QDROphile

The IRS recently accepted this approach in a VCP filing under Rev. Proc. 2013-12. Rev. Proc. 2013-12 does not say for sure; the IRS has requested comments on how to correct such a faliure.

The thought is that the IRS may be forced into hastily asserting liability to preserve possible claims. Once the IRS is in that posture, it is more difficult to deal with and it might want some blood for the extra adminstrative trouble instead of some more cooperative resolution of any issue of interest. I have only refused to extend the statute once. That was with the Department of Labor when it was so far out of line with its original assertions and general rudeness in the process that things could not get worse. That is not typical of my experience with the DOL. We tend to get constructive behavior from IRS agents, too, so we generally accommodate.

"the PEO is in TX" There's your answer. Texas is too big for the the law.

One thing that jpod is observing is that in almost any company there is disparity in compensation among employees, and there is often no objective measure about who deserves what, which gets one into the "business judgment rule" that protects directors against mere disagreement with shareholders over decisions about how to run the company, including compensation. A class warrior would robserve that management rapes the company to the extent that the shareholders let them get away with it. Other perspectives also have merit. Shareholders have recourse either by electing directors who have less tolerance for management rape or by a derivative action against the directors. Some ESOP fiduciary holds the shareholder rights in your company. If the directors are out of line, the fiduciary should take appropriate action as a shareholder. The trick is that the ESOP fiducicary is almost certainly either appointed by the directors or is one or more of the directors. Nice logic loop, isn't it? A fiduciary who does not take appropriate action as a shareholder against directors who tolerate mamagement rape breaches fiduciary duty. To prove breach, you have to estalblish that the directors are out of line in what they allow. You are at least aided by any confilict of interest of the fiduciary, but the business judgment rule is a huge barrier. I can promise you that the business judgment rule does not align with your sense of fairness.

If an ESOP is a shareholder, it would be helpful to know how much of the stock the ESOP owns as a percentage. It would not be uncommon for the ESOP to own 100 percent. It would also be helpful to know what benefits are at issue, if the directors are also employees, and the identity of the ESOP fiduciaries. The plan administrator and the ESOP trustee(s) are fiduciaries. The ESOP may have other fiduciaries.

Acquire shares in the company. Vote for directors who will take actions that you think should be taken in the interests of shareholders.

Plan terms probably prevent allocation in accordance with 2012 compensation at this point. To illustrate in the extreme, if someone terminated in 2013, the plan probalby would not allow allocation of a contribution in 2014 to that account. I know you instructed to assume that the plan does not have any language that otherwise indicates when a contribution must be made for the plan year, but you need to test that assumption very carefully and tose particular words are no the end of it. You should check to see if allocation according to 2013 or 2014 compensation is a close approximation of what is intended.

First, because this is a government plan, it may be subject to state or local law that affects the matters. Assuming that the plan follows federal standards under section 414(p) ot the tax code, it sounds like the order was not qualifed when "approved", as suggested by GMK. The approval was probably only with respect to form, which is a common procedure preceding submission of the proposed order to the court for its consideration and approval. An order cannot be qualified before it is issued by the appropriate authority, usually a court. The "my ex refused to agree to it" statement is the clue. One of the standards for qualification is that the plan cannot be ordered to pay more that the value of the benefit. The administrator's suggestion for terms of the order to be submitted now is constructive: pay the lesser of the value of the benefit at the time the order becomes qualified or the entire value of the benefit. The order will not qualifiy if it demands more.

That is a question for the fiduciary who has the authority to interpret plan terms.

Grandpa cannot be sure there is no risk. The raising of the credit is a benefit to a 25% shareholder, and generally providing a benefit to a family member is recgnized to be an intangible benefit. The Department of Labor is not forthcoming about where it draws the line, so we cannot say for sure that the DOL would not take issue. The circumstances may suggest that there should be no trouble, but I don't like to argue facts and circumstances when it comes to prohibited transactions.

A certain amount of diligence is required before accepting a rollover to avoid disqualifying the plan. It is not much. Check the regulation cited above for examples.

Your suggestion is viable and certainly beneficial to the participant. Many administrators do no like the addtional hassle that goes with collecting checks. Your terms should deal with what happens with late checks, checks for the wrong amount or NSF. Keep in mind that collection is a fiduciary matter, so if there is a default, the fiduciary will have to decide what to do about enforcement of the promise to pay. And everything will have to be disclosed in the laon disclosure. A more radical approach would be to require the employers to continue with payroll deduction and forwarding funds to the plan after discontinuing particpation in the plan. Who makes the call?

#2. Failure to follow plan terms.

Your plan document should address when coverage ends. Also be careful to distinguish when coverage ends (qualifying expenses afterward are not covered) and runout deadline (claims for qualifying expenses incurred before coverage ends can be submitted). A person who terminated in October 2013 probably lost coverage before 2014 and expenses incurred in 2014 are not eligible.

Some plans expressly provide that persons on approved leave, including medical leave, are treated as employed for limited purposes or for all purposes. FMLA is subject special rules and is treated as employment for limited purposes. Many plans have a waiver of such conditions for death, disability or retirement. You have an interpretation issue that does not have a pat answer. I have trouble with the term "actively employed" and never willingly use it.

Determination letters are not obligatory, but it may be imprudent not to get one,

Start with section 401(a)(13) of the tax code and section 206(d) of ERISA, but you will have to go to the bankruptcy code for a complete picture. Your question is not precise. A plan is not protected from its creditors. A participant's benefits are protected from the creditors of the participant.

See what EBIA is doing these days.

You have another issue if the sponsor is paying the expenses and getting reimbursed rather than having the plan pay expenses directly. See PTE 80-26. If the sponsor has been paying expenses and is discontinuing, it may change the ERISA reg. 404a-5 disclosure.

There is not a conceptual problem with a 403(b) money purchase plan but it is unnecessary and either a discretionary employer contribution under 403(b) or a 401(a) plan will be less complex and restrictive. Just choose 4% contributions.

Have you looked at Treasury Regulation section 1.403(b)-5?

If the employe retires in March, the first required distribution year is 2014. The first dollars distributed in 2014 after retirement are required distribution dollars and not eligible for rollover.

Including the individual policies in the plan documentation changes the optics, possibly to the point of making them part of the employer's ERISA plan. Including non-ERISA benefits in a document (defined as some pieces of paper held together with a staple) that serves as an ERISA plan document does not itself make the benefits subject to ERISA. It may make interpretation of the plan terms difficult and it may require certain things to be done with respect to the non-ERISA benefits as ERISA would have them done.

Aggressive proposal (but what I would do): Order is qualified under an interpretation that the AP's interest will be determined and effective 1/1/2012, with earnings calculated on the amount from 1/1/2012. If anyone disagrees with the interpretation they must notify the PA within whatever time is appropriate under the plan for claims. No distribution to AP until the deadline. If someone objects and will not back off when informed of the consequences, then the order will be disqualified, because, by golly, that interpretation was really wrong but the order, as properly interpreted, would require the plan to do something that the plan is not designed to do. Personally, I think plan B should try to get MEP A to calculate the pre-2012 portion and plan B can take it from December 31, 2011 forward. At least ask.

My take, based on how you report, is that the use of "gross" for application of the deferral percentage is OK and the use of the unreduced compensation for calculating the match (the number for application of the 4% to determine the maximum) is an operational failure -- not following plan terms. Best practice would be to include an explanation of the details about application of the deferral percentage in the deferral election form or the SPD.