QDROphile

I thought the "loan interest is taxed twice" misconception had been laid to rest. Don't bother arguing. I am taking the same position about debate as Stephen Jay Gould did with evolution deniers. You can talk among yourselves.

I thought the "loan interest is taxed twice" misconception had been laid to rest. Don't bother arguing. I am taking the same position about debate as Stephen Jay Gould did with evolution deniers. You can talk among yourselves.

At some point an interest rate would be high enough to inspire the IRS to assert that the arrangement provided for disguised contributions. Goldilocks is a good role model and commercial lending rates (although there are no similar loans on the market -- some old posts go into this in detail) are the standard. The IRS is more likely to go after individual or small professional organization plans with respect to loan hijinks.

Welcome to the compliance club. It is very popular and appreciated, especially in an environment of noncompliance.

The plan document sucks. Ideally it would say that a participant may specify that all or a portion of a lump sum distribution will be directly rolled over. It has nothing to do with elective or nonelective accounts. The plan provides for lump sum distributions. To me, that means all account balances are distributed at once in "a lump sum." He cannot get a distribution of one source account and leave the other source account in the plan. Look at your document very closely again. If it does not prevent an interpretation that would be in line with the ideal plan terms, then interpret the plan that way. The service provider needs to be on board to handle payment of one portion of the lump sum distribution as a direct rollover and the other portion as a taxable distribution

Why associate "typically" with "bad idea"? A safe habor match with typically be made to the plan with the CODA (and therefore not typically made to another plan). There is less affinity between a nonelective contribution and a CODA, so when a safe harbor contribution is made to another plan, it will "typically" be a nonelective contribution. Sponsors with plans that have nonelective contributions may simply adjust them if necessary and use them as the safe harbor contribution to go with the CODA in the separate CODA plan. Sponsors "typically" do not have matches in a plan other than the CODA that is matched, so when they adjust the pre-existing match (if necessary) to achieve the safe harbor, the match stays in the same plan just as the nonelective safe harbor contribution stays in the same plan as before safe harbor. I read "typically" as empirical rather than qualitative. It is more about the statistical affinity of match and CODA than issues. But it never hurts to ask.

Even more important for hardship distributions ... .

You may be able to trace the plan through the annual Form 5500 that the plan files. The publicly available on-line records do not go back to 2001 but I think there are services that, for a fee, can retrieve the records and possibly could be more helpful in tracing the plan through various corporate and plan mergers because of familiarity with the information that a Form 5500 presents. See what Judy Diamond Associates does these days.

Why not repay the loan immediately? Is a new deal expected?

I think so, but I am not sure exactly what you want agreement about. I agree that if the employee has control over not providing addtional service (including by bad acts or nonperformance - "cause" for termination), there is not substantial risk of forfeture. I edited my first post to clarify.

If you are very sophisticated and appropriately cautious, you might consider the general doctrine of rescission. If you believe it applies under 409A, it might not be avaliable under the facts because the election was made in the prior year. The devil is in the details and the doctrine is fuzzy.

Second paragraph, section IV of Notice 2007-62.

A retirement plan is required to notify the participant and alternate payee "promptly" about the receipt of the order and "within a reasonable time" about qualification. You need that evidence. A surprising number of domestic relations orders languish and do not get deliverd to the plans. Individuals have to watch out for their rights. If "L" was represented, it is possible that her lawyer has retained the file that would have notices. It is a best practice for a lawyer for an alternate payee to provide for direct notices to be sent directly to the lawyer as well as the alternate payee.

Let's put it this way: You would not be alone if you concluded that involuntary termination by the employer without cause was a per se substantial risk of forfeiture. The IRS would not say that because the IRS always suspects skullduggery and the IRS knows what happened under section 83 with respect to noncompetition clauses. For example, if you were trying to shift a boatload of income from one year to the next and used involuntary termination as the risk of forfeiture, the IRS might argue that there is not a substantial risk within the time frame. But if the vesting date is five years out, I doubt that the IRS would blink an eye unless the person who controlled employment was the participant or a lackey.

The IRS has said informally that as long as the practice is regular, a pay period that crosses year end can have pay recorded in either year. A written policy would be nice. I would start to be concerned about a pay period of a month. What happened the year before?

In a NQDC Plan, the benefit is what the plan says it is. There is no legal issue with the plan providing for no time value of money. The persons who are the participants are usually sophisticated enough and powerful enough to avoid being denied time value of money. Note that the IRS has expressed doubt that elective deferral and substantial risk of forfeiture can go together.

I always manage to refer to rabbit trusts. I don't think I am either a leporidaphile or a rabbiphobe. I regret that I have no referrals. I have never been part of or party to such a quest.

No, I am saying that if the provider has a rabbit trust product, a lot of things will fall in place without the confusion that you described in your original post. If the trust provider is independent of the investment provider (not common), then it might be possible to avoid the confusion simply by opening the account in the name of the trust; the investment provider need be none the wiser. You still need to be careful to assure that the participant does not have authority to withdraw funds.

You are correct that using a grantor trust is different. The trust arrangement is made for nonqualified deferred compensation, so you should not have the same difficulties with understandings. I do not care for grantor trust arrangements because I think there is little value for the cost. Executives tend to want them becuase their counterparts with perceived large appendages have them.

The account owner must be the organization. You must have assurances that the participant cannot provide instructions concerning payment. Most 457 arrangements allow the participant to direct investment, but that is a tricky combination: the particpant has authority to direct investment, but not the authority to direct disbursements. As awkward as it may be, the safer arrangement is to have the participant provide investment instructions to an authorized organization representative for execution; the particpant should have no authority whatsoever as far as the provider is concerned. If you keep it simple this way, it is just a brokerage account for the organization. No explanations needed for the provider.

Another reason for "don't"

Does the plan have self esteem problems? Employers have plans for the benefit of employees, and former employees probably only because ERISA requires it. You have identified some reasons not to go beyond the convention of allowing rollovers into the plan only by employees at the time of rollover. So don't.

Carmona v. Carmona, 603 F3d 1041 (9th Cir. 2010). The survivor interest under a QJSA cannot be invaded directly or indirectly. The opinion cites the earlier Fourth and Fifth Circuit decisions to the same effect, but with less convincing analysis. Until Carmona, I and others (in the minority) asserted that the Fourth and Fifth Circuits were wrong. The participant's payments can be assigned.

"The recipient can be changed to a different person providing said different person is an alternate payee and they get a new QDRO directing the payment to the alternate payee." Not true for the contingent annuitant's QJSA interest; possibly true if the plan is expressly designed to allow it, but no plan should be designed that way.

Stay away from extra-judicial input on determination of matters required to be included in domestic relations orders. The plan administrator can determine that an inexact title refers to the plan, but the individuals do not get to agree on anything and the plan administrator should not seek agreement or stipulation. The courts are very forgiving about what "clearly specifiy" means; it is up to the judgment of the plan adinistrator. A "supplement" to the order is really an interpretation of the order that is expressed by the administrator in the notice of qualification. Examples above are feasible. Another example: "The order applies to the Plan."