QDROphile

If you think you are going to set up the plan so it will not be an ERISA plan, you need to do so advisedly. Notwithstanding the prevarications of the Department of Labor about its positions about what triggers ERISA, I think it is rare or impossible to have a non-ERISA 403(b) plan unless it is exempt under the government or church exemptions.

It would help if you stated why you want to switch to a 403(b) plan, other than someone is trying to sell you on one. Otherwise you are asking people to speculate about advantages relative to your circumstances. In particular, please state if the employer intends to provide nonelective contributions and if the employer intends to exclude anyone from participation.

I have no illusions about the company I keep. I did not comment on the substance of the product itself. I offered only literary criticism. It is credit insurance. Not my interest or expertise.

"involuntary job loss" is not limited to involuntary death or disability in the description. Face it: the description is hilarious (and perhaps ironic -- I would have to check with my teenager about irony) for a self-styled advocate of clarity.

But if the loan is paid timely, there are no taxes. If the loan is not paid timely, there is "leakage of retirement assets" that is not prevented. My point is that for something that "advocates" clarity of disclosure, the description of what the product does, and when, is confusing. If they cannot disclose the product up to their standard of clarity, one wonders about the standards. On the other hand, this is the hallmark of marketing insurance financial products. The less the customer understands about the insurance, the better for the commissioned seller. Got insurance in your 401(k) plan?

The description of the product that "advocates" for "clearer disclosure" is confusing to me. If the loan is repaid because of the product, what are "the associated taxes, penalties and *** unrealized interest"?

At what point do you violate the requirement for determinable allocation provisions?

This is a question of risk and the behavior and signals of administration either enhancing the risk or minimizing the risk that the IRS would go after the arrangement as a CODA and the success that the IRS might have. The consensus of greed is that the arrangements are safe enough to pursue and the question is how much acrobatics one wants for disguise or minimization of outside attention, if any.

Kosher or not, we advise not to hold life insurance in a qualified plan. Those who have experience in doing so may comment on the compliance issues, but starting out with so much insurance is a separate concern.

I doubt it is the custodian's job to investigate and make determinations about taxability in extraordinary circumstances. I doubt the custodian will do anything other than report the distribution as any other distribution and you probably have to explain your position on your tax return.

I do not think it is a grey area. I have had the IRS rule on it indirectly. I was not asking about the issue because I took that element for granted. So did the IRS. The transaction is no different from any other spinoff/merger except that plan terms automate it rather than treat it transaction by transaction.

Andrew Z: I was focused only on the transfer part itself. I agree that there is little reason to maintain two plans under the circumstances. There is some odd trick to disaggregation that I have forgotten, but it does not matter in most situations. Mandatory transfer is permitted, and the transfer itself is not a big deal. I would have words with the recordkeeper.

What makes the arrangement overly complex and expensive? And can you quantify the expense to provide a frame of reference?

And it is a rather unenlightened way to treat employees.

Not acceptable under a well-designed ERISA plan.

If the plan says that on death of the participant, benefits are paid to the beneficiary, it seems like the post-death distribution was mistakenly paid. Then the plan says how and when benefits payable to the beneficiary are to be paid.

From Devil's Dictionary by Ambrose Bierce: "Cynic, n. A blackguard whose faulty vision sees things as they are, not as they ought to be. *** "

This is a legally and factually complex question that cannot be adequately addressed in this forum. Maybe it is, maybe it is not. If the individual has a compelling reason to disclose/disparage and is afraid of the contract, then personal legal advice is needed.

Please provide the authority for your statements and explain when filing is not necessary with respect to earned income. I cannot tell for sure, but it appears that you are confusing the obligations of the payer and the payee. The free pass you give on a "coupe of thousand dollars" is very suspicious. While it is true that earned income may not ultimately be taxable for some reason, contribution to a Roth IRA requires earned income and cannot exceed earned income. If one is going to assert receipt of earned income (by contributing to a Roth IRA), it is certainly best practice to report the income, even if the income tax liability is zero. A schedule SE (for SECA taxes) must be submitted if self-employment income exceeds $400. Contributing to a Roth IRA may get you an audit if tax returns are not filed. An audit is no fun, especially if one has no records, even if there are exceptions to filing because the income is below the filing threshold.

For defined contribution plans, plan-to-plan transfers often work well, but have implications that should be understood before undertaking them. Both plan documents must have appropriate provisions for the transfers. In-service distribution and direct rollover work if in-service distribution is allowed. The participant has to elect the distribution. Your post implies that the employee wishes to move everything to the other plan.

Nothing legally wrong with the employer loaning the funds to the former participant for payment of the plan loan to avoid the adverse consequences of alternatives. It is not a good idea in general to have employees or former employees as debtors.

Installment period cannot exceed 5 years. What you describe is defensible, if not generally accepted. A devil is in the operation (other demons are in ESOPs in general , but they were installed by the creator). The changes, which are amendments, cannot be discriminatory.

Allowed, not uncommon.

I agree with Kevin C but I also acknowledge that there is disagreement. I also think that there is no such thing as a nonERISA 403(b) plan except government and church plans. The DOL is disingenuous about its positions over time and its current position is a laugh.

If you want certainty you are going to have to go the VCP route. That should not be any problem. The IRS allows retroactive amendment of failure to adopt all the time. If you want certainty, you have a new thing to worry about. Multiple employer 401(k) plans have an issue with the securities registration exemption that covers single employer plans and plans without elective contributions. I think that if the participating employers have material common ownership, although not at a level that allows a single employer plan, the exemption applies. But we have no authority that gives a definitive answer. And no one seems to care.