QDROphile

Then I predict that the IRS would not allow retroactive amendment and I think that the correction would be a garden variety improper exclusion, or a failure to implement if the employees submitted salary reducton agreements that were not given effect.

I think the problem is that the employer should have amended the plan to exclude certain employees in a particular job class, but did not. The employees were excluded. The plan was not operated in accordance with its terms. Now whta do you think? If you think the correction is to amend the plan to fit the exclusion, that cannot be done under SCP. It is also not the type of retroactive amendment that Rev. Proc. 2013-12 anticipates, but that does not mean the IRS will not approve it. I don't know what the proscriptions really are under under the circumstances, but I would be inclined to find a different approach to correction, even under VCP. I find it hard to believe that the contract prevented employees from deferring compensation that was otherwise permissible, but government contracts can be as stupid as union contracts.

Ask the CPA if the CPA knows the defintion of PT, then ask how it would apply to the circumstances. Maybe the alternate payee is a disqualified person, unlikely though it may be. Even if, I think a mistake can be just a mistake, but I don't have any authority for that.

Tidbit responses that do not address all the issues: A plan that fails formal requirements for the ADP safe harbor does not get excused from providing the benefits offered by the plan. For example, if the plan provides for a match art a certain rate, the employer must contribute the match. The failure means that the plan does not get the benefits of the safe harbor, such as a pass on the ADP test or on top heavy compliance. There is no legal reason that a rollover account in Plan A cannot be transferred from Plan A to Plan B as long as both Plans have provisions for the transfer. The Employer has two plans for 2012 but the elective deferral portion of Plan A may have been merged into Plan B effective January 1, 2012. No comment on whether that means that Plan B is treated as having elective deferrals before May 1, 2012. The documentation might be very interesting. It is possible that Plan A was frozen April 30. It is possible that employees could continue to defer under Plan A after April 30. The document history will tell.

Other than being of generally questionable wisdom, and subject to missing information in your post, the arrangements do not have any obvious flaws except as described in this statement: "may or may not have allowed participant distributions of the rollover contributions from the existing plan." The statement is confusing. Does "rollover contributions from the existing plan" refer to amounts rolled over from the first plan to the new plan? Rollovers cannot be made from the first plan to the new plan because distributions are not allowed from the first plan unless a participant qualified for distribution by termination of employment, for example. Transfers from the first plan to the new plan are permissible as long as the terms of both plan allow it, and transfer of elective contributions only is permissible. On the other hand, the first plan could have distributed amounts rolled over into the first plan from some other eligible retirement plan as long as plan terms provided for it. MIssing information includes effective dates. The new safe harbor plan should have started January 1 and the first plan should have been amended to cease deferral and contributions as of the prior December 31. It does not work to transfer elective contributions from the first plan was to support the mid-year start of the safe harbor plan by getting elective deferrals from January 1 into the new plan as though deferred under the new plan. The first plan can be terminated in one sense, but the plan cannot distribute benefits based on the plan termination. The plan would really be frozen rather than terminated.

The employer decides. The circumstances of the transaction will be important in determining what is as soon as practicable. I don't think the IRS would be overly exacting, but I would wonder a bit if the transaction closed tomorrow or was not scheduled to close until the end of January.

Are you trying to test the limits of the guidance in Treas. Reg. section 1.457-10(a)? If you can't find authority allows participants to choose timing of receipt of income, consider that the principlels are generaly against it.

Maybe you can get the investment provider to use the same approach as applied to QDROs. Still a lot of work for data entry, even under the best of circumstance.

Using 50% rather than 80%

The IRS in informal Q&A statements at an ABA session said that purchasing the remainder of an undivided interest in an individual's principal residence qualifed as purchase of a principal residence. I do not remember the year. The infomation was reference in the Message Boards, with a cite or link, more than two years ago. You might find it if you seach.

You can't correct under plan terms. Plan terms can only prevent a 415 violation. Once the excess has been deliverd to the plan a violation ocurs. You can correct under plan terms if the plan provides that if the annual addtion limit is exceeded notwithstanding the provisions designed to prevent the violation, the violation will be corrected under EPCRS.

