QDROphile

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).

Start with Section 457(a)(1)(B) and then go to Section 457(e)(9)(B). I think an amount is made available if the participant could get it by request (e.g. a request after termination of employment). A nice way to avoid interpretation questions is to provide that distributions will start a month after termination of employment. That postpones inclusion for a month. The plan can provide for an election within that month to defer to something else. With that in mind, my answer is that a participant cannot make an election when eligible if the plan simply says the participant is eligible at termination of employment. Section 457(a)(1) (B) will include amounts in income at eligibility. A participant needs to make an election under Section 457(e)(9)(B) before the payment date. I don't know why the wording has to appear to prevent an election simply before or at eligibility, or even a reasonable time after eligibility. And I may be interpreting the statute incorrectly, except that my approach should work.

The short answer is that a nongovernmental plan can allow a change in the time and form of distribution when the participant becomes eligible, but there is some restrictive regulatory language to navigate. Sorry I missed the reference in the title. Once I go down the rabbit hole I don't look up.

The idea of the grace period is that expenses incurred after the end of the year could be covered or reimbursed with respect to the elected coverage for the year. No matter what, you should have no amounts "sitting in the acct from prior years." You seem to have no support and the situation appears to be so fouled up that you need to hire someone to help you straighten it out.

457(b) or 457(f)?

The grace period operates the way the plan says that it operates. A grace periond is not required. The plan had to be amended to provide for it and the terms did not have to go as far as the law allowed.

The plan should be designed so that the account should have been forfeited before now. The observation may not be helpful except going forward.