QDROphile

The whole point of the cafeteria plan is to provide a choice of cash or notaxable benefits. If the choice is cash ($200 or $50, or $250), then the cash is w-2 income. If the choice is benefits, then the nontaxable benefits are .... nontaxable (not included in income). "Choice" can occur by default -- the premiums are what the premiums are. If the employee gets the medical benefit and the residual cash, the employee has chosen the amount of cash. If the plan talks about "bonus" for amounts delivered in cash to the extent not applied to pay premium, the drafter of the plan is incompetent.

Well, I hope at least the citation was understandable.

The DOL published in Interpretive Bulletin 96-1, found at 2509.96-1 of the ERISA regulations, in footnote 1, its postion that there is no duty to provide investment education. Investment advisory firms, such as Oppenheimer, have been lying/misinforming to the effect that it is required ever since. And they would be happy to help you with your investment education program. "Not sure why they wouldn't..." I don't know who you think "they" are, but they are not so stupid as to think that investment education has any value to the masses of plan participants who have been thrown to the dogs under 404©. Investment education is just a feel-good pill for those who should feel guilty about resorting to 404©. One really good indication that 404© has produced a total travesty is the popularity of target date funds as "the answer" for the unsophisicated investor.

I think this discussion is going on flights of imagination and misunderstanding, so I am going to reform the question so we can at least be posting about the same thing. Perhaps I misunderstood the original post, but here is the reformed post: Alternate payee is awarded a portion of benefits under a defined benefit plan. The AP starts benefits in the form of a life annuity. Later, a domestic relations order is received that purports to cancel the AP's interest and restore that interest to the participant. Can the order be a QDRO and how can it be implemented? Response: Assuming the plan does not have the terms as described below for reformation of benefits, the order would not be a QDRO and would be given no effect. It requires the plan to do something that the plan is not designed to do -- reform a benefit that is in pay status. The order could be a QDRO if the plan provided (or was amended to provide) that after an annuity benefit started, the benefit could be reformed so the remaining actuarial value of the benefit could be paid in a form other than the form orginally elected at the start of benefits (such as restoring it to the participant and paying in the form of benefit elected by the participant). That would be a terrible idea and would allow adverse selection. All it would take is a post-starting-date diagnosis. The benefit would be reformed to shift benefits away from the recipient that has a newly-discovered shorter life expectancy, to the actuarial disavantage of the plan. The reformation (the cancellation of the QDRO) would apply only prospectively. Amounts paid would reduce the value of the benefit and plan would have nothing to do with prior payments. The court could order the AP to pay amounts to the participant, but that would be independent of the plan. And I now question my original response that if the sponsor was ill-advised, the plan could be amended to set it up to qualify the order. That amendment might violate section 411(d)(6) by ultimately cutting back the AP's benefit. I vaguely recall some authority that beneficiaries are protected.

The corporate sponsor of the plan should not be named as plan administrator, with few exceptions. I have made the comment and explained the reason in greater detail in many posts. Very succintly, if the corporation is a fiduciary, then every director and executive officer is at risk of being treated as a fiduciary, and will be a named defendant in any action relating to fiduciary responsibility. Those persons will not know of the exposure and will not comport themselves in a manner befitting a fiduciary, which is high assurance of liability under ERISA. Only those individuals who will actually undertake fiduciary functions and responsibility should be named as plan administrator and they should be aware of the designation so they can perform as required.

The U.S. Company need not be and should not be a fiduciary. The trustee (legal owner of the plan assets) must be a person who is subject to the jurisdiction of U.S. Courts. I have doubts about the the Danish controller.

Lump sum only distribution is a perfectly viable design. It depends on what the employer wishes to accomplish with the plan. It is a bit funny for owners because the account is zeroed every year after the benefit is accrued for the year.

