QDROphile

Any question about the propriety of originating a loan during the leave?

A qualified plan should allow a QDRO to be amended or superseded. This assumes pay status has not changed, state law allows, and documentation is competent.

You are assuming that any thought went into the choice of into the definition. If the plan is on a pre-approved document, my bet is unconsciouslness. Still, the words are there.

If you do not get a convincing answer to your question based on authority, the question becomes, "How does the plan administrator (or whoever has authority to interpret plan terms) interpret the plan provisions concerning compensation relating to options?" The express exclusion in the plan should inform the interpretation.

Who are the knaves in charge who did not elect to defer before the effective date, or elected a disproportionately smaller amount, and will go all-in after? And who are the chumps who overweighted early?

Whether or not a distribution is requested, a competent plan document would provide for an offset distribution after any cure period has expired. The balance of the loan at the time of the offset should be reported as a distribution on Form 1099. Other amounts will reported if other distributions occur in the same year.

Agree with rcline on paragraph 2. As a practical matter, Company B will probably not maintain the plan and will not want to maintain the loans if it maintains the plans, but legally the loans could be maintained in the B plan. Administration would be a pain. Company A could agree to a payroll feed to the B plan, but no one is going to go to such an effort.

Agree with mbozek, That is one of the elements that makes setting up the grantor trust account as a corpartae account of the employer (as far as the fund company is concened) feasible for tax purposes. There are some state statutes that recognize grantor tursts as separate for certain corporate purposes to allow, among other odd things, grantor trusts to hold shares of company stock (usually for nonqualified deferred compensation plans). In those states, there is no such thing as treasury stock and were it not for the special separate identity, the stock would revert to authorized but unissued shares.

Corporate account; trustee is the only individual authorized to provide instructions; the account effectively becomes the custodial account for the trustee. That is how it looks to the provider, except that the provider does not know anything about the trust. This is a way to use typical provider products to achieve the investment arrangements for the grantor trust. It would be nice to be able to register the authorized individual by name with ", Trustee" after the name, but that might throw off the provider. The trust agreement will describe the legal relationships and operaton of the trust. This arragnement can work. I do not recommend it. I am in jpod's camp about thei worth of grantor trusts. But if one just has to have a grantor trust, then get an institutional trustee that has a deferred compensation grantor trust product.

The corporation is in control as far as the account set-up, but under the account set-up, if authority is given only to the trustee as the corporate representative, then only the trustee can manipularte the account and the trustee is bound by the trust terms. I stil go back to, who do you trust?

Who is the individual relative to the organization? We are drfiting from your original question into some fundamentals that are often overlooked and not understood. A grantor trust is used for noqualifed deferred compensation, e.g. 457(b) plans of non-governmental nonprofit organizations, to prevent the organization from raiding the set-aside funds for organization purposes other than payment of the deferred compensation obligation. That is it. The organization still has the obligation to pay and the raid may be a breach, or set up a future breach, of the organization's obligation to pay (by being short of funds on the payment date). The participant will have to work hard to collect. A grantor trust is not good for any other purpose. It does not protect against creditors of the organization and the funds are funds of the organization. If the trustee is an organization employee or other agent, it is questionable if the trust even serves its limited purpose of preventing the organization from raiding the set-aside funds. If the organization wants to raid, what assurance is there that the interested trustee (employee of the organization) will not participate or facilitate? Who can you trust when the organization decides to act improperly? If one belives in the good faith of the organization, a grantor trust is unnecessary and the plan can be accommodated by a corporate account. If one is cynical, then one would go to a commercial trustee, who should be able to offer or arrange the appropriate accounts becuase that is the business of a commercial truatee. If you use an individual, interested or not, I think you should still be able to set up the account as a corporate account of the organization, but the individual would be the only authorized agent.

Check the EPCRS provisions relating to the minimum ($75 I recall) distribution (not necessary to correct if the cost of distribution excedds the distribution -- read it carefully). For a former employee with a very small amount, the correction would usually include a distribution, so that might save all the trouble. For current employees, the provision does not apply becuase there is not distribution as part of the correction.

Who is the trustee of the grantor trusts? Are you having trouble setting up the account under the name of the trustee?

Employer covered the cost of something for all employees as an employer expense mid-year. Employer decided late in the year not to take responsibility for determining that the expense was not taxable compensation and added the value (but no additionall actual dollars) to paychecks in the Christmas pay period. Withholding was based on the larger number (regular pay plus the imputed compensation), so the paycheck around Christmas time was lower than usual because of the greater withholding. I know you can say that there was no negaitve (assuming that the goody was taxable compensation) and it was only a matter of timing and apearance, but "negative Christmas bonus" is a much more provocative description. So do we have an equally inadequate explanation of a negative contribution?

And why do plans not have terms or QDRO procedures to provide a default features in the event that the order does not have an appropriate provision to cover the possibility?

Only if the negative contribution is a negative square root. What is a negative contribution? I have experienced a negative Christmas bonus, but until then I would not have thought it was possible..

The detailed analysis required to evaluate the situation and to determine the appropriate action, is beyond the scope of this forum, or at least beyond my limits.

The plan must be operated in accordance with its terms. The terms have to be carefully considered, and you may have to distinguish definitions of compensation that apply for compliance purposes with defintions that apply for admiistrative purposes, such as which sources of compensation may be charged with the deferral. If the terms exclude commissions (directly or by elimination), then no deferrals can be charged to commissions. If the plan terms are not very clear, a reasonable interpretation might apply that would include comissions in the source for deferrals even if the term "commission" is not used, but be sure that the interpretation is uniformly applied. If other commission payments for the participant or other participants have not been charged, then you have the same problem, other side of the coin.

Keep in mind that you cannot charge fees to terminated particpants as such. You can charge fees to participants, and the employer can pay the fees with respect to employees. That means the plan must have a real expenses that really get paid. The real expenses determine what can be charged.

If you are the TPA, then the guidance you need in the matter should come from the plan sponsor or the plan administrator.

If you do not have a plan document or written loan policy that covers the situatuation, fix it.

Why do you need to do anything other than report the facts and status? Are you the plan sponsor or plan administrator?

So the TPA has fidicuary responsibility for the travesty? Or the owners have separate authority to process distributions independent of the TPA?

With discretionary match, the big picture can be overlooked. The problem can be identified by reference to Gray's Anatomy, which will definitely show where the cranium should be relative to the rectum. Unfortunately, repositioning is only the first step toward an understanding that one should never even get to the question let alone to the point of requesting a citation for disposition of the question.Treas. Reg. section 1.401-(b)(1(ii) should be considered.

One way to look at the circumstances is that the employee participates at the first entry date with an election of zero unless another election is submitted (just like automatic enrollment would set the election at another level) and a new election can be submitted effective as soon a election changes can be made effective under the administrative rules of the plan. I cannot tell if that would be the "2nd payroll run" in your question. If election changes can be made effective each payroll period, then yes.