Y needs to submit a claim under the plan's claims procedures. The plan administrator should deal with Y in that context. The proceedings will cover matters described by Andy, but it may not matter. The plan may conclude that the plan properly identified the spouse in accordance with plan procedures and the existence of another marriage does not matter. That conclusion might best be made with advice of legal counsel.

See Treasury Regulation section 1.403(b)-10©. Your description causes me to think that either (i) someone does not know the meaning of section 414(p)(4)(A), or (ii) the plan does not take a very practical approach to QDROs, but it is difficult to read between the lines. Is the administrator and employer person or an insurance company person? Subject to some unusual circumstances, the plan should (as a mattter of policy, not law) allow an alternate payee to receive the entire amount awarded as soon as practicable after the order is determined to be qualified. If that is what you want and you can't get it, I encourgage you to make youself such a pain in the ass with occcupying the plan administrator's time that the plan administrator gets some brains and figures out how to get rid of you by giving you your benefit.

Cynical, but rational. I have always alway enjoyed your tag line.

Cynical or sarcastic?

Treas. Reg. section 1.411(a)-11(e)

First question: Is the owner of the plan sponsosr a fiduciary? If so, is that fiduciary the fiduciary that made the dscision that the plan would invest in the LP? If both are true, the ice is extremely thin and I would not go there.

The plan's written QDRO procedures should address what triggers restriction of a particpant's account. If the trigger is other than receipt of a domestic relations order (not a draft order), the procedures should be very specifc and detailed about what the trigger will be and what will happen and for how long. You may wish to consider that the Department of Labor informal postion is contrary to the published federal court decision on the subject.

Distributions based on incorrect values of plan assets touch on some very serious issues and the self-dealing aspect only makes it worse.

The IRS has the power to audit the individuals of interest. What would be more obtrusive? And how would the university liek to explain why someone got audited? Any chance the university employees are physicians? The IRS does not like docs and the employer should have stepped up the game with docs. While I appreciate client loyalty and advocacy, you have to recognize the the enforcement landscape changed under the regulations. The employer should have taken serious steps to make sure that participants knew of the odd annual additions rule so the participants could take appropriate measures to comply. The participants would also have less to be upset about when the inquiry comes. If the employer acts diligently in the matter, the IRS is not going to beat up the employer. I don't think the IRS expects the nonprofit employer to supervise the employee's other plans. The attitude that the employer should not have to be bothered with any responsibility for addressing the issue is not going to get you any points and you should be concerned that the IRS might be in the mood to make an example out of a high profile institution. The IRS is fed up with noncompliance in the 403(b) arena. That is why we got the new regulations with focus on the employer. Cooperation is usually the best policy in an audit.

The sponsor can assess the risk and amend the plan without correction. In other words, don't amend with a retroactive effective date. The retroactive effective date will get unfavorable attention on audit and in determination letter review. A rollover account in a plan that has a rollover provision will not stand out for attention to the timing. Ideally the amendment would not be a stand alone amendment. The plan auditors (not the IRS auditors) may be more likely to observe violation. If the matter is taken up in an IRS audit, the penalty should not be terrible, but it would be lucky to get away free. If you take the rollover out of the plan, the you will have to contemplate asking for a letter ruling that the mistake does not prevent preserving tax deferral by putting the money in an eligible rollover vehicle, such as an IRA. A letter ruling would be just as bad or worse than VCP.

What does it matter what anyone thinks?

That will not cure the violation or avoid the excise tax. See Rev. Proc. 2013-12 for the currentl EPCRS guidance.

Another thought. The interpretation of an order and the determinetion of qualification are fiduciary functions. You may be expected to provide a recommendation, but the ultimate decisons about administration of QDROs are made by a fiduciary.

I have always considered the exception to the anti-assignement provisions of 401(a)(3) for assignment "pursuant to" a QDRO to mean that the terms of the order have to be followed, even if the terms of payment are more restrictive than the plan would allow. During the qualification process there are ways to avoid restrictive provisions that are the unintended product of incompetent drafting. Once the order is qualifed with terms that have an established meaning, variance from the terms is a difficult proposition. If a very careful reading (that does not mean a conserviative reading) of the terms of the order leaves you stuck as you describe, the only course is amendment of the order or occurrence of circumstances that fit other distribution terms. By the way, the "earliest retirment age" for a plan that allows distribution at termination is age 50.