QDROphile

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"

We have a special defintion of what compensation will be charged for elective deferrals in EVERY plan where we can convince a client to do it. Among other things we do it for clarity of communication. If a particpant is electing some percentage of compensation, you want the participant to have the "correct" compensation in mind for the sake of carrying out the partcipant's intent and avoiding surprises. For most particpants, the compensation they have in mind is regular salary/wages (and overtime) and bonuses, so the next question is whether or not to have a special election for bonuses. If the definition is bigger, and includes non-cash amounts, the take home pay is smaller than anticipated and that is the type of surprise that draws ire.

Paid out? How much more confusion could be created? The arrangement and disclosure appear to be a disaster. It is bad enough with the health plan elections, which are annual elections. Are the 401(k) elections annual? I do not see how this can make any sense to the poor particpants if the election rate can be changed during the year.

Which part is ridculous? My vote goes to this: "the original plan was to merge the two together with the added step of first paying out everyone who otherwise would be ineligible for a distribution in the event of a merger"

Do the participants know which 24 pay periods will have a reduction? Is the election annual?

Possibly regulation section 1.409A-2(a)(5).

The summary plan description of your plan will describe when distributions can be made from the plan. You must have a distribution to be able to roll over funds. At age 30 it is unlikely that you will be eligible for a distribution if you are still employed by the plan sponsor. Thank cold, thoughtless, and cowardly reaction to section 404© of ERISA for you investment complaints. Or look closer to home.

Thank you for the correction.

" I think it's reasonable to take the position that none of the premium is taxable." Despite the logic, I think the position is aggressive.

The 20% withholding applies only eligible rollover distributions, not to distributions to nonspouse beneficiaries. If state tax law says withholding is required, then withholding is required. Most states have rules parallel to federal rules.

Is all this wheely necessary to respond to the question?

Multiple employer 401(k) plans have securities law issues that are relatively obscure (but potentially devastating), so they are usually overlooked or disregarded. But even becoming a scofflaw should be undertaken advisedly.

What you describe is feasible if everything is designed and documented correctly. However, it can get uncomfortable, such as the circumstnaces you describe when some serious thinking needs to be done about managing the investment (e.g. how long to wait to foreclose or whether or not it is worth it to spend enforcement money based on prospects of recovery. Also, a very watchful eye is needed with respect to prohibited transactions. Then there is the valaution issue. This is not for the unshophisticated or the timid.

Fidelity has the attributes of a 900 pound gorilla except for the understanding and respect for ERISA rules, to which it applies the attributes of a hookworm. The only way to deal with Fildeiltiy is to fire it. And given the trouble the plan has now had with Fidelity's faliure to assume its proper role and Fidelity's interference with the fiduciary, the fidcuciary must at least consider firing Fidelity to avoid a breach of fiduciary duty. The fidcuciary cannot allow a service provider to interfere with the fiduciary's judgment.