QDROphile

MoJo: Please discuss any authority you have for the statement below. I was under the impression that the plan fiduciary has an obligation to choose and IRA that is reasonable at the time of initiation, which includes reasonable fees. Even reasonable fees can eat up a low balance, given that permitted investments include low interest rate options, but IRA maintenance fees are generally quite low. I think it is an overstatement that the plan fiduciary has no responsibility "Fees taken by the IRA custodian are NOT the responsibility of the plan fiduciaries."

Another approach is to require that a fixed payment award be distributed immediately. The available balance is known at the time of qualification and the AP's amount is segregated and liquidated for distribution. If the balance is insufficient, the order is not qualified. This approach is necessary when dealing with the FIdelitys of the world, plus you have to invest the liquidated amount in a money market fund and ultimately distribute the wrong amount to the AP (at least it is wrong by excess, and not by much). Thanks again, Fidelity.

IRC 414(p) (3)(B)

The plan adminsistrator is responsible for interpreting and the plan's QDRO Procedures should address the circumstances, but they won't. Asking what was intended is asking for trouble. There is nothing wrong with strictly follwing the terms of the order and distributing the amount specified. After the 2008, we saw plenty of QDROs that were quite clear that they did not want earnings adjustments. They were avoiding the real possibility of losses.

Multiple employer 401(k) plans are not exempt from reigistration under section 3(a)(2) of the Securities Act and are not exempt from the Investment Company Act (I recall that 3(c )(11) is the usual exemption, but don't rely on that).

Yes, in accordance with appropriate plan terms.

If by "diversified investment menu" you imply participant direction of investment, I would assert that the absence is not adverse to the interests of beneficiaries. It is certainly not required by ERISA, if one looks that direction for guidance or wisdom. It is well documented that individual participant investment direction results on average in significant underperformance of the portfolio. If you mean that a common stock portfolio cannot be operated solely in the interests of beneficiaries, you need to make an argument for the position rather than issue dares.

In-service distribution provisions may be added at any time, subject to the controversy over permissible mid-year amendment of safe-harbor plans. It is possible that the amendment would violate section 401(a)(4), but unlikely if the amendment is maintained even if instituted because of the desires of HCEs. As observed by My 2 Cents, the terms of the provisions must be compliant with rules relating to in-service distribution, but you were asking about timing.

The termination will not be respected as a termination for puposes of distribution. That makes your other questions moot.

Have all expenses been incurred and paid? Final Form 5500?

The order should state how the payments should be made, but the plan can only pay an an alternate payee or agent. Typically a child support agency will assert that it is the agent, but sometimes not a lot of sophistication is demonstrated. Use the power of disqualification to make sure the order says what you need it to say. The particpant is responsible for the taxes, which makes withholding an intersting question. Smart QDRO procedures will require the order to speak to the question of withholding as a matter of detemining the amount to paid to the alternate payee. You can imagine some friction if the participant elected withholding at a very high rate.

Bravo!

Depends on the terms of the plan in effect in 2014. Were I in charge, I would presume no exclusion unless proven otherwise. Or maybe the SEP is invalid for failure to document if the liberal presumption does not save it. Pigs need to mind their Ps and curliques.

You might not call that a plan amendment, but it is. The participation agreement is a plan document. The "core" plan document has to say how an affiliated employer can particpate. If it says participation is by participation agreement, then the participation agreement is expressly a plan document. If the plan says nothing about a participation agreement, then the particpation agreement is ineffective to provide for participation unless you treat the participation agreement as a plan amendment.

Thank you for the clarification. In that situation, if the question were asked of the plan, the plan should respond that the question should be redirected because it is outside the scope of the plan's concerns and responsibilities. that goes back to the issuse of what is happeing under state domestic relations law and how the plan is not required to occupy itself with stat law matters. In almost any QDRO situation in which the plan is not required to attend to something, the plan would be well-advised to keep out of it.

Really? You asked that question and you haven't even seen the document that is the basis of the speculation? Where did you make this up from? Is anyone else feeling a bit put off by spending time to help with a question that is not even a real question? I don't mind so much a clear "what if" on an interesting legal point, but his one really bothers me because it the question is based completerly on imaginations that will be realized (or not) later and the question could have been asked later when it might have had some meaning.

Courts order a lot of things that one of the parties does not agree to. The question is whether or not the order is valid under state domestic relations law and the plan administrator does not have a duty to determine state domestic relations law. The plan administrator can accept the order on its face, so jpod's questions are determinative. If the order appears on its face that the execution by the participant is a condition of effectiveness, then signature is neccessary, otherwise not. A blank signature line in the form of order is not a provision that says that execution is required for the order to be effective. The presumption should be that if the order is issued, then it is effective. The participant can take appropriate action to suspend matters upon receipt of the notice of qualification if in fact participant consent was necessary for the order to be effective.

Assuming that you accurately described the corporate aspects of the transaction and that you did not omit any aspects of the plan transsactions, the money rolled into the new plan is rollover money. There is no meaningful concept of "related rollover money" or "unrelated rollover mioney" -- at least no valid concept that has general acceptance of those terms. The assumptions determine the conclusions, so if you are not completerly confident with the corprate aspects and understand how any diferences woudl affects the final conclusion, then you need to ask soem other questions, such as nature of the acquisiton (equity or asset sale) and timing of the termination of the original 401(k) plan.

"This is very helpful." Do you intend to advise the employee of a client about property division options in a divorce and the personal tax consequences that go along with them? I thought you were just reality-checking the incorrect suggestion about distributions to the AP because that is something you are involved in at the plan end. The plan and its advisers need to maintain appropriate boundaries. Curiosity has very different boundaries, and it can be helpful to see a greater context even if the knowlege is academic. Leave the poor employee to his ill-advised or misunderstood lawyer.

Never trust the Department of Labor with respect to any of its thinking about QDROs. It has an absolutely shameful record of incompetence and indolence. While the quoted text above is correct as far as it goes under the most conventional of circumstances, it would be incorrect in others. The "as if the alternate payee were the participant" is the problem. It fails to capture correctly the language in the statute. The Department of Labor seems to be unable to understad or imagine how plans actually operate or how they might be designed. As fat as this thread goes, it is irrelevant. Distributions to alternate payees are not required by law to be rolled over.

Thank you for providing the best available statements; reliance or not.

Please identify the statment(s) of the DOL to the effect that fees relating to a QDRO cannot be charged.

If the intention was not that the employer would advance funds for payment of plan expenses and then be repaid (a loan), then what was the intention? If the employer was just going to pay the expenses, and now opportunistically decides to recoup, then I think it would be a prohibited transaction. If the loan was intended, then it is a prohibited transaction (a loan), but it may be exempt under PTE 80-26 if the conditions are met. I imagine that one of the conditions is met: no interest charged. Also be aware of the role of the fiduciary in all this. There may be a nice breach of fiduciary duty to reckon with.

Become familiar with PTE 80-26.

I don't think the correction for the 10% person should be labeled "QNEC"