QDROphile

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.

How high is up?

A 403(b) plan is considered a plan of the employee, so it usually has a separate 415 limit from the 401(k) plan. See section 415(k)(4). Sometimes physicians run afoul of the combining rule.

There is no such thing as a mapping notice. Maybe someone is thinking about a blackout notice? The bigger issue is that the vendor should do as told by the responsible fiduciary -- after being thanked for its concern and advice.

ESOP Guy is correct. The exact procedures for taking stock out of the plan depend on whether the employer determines not to allow the stock as an investment or the fiduciary determines that the stock is not allowed. Plan terms and any administrative investment procedures must be followed or changed, and the transaction must be conducted in accordance with the prohibited transaction exemptions. If the plan provides for distribution of employer securities, then the appropriate steps must be taken to comply with section 411(d)(6).

Get some useful written QDRO procedures and then look at the answers provided in the procedures. This is a great opportunity to see some of the issues that should be addressed in the procedures and to reconsider policies that are questionable, such as restriction of accounts upon receipt of a draft order (although you may be stuck on this one). Since you are probably stuck with the restriction, and assuming that the wording in your QDRO procedures is a dull as the thinking behind the provision, you may be able to interpret the restriction in accordance with the law, which requires only protection of the amount would be paid to the alternate payee if the order were determined to be qualified (and only after receipt of a domestic relations order). DON"T TAKE MY WORD FOR IT. LOOK AT THE STATUTE OR GET PROFESSIONAL ADVICE. The ordering of charges to sources to fund the alternate payee's interest is also a matter that should be adressed in the QDRO procedures (or the plan document), but many plans are stuck because their service providers are inflexible bullies and will only allow adminstration one way -- typically pro rata. Or you can say that the inflexibility of the service providers is a product of the quest for efficiency that keeps the price of adminstration as low as possible for the benefit of plan participants generally. It depends on you personality. I am harsh and critical.

Could it be that (i) the DOL sees that the general partner as a fiduciary because the general partner is managing plan assets (see plan asset rules under ERISA reg. section 2510.3-101), and (ii) the fiduciary is using plan assets for personal benefit because of the fiduciary's personal stake in the partnership? What is preventing you from getting a direct explanation from the Departement of Labor about its assertions?

The ESOP document is not silent on the matter. The ESOP document has provisions for when distributions are to be made. If the ESOP document does not say that it allows in-service distributions (no matter what age), then they are not allowed. There is no external mandate for in-service distributions unless the particpant is an owner. The ESOP document is equally silent about whether or not it will pay benefits if you stand on your head.

ERISA section 503 and related ERISA regulation section 2560.503-1. The disposition of the claim does not restrict the review. The goal is to get to the correct result with appropriate consideration. The rules are different with respect to presenting and adjudicating the claim in court.

If the plan is subject to ERISA (and they all are), one cannot evaluate the eligibility provisions by looking at the 20-hour provision in the tax code alone. See Treas. Reg. section 1.403(b)-5(b)(4)(ii)(B).

Sad common situation. The better way to look at it is that the township has one plan and has been snookered/bullied into multiple investment providers. The practical trick is how to provide for plan administation other than investment management. The two pigs at the trough probably won't cooperate. Whether or not the township can maintain a 457 plan is a matter of state law.

I write plans to require a full distribution at the first required distribution. The entire balance is also required to be paid at the next required distribution and required distributions thereafter. It is not so strange and there are good reasons for doing it that way. It may be unusual because people no longer think about what they are doing or could be doing. It's all about the efficiency of one-size-fits all mass production.

The "Yes" answer is safe if the plan sponsor prefers to be told what to do (prototype documents) rather than decide how it wants to conduct itself. If the sponsor does not like the answer, there are alternatives that can be implemented without changing the plan documents.

The question is answered by plan terms and corporate governance considerations. The answer may be different from plan to plan.