate correction if the deposit is late).

OK to amend as you describe.

Has the plan filed Form 5500 in the past? Why not ask the vendor to explain its statement?

How does one change the plan sponsor if not by restatement or amendment? A restatement is an amendment, but not every amendment is a restatement.

The plan document should say that the sponsor may elect to cover administrative costs. Sometimes the sponsor is required to cover certain admimistrative costs.

Plans can have a safe harbor definition of compensation that excludes taxable fringe benefits. That DOES depend on plan language and I am glad to have the opportunity to clarify my statement that plan language does not matter for income tax purposes.

The plan document has nothing to do with the income tax treatment to an employee of employer-provided health benefits to a domestic partner. Marital status and dependent status determine the tax treatment. Domestic partners are not spouses unless the state has converted registered domestic partnerships to marriage. Check out Washington -- I do not think the conversions are effective yet.

I may have seriously underestimated the understandings and arrangements described in the post.

The original message also said that each of them has their own 401(k) plan, presumably as employees of the S corporation. Then it goes on about 401(k) plans in a partnership context and uses the term "partner" to apply to each of the employees of the S corporation. Who knows the actual circumstances? I only know that the correct assessment and advice cannot come from the message boards.

Employees cannot maintain personal 401(k) plans with respect to their W-2 income. You should also get acquainted with section 401© of the tax code. A partnership is the "employer" of an individual who has self-employment income, and the individual is an "employee." You probably need to buy some competent professional advice to find some compliant arrangements for yourself and others.

I know no secrets. The IRS let the horse out of the barn with its inattention to execution of new comparability and appears to have given up the chase. However a blatant pie in the face, with no attempt at illusion or formality, might get exceptional enforcement.

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.