QDROphile

How does the advisor express his or her thinking? "There is an issue." "I wonder if there is an issue." "I wonder if there could be an issue? Depending on the statement, the advisor might be asked for clarification or support. There is certainly an issue about priority of the loan payment relative to other deductions from gross pay that are required or authorized if the pay is insufficient to support everything and there are issues relating to the loan if the amount available is less than the debt service amount.

If you are asking if the participant is entitled to information about the alternate payee's account or actions with respect to the account, the answer is negative. If the alternate payee consents, the plan can disclose information.

If they cannot explain in detail why they assert an impropriety, or their explanation is incorrect, get a new service provider. One cannot expect advice to be correct 100 percent of the time, but starting off incorrectly within a fundamental function of the service provider is intolerable. You should let them know they are on the spot now, so they can push the question up to someone above the clerical responsibility level.

With respect to the law, no and no. However, if funds are set aside because of contract, both the tax consequences and the second question depends on how the funds are "set aside."

The $1000 minimum is a plan term, not a legal requirement. Whoever has the authority to interpret the plan will answer questions about the meaning of the terms. Refinancings can be quite tricky and are governed by rules that are not simply a matter of plan terms.

The plan document question is not that interesting an issue compared to what to do about the change in control that may have occurred in the middle of the year. Once you have that figured out, then turn to the plan configuration and documentation. Of course it is easier if you can avoid mid-year changes; you may not have that luxury.

From an experience years ago, and involving an IRS letter ruling, I recall that the one-time irrevocable election concept under 401(k) also applied to 403(b) plans as well. I have not thought about what may have happened since in the law (other than the employer must have a plan document). That might not fit where you want to go or the timing elements. The person could be made ineligible for the match and discretionary contribution without participating (recorded opting out), subject to discrimination rules, and a risk that the negotiation would be treated as a CODA. Done properly, the CODA risk should be very small.

See ERISA reg section 2550.404a-5(d)(1): ... furnish to each participant or beneficiary on or before the date on which the participant or beneficiary can first direct his or her investment, and at least annually thereafter, the following information ... Employer securities are subject to special standdards.

The underlying issue (prohibited transaction) is the maintenance and use of plan assets by the employer, a party in interest/disqualified person. Segregation from employer assets and delivery to the trust is the key event, not loss of earnings to the plan. Loss of eranings to the plan (and value to the employer of holding the funds before delivery) are relevant only to correct of a prohibited transaction, not determining if there is a PT. There would be no PT issue if the funds were delivered promptly to the trust, but sat unallocated and uninvested for seven or eight days. The timing of investment of plan assets is a fiduciary issue. At some point uninvested assets become a fiduciary concern. If the roles of employer and fiduciary are properly assigned and observed, the fiduciary has no responsibility for investing plan assets until receipt by the trust unless the fiduciary did something to delay the receipt. I express no view about how to count days between payday and delivery or how to apply the safe harbor.

You create a document that that describes and effects the spin off and then the employer who is the sponsor of the spun-off plan adopts a restatement of the same pre-spin plan document for the spun-off plan. The original effective date of the spun-off plan is still the original effective date of the pre-spin plan (or consider the original effective date of the spun-off plan as the date the renegade employer adopted the pre-spin plan). The effective date of the restatement is the effective date of the spin off. Don't forget to attend to the related trust issues, including transfer of assets if there will be a spun-off trust. This assumes that the spun-off plan is going to be exacly the same as it was before the spin off, at least for a while.

Then certain record keepers can tell you the source of the requirement or they should be scorned.

Whether or not a state law of general applicability "relates to" a plan has been a troublesome question.

I am not sure that one can transfer (as opposed to roll over) amounts from an IRA to a qualified plan. Confusion abounds in the discussions, but I think you should find some authority for a transfer. An interesting test will be to instruct the IRA custodian/trustee to transfer to the plan, with insistence that it be a transfer and absolute clarity that it will not be a rollover. I expect resistence, bewilderment, or disregard by the custodian. By disregard, I mean that the custodian will report the transaction as a rollover despite talk of transfer.

Not enough information has been given to respond correctly. An elective deferral must be made on the basis of a salary reduction agreement and must go "through payroll." Elective deferrals and after-tax contributions are the only types of "personal" contribution allowed. The owner may not distinguish well between personal and company contributions. The plan can be designed to allow the company to make make a contribution.

The VERY respected consultant is correct. The outcome is determined by the plan document and good arguments can be made for designing the plan to exclude severance pay without regard for timing.

