QDROphile

This is a demonstration of the Department of Labor's zeal exceeding its intelligence and knowledge of the law.

I am not so sure about past compliance with section 457(b) (1), but that concern suggests that a spin off of the B portion of the plan should include former B employees to emphasize that B was maintaining the plan for its employees.. Also, for feasibility and efficiency of administration, assets are usually good; many service providers have minimum asset requirements or use assets as a factor in determining fees. No comment about state law, except that state law governs because there is no preemption and government entities are entities of limited powers.

Is B eligible and authorized to maintain a governmental 457(b) plan? Apologies if the question seems to be an insult to your analysis, but fundamentals are sometimes overlooked. The question has both a federal law and a state law aspect.

You will need a heap of advice about what life will be like after implementation in order to decide if this is the best course to follow, and that advice will involve understanding of your circumstances. You may get encouragement or discouragement here, but you will not be able to make a good decision about proceeding from the comments. You probably already know that the most common pattern is to freeze everyone in the DB plan and total migration to the DC Plan. There are reasons for that.

The new plan does not necessarily have a problem based on what you report. Neitehr does the transferor plan. A loan program is not necessary to maintain transferred loans, but some refinements to the new plan's terms would be appropriate. Opinions differ about maintaining Roth accounts in a plan when Roth contributions are not allowed. The documentation of the transfer may have been rough and in need of refinement, but don't jump to the conclusion that a disqualifying violation has occurred.

BG5150: I have never had a client follow that good advice.

There is a difference between a record keeper not having any responsibility and a record keeper doing what it is told to do if given specific instructions about what to do by the plan administrator. When the plan administrator figures out what to do under the circumstances, then it should direct the reord keeper what to do (if the action is within the reocord keeper's functions). By refusing to follow the instructions of the plan administrator with respect to a matter within the plan administrator's authority, the record keeper is making itself a fiduciary and then it will have responsibility and potential liability.

You need to know what documentation went along with the change. The plan could have merged into the corporate office plan or the plan could have continued with a different sponsor, or somethng else. All would have different reporting requirements, but none seem to allow a final Form 5500 as of the end of 2013.

What about helping clients achieve legitimate desired goals within acceptable tolerances of risk and uncertainty? Not batting an eyelash is rather conclusive (rather than explanatory) with respect to a controversial subject, but it communicates a judgment about risk.

Contributions are tested based on the plan year. An allocated mid-year contribution contribution could fail because of distortions in the remainder of the year, as you have illustrated. You might consider a contribution mid year that is not allocated until the end of the year based on compensationfor the year, but that allocation would not correspond to the employer wish to provide a particular contribution to the employees as of the closing because of the distortions occurring in the year after the closing.

Generally when you merge plans, the survivor inherits the historical problems.

Ater reading the chart, your next question may be "Can a qualified plan have a Designated Roth Account if it does not allow designated Roth contributions?" If you follow the link in the chart you will learn this about Deisgnated Roth Accounts: "A designated Roth account is a separate account in a 401(k), 403(b) or governmental 457(b) plan that holds designated Roth contributions. Designated Roth contributions are elective deferrals that the participant elects to include in gross income. The plan must keep separate accounting records for all contributions, gains and losses in the designated Roth account." Not a perfectly clear answer. Are the designated Roth contributions that are held by the plan the plan's own contributions or is it enough that the rollover is designated Roth contributions of another plan? I think a plan can have a designated Roth account solely for the purpose of holding Roth rollovers, but I am not sure and the IRS chart and its links do not directly address the question.

The plan reports a distribution on Form 1099-R and the trust records show no Kruggerands or silver dollars after the distribution. How the plan arrives at a value to report for the tangible assets is a different question, which you seem to anticipate by mentioning an appraisal. I assume the Kruggerands are grandfathered so they are legal assets.

If the the plan had set things up correctly (cut off my legs and call me Shorty if it did) the plan would have an assignement of pay and would be able to instruct the employer to deduct amounts due and overdue at any time the employee is paid. The plan may have other remedies that efectively allow the plan to grab more than an installment's worth of dollars from a payment. As it is, the repayment arrangement is a contract that must be respected or renegotiated, and I doubt the the employer has anything to do with extraordinary actions. If the employer is the plan administrator or loan administrator, the employer would have the rights of the administrator, but in its capacity as administrator, not employer. The employer, as employer, simply follows the terms of the payroll deduction authorization. The employee can authorize special deductions for the sake of avoiding consequences of default.

There are no unspent FSA funds. There may be a difference between salary reduction amounts and the amounts of benefits paid. That difference is reflected in the general assets of the employer. For a healthcare FSA, the difference could be positive or negative.

4. Doesn't this situation point out that the loan terms are bogus? If 2% was a legitimate rate, 1% is not, so you can't amend to legitimize 1%. If 1% is a legitmate rarte, then 2% is not and the loan terms are bad.

One issue for consideration is granting of past service credit. That is typically a matter within the employer's authority. That point should have been negotiated as part of the terms of the purchase. Questions relating to rollover of plan loans are probably within the plan administrator's authority, not the employer's authority.

This sounds exactly like the legitimate reasons and circumstances for forbidding mid-year amendment. However, you might think about the rules relating to mid-year cessation of safe-harbor contributions and if compliance with those rules for the spin-off might work.

I have not enough empirical or anecdotal information to answer, but I don't think it matters.

Whose interests do you represent? From the perspective of the manager, who would not like to conclude that a prohibited transaction occurred, I think someone who has appropriate skills and knowlege should analyze the events. From the sketchy facts presented, I can narrate to a conclusion that the IRA simply distributed Stock A to the manager. The distribution is taxable, and may involve an early distribution penalty, but there is no prohibited transaction.

TPAs should not do anything extraordinary except at the direction of the plan administrator. As for what was done, how would you have corrected an excess distribution? Guidance under EPCRS says to request return of the excess.

Be careful about your plan for rollovers, Rollovers can occur only in connection with a distribution. The change of employment to the for-profit subsidiary may not be an event that enables distribution.

IRC section 3405© plus 402(c )(11) via 402(f)(2). You have to connect the dots. http://www.irs.gov/Individuals/International-Taxpayers/Pensions-and-Annuity-Withholding

The plan provision should be reconsidered. I advise clients that it creates hardship on the executives not to have the deferred comp benefit in play in a divorce. Perhaps the decision about assignement provision was not given enough thought. It sounds good just to say no without full consideration and understanding. Also, before the revenue rulings in 2002 and 2004, there was a lot of uncertainty about allowing a split in a divorce, so the habit was to forbid. Some minds never opened up.

The question was not, "did the plan allow a second loan." Is it proper under the standards for issuing loans to loan funds to an employee on unpaid leave? Hint: A loan is not proper if the fiduciary does not have a reasonable expectation of repayment. One fact is helpful. The default did not occur before the secon loan origination. I think some unusual analysis is required to a justify a loan during an unpaid leave. A commercial lender would treat a loan to someone without current compensation as an unusual case. But I am not responding to your question, so don't feel as though you have to enage on this issue.