It is not a question of callous. A plan administrator or its agent in no way should be discussing any personal matters or solutions with a participant. Only matters relating to the plan are appropriate. An appropriate proposition is whether or not the plan will reverse the distribution and distribute as a direct rollover. I do not recommend that; the proposition is only an illustration of a plan matter as opposed to a personal matter such as choosing to roll over some portion of the amount if 100 percent is not feasible because of limits on avaialbe cash.

Probably, and certainly if the plan allows rollovers to be distributed under special rules of the plan. But a plan is not required to allow special distribution privileges for rollover amounts. Check before discoving that your rollover amounts have become captive.

I do not understand the "ERISA v tax code" question. It is all about tax. I think you should look at the award from the perspective of section 72(m)(10) of the tax code. The language is difficult to unravel and the terminology sucks, but I think the intent is to allocate basis proportionately to the allocation of balance. One might guess that a purpose of 72(m)(10) is to prevent allocation of basis disproportionately to the higher-rate taxpayer. From that I conclude that one cannot allocate only basis to an alternate payee or allocate a designated amount of basis (meaning an amount determined in some way other than pro-rata). I think Q&A-9(b) applies only after the division and identification of the alternate payee's interest, which means after the application of section 72(m)(10) to the division.

The DOL foolishness is trying to maintain the lie that requirements of the tax regulations do not force all such plans into ERISA.

It is not the best they could do and it is inadequate for compliance.

Part 5 appies, which includes pre-emption and claims provisions.

Revenue Procedure 2013-12.

The plan should specify how hours are to be computed. If this is the first employee of this type, the plan may have to be amended to provide the answer. One of the hour equivalency methods should work; other approaches may be possible. Expect the method to be more generous than somone's notion of actual hours.

The proposition does not sound to me like a complince amendment under -11(g). It appears to be an elective amendment to expend contributions beyond what the plan provides. It is too late for a contribution for 2014.

I have always operated under the limitation that a discretionary expansion of plan terms for contributions must be done by amendment not later than the end of the year to be effective for the year.

Are you asking about a qualified plan?

The plan would only restrict distribution of 401(k) benefits if (i) the plan had recieved a domestic relations order that applied to the 401(k) plan benefits, or (ii) the plan were so ill-advised that it set another standard for restriction in the plan's written QDRO procedures and the circumstances fit the standard.

Some trust institutions insist on at least nominal assets to be held in the trust before they consider the trust to be effective, but for tax purposes, having the documents properly adopted and executed by the end of the year should satisfy the IRS that the plan is effective for the year and post-year-end funding will relate to the year.

ERISA is all about the plan terms. You cannot even begin to deal with operational issues with first identifying all the relevant plan terms. You can't do that without all relevant plan documents.

Read the document more closely. Absent a specific provison for periodic matches, the terms relating to match usually refer to the plan year. It will not necessarily say that the match is based on the year in the same way that it would say the match is based on a payroll period -- the year is the presumptive measure. In any event, the plan administrator or other fiduciary should have authority to interpret the document and determine the relevant measure. You have a separate problem with "that's just when they began matching" and the problem is worse if the period for the match is not the year. What stopped the match and what was provied for stating the match again? for example, if the plan was simply amended to stop the match, no one gets a match for 2014. Maybe you have the abomination of a discretionary match. Good luck with that.

Have you considered the applicability of the blackout notice rules?

The whole idea sucks and any suggestion of a ROBS arrangement to facilitate a transaction (as opposed to pure ownership) also sucks. At best, ROBS transactions are sensitive and complicated, and when they are entered into the facilitate an abuse they are dangerous.

If the plan is written with a single vendor in mind, it may preclude multiple vendors and the provisions would need to be changed. the plan has to operate in accordance with its written terms As noted in the previous post, use of multiple vendors requires documented coordination provisions. Things that must be documented under the regulation standards are best viewed as plan documents. You may need to broaden your view about what constitutes the plan document. The plan document does not necessarily have just a single staple. The collection of documents should show a relationship to the plan.