Were it not for what I infer is a gap in contributions, the best approach would be to spin off the portion of the plan that related to the nonparticipating employer to form the "new" plan, automaticaly retaining "all aspects of the prior plan." It still might be the best approach. I am troubled by the gap in contributions under any approach. It might be better not to resume anything until January 1, and then the spin off should be a serious consideration, but I have not thought through the repurcussions of ceasing contributions mid-year.

So what are you going to do about the difference of opinion? Are you going to go find a different document provider because the document provider proved incompentent and the document was inadequate or do you now think that the consultant is only very respected instead of VERY respected?

I do not think you are dealing with an "excess deferral" within the meaning of Rev. Proc. 2013-12, nor are you dealing with an ineligible participant. You have a faliure to follow plan terms, and I think that means you have an "excess amount" subject to the following provisions of Rev. Proc. 2013-12 (but you should read the Rev. Proc. yourself to determine what is appropriate, including applicable provisions that are not included below; I have deleted some imbedded images that will not post, so you are looking at an altered copy of the text that might have unintended alternations): "A distribution of an Excess Amount is generally treated in the manner described in section 3 of Rev. Proc. 92-93, 1992-2 C.B. 505 (relating to the corrective disbursement of elective deferrals ). The distribution must be reported on Form 1099-R for the year of distribution with respect to each participant or beneficiary receiving such a distribution. Except as otherwise provided in section 6.02(5)©, where an Excess Amount has been or is being distributed, the Plan Sponsor must notify the recipient that (a) an Excess Amount has been or will be distributed and (b) an Excess Amount is not eligible for favorable tax treatment accorded to distributions from an eligible retirement plan under § 402©(8)(B) (and, specifically, is not eligible for rollover)."

Despite the IRS use of the term "transfer" with respect to direct rollovers, direct rollovers are still rollovers and they are under the control of the participant. A rollover is what a participant does (or directs a plan to do) with an eligible rollover distribution. If there is no distribution, there is no rollover. Disposition of a distribution is entirely within the control of a participant. Whether or not the participant is eligible for a distribution or will get a mandatory distribution is subject to plan terms. Whether or not a distribution is an eligible rollover distribution (not whether or not it will be rolled over) is a matter of plan terms. For example, required distributions are not rollable. A plan would not comply with an instruction to directly roll over an amount that is a required distribution. Your questions should start with, "Is a participant eligible for distribution (e.g. because of plan termmination)?" Then, "Is the distribution an eligible rollover distribution?" Transfers are another matter and are easily confused with direct rollovers. Since you are already overloaded to confusion, you need not bother with learning about transfers for your mission. Transfers are not permitted between 401(k) and 403(b) plans.

A QDRO can provide that the AP is to be treated as a spouse for purposes of the QJSA beneft. That means that the AP is entitled to the plan's standard form (usually joint and 50%) unless the AP consents to a different form. The AP can consent to a joint and 100%. The court, in an order that is a QDRO, can order the participant to elect a joint & 100%, but that is not for the plan to enforce. In the order described, the participant shoud elect a joint and 100% annuity if the participant does not want trouble with the court. The AP can decide whether or not to consent to the joint and 100% annuity in lieu of the regular QJSA form. The order may be imperfect in its award of the QJSA benefit to the AP, but that is going to be a matter of interpretation for the plan adminstrator. I think the plan adminstrator should be accommodating and apply its superior understanding of the QDRO rules to give effect to the clear intent of the order.

Looking to pre-approved document language for what the law is or what one can do is foolish if that is the end of the inquiry. Unfortunately, many consultants think the universe is the product and the client is none the wiser. Why do so many think that elective deferrals must be suspended after a hardship distribution?

There is no rule that says you cannot set up a new DC plan within a year of terminating a 401(k) plan. What is the rule that you think is violated?

Plan terms, which are based on qualification requirements. I suspect that the only permissible ways to a credit a participant account are (1) allocation of employer contributions, (2) allocation of investment earnings, (3) loan payments, (3) possibly employee after-tax contributions, and (4) corrective or restorative contributions. I do not think a payment to a plan by a former alternate payee is a corrective contribution unless there has been some error, such as distributing to the alternate payee more than a QDRO provided. That is where we got started.

"Failure to make the RMD is a problem for the plan as well as the Participant I believe." Yes, and this is why the lost participant circumstances need to be addressed timely and completely, not just with each year's required distribution. The first place to start is the plan document. A common approach is to forfeit the account balance. You should also become familiar with Field Assistance Bulletin 2014-1; it deals with plan terminations but has broader implications.

Perhaps you should state the sucessor plan plan rule that concerns you and how it has been violated.