QDROphile

At one time there was a provision in the tax regulations that spoke to the ability of anyone to pay the COBRA premium for someone, leading to a fantasy scenario that a hospital treating an uninsured person could discover that the person was still eligible for COBRA coverage. The hospital could pay the premium to gain the coverage for the person and have insurance pay for the some portion of the cost of care, which would be much higher than the cost of the premium and a better recovery than the hospital could exepct to get any other way. Do you need authority to permit it?

K2retire: You can't say that with confidence. That is a typical arrangement suggested by the somewhat disjointed post, but the procedures for retirement or removal of a trustee and the replacement of appointment of a new trustee are determined by the trust terms. Those terms may or may not speak to the corporate governance aspects of the arrangements. In fact most prototypes avoid any statments about goernance matters, much to the dismay and confusion of hapless HR personnel who have no clue abut corporate governance matters, which brings us to Eleanor Rigby's father's most appropriate questions.

The Form 5500 for an FSA is required because it is a health plan. As with other health plans, it may be funded through a section 125 plan. As an ERISA health plan, it is subject to the ERISA trust requirements. The DOL's limited nonenforcement policy is mostly either misunderstood or disregarded. If done properly, the FSA can be administered through a checking account of the employer.

Determining qualification is a fiduciary function. You need to understand if the service provider will be functioning as a fiduciary with full responsibility of if the service provider is going to try to duck the responsibility and leave the plan administrator responsible. If the plan administrator remains responsible, then the plan administrator needs to attend to that responsibility. If the service provider is going to be the responsible fiduciary, then the appointing fiduciary needs to monitor as it would for any other appointed fiduciary. One question: Who is responsible for the written QDRO procedures? Then you need to figure out if the QDRO fiduciary is handling plan assets and is required to be bonded. Interpreting domestic relations orders and determining qualification involves the ability to direct the dispostion of plan assets. Maybe that becomes a test question for your interview. If you are having the participant/alternate payee bear some of the administrative cost of the QDRO processing, then the plan administrator has to determine that the cost is reasonable.

It is permissible for an employer to cover more of the employee cost of premium than the employee elects to forgo in pay under a cafeteria plan. You may have to come to grips with discrimination rules depending on circumstances.

Would you be more comfortable if it were described that the employee was entitled to a certain amount of cash compensation but could elect instead to have the employer pay the health coverage premium that the emplopyee would otherwise have to pay to get coverage?

As a practical matter the plan that is making the distribution will not send the entire balance as a direct rollover. The required distribution amount will be sepeartately distributed to the participant. The distributing plan could distribute the entire balance to the participant (less the 20% withholding on the rollable portion) and the distributing plan would have no care or claim if the new employer's plan improperly accepted the entire distribution (plus the amount withheld). The accepting plan would have some qualification issues. It has reason to beware of the required distribution issue with this participant and cannot accept a rollover without reasonable belief that the amount accepted is an eligible rollover distribution.

Yes. That is why it appears that a required distirbution will occur for the 2013 distribution calendar year even if the distribution/rollover occurs in 2013. If the distribution occurs in 2014, a required distribution will occur for both the 2013 and 2014 distribution calendar years. No required distribution from your plan until retirement from your firm.

While I am familiar with the concern that ostensibly self employed persons (partners) remain self-employed as they move from firm to firm and therfore never have a retirement or severance from employment, I look to section 401© to normalize employment arrangements. Therefore, leaving a firm and joining another is a severance from employment and allows a distribution. Leaving a firm after normal retirement age is retirement from that employer for purposes of section 401(a)(9). Working at a firm past normal retirement age means the person is not retired from that employer (or that employer's plan, including amounts rolled over into that plan) for purposes of section 401(a)(9). Trouble begins when firms allow "retired" partners to continue to dabble in practice. They are "retired" in many senses, such as they no longer participate in firm administration or receive benefits such as health coverage. However, they generate revenue for the firm and are compensated, may on W-2, maybe on K-1. Their continued presence as an elder may be very valuable to a firm or it may be an accommodation out of respect, affection, or lack of backbone. They are working, albeit at some reduced schedule. Are they retired for purposes of section 401(a)(9)? I am am concerned that if working in any capacity after normal retirement age is not retirement for section 401(a)(9) purposes, it is a great opportunity for abuse of the rules. But how does one measure a level of work that is bona fide? Do we look to section 409A standards for separation from service and say that 20% is the mimimum level to avoid retirement? Or do we play safe and say that any post-retirement age significantly reduced work status that also involves loss of other attributes of regular employment status (e.g. health benefits) will be treated as retirement for section 401(a)(9) purposes? Reduction to part-time work is not retirement, but where does it cross the line for persons who are or were owners (partners), whether or not at 5% ownership?

Exactly. It is not the TPA's concern that the plan was terminated and liquidated as long as the TPA followed the instructions of the plan administrator unless the TPA undertook responsibilities for comnpliance and planning that would have been unwise to undertake.

If the plan assets have been distributed, your job is over. Whether or not your are engaged to do something else is up to you, keeping in mind that if you are re-engaged, it should be by the same plan administrator that hired you in the first place. You probabaly have confidentiality responsibilities with respect to the plan. The plan sponsor seems dumb enough that it probably was the plan administrator. If the plan sponsor's identity has become confused because of the transaction, the person who wants to engage you should be the one to explain and convince you who the successor plan administrator is as a result of the transaction This is not a very good place to get a lesson in corporate law. You may need to pay for some education to ensure that you are engaging with the appropriate party relating to the plan.

The plan should have been designed to forfeit the benefit after failure to locate after appropriate efforts.

Most states have laws that proscibe deductions from pay without employee consent.

The law allows payment for stock distributed in lump sum part in cash and part by promissory note, and the plan may have terms that allow payment in accordance with that law. The rules are complex and ther are standards and conditions. The summary plan description of the ESOP should explain the distribution and payment options. Based on all of you posts, it appears that the real problem is the the employer does not have the funds to pay the benefit in accordance with the plan terms or original expectations. What is needeed is a competent adviser for the participant to understand all of the facts and circumstances so the participant understands the participant's rights and what make sense in terms of compromise or challenge. Having theoretical rights may be nice, but that does not guarantee that the participant will get what is due on those terms. The situation is complex and the best solution is most likely not going to be found in the books or in this forum.

I see the words "state agency." No fear of Department of Labor. If you need to force the issue, you need to go to the court whose order is not being obeyed.

The access to the employer checking account is surprisingly rare given the ease of providing for compliance. Most arrangments simply violate the rules by having an account maintained by the provider. I don't know if the DOL non-enforcement policy extends to the ERISA bond (it probably would because the non-enforcement is based on the idea the the funds are employer assets in an employer account), but ERISA bonds are extremely inexpensive.

DOL Technical Release No. 92-01, 57 Fed Reg 23272 and 58 Fed Reg 45359 (extension of position taken the Technical Release) The administrative service provider cannot maintain an account from which benefits are paid, except on an immediate pass-through basis. The provider can be given check writing privileges on the employer's account.

Do you understand the trust rules with respect to helath FSAs or will you be violating them like everyone else?

I don't advocate for the proposal for deferrals only once a month when payroll is not monthly, but it is not uncommon to pay plan loans at only one of the pay dates in a month. But the applicable statute requires payments not less often than quarterly, so there is support for loan payment arrangements that do not exactly overlap pay dates.

In concrete terms, the question should be: Was the notice given in time for the individual to decide and implement a deferral election change that will get the individual the maiximum match beginning with the first deferral in the year? But if that is the question, why would the 3% contribution safe harbor require advance notice? The notice and the contribution should not affect the individual deferral decision, except in the wrong way (Hey! I'm getting a 3% contribution! I don't have to save as much myself!). And why am I asking for reason when it come to notices?

Your guide will have to be the mendacity of Departement of Labor Field Assistance Bulletin 2007-2 at http://www.dol.gov/ebsa/regs/fab2007-2.html Although the insurance company resistance is your friend, I believe that limiting employees to the use of a single insurance company made the plan an ERISA plan even before the killer 403(b) regulations came out. We used the standard of a minimum of three providers to get by the involvement of the employer in determining the investments/benefits. I think correcting for the Form 5500 filing is worth getting away form all of the concerns about exemption. However, because if its lie, the DOL will be hard-pressed to challenge the status of a plan that meets the "old" exemption standard but for what is absolutely necessasy to comply with the 403(b) plan tax regulations. It looks like your client is inclined to be a minimalist anyway. Any chance they want to become a church?

While you can use a simple W-2 rule, there is flexibility. For example, a plan can treat a payroll period that begins December 30 as included in that year even though the end of the period and the pay day are in the next year. Consistency is important and abuses are still vulnerable.

Please let us know if you find any guidance. I do not think there is any official prescriptive guidance and there is no correction program. From time to time certain IRS officials have provided informal statements about corrections. Your best source for suggestions is probably EBIA, but you won't get a prescription there, either.

So what did you do about expenses incurred by 3/15 of the next year when a participant had not exhausted the full coverage with expenses incurred in the year? If the plan says there is a grace period, then the participant should get the benefit of the grace periond. You seem to say that you did not provide a grace period in operation and that suggests you have some other fixing to consider.

I think a plan could provide for a participant election of time of payment before amount becomes available. Treasury Regulation secton 1.457-7©(2)(ii).